ROBERT SICHINGA

1. ROBERT SICHINGA

2. 1. INTRODUCTION The Energy Sector is in a crisis world-wide. Rising oil prices, demand for clear air, global warming, use of food crops to produce bio-oils for energy alternatives. Zambia has been impacted by the world-wide energy crisis. So how are we (in Zambia) responding? The listeners and all of us need to recognise that our energy sector comprises not just ZESCO who produce electricity. The energy sector includes the following other players:

3. Fuel: • TAZAMA Pipelines • INDENI Refinery • Oil marketing companies • Maamba Collieries

4. Electricity: • CEC • Mulungushi and Lunsemfya Power Company

5. Generally, ZESCO enjoys a virtual monopoly in the generation of electricity in Zambia with the exception of Lunsemfya Power Company. Previously there was the Kariba North Bank Company (KNBC). In 1978 Zambia and Zimbabwe decided to dissolve the jointly owned power company, Central African Power Corporation (CAPCO) and share its assets and liabilities, but created the Zambezi River Authority to manage the Kariba Dam and the lake.

6. Current - Kafue Gorge - 900 mw Kariba North Bank - 600 mw Victoria Falls - 120 mw Potential - Itezhi Tezhi (80) - 120 mw Kafue Lower Gorge - 600 mw

7. The transmission and interconnections are of 330KV and 220KV. There is a Namibian which is 132KV. Total distance covered about 4,000Km. Fifty percent (50%) of the generated electricity is used by the mining operations. The development of new mines (besides the existing ones) in Lumwana, Kansanshi, Luansobe mining operations as well as new mines in Mumbwa, new coal mining operations will demand additional power.

8. 2. THE CHALLENGES It is clear that the investment needed to develop additional power generation cannot be met from ZESCO internal resources. There will be need to borrow heavily for each project and massively to develop all the potential projects. The market for power is readily available from within the SADC and even COMESA region.

9. We can number the challenges as including the following: • Financing constraints due to low tariffs internally – which can only yield low returns; • Need to expand/extent/increase number of power companies to develop capacity. ZESCO must NOT be protected from competition; • Induce/encourage the development of PPP/BOT’s which are new investment instruments; • Important to ensure design standards for safety, reliability of electricity supply; • The Zambia Bureau of Standards will need to play a pivotal role in collaboration with the Energy Regulation Board. • The Rural Electrification Authority which benefits from the current taxation being 10% charged as Excess Duty.

10. 3. POSSIBLE SOLUTIONS 3.1 Address the legal framework in consultation with all stakeholders – regulators, consumers, included. This can be done fairly quickly 6 – 12 months. 3.2 Tariff structure has to be agreed. Separate commercial from domestic tariffs. There must be a distinction between the two.

11. If the industrialised consumers use 50% of the electricity, then they must meet 50% of the cost of generating, transmitting and distributing power to them. The cost of building/constructing the line to Lumwana must be borne by Lumwana Mine, over time of course. Current structure where industrialised consumers (especially the mines) pay tariffs below the domestic consumers, should not be tolerated.

12. Policy changes are imperative Zambia should be a major exporter of clean and cheaper power due to the volume of the water resource that Almighty God has blessed our nation with. Zambia should be an exporter of say 50% of all electricity power generated. As soon as it is politically feasible with neighbouring Zimbabwe, start considering another dam on the Zambezi River, above the Kariba, below the Victoria Falls. For example, we could share the dam wall and let each country build its own power station on either side of the river/dam wall. Policy needs to change because it is unlikely that the price of crude oil will ever reduce, just as happened in 1973//74. Demands for clean renewable power will not be reversed.

13. 3.3 ZESCO’s high cost structure must be addressed immediately. Institutional operating costs and even generating, transmission and distribution by ZESCO needs to be comparable to similar organisations.

14. 3.4 Address PPP/BOT Legislation. It is for this sort of economic and profitable purposes that government should be willing to borrow and use special purpose vehicles to exploit the tremendous hydro- power potential – PPP’s/BOTs would be ideal for this purpose. A specified percentage which will ensure the project pays back in a relatively short-term, say 10 – 20 years, will need to be reserved for export at least until the loans are repaid.

15. 3.5 Revamp the Railway System and plan to procure dual capability trains and diesel/electric. Shift all bulk transportation to the rail in order to preserve the roads and fuel consumption. Make rail the transportation of choice.

16. 3.6 Identify all potential power sites. A special purpose vehicle to be used to identify all possible power station sites throughout Zambia and design the power stations/plants right away so that generators/turbines which take a long time, 5 – 7 years to manufacture, can be ordered immediately while civil works and construction of the infrastructure at the power station sites, is being undertaken.

