“This precarious situation is likely to last several years until the end of the decade,” according to the Institute of Public Policy Research (IPPR).
The IPPR recently released a special feature on Namibia’s electricity supply industry as part of its quarterly economic review.
For a considerable time, Namibia has been reliant on importing electricity from the Southern African Power Pool (SAPP), the independent think tank said. Over the years, the country has faced challenges in establishing new domestic power generation capabilities and achieving greater energy independence.
Even though Namibia had expanded its renewable energy capacity, in 2022, the country still imported over 70% of its power needs. This increase in imports was due to a decline in power supply from the crucial Ruacana hydroelectric power station, the IPPR said.
The rise in Namibia's renewable energy capacity was mainly attributed to the establishment of solar photovoltaic (PV) plants by independent power producers (IPPs) under the Renewable Energy Feed-in Tariff (Refit) programme, the institute added.
The majority of Namibia’s imported power was provided by South Africa's Eskom and Zambia.
Nonetheless, both countries are facing their own domestic power shortages, which are not expected to be resolved in the foreseeable future, the IPPR pointed out.
NamPower is the state-owned national power utility responsible for the generation, transmission, distribution and supply of electricity. Additionally, it plays a crucial role in trading electricity, which encompasses both importing and exporting of power.
NamPower currently owns and operates the following generation capacity: Ruacana (run-of-river hydroelectric power plant with an installed capacity of 347MW); Omburu (solar PV, 20MW); Van Eck (coal, 120MW); and Anixas I (diesel/heavy fuel oil, 22.5MW).
Ruacana and Omburu operate as a variable regime, while Van Eck and Anixas I are emergency standbys.
For several years, NamPower's generating capacity was primarily limited to three sources: Ruacana (commissioned in 1978, with a fourth turbine added in 2012), Van Eck (constructed between 1972 and 1979), and Anixas (commissioned in 2011).
However, a new development took place when Omburu, situated on a 42-hectare site near Omaruru, was commissioned in March 2022.
This marked a significant milestone as it became NamPower's first fully owned and operated renewable energy power station, the IPPR said.
The project was a joint effort between Hopsol Africa and Tulive Private Equity, with a cost of N$340 million, and funding provided by the Electricity Control Board (ECB) through the Long Run Marginal Cost (LRMC) reserve. The Omburu power station is expected to produce 63GWh of clean energy annually.
Furthermore, NamPower is actively engaged in expanding its generating capacity as part of its Integrated Strategic Business Plan for the period 2020-2025.
NamPower’s planned new power plant capacity from 2023 comprises of: Omburu (a battery energy storage system with the installed capacity of 58MW); Anixas II (diesel/heavy fuel oil, 50MW); and Otjikoto (biomass, 40MW).
The completion dates scheduled for these projects are Omburu (end 2024), Anixas II (end 2023) and Otjikoto (end 2025).
In addition, two IPP power plants are planned: Khan (solar PV, 20MW) and Lüderitz (wind, 50MW). The Khan project should be completed by the second quarter of 2024, while the one at Lüderitz should be finished by July 2025.
The Omburu Battery Energy Storage System represents a groundbreaking development as it will be the first of its kind not only in Namibia, but also in the entire subcontinent, according to the IPPR.
To support this pioneering project, a tripartite grant funding agreement of €20 million was inked in December 2021, involving NamPower, the National Planning Commission, and Germany's KfW Development Bank.
This initiative aims to advance Namibia's energy infrastructure and foster sustainable power solutions for the region, the IPPR said.
NamPower is set to develop the Anixas II Power Station, a project estimated to cost N$1.2 billion. The primary purpose of this power station is to serve as a backup power source, helping stabilise the grid in response to the intermittent nature of renewable energy sources, according to the institute.
The power plant will employ internal combustion reciprocating engine technology, utilising heavy fuel oil, diesel, liquefied natural gas (LNG), or compressed natural gas (CNG) as fuel sources. The completion of the Anixas II Power Station is expected in December, contributing to enhanced grid reliability and energy security in the region.
Other new projects
The Otjikoto Biomass Power Station, with an estimated cost of N$1.6 billion, will utilise encroacher bush as its fuel source. This power station aims to provide dispatchable baseload generation, enhancing the security of supply while also stimulating the biomass fuel supply chain.
Fichtner GmbH has been appointed as the engineering firm responsible for overseeing the project. To reduce the tariff for end consumers, a grant funding application has been submitted to the Nationally Appropriate Mitigation Ambition Facility.
