Addis Fortune (Addis Ababa)
Omer Redi
1 June 2009
interview
The crisis in the power supply has reached such a critical point that blackouts now occur every other day. With the water level in the currently operating hydropower generation dams going down by an average of one to two centimetres everyday, the expected rains in the coming few months will determine whether the power utility can continue supplying energy given the current state of affairs. Nevertheless, Miheret Debebe, chief executive officer of the Ethiopian Electric Power Corporation (EEPCo), says - in an exclusive interview with OMER REDI, FORTUNE STAFF WRITER - that it is not all doom and gloom as there are upcoming power generation stations to be commissioned in a matter of months.
Fortune: It is obvious that Ethiopia is now in such a serious power crisis that you have been forced to introduce load shedding with a frequency that now has reached every other day. What exactly has happened to the power generation sector to make you introduce this schedule?
Miheret: The current situation of power shedding is because of the imbalance in supply and demand. We have short, mid and long term planning. This is the supply-demand forecast and the planning that follows this forecast. From the demand side, this year we anticipated between 17pc to 20pc growth in actual demand, despite the surface demand growth being 24pc.
There is a gap between the demand and supply side growth because forecast depends on different methodologies, knowledge base and experience of the sector. Other major factors, such as economic growth, social development, environmental situations, industrial, commercial and domestic GDP growth, have their own impact on the growth of energy demand. Population growth is a very important factor for the increase in energy demand. To mitigate this demand, definitely there should be supply side planning and this supply side planning starts based on the master plan, which includes all the factors I have mentioned.
Q: Let us discuss the work on the supply side because obviously, the supply has not grown as much as, or at least close to the demand, has it?
The supply side planning follows ways to mitigate this demand growth in the coming five, ten or twenty-five years, focusing on what should be the generation, transmission, distribution and the universal electricity access planning aspects. The generation planning is very critical factor in this regard. But the generation has its own limiting factors to meet its own schedule.
Around the world, generation projects are not completed on time or ahead of schedule; they are delayed significantly due to forced or voluntary situations. For both reasons, our projects are delayed and that is one factor causing the deficit.
The second factor is the hydrology; especially considering that Ethiopia depends on hydrological resources for 95pc of its power generation. This factor was not in our favour; the situation in the existing dams is not in line with the metrological or hydrological forecast anticipated for this year. There is quite a big gap between the water volume we had anticipated and what we actually got from the Belg season. In addition to the low level of water we got in the dry season, the dry season has also aggravated the evaporation at the dams.
The other factor is that though we have had an emergency plan of a capacity the country could afford, the plan was to supply power to meet half of the 24pc demand growth. That means the emergency plan was meant to increase the supply by 12pc. If we had planned to mitigate the entire (24pc) demand growth, that means the country should deploy four times what we have invested today to rent generators. And this is beyond the country's foreign currency capability.
Q: How did you get the funding for the emergency plan?
It is a complex subsidy element. We initially planned to get financing from the World Bank and the Ethiopian government. Though we started work on the same day with the same objective, financing from the Ethiopian side went efficiently and the emergency generation started in December 2008.
The World Bank financing has been delayed; even the bureaucratic decision making process has not been finalized up to today. Hence, yet again, we now have the capacity to generate only half the emergency plan we had prepared for. The lengthy bureaucratic decision making process at World Bank has delayed half the financing for the emergency plan and thus we rented half the generators we initially wanted to.
The minimum duration of generators rental agreement we can enter to is about six months. So if [the World Bank is going to release the fund afterwards] we enter another agreement for the remaining generators, we will put the country into a serious loan burden for a facility that we can use for weeks or one month [because the rainy season is already closer].
So we have to drop this option and it creates a big gap. All these factors contributed to the big deficit. In any country's practice, this is [load shedding] how you mitigate the deficit in such situations.
Q: So can we say it is not feasible to rent those diesel generators for six months because it puts a lot of loan burden on the country?
It is not about feasibility. We started the same scheme for six months with Ethiopian and foreign financing. With the Ethiopian financing, the same was completed in a few months and started operations in December last year. With the foreign financing, because of the financiers own conditions and decision making processes, the scheme has been delayed even without approving the tender up to today.
So, even if it is approved today, negotiating, signing a contract agreement and placing orders to rent the generators will take until July and they can be used only after July. By then, the scheme will have lost its service purpose; we have already lost the time we want to fill the gap.
Q: Your plan was for more diesel generators to be rented for the short term and now you are actually using half of your actual plan. Even so, I expect it is a lot of financial burden on the government. Let us talk about this burden. How much do you pay in terms of kilowatt hours for the rent and how much do you charge your customers in the same measurement?
Though the plan was to generate 120Mw from the emergency scheme, we are now getting 60Mw for 20 hours a day continuously.
Of course it creates a lot of financial burden. Yet, for the short term, it is a big scale and feasible practice in any global experience, as in the case of Afghanistan, Iraq and some African countries like Uganda, Kenya, Tanzania, Ghana and almost everywhere because the continent is suffering a huge energy crisis now. This is the best short term solution as the containerized generators are mobilized, installed and synchronized fast.
Their impact - we pay more than 0.20 dollars for a kilowatt hour and collect less than 0.5 dollars from the consumer. This is a huge subsidy from the government and the corporation. We are doing this only to mitigate the negative socio-economic effect, not as a business objective.
So roughly, we are now spending about 100 million Br to 120 million Br per month for fuel, in addition to the capacity costs we have to pay to the owners of the two generators, which is 10 million dollars for each for the six months rental period. The 20 million dollars for the 60Mw is the least cost available. In addition, we have to pay for fuel and other costs. The monthly breakdown of the six months' rental cost is about three million dollars.
Q: Do you anticipate any possibility of the rental of these generators being extended for a longer period than the six months?
Well, hopefully, since the problem depends on the start of the rainy season, whether it would start in early or late July, the deficit could last a bit longer. In that case, it could extend for couple of weeks or for a month.
Q: You are now almost close to the end of agreement period, which began in December. Do expect any power supply from the almost finalized hydroelectric power generation stations, such as Gilgel Gibe II and Tekeze to replace these generators?
The agreement period ends around June. Already in Gibe II, only about 200m of the 25.85Km tunnel remains to be completed. So you can imagine what huge progress it is. But still, the last one metre is a challenge for us. Once we complete the breakthrough on the tunnel, hopefully in early June, the two tunnels to the powerhouse [penstocks] will join the 25.85Km tunnel.
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