For too long Namibia has been benefiting from low electricity costs, unfortunately stifling growth in the energy sector and specifically in affordable and sustainable generation capacity.
Vast distances with relatively light loads, coupled with below average income households not able to support the necessary but expensive infrastructure have been contributing factors to this end.
Base load generation options, generally requiring adequate economies of scale for affordability have also been challenged by relatively low electricity demand compared to the rest of Sub-Saharan Africa as well as limited natural resources in the form of fossil fuels and the high cost of development to extract these if indeed available.
It is common knowledge that supply constraints in Namibia and the Southern Africa Region alike are increasingly being addressed by expensive and unsustainable mid-merit and peaking generation sources.
Natural resources for renewable energy, specifically wind and solar, although abundant in Namibia, have historically been expensive to develop until fairly recently.
The good news is, however, that generation from renewables in South Africa has redefined their meaning to the sector.
Initially viewed as costly generation, as previously mentioned, when compared to conventional generation, renewables in South Africa have become an invaluable macroeconomic instrument, with operational savings in excess of N$6-billion over 24 months.
Over the latter period of operation, the renewable sector in South Africa has not only proven to be competitive in terms of meeting the demand/supply balance, but have made a significant difference on a macroeconomic level.
Based largely on Government support and its instrumental role in driving the renewables’ programme in South Africa, not only was the Independent Power Producers (IPP) sector unlocked, but a level of competitiveness and efficiency was introduced, commended on an international level.
It is imperative to note, that the success in the Region, and by example, South Africa and Kenya, in unlocking the power sector potential, was the instrumental role played by these respective Governments.
IPP’s are provided comfort, given certain eventualities out of their control, by way of so called “enablers” in the form of a Government Support Agreement.
Through the enabling property and de-risking mechanism of the latter, IPPs are increasingly competitive in their pricing resulting from the favorable view taken by lenders, i.e. funding costs and increased tenure.
In Namibia, the immediate aspiration in terms of photovoltaic power could provide a minimum net saving of 5% to 10% to the country’s annual generation revenue requirement by avoiding expensive US Dollar (USD) denominated imports; a pure financial benefit with the potential to translate into even higher macro-economic benefits given the increased affordability of power.
NamPower expects to spend a minimum equivalent of N$2 to N$3 billion on a combination of USD denominated import generation and currently pursued short term generation options, resulting in added pressure on the Balance of Payments of the Namibian Treasury and general affordability of electricity.
It is for these reasons alone that the Government of Namibia is presented with the opportunity to provide support in the form of “enablers” in achieving its objective of unlocking this strategic resource in the most effective manner and therefore providing for a giant leap into the direction of at least one of Government’s priorities, namely poverty alleviation through affordability, job creation and economic multipliers.
Notwithstanding the above, Namibia’s Electricity Supply Industry (ESI) certainly requires the development of a base load power station to absorb the potential unpredictability of renewable supply to offer the Namibian consumer peace of mind in terms of security and reliability of supply.
Size and fuel independence, where possible, should be the determining factors, with maximum sustainable and predetermined renewable penetration and the remainder of Namibia’s current generation fleet augmenting such base load supply to achieve optimum flexibility, use of, specifically local, natural resources, affordability and independence.
Standard Bank, given its vast expertise in the Electricity Supply Industry across the continent and major player in terms of financing the renewable generation sector in South Africa, embraces Namibia’s recent drive towards the development of renewables and has already proven its appetite for the sector by being the first commercial bank to extend financing to Solar PV projects in our country.
Standard Bank is rapidly moving towards realizing its motto “Sustainability Through Growth” by its active involvement in the renewables sector, not only across the continent, but also in Namibia’s Renewable Energy Feed-in Tariff (REFIT) Program and other utility scale renewable power projects.
Namibia, as the gem of Africa, can ill-afford the same mistakes made by the Region in terms of crisis management in the power sector, due to its already small, by comparison, and fairly fragile economy.
Standard Bank is thus proud to be associated with the recent developments in the country, specifically the drive towards self-sufficiency and security of supply in the Electricity Supply Industry.
l Marco Triebner is an Investment Banker within the Corporate and Investment Banking Division at Standard Bank