Friday, May 24, 2024

We need more expensive electricity

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By Michael Chishala

Imagine that right now you had a choice between two options:

1) Continue with cheap electricity but get 8 to 12 hours of load shedding.

2) Pay twice per KWh what you are currently paying, but you get power 24 hours per day, 365 days a year. Which of the two would you choose? I can bet my last Kwacha that 99.99% of Zambians would choose option 2.

They would grumble at the beginning, but then eventually adjust and get used to paying more. Almost everyone (except the few with kasaka ka ndalama) would use less power, since they would feel the pinch and the demand for power would eventually cool off and reach an equilibrium with the supply. Then we would never ever have load shedding because there would be plenty of power at the higher price point with reduced demand.

Zambian electricity is too cheap. But by law, ZESCO cannot unilaterally increase electricity tariffs, a relic of the Socialist UNIP government. They need permission from government through the Energy Regulation Board (ERB). ERB holds public meetings, some people protest that electricity is too expensive, the ERB Board sits after taking their orders from upstairs and they almost always push back against higher electricity tariffs proposed by ZESCO whose hands are tied. But this is exactly what we need. Expensive electricity.

What the government should do right now is amend the laws and regulations and allow ZESCO and other players to charge whatever they want, whenever they want. No need for ERB approval or public hearings. Forget “Cost Reflective tariffs”. What we need are “Market Reflective tariffs”. As we wait for the law to change, ERB can just give blanket approvals for tariffs to go up until things settle between Demand and Supply. If only our government leaders had the courage to bite the bullet instead of what they always do of taking a gun, taking careful aim and shooting themselves in the foot!

Many will push back against this “crazy” proposal because ZESCO will begin “exploiting” us since it is a monopoly. But that is besides the point. We need an immediate solution and cannot keep repeating the same actions but expecting different results. The Physicist Albert Einstein called that insanity. Moreover, we can solve the monopoly problem by splitting up ZESCO into Generation, Transmission and Retail. Privatise Generation and Retail and keep Transmission with shares floated publicly.

ZESCO Transmission would eventually pay off the current $3 billion ZESCO debt with increased revenues and would invest in maintaining the grid. More players with big pockets would build many new power plants, attracted by the high prices of electricity that are free to move up or down. They all want to make a killing, so the supply of power would naturally increase with more players until the tariffs eventually come down in future. Let the free market do its magic mwebantu!

Now, of course expensive electricity means production costs of goods and services go up which will trigger some short term inflation. But most nations in this part of Africa actually have more expensive electricity than us. How are they managing? Countries in the region are still exporting and surviving. Between cheap power but zero supply for 8 hours per day versus expensive power but always on, the latter is obviously a lesser evil.

Businesses will lose some customers due to increasing prices with more expensive power, but they will still retain some business. When you switch them off for 8 hours in the morning, they lose half the business day and there is a mad scramble to catch up in the remaining few hours of daylight left. This leads to even higher consumption of the cheap power which defeats the whole point of load shedding, and may even overload the grid since everyone wants to turn on their grinders, cookers, geysers, welding machines, etc, at the same time (rather than spread out during the day).

Whilst expensive electricity solves load shedding, it introduces in the interim a major problem of higher demand for charcoal which means more trees cut down and more Climate Change and less rain and lower Kariba Dam water levels. However, as I already stated, high electricity prices that are not subject to government price controls causes increased investment in new power plants which leads to cheaper power and thus more people connected to the grid and hence less demand for charcoal.

Another good (but very expensive) solution is a technological one. Smart electricity meters which communicate with the ZESCO system and implement localised load shedding. Customers who want power 24 hours a day pay a higher tariff. Their next door neighbour who cannot afford voluntarily remains on a lower tariff but gets “load shedded”, if such a term exists. Everyone will be happy and we can all live happily thereafter with no more “load shredding”.

FURTHER READING

The Real Cause of Load Shedding – Zambia’s Low Tariffs

The author is a Zambian analyst, blogger and IT Specialist with interests in Politics, Economics and Philosophy.

23 COMMENTS

  1. That is only for rich countries where minimum hourly wages is not less than ten dollars. People have no jobs and those who have jobs don’t get enough to meet your suggestions…. we’re in a third world and instead of weird ideas coming from a wired head, we should be thinking of ways to make power sources abundant.

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  2. A higher tariff will also bring the much-needed foreign direct investment (FDI) into ZESCO. At present, no investor wants to touch it because it’s not profit-making!

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    • What would an investor be doing with Zesco other than buying it….then he will be free to increase or reduce the tariffs.. the problem with Zesco is incompetence brought about by the fear of politicians. If for once everyone refused to work for Zesco until they are allowed to operate as professionals, you will get sanity and efficiency.

    • We have to do things for ourselves. Investors have been here since 1991 but the living conditions have sunk to an all time low. Our best economic days were under UNIP. This experiment will never work.