17. 3.7 In the short-term, ZESCO’s technical capacity must be expeditiously revamped beyond rehabilitation. Power losses and interruptions must be brought to the minimum. ZESCO should be restructured to improve efficiency - power generation can be separated from transmission, can be separated from distribution. The Economics of doing this must be examined expeditiously. We already have examples of complex operations being consolidated for about 20 years only to be dismembered – ZCCM (1983 – 2000). Is it any better now? The question is not whether it is possible, but whether it can be done properly with minimum disruptions. ZESCO should be planning for an IPO within 3 – 5 years. Can it be done – Yes it can be done if there is political will. As a consumer, I would like to buy into ZESCO as a shareholder – at least equivalent to what I consume every 5 years.

18. 4. OTHER ENERGY SOURCES There are at least 4 (four) other energy sources which have been commonly used in Zambia albeit not to the same extent as hydro-electricity; these are: 4.1 Wind Power – through windmills The use of this form of energy has generally been restricted to isolated farms and locations which are not connected to the national electric power grid. Predominantly the farmers use this form of energy for pumping water into their homes. It is not wide-spread and therefore has little impact at the moment, but it is worthy of further exploration for rural communities.

19. 4.2 Bio-Fuels • A more recent source of energy is the use of Bio-fuels. This source also takes many forms: • Decomposing vegetable/organic waste which produces gases. • Like the wind power, this has been of limited use in Zambia. • Jathropha and similar plant sources. • This source is very new but is proving to be a promising source of fuel even for industrial purposes. • Ethanol – has been available from sugar beet or sugar cane. In Zimbabwe it has been used extensively as a fuel BLEND (mixture with petrol) to supplement the mineral derived fuels.

20. 4.3 Solar Power This is the energy source derived from energy of the sun. Predominantly used on stationary structures such as on building, to heat water geysers, to pump water or to provide lighting from the energy accumulated in energy storage devices. Mostly used to complement. This source has been extensively used in Botswana, but their use in Zambia has been (very) limited to rural or farm locations without connection to national electric grid.

21. 4.4 Charcoal The majority of the urban dwellers living in the sprawling townships have no access to electric or solar power. They rely on charcoal to meet their cooking and warming energy need. Because of the high demand on the affordable charcoal, this is bearing negatively on the forest of Zambia. There is need to turn this into a win-situation through the use of coal briquettes which are manufactures from waste coal. If this type of coal product was made affordable, most of the town dwellers would purchase and use this source. Currently the manufacture of coal briquettes with the companying energy saving “mbaulas” is not wide-spread. It has gained considerably in its application. While this source offers proven technology, it is only useful for domestic purposes. Overall with the possible exception of ethanol, all these alternative sources are of limited application in addressing industrial level needs.

22. 5. CONCLUSION So what are the really possible solutions to the current crisis? The solution is to:

23. 5.1 In the short-term, it will be to undertake measures on the use of existing power use of more efficient devices either at transmission or user level. It is unlikely that power supply will improve in the short-term but the country must take a long-term view.

24. 5.2 Develop the national hydro-electric potential of some 6000 MW, through a combination of the following: • Joint ventures for the large hydro power projects; • Joint ventures between ZESCO, mines, CEC/mining companies • Construction of mini-hydro power stations by new entrants; • Building localised power reticulation networks (REA); • Increase the capacity of the Congo inter-connector to 330 KV and 220 KV; • Explore the economics of Congo’s INGA Dam Power for fallback for CEC • and mining companies; • Develop power stations to generate power specifically for export to SAPP; • Rural electrification authority to concentrate their programs at district to community level and for ZESCO to concentrate on developing grids to the nation; • As part of its citizens economic empowerment policy, ZESCO should be a wholesaler to REA, power distribution companies (just like it sells to CEC); • Customer site installations and construction of power lines, to be sub-contracted to independent companies

25. 5.3 Meanwhile, it will be necessary to address those aspects which do not involve the actual use of energy – issues of policy and legal frameworks, establish special purpose vehicles, research, invitations and arrangement of joint ventures (PPP/BOTs) identifying power station sites, planning and designing power stations, placing orders for long-term equipment such as generators and turbines. 5.4 Establish alternative power supply sources, especially in localised sites – pre-construction of local power networks within smaller communities in readiness for connection to national grid. This will save time in the longest-term. 5.5 Arranging tentative joint-venture, funding for the larger construction of hydro-projects and undertake the construction of high tension transmission lines, arrange for power sale agreements with potential clients.

26. 5.6 Re-organise ZESCO to prepare it for the Initial Public Offering (IPO) as part of local empowerment to raise local capital to finance the new projects which can be undertaken at commercially profitable levels. 5.7 Indeni Refinery will need to be modernised be replacing the CRAKER and building a modern refinery which can use more readily available crude. 5.8 Subject to 5.7, evaluate the economics of building an oil pipeline to Angolan crude from Cabinda. 5.9 Research in the use of hybrid vehicles which use a combination of fuels/gases/electric cars, electrified local and inter-town rail cars/trains.

27. 5.10 Electrification of the main rail lines RSZ and TAZARA, assuming that electric power supply can be increased. It is important to recognise that we are already in a crisis but we can now take measures to reduce on the duration of the crisis.

28. All things are possible. A lot of what can be achieved, would depend on our ingenuity. END OF PRESENTATION THANK YOU!