Power covid-19

Power Outages Amidst the COVID-19 Crisis

Power outages are a common problem faced by everyone in Ethiopia. From households to industries, it is a major challenge that affects productivity, thereby contributing to inflationary pressure as it results in supply shortage in many sectors. Amidst the COVID-19 crisis, interruption has become more frequent due to the rise in household consumption. Although many citizens and expats have been told to work from home to curb the spread of the virus, this has proved to be quite a challenge due to power interruptions. EBR’s Samson Berhane explores.

Soon after the first Coronavirus case was confirmed in Ethiopia in March 2020, a graphic designer working for an international organization in Addis Ababa, Tewodros Alemu was amongst few Ethiopians to quickly comply with the government’s stay at home advisory. His boss did not hesitate to allow him work from home.

However, doing so has not been easy. With frequent power interruption, meeting deadlines and delivering assignments given by his supervisors on time became impossible. “There was a time when there was no power for five consecutive days. It left me speechless,” said Tewodros. When Tewodros reported the case to Ethiopian Electric Utility, he was told to contact a project office that built an electric line and installed transformers in their vicinity. The project office then told him to go back and ask officials of the Utility to fix the problem. “The authorities were literally accusing one another; one of them even insinuated that we deserved the predicament we were in, by asking why we let the other take the transformer. It is government accusing government, an insensible situation that left us in the dark for nearly a week,” said Tewodros. He went on to remark that once again his latest experience showed him that in Ethiopia, working from home is not as simple as it may seem.

Power outage is a common feature of life in Ethiopia. It is a rich experience that every household with access to electricity in both urban and rural areas has amassed. Some towns may stay in the dark for over a week due to power outages, although the frequency is much lower in Addis Ababa – the seat of the African Union and the third largest seat of UN offices next to Geneva and New York.

In February 2020, the country was in a total blackout after a circuit breaker faltered at Gibe III, the largest hydroelectric dam in the country with a generating capacity of 1870MW. That makes up a third of the country’s total installed capacity. “The rise in the installed capacity remains just a number, if we don’t get proper electricity to do our work and live a normal life,” said Tewodros.

Bribing maintenance workers to repair damaged electrical lines and install a new transformer has also become very normal in the capital. A case in point is the situation in a residential village constructed by Hacomal Construction, which is located near Salite Mihret Church. “We have not had light in our house for over a month due to a dispute between our real estate developer and Ethiopian Electric Utility, which is not willing to install a transformer to bring back the power. We are now paying ETB300 per week for a generator,” said a resident, married and a mother of one. “I am using charcoal and kerosene to cook for my family. I’m not sure if my refrigerator still works as I have not used it for a while due to the power cut.”

Getting maintenance service promptly is still unthinkable in Ethiopia. Officials are not usually responsive when told to repair damaged electrical lines; there are long procedures to get service and pay bills despite the attempt to digitize payment system. The situation has not changed despite the importance of electricity in the era of COVID-19. “Due to lack of access to electricity, I am not even following new developments in this critical moment. Staying on top of current information is one of the recipes for protecting oneself from the virus,” the resident said.

Even though the government repeatedly announced that sustainable transmission and distribution of power is very crucial at a time when the country is hit hard by Coronavirus outbreak, the reality on the ground shows that the issue is not being properly addressed. Since the first case of Coronavirus was confirmed in Ethiopia, household consumption grew from 371.2 KWH in February to 379kWH in March, while it exhibited a 27Pct fall to 379KWH in case of industries, while consumption of commercial customers declined by 40Pct to 707KWH.

“Averaged around 100MW since covid-19, there is no significant reduction in power supply. However, household demand has increased as a large population is at home utilizing energy the whole day. The situation increased the frequency of power interruption,” said Hizkyas Dufera, Senior Advisor to the Minister of Water, Irrigation and Energy (MoWIE). Despite the rise, however, the rate of power interruption remains unchanged, if not increased. “After COVID-19, electricity consumption is always at its peak largely due to the stay at home advice in place to fight the spread of the virus.”

In the face of the rise in residential consumption, there is a fall in electricity utilization in manufacturing industries. Power interruption is becoming more common, forcing the producers of essential products work way below their production capacity and resulting in a bulge in inflationary pressure.

“Coupled with shortage of forex and shortage of raw material, we are producing way below our production capacity because of Power outage. Had it been solved, we could have produced in surplus and sold more fast moving consumer goods (FMCG) at affordable price,” says Chief of Staff at East African Holdings Group, Fitsum Demissie.

