admin
Jeffrey Gogo Climate Story
THE approval last week by energy regulator ZERA allowing Zesa Holdings to buy electricity generated from diesel at a premium has raised questions on the sustainability of pricing of energy, particularly climate changing fossil-fuel based energies.
Zesa Holdings will pay US15,45c for a kilowatt hour (Kwh) when the 200 megawatt back-up Dema diesel electric power plant, built by private firm Sakunda Holdings 50km east of Harare, comes online a few weeks from now, authorities say.
That’s a premium of 55 percent over what consumers are currently paying to Zesa Holdings for electricity, suggesting the power utility – holding the sole licence for distributing electricity in the country – is selling power at a loss. Not really.
Zesa Holdings, through its electricity transmission and distribution unit, ZETDC, does not pay the same price for power to different producers, says Zimbabwe Energy Regulatory Authority (ZERA) chief executive Gloria Magombo.
Each provider sells at own price, depending on the strength of their agreement with the purchaser.
So, here is why the ZETDC ends up paying as much as US18c per Kwh to South African power company Eskom and as low as US4c per Kwh for electricity generated from the Kariba Hydro Power Station. That diversity should reflect in the final tariff.
“When we talk about the price to the consumer we should not compare the price from one supplier with the average final selling price,” Engineer Magombo told The Herald Business Thursday, by telephone.
“I think that’s where the confusion is. Zesa buys power from different sources at different prices. The final selling price of electricity from Zesa is a blended price.”
But this matters little to Zesa Holdings. The power utility has made no secret of its intention to transfer the costs of Dema’s profit ambitions to the consumer via a 42 percent electricity tariff hike from US9,86c per kilowatt hour to US14c per kilowatt hour.
Few have cared to sympathise with the power supplier. And that’s understandable.
A tariff increase at this margin could cost hard-pressed Zimbabwean households between $20 and $30 more in electricity spending each month, according to calculations by The Herald Business.
Isolated in its calls, Zesa Holdings has instead come under severe criticism from both household and industrial consumers for inefficiency, greed and corruption.
On its part, Zesa Holdings has defended its decision: it says electricity prices have not been raised for years.
Others in the region (where economies are more stable) are doing so fairly regularly.
For these reasons – and a few others – prices must rise, it argues. Otherwise, more power cuts!
Zesa Holdings cannot ride on Dema to ambush for a price hike, a hike that is clearly influenced by factors other than those presented by a plant that will increase Zimbabwe’s carbon footprint.
Now, while it is not clear how much fuel Dema will consume, diesel produces up to 2,7kg of carbon dioxide equivalent for each litre burned.
With just 100 megawatts – about a tenth of current national generation – feeding into the grid from Dema at a monthly cost of $7 million, surely, economies of scale must come into play.
This means the final electricity cost should reflect the dilution of different supplier prices, particularly the greater influence of low-cost supplies from power plants like Kariba, which at peak periods delivers over 60 percent of total local power needs.
Mrs Magombo thinks so, too. “When you charge for electricity you do not price it per supplier. The blended tariff is what should be passed on to the consumers. We cannot deal with Sakunda as if they were the only supplier,” she said.
It has also become clearer that Zimbabwe – like most of the world – is paying more for electricity generated from fossils like coal and diesel than it does for cleaner renewable energies such as hydro-power and solar.
The global average for renewable power per kilowatt hour is around US6c.
ZETDC is understood to be paying between US3c and US6c per kilowatt hour for hydro-power generated locally.
Now, historically, one of the biggest barriers to increased private investment into renewables has been the huge start-up costs and the lower prices for power generated from similar sources, experts say. But things are changing.
Pricing influences financial flows not only in renewable energy, but also non-renewables in a very big way, according to Panganayi Sithole, chief executive Zimbabwe Energy Council.
“Price is one of the key components that have an impact in attracting investors,” he said.
“However, price on its own cannot do the magic. The prices that Zimbabwe is currently offering to the private investors are high (but that has not attracted large-scale investments into the energy sector).”
Zimbabwe is looking to spend hundreds of millions of dollars investing into a new 300 megawatt solar power plant in the south-west, and in the expansion of the 750 megawatt-capacity Kariba by another 300 megawatts.
With the cost of producing electricity from renewables falling from US18c per Kwh ten years ago to as low as US6c per Kwh today due to technological advancement, renewable energy can be relied upon to deliver greater socio-economic benefits in the future, said Mr Sithole.
But the ZETDC should start operating profitably, he says. “The power utility cannot go for long buying power at a higher price and sell at a lower price. That does not make economic sense,” he said.
Investors are looking for projects that are safe and secure, the kind that in the long run will deliver efficient energy systems, at sustainably affordable prices, to drive economic and social growth.
Worldwide, governments have pledged a complete switch from fossils to renewables by mid-century, as part of a global strategy to curb climate change, cut energy costs and improve energy access to those currently without, especially in Africa.
God is faithful.
Online Reporter