Wednesday, June 7, 2023

Botswana must liberalize the energy sector and end the BPC monopoly

Minister of Minerals Energy and Water Resources Kitso Mokaila is a master spin doctor. The man must have high tolerance levels because clearly the Ministry that he oversees is crumbling under the weight of bad publicity, bungled projects and frequent power and water outages. Amazingly, Mokaila takes it all in stride. Over the years, he has displayed an amazing ability to defend his Ministry from criticism and eloquently take on difficult questions from irate members of the public, the media and the business community. If he wasn’t a politician, he would make a very good spokesperson.

But the reality is that there seems to be no end to the widespread power blackouts. Both households and business are equally affected. The ill-fated 600?MW Morupule┬áB power station, which was supposed to meet Botswana’s power needs from 2012, has deteriorated into a white elephant and a stark reminder of the ineptitude and corruption that is bedevilling this country. With Morupule B comatose, the country depends on erratic and very expensive power supplies from South African power utility Eskom and two small and expensive diesel-generated plants in Orapa and Matshelagabedi. But South Africa is also grappling with its own power problems.

Eskom has repeatedly declared power emergencies and restricted supply to major industrial users. Eskom has also gradually reduced power supplies to Botswana from 250 MW to only 100 MWÔÇöwith a possible further 200 MW if available. At the same time, South Africa is under considerable pressure to terminate its power supply contract with Botswana so that Eskom can satisfy local demand. If that happens, Botswana will be in trouble.

Burdened with hefty payouts to Eskom for electricity supplies plus millions spent on diesel to power the two stations in Matshelagabedi and Orapa, Botswana Power Corporation (BPC) has been performing very badly and reneging on its contract with government to make profits. It came as no surprise when government allocated the biggest chunk of the national budget to the Ministry of Minerals, Energy and Water Resources, most of which will go towards BPC. The embattled corporation incurred a net loss of P1.3 billion in 2013. The Auditor General’s report for 2013 clearly indicates that the situation at BPC is more critical than initially reported.

Available figures also show that BPC’s working capital position is bad, as by close of books on 31 March 2013, its current assets were valued at P1.19 billion while its current liabilities stood at P3, 73 billion, giving BPC a net current liabilities position of P2.54 billion.┬áAnd so it was that early this year Matambo once again pumped in P1.5 billion to cover BPC’s tariff subsidies and operational expenses. It was clearly not the first time that BPC was bailed out and it will not be the last. The power crisis will not be resolved quickly, and could weigh on Botswana’s GDP growth forecast.

But there is a solution. Botswana is a semi arid country that receives lots of sunlight throughout the year. The sun is a source of renewable energy. The country also has lots of domestic animals. In fact, the cattle population in Botswana exceeds the human population by far. This puts the country as a potential producer of biomass. There is also potential for generation of wind energy in some parts of Botswana. Added to all this, Botswana has committed to the climate change agenda and is party to the Kyoto protocol. It therefore remains a mirage why the country has not joined the global climate change campaign and pushed for renewal energy, as it has the necessary conditions to do so. Government should motivate Batswana to embrace renewable energy to mitigate against human induced green house emissions.

Mokaila knows that Batswana are willing to tap into the renewable energy enterprise. When addressing Kgatleng District Councilors early this year, Mokaila said: “Imminent power shortages and the Amendment of Electricity Supply Act have sparked a lot of interest from the private sector to invest in power generation projects through renewable energies, especially solar. This led to the Ministry receiving an influx of proposals.”

But there is a deterrent. He seems unwilling to even consider those proposals. This is what he said in continuation: “However, currently there are no institutional and regulatory frameworks and incentives to promote investment in renewable energy projects. Consequently the Ministry in 2010 commissioned a study on the development of renewable energy feed-in tariffs as the first step towards the promotion of renewable energy projects.”

The study’s objectives were to develop a sustainable cost effective tariff structure for all technically feasible renewable energy resources in Botswana, together with a regulatory framework for all technically feasible renewable energy resources in Botswana. Currently Morupule ‘A’ power station is out of service and under care and maintenance. Efforts are underway to ensure that the plant is refurbished and up and running by 2016/17, with better reliability, reduced emission levels and economic lifespan of not less than 15 years. Councilors asked why the government does not allow for competition in power supply. They gave the example of Botswana Telecommunications Corporation (BPC), which has upped its service levels because of competition from private industry players like Orange and Mascom.

In response, Mokaila said his Ministry is in the process of establishing an Independent Energy and Water
Regulator as a step further to liberalize the energy market. The government, he said has in principle agreed to establishment of the Regulator, as a bill has been drafted and is being considered by Cabinet before presentation to Parliament. This is part of efforts at transforming the electricity sector and ensuring a liberalized competitive energy market. Government also amended the Electricity Supply Act in 2007 to allow for Independent Power Producers (IPPs) partaking in energy supply, hence the development of the 300 Megawatts Greenfield Power projects by 2018 and 2020. It is not clear how this liberalized energy market is meant to operate, given that these IPPs will not be allowed to sell power to Botswana Power Corporation (BPC). To demonstrate its commitment to a liberalized energy market, government should motivate beneficiaries to embrace and own such projects, and decentralization of power supply is the solution. Unlike what politicians want us to believe, renewable energy projects are not expensive, if long term results are to be considered.


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