eBusiness Weekly
Along with inflation and foreign currency, the biggest single problem facing most businesses is the load shedding and shortages of electricity.
Inflation and foreign currency are solvable, at least in the medium term, since the basics of fiscal discipline and a positive current account are in place. Inflation is a direct result of the currency problems, or at least these are the major causes of inflation and account for most of the inflation.
As we have argued before, many of the problems come from how the currency is distributed, rather than from a fundamental shortage, and from the way some businesses and individuals either worship the black market, despite its huge margins between buy and sell prices and its general inefficiency, or from actively trading within that market.
But the power problems are only distantly related to these two and are likely to be longer lasting. The basic cause is that we have not built a major power station since the late 1980s, or at least a power station that can add energy to the grid. The 300MW extension to Kariba South adds to the power output, but not to the energy output as there has not been enough water for some years to use even the original six generators at Kariba South 24/7.
The extension was not a waste of money or a white elephant, mind you. What it has done is to give Zesa a lot of flexibility, able to put out 1050MW at peak power demand and cut right back to one 125MW generator at 1am.
Hydro-stations can with modest storage, and Lake Kariba is far from modest, be used very easily to manage the fluctuations in demand on an electricity grid. A generator can go from just sitting there to going flat out and phased into the grid in less than five minutes. It is not much more than turning a tap to open an inlet valve.
So while there is only enough river flow, averaged over the year, to give Zesa a daily ration to use less than half the extended station if Kariba South was assigned to base load, the extra generating capacity can be brought in when needed and the station can be cut right back during the off peak periods to keep within the water ration.
Where Zesa falls short is in generating this base load before Kariba South handles all the peaks in demand. At present this is basically Hwange Thermal, commissioned in two phases during the 1980s but since then with skimped maintenance in the worst years and in any case not having a fair amount of its works replaced.
So while it has a rating of 920MW, although cooling deficiencies mean that the last 100MW was basically impossible even when the station was brand new. But right now it is generating a little over 400MW, and any failure of a unit pushes that down even further.
The 600MW extension, two large new units, are coming up for commissioning towards the end of this year and fairly early next year. But this means Hwange will only be back to a little over 1000MW, not much more than it was handling 30 years ago.
The real benefit comes from the second stage of major works at Hwange, when the original four 120MW units from the early 1980s and the two 220MW units from the second stage of the late 1980s are pulled down one by one and worked on, meaning that quite a lot of the machinery will need to be replaced.
The real problem is that we did not build a new power station for the 30 years after the early 1990s. This was not because the engineers did not know what to do. They did. If Zimbabwe was to be close to self-sufficiency, and the economy was to continue to grow at its 1980s rates, the Hwange extension needed to commissioned in the mid-1990s and a second large thermal station commissioned in the early 2000s, probably in phases. Then the Kariba South Extension would be needed as the base load would be almost pure thermal so the peak demand station became critical.
There were two reasons, and later three, why the phased work on adding another 600MW or so every half decade was not done.
First was what this would mean to electricity rates in Zimbabwe. Once Kariba Dam wall was paid for the costs of generating at Kariba were low. A hydro-station has no fuel and low running costs, basically maintenance, although the capital costs are very high. But once those capital costs are recovered then hydro power is cheap.
There was a lot of resistance to higher power charges, both from the business sectors and from individuals and so other solutions were sought.
At that stage SADC, basically South Africa, Zambia and Mozambique, had a surplus of generation. South Africa had just commissioned a pair of giant 4,5GW thermal stations and had decided to keep its older thermals running; Mozambique had ended the Renamo menace and so was able to export again from Cahora Bassa, and Zambia was at that stage in surplus at Kariba North and Kafue.
The net result was that it was cheaper to import power into Zimbabwe rather than generate our own in new stations, and it was a buyer’s market with the generation surplus countries keen to find customers.
The third reason for delaying the new power stations was the general economic malaise during the latter years of hyperinflation and most of the dollar era. Industrial and mining output were falling so naturally power demand fell. Even households were using less as they switch from incandescant bulbs to LED lights.
Now that the economy is growing fast electricity demand is rising fast and we are likely to be in the Red Queen syndrome, having to run flat out just to stay in place. The extra 600MW at Hwange will meet the shortfall, but for how long? So we need to planning the next large station now, and the one after that.
Meanwhile the business sectors need to plan for tight supplies. Many already are, if they are not in the high consumption groups of mining and heavy industry. In some parts of cities almost every roof has solar panels fitted and some businesses even now have a surplus during the sunniest part of the day with Zesa prepared to buy this.
That is a start. While each office block’s output is quite low, when they are added together there is a lot of power and energy. Even if businesses are not selling to the grid when output is high, they are not drawing from it either. And with Kariba South acting as a giant storage battery that means generation can be lowered as well, if possible.
So those that can “go solar” should going solar, although this requires high capital investment and with interest rates sent skyrocketing as part of the anti-inflation drive that is one problem, and the fact that solar panels still have to be imported is a second. And that takes us back to the other two problems.
But it is probably worth while going the solar route even if there was plenty of generation capacity. Power costs must be rising with these new power stations, or rebuilding of stations. At least putting in solar panels and batteries fixes the costs, and sunlight has no operational costs.
Disco, the giant steelmaker in Mvuma, has gone a step further and is building a coal thermal at Hwange, paying Zesa to swing this power across the grid to where the mills are. In fact Disco has gone a step further with a joint venture to put in a vital missing link in the grid. But the point being that Zesa is quite able and happy to move private power across its national grid, and a national grid cannot be split.
But this problem of raising capital, the long lead-time for a major power station and the shorter lead times on building new factories and houses means that we need to play more attention to our power supplies than just flicking a Zesa switch and paying the Zesa bills. We are likely to be in Red Queen land for the rest of this decade, so some private initiatives will be needed.
