Namibia, which imports over 70% of its electricity needs, spends at least N$2.6 billion to import electricity annually. The high cost of electricity imports have been blamed for Namibia’s high trade imbalance which has seen imports exceeding exports by close to N$26 billion.
Since most of the electricity is imported from South Africa, a local researcher, Rowland Brown, warned that electricity imports presents a drag on the economy.
He also warned that Eskom‘s generation vulnerability due to transmission vulnerability and losses, flow of river, dam levels, political risks, capacity availability and currency risks is threatening the country’s security of supply.
“As energy is a critical factor for many industries, this uncertainty can reduce the willingness of investors to invest in Namibia. Alternatively, it can increase the price of doing business should the investor have to secure their own energy supply,” he said in a presentation at a Public Dialogue on Energy and Energy Efficiency dialogue organised by the Renewable Energy Industry Association of Namibia(REIAN) this week.
Brown is optimistic that Namibia can move from being net importers of electricity to net exporters if it prioritises local production.
“Additional benefits of local production are plentiful: wealth and employment creation, opportunity to deploy local investment assets into quality industry,“ he said.
Brown also underscored the need for more investment towards renewable energy projects.
Meanwhile, government said it does not think the introduction of a Green Tax reprieve as an incentive to encourage local investors to embrace renewable energy production is a wise idea.
This was finance minister Calle Schlettwein’s view while answering questions during the dialogue.
One of the participants wanted to know during the question and answer session whether government would consider introducing more incentives to boost local participation in the local electricity production sector.
“I do not think it is a good approach, especially when you consider the impact it will have on the tax base. I am not saying incentives are inappropriate, but i would rather prefer that incentives are accorded to start ups,“ he said.
He said there is need for a rapid resolution to our energy sector needs, adding that Namibia is extremely exposed to the view that other countries take on how much electricity can be spared for Namibia.
“I would like to touch upon the electricity situation in our country. The peak electricity demand in the country at present is close to 650 MW. We substantially rely on energy imports from our neighbors – where depending on the time of the year we import between 40% and 80% of our energy requirement,” he said.
A recent assessment made by the African Development Bank revealed that power demand in Namibia is projected to grow at close to 9.5% per year between 2015 and 2020 on the back of announced industrial projects.
On the other hand, energy surpluses in the southern African region have now shrunk to net deficit levels, and this puts importing countries in a precarious situation.
“Access to electricity remains an important issue. According to recent estimates of the International Energy Agency, over 2/3 (two thirds) of our population does not have access to electricity, and rural areas disproportionately suffer from this exclusion,” said the minister.
He also noted that the electrification rate in Namibia is slightly above Sub-Saharan African average but well below the average across developing countries and even Africa as a whole.
Schlettwein also highlighted the price Namibia has to pay for running an under-developed electricity sector.
“I believe that when we think of the price that we pay for deficiencies with respect to provision of services, the social costs of unserved population needs to be at the forefront. It is well understood that the coping costs of lack of basic infrastructure is often several times more than the commercial cost of providing such infrastructure,” he said.
He added that the absence of reliable and affordable electricity supply perpetuates a negative spiral of reduced economic opportunities and poverty.
“Electricity is one of the major imports of Namibia and this contributes to this imbalance. By not producing electricity within the country we miss out on domestic economic activity and value addition. Imports also expose us to electricity pricing and currency rate fluctuations,” he said.
Schlettwein said the availability and affordability of electricity is an important factor in attracting investments.
Namibia exhibits electricity tariffs that are higher than most countries in the Southern African region.
A study on electricity tariffs conducted by the Namibia Manufacturer Association in 2012, showed that national residential tariffs were on average 25% higher than in South Africa.
When compared against industrialized developed nations, Namibia’s average industrial tariff level is significantly above that of the European Union, Norway, and the United States.