adminElectricity Regulatory Commission is licensing private power stations, including two giant stations on the Gokwe-Binga coalfield, is both welcome and reasonable.
So far 13 licences have been issued. Only four stations have been built, all small, but two of them have brought lights to the Lowveld sugar towns and are even selling energy to Zesa to put on the national grid.
Some of the other licences might be surrendered in time. Private investors need a licence before they spend money on turning a vague desire into a detailed feasibility study.
Obviously the proposed investment has to be profitable and viable before anyone sinks their money into a scheme.
So quite a lot will depend on what these new power stations will be allowed to charge when they sell their energy to Zesa, and what mix of local sales and exports they will be allowed.
The general energy shortage throughout Southern Africa, plus the interconnected regional grid, removes much of the risk any potential large investor might have.
Two of the proposed power stations, those on the Gokwe-Binga coalfield, are each larger than all Zesa’s stations combined.
Zimbabwe is short of power, but a near quadrupling of generation capacity in a very short period will probably produce a short-term surplus.
Fortunately, that will be easy to sell, and easy to move, to neighbouring states short of power.
Again ZERC will probably have to set the fee Zesa, which controls the grid and the links, will be allowed to charge.
It may seem odd at first sight that Zimbabwe, a perennial importer of power and a country that is deficient, should suddenly race past most of its neighbours and become an exporter.
But that is because Zimbabwe took the plunge some years ago to change the legal structure of its electricity industry, ending the legal monopoly its sole utility enjoyed and creating the easy possibility of separate entities for generation, transmission and distribution.
Practically the only monopoly that needs to be retained is a single owner of the national grid. That is difficult to split.
But the power stations that feed that grid can each have a different owner if necessary, and while distribution in each town or area probably must be kept as a monopoly there is no technical problem if different areas are served by different companies.
Of course such a multiplicity of generating entities coupled to a monopoly grid can cause a lot of practical financial and management problems. How much will each station be allowed to charge? Who decides which station supplies at any given time?
Well, Zimbabwe put in a regulatory commission, one that does a lot more and is able to do a lot more, than just decide what Zesa charges its customers.
In these respects Zimbabwe is ahead of its neighbours.
The other advantage Zimbabwe has is the richness of its coal resources. The country has the second or third largest reserves in Africa after South Africa and perhaps Botswana. And most of this coal is fairly near the surface and, rather conveniently, in sparsely populated areas.
Unlike South Africa, which has a lot of coal sited near its coasts and so can export the mineral itself, and unlike Botswana which has a miniscule local market, Zimbabwe has both the local capacity to mine the stuff and has to export energy as electricity rather than as coal.
So the advantages of cheap and plentiful coal easy to mine near the surface and the apparent disadvantage of not being able to move that coal easily to coal markets means Zimbabwe is both
well-placed to become an electricity exporter and has no other way of viably exploiting its coal reserves.
Some might query how the proposed investments would fit in with the indigenisation policy. But we do not see any serious problem here.
The investments are coming after the announcement and implementation of the policy so it will be relatively easy to negotiate in advance how a suitable mix of foreign and local investment can be put together and how that mix may change over the lifespan of the new power stations at fixed intervals.
The important point is that the investors can have a guaranteed deal before they sink their money into the new schemes.
ZERC has shown commendable initiative so far and has been looking at the national interest as it presses forward with its own mandate.
We are sure that the advantages of switching from an effective monopoly to a system where the private sector owns most of the generating capacity are so large that the details of pricing, returns and negotiating ownership mixes can be easily worked out.
Online Reporter