The preferred project financier, Agence France de Développement (AFD), is currently conducting the final due diligence on the project, the IPPR said.
The contract for the development of the N$300 million Khan project was awarded to the lead developer IPP Access Aussenkehr Solar One Namibia.
They secured the bid with the lowest base tariff in the country, set at 49.04 cents/KWh, and a fixed annual escalation rate of 3% over the 25-year power purchase agreement (PPA) period. Subsequently, in August 2021, the lead developer in the consortium was acquired by Alpha Namibia Industries Renewable Power Limited (Anirep).
Construction of the project began in April 2022, and NamPower has high expectations that the plant will be operational by the second quarter of 2024, according to the IPPR.
The N$1.4 billion Lüderitz Wind Project is situated approximately 16km south of the town. In April, NamPower finalised an exclusive 25-year PPA with Cerim Lüderitz Energy, paving the way for the project's development. Cerim is a joint venture between Energy China and Riminii Investments.
Under the agreement, Cerim will take on full responsibility for the entire development, following a Build-Own-Operate model.
NamPower has the capability to engage in electricity trading within the SAPP through its energy trading system. This system enables NamPower to balance its energy supply and meet varying demands effectively.
In order to ensure a continuous supply to meet all demands, NamPower augments its energy requirements by procuring power from the region through long-term bilateral agreements (PPAs) with sister utilities in the SAPP, as well as through short-term trading markets (STEM).
In March, NamPower disclosed the specifics of its bilateral agreements with three sister utilities:
• 100MW firm power with a fixed and variable tariff with Eskom in South Africa from 2022 to 2027. There is also an additional non-firm 300MW available when Eskom is not constrained.
• 100MW firm power supply with minimum uptake of 70% with state-owned Zesco in Zambia;
• 80MW firm power supply with minimum uptake of 92.5% with Zesco; and
• 80MW with capacity factor of 50% with Zimbabwe Power Company (ZPC) from 2015 to 2025.
IPPs are privately-owned entities that operate independently from NamPower, although NamPower has the option to participate in IPP projects as well. These IPPs are subject to separate regulation by the ECB.
Many IPPs are collaborative efforts between international renewable energy companies and local partners. Similar to NamPower, the tariffs of these IPPs must be approved annually.
Out of the 14 IPPs currently active, all of them, with the exception of the Ombepo wind plant in Lüderitz, are solar PV plants. Collectively, these IPPs contribute to a total capacity of 70MW, adding to the renewable energy generation landscape in Namibia.
“Despite the string of new domestic generating capacity which has come on stream in recent years, the year 2022 saw Namibia more reliant than ever on electricity imports,” the IPPR said.
Out of the total supply of 4 097GWh into the system during that year, NamPower supplied 816GWh, while domestic Refit and other IPPs contributed an additional 364GWh.
The majority of imports came from South Africa's Eskom, supplying 1 253GWh, followed by Zambia's Zesco with 1 018GWh and Zimbabwe's ZPC with 390GWh. An additional 256GWh was purchased from the SAPP expensive short-term energy market.
Overall, imports accounted for a substantial 71.2% of Namibia's total electricity supply, highlighting the country's acute vulnerability to developments in the energy sector within the rest of the region, according to the IPPR.
The greater dependence on imports has come at a price.
NamPower’s 2022 Annual Report states the following: “Operational profitability also worsened compared to the previous financial year with NamPower posting a loss in excess of N$2 billion at both Group and Company levels.
“For the first time in many years, even Ebitda [earnings before interest, taxes, depreciation, and amortisation] came out negative, a serious blemish on the Group’s performance scorecard. NamPower recorded an operating loss before net finance income of N$2.3 billion.”
The Ruacana power station faced its lowest energy generation in the past decade, producing only 780GWh, primarily due to decreased rainfall in the Kunene River catchment area.
As a consequence, NamPower had to resort to high-cost electricity imports to maintain a continuous supply of power. This situation highlights climate change as a critical risk for the energy sector, the IPPR pointed out.
The effects of climate change are evident in the rising global temperatures, irregular patterns of precipitation, and other related phenomena. Specifically, the significant decrease in energy generation and dispatch from the Ruacana Power Station can be attributed to the notably low Kunene River flows observed over the last four years, it added.
Furthermore, the unpredictability of rising temperatures may also have uncertain implications for electricity demand, which already varies according to cooling and heating needs. These climate-induced fluctuations pose additional challenges for managing a stable and reliable energy supply, the think tank warned.
Two of NamPower’s key suppliers, Eskom and Zesco, have been experiencing significant problems of their own, the IPPR added.