Thhe Electricity Control Board (ECB) is finalising a formal market structure policy aimed at breaking the current vertical monopoly held by Namibia Power Corporation Ltd (NamPower).
NamPower, a 100% State owned Enterprise, holds the monopoly for power generation and transmission in Namibia. The company which relies on the Ruacana hydro plant with some back up plants for periods of peak demand also imports about 60% of its electricity from the Southern African Development Community (SADC) region to meet electricity demand.
The current vertical monopoly held by NamPower allows it to control all aspects of the production and distribution of power in the country. Experts had long argued that NamPower monopoly in power trade, limits accessibility and affordability of electricity to the whole population.
In an interview with The Villager, ECB’s Chief Executive Officer (CEO), Foibe Namene explained “The world is moving away from vertical monopolies towards policies that are clear. In the vertical monopolies you have one entity responsible for the generation, transmission and distribution of energy. A formal market structure allows for multiple players in the entire value chain”.
She debated that the absence of a formal market structure permits a non-coherent and no structured approach of negotiating a Power Purchase Agreement (PPAs) with the utility – in this case NamPower. Therefore, the objective of the formal structure, according to the CEO, is to allow the attraction and introduction of Independent Power Producer (IPPs).
She added that Namibia is currently using the modified single buyer principle as the single buyer market rules have been developed and established in the NamPower Trading Business Unit, therefore the formal market structure will also ensure that such points are changed.
Namene, who recently took the reins at ECB, noted that beside the finalisation of the formal market structure, they have presented the gazetting of three major electricity policies to promote a diverse electricity supply market.
The three items include National Integrated Resource Plan (NIRP); National Connection Charge Policy and the National Support Tariff Mechanism.
NIRP is a policy that recommends that Namibia should use wind energy in the future and reduce electricity import. The NIRP study was made by ECB in conjunction with World Bank and recommended that Namibia needs at least 44MW of wind power as part of NIRP to meet in short and long term power needs.
The objective of the second proposed policy for gazetting is the National Connection Charge Policy which was established to provide direction to the transmission and distribution license holders. It will apply on all customers who intend entering into a connection agreement with a network licensee. While the third policy ‘National Support Tariff Mechanism’ is aimed to cushion poor people from paying heavy electricity tariff.
She stressed that as electricity is a strategic commodity; Namibia needs a well-functioning Electricity Supply Industry (ESI) to achieve Vision 2030 and NDP4. And to be realised, the future energy mix of Namibia must in addition to traditional fuel based energy comprise of alternative energy sources of wind, solar, hydro, biofuels.
For a well-functioning ESI, it is crucial that for the whole value chain to function effectively and efficiently, energy security should be a collaborative process (coordinated framework for energy development).
She, thus accentuated the ESI restructuring is necessary for an efficient for an effective ESI.
“For sustainability and growth, government must send out the right market signals to investors to support our conventional and renewable energy development. Namibia must focus on keeping the investors enticed and reduce the burden of doing business including implementation Agreement (IA) and Government Support Agreement (GSA)”.
She emphasised that there is need for planning a blue print that indicate a serious intent by the state to drive energy growth and especially renewable energy, select the correct technology for the country, clarity of policy, regulation and management capacity to manage the vast energy resources.
“There is also a need to attract investment in the energy sector, coordinated approach and sending correct market signals as well as implementation of the developed NIRP to better prioritize projects and guide the IPP regime. The formalisation of the market structure is crucial for creating a level playing field for IPP,” she said.
On his part, Managing Director of Nampower, Paulinus Shilamba told The Villager that the popular perception that his institution is snubbing IPPs is wrong.
Said Shilamba; “There is a wrong impression that we don’t welcome IPPs, but even last year we had an agreement with one of them (IPPs) to set up an electricity box for Nampower.”
He added that; “They (IPPs) must just not put Nampower in any political risks, because those are the risks that Nampower cannot resolve.”