Saturday, March 6, 2021

SAPP advocates for competitive electricity inn SADC

Due to the energy crises confronting Southern African countries such as Botswana and of late South Africa, the South African Power Pool (SAPP) strongly advocates in the economical viability of facilitating the development of a competitive electricity market in the region, SAPP Chief Market Analyst Engineer Musara Beta says.

Sharing a vision with energy suppliers and consumers in Gaborone recently Beta said a competitive energy market gives the end user a choice of electricity supply, ensure Southern Africa becomes the region of choice for investment by energy intensive users, availability of sustainable energy developments through sound economic, environmental and social practices.

Beta said: “Market based mechanisms allow the energy development and supply market to determine the price. However, in the quest to achieve energy supply efficiency and sustainability, the market has to address project implementation challenges involving preparation and packaging. Cognizance should be taken on board projects that appear good on paper more often than not lack development to bankability levels. Other impediments include the fact that most utility tariffs are unfavourable and furthermore investors’ weak utility balance sheets fail to anchor projects.

“As an interim measure, SAPP plans to strengthen Project Management capabilities in order to prepare projects to bankability levels.”

He said approaches to the project structuring can adopt the traditional approach, whereby the necessary funding of the infrastructure is provided through internal equity, corporate or government debt and concessional funding.

Project structuring can be accomplished whereby a special purpose vehicle (SPV) is established with the infrastructure ownership and indirect ownership through shareholding structure. Funding can then be arranged on a project finance basis, based on stable and secure cash flows of the project through equity contributions from shareholders, equity and long-term project debt.

SPV can be structured using following alternatives; build own operate (BOO), build own operate transfer (BOOT) and build transfer operate (BTO).

“What sets the traditional from SPV approach is that in the former it becomes less complex if sponsor has strong balance sheet, while in the latter in the event of a sponsor with a weak balance sheet, SPV approaches are more favourable”, he cautioned.

Twelve countries which include Angola, Democratic Republic of the Congo (DRC), Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe are connected to SAPP.
With an estimated population of 280 million, installed generation capacity (IGC), available generation capacity (AGC) and peak demand (PD) are 56 gig watts (GW), 54 GW and 52 GW, respectively.
Generation mix and contributions by energy source are 74.3 percent coal, 20.1 percent hydro, 4.0 percent nuclear, 1.6 percent gas or diesel. And based on country power generation capacity: South Africa, 80.4 percent; Mozambique, 5.0 percent; Zimbabwe, 4.1 percent; Zambia, 3.6 percent; DRC, 2.6 percent and the rest, 4.4 percent.

Currents statistics show that as at February 14, 2014, total interconnected SAPP installed capacity was 54, 088 mega watts (MW), available capacity, 49, 106 MW, forecast demand, 47, 009 MW and shortfall capacity, 2, 787 MW.

Although SAPP offers a competitive market that can be used for any power, this may not be used in anchoring projects but provide reference price, he said.

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