  3. We really need to get rid of ZESCO top management and bring in someone with experience in water management and understanding
    Kariba levels have been around 20% for years yet we have carried on as if all is well
    Zesco will bring this country to its knees if action is not taken now
    and no hefty bonus shoud be paid or severence pay

  4. When you write articles do your research. Lower electricity tariffs didn’t start with UNIP. It was the intention of the colonial government to keep the tariffs as close to the break even point as possible as that was what was going to trigger the much needed development. It’s not sharks that financed the construction of the Kariba dam and those that were displaced weren’t adequately compensated. Should we now change and allow electricity supply to be a dividend driven business? That’s what we need to unanimously resolve. It’s Zambians that collectively shoulder the cost of loans that have financed both the construction and expansion of the electricity generation

  5. With all the sun, we are a blessed nation with no snow… why can’t we have huge solar farms to power our small nation? No political will, POLITICIANS!!!!!!!!! So stupid with their degrees

    • We can’t have them because the politicians insist you sell power to ZESCO at a very low tariff.

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  6. There is too much corruption and self service in this country. I know not less than 3 zambian enterprises that have sought to develop hydropower plants in various parts of the country. They have met insurmountable red tape/imingalato from civil servants. Obviously with the blessings of the ruling elite. Even in the midst with power shortage efforts to develop power plants in the northern part of the country are hitting a hard wall. Decision makers want to eat from the cob, even before the maize seed is planted.

  7. all these theories will not solve the electricity shortage problem. Firstly let ZESCO publish detailed financial statements so that we have an idea of how much in revenue they generate and also the expenses they incure. We shall then see where the generated revenue goes. At one point world bank reported that 52% of ZESCO income is spent on staff welfare, and last week a certain report revealed that ZESCO makes over usd1billion annually in revenue but same report did not tell how the amounts are used. so why should we argue amongst ourselves based on half baked data?

    • You start off by claiming that increasing prices will not solve the electricity shortage problem, then you say ZESCO should publish financials. So you think publishing statements will solve load shedding? And for your information, ZESCO does publish its financials and the Auditor General always writes about ZESCO. Problem is you Zambians don’t read then you come and say ridiculous things while trying to sound clever.

  8. ……….

    All this load shedding is the fault squarly of PF………..

    they invested billions of borrowed money on hydro, knowing full well the effects of climate change…………..

    With all those billions , zambia today should have been a star for renewable energy……

    By now all domestic customers should have been off solar ……

    We are where we are because we have du.ll corrupt people running the country……….

    How can you have load shedding when you bath in solar energy almost 9/24/365…….??

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  9. I thought load shedding was cause because of the low water level in the dams. How does more expensive electricity solve that? I don’t know how easy it is to get solar panels but that is what individuals and businesses need to look into. Forget about government or zesco do it yourself. Solar panels or community wind turbines.

  10. Load shedding is due to consumer demand exceeding the generating capacity of our energy assets.
    Zambians need to understand even if Kariba dam levels were at full capacity today only about 50% of our population has access to the grid currently .If 90%+ of Zambias population got access the grid , even a full kariba dam and a full itezhitezhi dam would still be inadequate to provide water to generate enough power to meet the high demand.
    Zambia needs investments in new generating assets (Solar, Hydro, wind, coal, HFO etc). HOWEVER, the low electricity tarrifs in Zambia wont attract any meaningful investment funds. Selling electricity to local consumers is not PROFITABLE with the current tarrif rates.

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  11. If we double the tariffs its not only individual customers that will be burdened but the cost of bread would increase, the cost of production would increase, the manufacturing sector would need to increase prices to factor in increased costs, so even basic commodities like cooking oil, mealie meal, sugar etc would be affected. Charcoal use would increase so will deforestation. Therefore we don’t need expensive electricity 24 hours a day but cheaper electricity 24 hours a day and to achieve that we need ZESCO to cut their costs since a majority of their income goes towards renumeration and funding politicians.

    • Razor, Zambia has been in a power deficit since 2007. ZESCO has had all the time in the world to do everything you are saying but zero results because of bad leaders and that won’t change anytime soon. So you think things magically improve with wishful thinking? And you can’t even see the irony in your point, because load shedding leads to even more charcoal usage than expensive electricity.

  12. I hear you and we pay what ever ZESCO dictates, but here in Mtendere PHI area, we have intermittent power supply every night after loadshedding. Even now this evening, power came around 20hrs after going at 8hrs in the morning but its gone again after 10 minutes only and this is a daily event with no word from anybody even with daily complaints from customers and ERB thinks their job is to just announce fuel adjustments only.

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  13. ZESCO please, we have accepted your 12 hour loadshedding but can you sort out this mess of daily blackouts outside load shedding schedule after restoration of power in Mtendere /PHI. We have endured 12hours of no power the whole day but literally every evening we have to lose supply including now. Does this area have an MP.

  14. ZESCO please, we have accepted your 12 hour loadshedding but can you sort out this mess of daily blackouts outside load shedding schedule after restoration of power in Mtendere /PHI. We have endured 12hours of no power the whole day but literally every evening we have to lose supply including now. Does this area have an MP. Do something

  15. It looks like the writer has been paid to campaign for ZESCO by hearing the comments from the readers Otherwise this article is USELESS

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  16. ZESCO is inefficient and some of the rising cost has been the result of these inefficiencies. The last Kariba rehab works undertaken by PF Chinese contractor installed large turbines than needed that use more water to work. The gates were also made too big water is just wasted. ZIMBABWE SIDE IS EVEN WORSE. That’s why one drought has thrown them out of commission. Junior ZESCO engineers warned management about the consequence. Low water levels affecting power generation should have occurred in September/October not April. ZESCO/ZRA may need to pump water from downstream back into the dam to survive until December. Who will be held accountable for this national tragedy?

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