2020 ENERGY SECTOR OVERVIEW
How tanker drivers contracted COVID-19 as they struggled to bring fuel to Zambia
THEyear 2020 has come to an end. In line with expectations and what has now become annual routine, I wish to highlight some significant developments which happened this year and provide an expected outlook for 2021 in the next article.
This article is arranged into thematic areas within the petroleum and electricity subsectors. Before I proceed, I wish to thank both print and electronic media for the coverage extended to me throughout this year. In the same vein, I thank the readers and viewers.
PETROLEUM SUBSECTOR
Fuel supply in 2020 has been stable with no major incidences of fuel shortages reported. Isolated instances of petrol stations running dry was not due to lack of fuel in government depots. Stakeholders have worked hard to sustain a spirit of continuous improvement compared to past years where episodes of stock outs were reported.
We saw crude oil prices plummet in some instances to negative prices at the peak of the COVID-19 pandemic. The pandemic ruined and paralyzed global operations and global supply chains.
Demand fell as economic activities significantly reduced and pushed the economy into a recession. A steep depreciation of most currencies including the Kwacha punched holes into prospects of a reduced fuel pump price although there was thought in some circles that some form of reduction should have been extended to consumers.
With further depreciation of the local currency and an upward trend of the global fuel prices, there has been strong industry sentiment that fuel prices should have been increased in the last quarter unless Government has slid into subsidies.
Even if Government has slid into subsidies, the currency index has taken a heavy toll on oil marketing companies (OMCs) which are importing fuel in the country.
God knows for how long they will continue to sustain the status quo. However, what the country cannot afford is a fuel crisis as economic activities slowly return to normal. It is also encouraging to note Government’s intention encapsulated in the recently launched 2020-2023 Economic Recovery Plan with regard to urgently revisiting the pricing mechanism.
Both Government and industry are hereby commended for sustaining fuel supply without interruption. It must be underscored that a fuel crisis is more tragic than electricity poverty.
In 2021 Government is encouraged to build upon this success and ensure that there will be more fuel reserves in the country and innovate more measures aimed at managing the possibility of frequent price adjustments due to a possible weakening of the currency in 2021. Major 2021 national events could have a bearing on the currency index.
On the downside, the inability by Government to bring
The Petroleum Management Bill of 2019 to Parliament in 2020 is unfortunate and represented a dent in the energy sector reform drive. The Forex exposure which Government is facing due to continued participation in the procurement of refined and crude oil is too much within the context of what the country is going through.
There are many ways of refining this particular Bill to ensure it meets critical expectations and national interest while saving Government from spending $1 Billion on fuel procurement every year.
Despite maintaining a steady flow of fuel, Zambia still remains vulnerable should there be prolonged disruptions to the fuel supply chain owing to lack of Strategic Petroleum Reserves (SPR) in line with international best practice. While, the country has striven to keep operational fuel inventory averaging a number of days, this inventory is NOT Strategic Petroleum Reserve (SPR).
SPR can be defined as stockpiles of crude oil or refined fuel which are kept by countries or private companies as a hedge against potential future energy crises. Intervals of drawing down from the stockpile and replenishing is a matter of government petroleum policy framework which also should highlight the purpose of the SPR.
Another major highlight has been the performance of fuel transporters in Zambia. We saw a lot of our transporters contract COVID-19. It was very challenging to sustain transportation of fuel from other countries in a COVID-19 environment and border lockdown and 14 days quarantine measures for them as frequent travelers.
Therefore, it is important to acknowledge and commend the transporters, drivers and their assistants for the resilience demonstrated during this challenging period. The environment still remains challenging. We must thank them for bringing fuel to locations where we can easily and safely get it in good time.
THE ELECTRICITY SUBSECTOR
The electricity subsector has faced significant challenges which embarrassed the nation in 2020. While climate change has frequently been cited as the major cause of the worsening energy poverty, the deep seated reason Zambia is facing serious energy poverty can be attributed to inadequate balancing of the energy mix in the past decades.
If the diversification of the energy mix had been pursued a couple of decades ago with the vigour it is being pursued by the current government, we wouldn’t be in this kind of embarrassing mess we have found ourselves in.
While it is accepted etiquette to develop an industry around national arbitrage, the extent to which Zambia’s energy security is built on water bodies is frightening to say the least. We have learnt it the hard way and if we do not implement measures cited on page 72 of the 7th National Development Plan, we will go through similar challenges in future.
Without a doubt, our economy got significantly affected negatively due to lack of adequate electricity. While big industries may not have been affected significantly, households and SMEs got devastated. This kind of energy poverty imperiled not just the economy but also Utility companies themselves due to lost revenue aggravated by lack of electricity to sell. Unfortunately, the state of energy security in the SADC region still remains compromised meaning that it is not easy to depend on neighbouring countries for alleviation of the energy poverty and accentuating energy security.
To this end, the solution is anchored on strong praxis of leadership from those who seat in alpha positions to drive the national energy transition agenda.
However, Zambia has been put on the correct path with regard to the energy policy. The solar power plants and thermal power plants which have been built have averted a near catastrophe of total energy poverty.
Furthermore, consumers have to be commended for cooperating to some extent. If the nation had not migrated to energy saving bulbs, Zambia would have been in a worse energy crisis because the migration to energy saving products is saving the country electricity demand estimated at more than 100MW.
The power plants which are in the pipeline are poised to improve Zambia’s chances of becoming a significant exporter of electricity thereby contributing to the energy security in the region.
In addition, the availability of electricity will support the attainment of the UN SDG number 7 which calls for universal access to clean, affordable and sustainable energy for all by 2030.
While Zambia is unlikely to 100% attain this goal, a decent score is possible by 2030 depending on how we implement the 7th National Development Plan, Rural Electrification Master Plan and other intermediate future plans. While in 2019, we saw strong engagements with the public to accept nuclear energy, there was little public statements in 2020 on the same.
Further public engagements are needed. It must be underscored that the days of depending on hydro power are numbered. The maximum power we get from all our rivers is 6,000MW. Our eyes must be on where our future energy will come from in the post dependence on hydro power journey when our demand for energy sows to more than 6,000MW.
Johnstone Chikwanda is an energy expert and a Fellow of the Engineering Institute of Zambia, a PhD candidate at Johnson University, Knoxville, Tennessee, USA