He is not alone. Although not a new phenomenon, almost all companies producing essential goods or non-essential goods at the time of the COVID-19 crisis in Ethiopia are operating way below their production capacity, even as low as 30Pct, partly due to power outage. In fact, the IMF Working Paper published in 2018 indicated that power supply disruptions led to productivity losses of about four percent to 10Pct in the manufacturing sector. The study found out that while firms with low electricity intensity adopt costly coping mechanisms to a lesser degree and are hit harder by disruptions. Firms with high power intensity do invest in adaptation measures, but are also most affected by the high costs of self‐generation, incurring greater losses. Currently, insufficient power transmission is also affecting industrial production by discouraging the creation of new jobs and leading to an inflationary pressure that is washing away the earnings of households.

Households make up a lion’s share of energy consumption in Ethiopia. Of 40,000 GWH energy consumed every year, 92Pct is consumed by domestic appliances, four percent by the transport sector and three percent by industries. Most of the energy demand is satisfied by bioenergy, which usually stems from unsustainable sources in the case of domestic use.

Of the 9,000 GWH of electricity generated by hydro energy (96Pct) followed by wind energy (four percent), 11Pct is exported while the rest is consumed locally. Energy demand is also growing at an astonishing rate. As industries expand and population grows fast reaching 112 million last year, energy demand is also expected to rise by an average of 12Pct annually in the next decade. Plus, a one percent rise in urbanization would result in 0.22Pct increase in residential electricity consumption.

To boost coverage of electricity, the government has constructed several hydroelectric power dams, wind farms and other projects over the last 15 years. By doing so, it managed to increase the country’s electricity generation from 380 Mega Watts (MW) in 1991 to over 4,514 MW. That marks the second-highest installed available capacity for electricity generation in Sub-Saharan Africa.

Even more, 80Pct of Ethiopia’s population lives in proximity of medium-voltage transmission lines with abundant sources of renewable energy nearby. Ethiopia is one of the few countries in the world where the electric grid is almost 100Pct supplied by renewable sources. When it comes to practical usage though, the facts are not so rosy. An estimated three million consumers have formal connections with 3.8 million consumers in need of regularization. About 96Pct of urban households are connected to the grid (99.9Pct in Addis Ababa) while only 27Pct of rural households have access to electricity services, according to the Ministry of Irrigation and Electricity.

A report published by the World Bank last year showed only 24Pct of primary schools and 30Pct of health clinics have access to electricity due to lack of power. To buck this trend, the government unveiled a national electrification program since last year focusing on integrated—grid and off-grid electricity access. The program provides an implementation framework for the achievement of 35 percent of off-grid access by 2025.

This comes after the end of implementation of Ethiopia’s First National Electrification Program (NEP) in 2017, which helped the government achieve significant milestones in connecting 33Pct of its population with on-grid electrification and 11Pct with off-grid pre-electrification, thereby achieving a 44Pct electricity access. The new program aims to add 8.2 million new grid connections, while six million beneficiaries will have access to off-grid solutions through stand-alone solar solutions and mini-grid technologies.

Though six billion dollars is earmarked for direct investments and technical Assistance for on-grid and off-grid electrification, experts say the policy adopted by the government still fails to account for the problems in the ground and failed to come up with real possibilities to raise access to electricity. A case in point are the damaged existing electricity infrastructures that are not being properly upgraded. “The distribution infrastructure, which is old and aged, is very poor. Transmission lines and substations, for instance, have not been upgraded based on the growth in demand. Though some upgrading projects have been put into effect recently, they are still not enough considering the extent of the problem,” stated Tigabu Atalo, an Expert in Energy.

Hizkyas agrees. “Basically, power shortage and fluctuation remain bottlenecks not only because of shortage of generated electricity, but also due to maintenance problems. Old transmission lines are unable to carry higher energy, while higher numbers of clients are connected to limited lines and substations. Voltage drop and lack of capital for operational expenses worsens the problem,” he said.

Over the last 15 years, construction and upgrading of 58 substations and construction of 1,395km of 132kv and 522km of 230kv transmission lines have been completed. The government plans to rehabilitate and upgrade existing distribution networks in a bid to improve electric supply reliability, electric power loss reduction and boost the existing network capacity to further connect more new businesses and households. “Currently, we are upgrading distribution systems in six major cities including Addis Ababa, Adama, and Hawassa,” said Hizkyas.

