WINDHOEK – Cabinet has approved the modified single buyer market model for the electricity supply industry, with effect from September 1 which will allow electricity consumers and independent power producers (IPPs) to transact with each other directly for the supply of electricity to allow for competition and to allow for private sector investment.
Through this modified single buyer model, the National IPP Policy shall ensure that there is sufficient competition at the supplier level (amongst IPPs) and a reasonable level of balanced competition at the off-taker level (among NamPower, the Reds, the municipalities and large industrial off-takers such as the mining companies).
The policy states this level of competition will result in benefits to both the electricity supply industry and the consumers in terms of improved quality of service at a fair price.
The approval was announced by Information Communication and Technology Minister Stanley Simataa last week during a briefing on Cabinet resolutions taken.
This follows government and the Electricity Control Board’s plans to liberalise the supply of electricity by introducing a modified single-buyer market model. Deputy Minister of Mines and Energy, Kornelia Shilunga, last month said the modified single-buyer market model would allow eligible IPPs to generate and sell electricity directly to competing customers such as regional electricity distributors (Reds), large industrial and mining companies, and municipalities.
The new market model will replace the current single model, whereby electricity suppliers can only sell to NamPower.
Based on inputs from the stakeholders and international best practices for designing and implementing an IPP regime, the government recognised to re-examine the suitability of a single buyer market model for Namibia in order for IPPs to more aggressively participate in Namibia’s power market.
Current developments in the electricity supply industry have seen small IPP projects selling electricity to large power users, such as the Reds, local authorities and mines.
In November 2000, Cabinet approved a model for restructuring of the Namibian electricity supply industry.
In order to better meet future electricity needs and accommodate new technologies, the government, through the national IPP Policy, decided to adapt the market model to a broader array of transactions and electricity sources.
These modifications, which are termed the modified single buyer model, shall be implemented in order to conform the development of the electricity supply industry in Namibia to transaction types already under way between IPPs and the Reds.
The key differences between this modified model and the existing single buyer model is the acknowledgement of bilateral trading agreements. Such transactions, already a fact in the Namibian power system, would be formally acknowledged in this modified model.
According to the 2017 Electricity Supply Industry National Policy for IPPS in Namibia, generators would not be in a situation to sell output only to NamPower Trading but also have the opportunity to sell directly to Reds and other large customers.
Among the numerous developmental challenges facing Namibia is the need for huge investments in power generation capacity, especially in view of strong economic and demographic growth in the Southern African Development Community (Sadc) region over the last decade.
The National IPP Policy projections show electricity demand in Namibia is expected to rise and by 2035 will be more than double its current electricity consumption.
The document reveals that IPPs constitute the primary vehicle for privately developed, constructed, operated, and owned generation plants that sell electricity to public utilities, end-consumers, and as non-utility generators have long-term power purchase agreements with off-takers.
It also indicated Namibia as a stable country with macro prudential policies and a legal system which allows contracts to be enforced and respected are critical factors attracting IPP investments.
“Namibia’s legal framework specifying market structures, roles and terms for investments based on the electricity supply market model is in place. A transparent and predictable licensing and tariff framework including cost-reflective tariffs all form part of our regulatory environment. The lack of electricity access remains one of the biggest barriers to development and prosperity and continues to trap Namibians in poverty,” reads the document.