September 23, 2024
Economy

Namibia's modified single buyer success dependent on infrastructure

August 28, 2023
Namibia's modified single buyer success dependent on infrastructure

Namibia should start investing in infrastructure if its ambition of exporting electricity through the crafted Modified-Single-Buyer (MSB) market is to be realised, an expert has said.

According to Marc Goldestein, a consultant from African Power Venture, the development of power lines is an expensive exercise, hence the need to start implementing infrastructure reforms well ahead of the planned electricity export to the Southern African Power Pool (SAPP).

"Namibia needs to increase its interconnector extending into the SAPP region, which is the best option going forward because these lines take longer to develop and require significant funding. In our view, it is better to start now, while you look at exporting the 400MW," said Goldstein who assisted the Electricity Control Board (ECB) in coming up with the MSB market model.

He added that "there is a big challenge of interconnectors in the region as existing lines are congested and only few are considered safe and stable. Thus, this creates a problem in sharing power and if smooth trading is to take place more emphasis should be placed on investments in power lines".

ECB has a licence to export 1GW of power through MSB, of which 400MW is allocated to PhotoVoltaic Plants, this is though Namibia imports about 500MW.

In the same vein, Goldstein said there is between 10GW and 12GW of unserved power, emphasising the high demand for power which the region needs to work towards generating and filling the gap.

"The outlook for trade is positive, something that we doubted when formulating how Namibia could participate. There is a high demand, of which a lot of power is unserved. You may realise that demand is high as not all countries in SAPP have universal electricity. Therefore, from a demand perspective, it is an interesting case going forward. For instance, South Africa will be in high demand when the coal industry they are heavily reliant on is decommissioned," Goldestein said.

It was further stated that there has been a supply deficit in relation to demand. 

"Supply hasn't picked up over the years, nor has power generating projects been built. This is because there has been no mechanism to address bankability. Many SAPP countries are having trouble in securing funding for the procurement of these projects and can’t manage to have government guarantees, something many utilities fail to do, except for NamPower which has cost-effective tariffs," he said.

Goldestein also noted that in order for the SAPP market to become liquid, there is a need to spot more customers to come on board.

Meanwhile, ECB's Chief Executive Officer Robert Kahimise said the MSB Market Model opened the electricity supply industry to establishing a level playing field. 

He said the market was opened to allow competition in the market which he believes will lead to lower tariffs, increase local generation capacity, encourage private sector investment in generation, and reduce the funding burden from government amongst others.

"The phased implementation of the MSB has allowed the industry to take small but vital steps towards market stability and resilience. In Namibia, we are presented with a unique opportunity to not only meet our energy demands but to revolutionize our approach, while at the same time exporting much-needed power to the region, furthering the regional integration agenda, and nurturing an environment where novel industries can flourish," said Kahimise.

"The establishment of local generation plants, not only reduces our dependence on imports but also generates employment opportunities, nurturing a skilled workforce that drives economic growth. The ripple effects of a robust electricity market extend beyond industry-specific domains. A reliable power supply facilitates infrastructure development, paving the way for government, public, and private sector industries to expand services," he said.

This, in turn, the CEO said will attract foreign investment, as well as domestic entrepreneurs, who see Namibia as a land of opportunity, a conducive environment to establish and expand their businesses

Kahimise has consistently highlighted that NamPower with support from the ECB is in the process of finalising the necessary market agreements that will enable the smooth operation of the market for all market participants.

"We fully understand the urgency to have these agreements finalised. However, this necessitates a comprehensive approach, underpinned by collaboration between these two organisations," he said.

The MSB is a result of the government's efforts to provide the necessary regulatory frameworks and incentives to attract investments. 

 

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Last modified on Tuesday, 29 August 2023 20:13
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