Nonetheless, with the current pace, it is obvious that the government is not in a position to correct things any time soon. “There is lack of finance and skills gap to improve transmission and distribution infrastructure. Transformers, besides the burden of longevity in service, are not being properly installed as per the growth in the number of consumers,” said Tigabu. “Though a little has been achieved so far, transformers are being manufactured locally. The procurement process to buy transformers from abroad is also very centralized and long.”

Melaku Taye, Communications Head of Ethiopian Electric Utility, also admits that there is a lot to go in terms of reinvigorating distribution lines. “Although there has been a significant increase in terms of electricity generation, we have not done much in upgrading distribution lines, said Melaku. Cognizant of the matter, he went on to state, we are upgrading electricity networks and refurbishing transmission lines in seven cities. We have embarked on the same project this year in other six cities.

Moreover, Melaku says EEU has installed a technological system called Enterprise Resource Planning in order to centralize and closely follow its activities across the country. “This allows us follow and identify areas where there is power interruption; that, in turn, helps us save the time and cost incurred to do the job manually,” he said. “Our toll free line (905) has also started to operate independently as it doesnot use ethio telecom’s server anymore. It allows us serve 80 customers once, four times as much capacity as we had last year.”

Yet for Moges Mekonnen, Communications Head of Ethiopian Electric Power (EEP), the problem won’t be gone anytime soon. “Replacing maintenance equipment and spare parts locally remains difficult, while power equipment and spare parts are produced only by a few companies around the world. This means we cannot import the same equipment from another manufacturer and we cannot manufacture it locally,” noted Moges. “But our hope is that technology would be transferred to local experts as they get involved from the beginning until the end of the project; that is the path we are following now,” he added.

Meanwhile, industries are raising their concerns over electricity shortage, which has forced them produce way below their production capacity. In particular, one of the biggest consumers of electricity in Ethiopia, cement producers expressed their concern over power shortage and interruption in a meeting held last month. “Power shortage, along with shortage of forex, has affected our production. That has led to cement shortages and spike in price,” said Haile Asegide, CEO of Derba Cement and President of the Cement Producers Association. He complained: “The cost of electricity has increased drastically. Even under such conditions, its impact on the final price of cement could have been lower, had we got uninterrupted electricity.”

In response to the growing demand of electricity among industries, the government designed short term and long term plans. In the short run, it is attempting to boost the country’s generating capacity by completing pending projects, including the Grand Ethiopian Renaissance Dam, which is expected to generate 5150MW once it is completed within three years. “EEP will not start new power projects from now on. We will only focus on finalizing the GERD, which stands at 73Pct project implementation, Koysha at 35Pct and Aysha wind farm at 46Pct. Once we finalize these three projects, we will focus only on upgrading and modernizing the distribution system and substations,” Moges said. “We are already talking to EEU on scaling up distribution infrastructure.”

Developing new projects and producing additional power will be left for the private sector. Introduced two years ago, the Public Private Partnership scheme is now being implemented. So far, the government has an agreement with a Saudi company to construct Gaad and Dicheto solar projects in Afar and Somali regions under the PPP arrangement. “The company offered the cheapest price in Africa so far, while solar power investment is viable especially because it does not involve maintenance expenses once it is finalized. Unlike solar technology, hydroelectric projects require regular maintenance,” Moges explained.

Yet Tigabu fears that if the government fails to revise electricity tariff, private companies may not be interested to engage in the energy sector in Ethiopia. He went to add: “It is imperative that electric tariffs are increased in order to attract more investment in the sector; even allowing private entities generate and sell electricity directly to consumers would help, especially to alleviate the power shortage problem faced by industries.”

Hizkyas, from the Ministry of Irrigation, also understands that now is the time to swallow the bitter pill. “It is paradoxical because if we improve power tariff at once, we discourage FDI and domestic investments in the economy because of higher energy price, especially in manufacturing,” he argued. Hizkyas noted that power tariff must stay cheap in order to maintain stable industry. He insists that the country is left with no option but to adjust the tariff in a way that attracts investors who would like to engage in the sector and still proves affordable for consumers. EBR

9th Year • Jun.16 – July.15 2020 • No. 87

Samson Berhane

Editor-in-Chief samson.b@ethiopianbusinessreview.net

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