BusinessLights out! the aftershock
Lights out! the aftershock
By: Birhanu Fikade
It has been a week now since the government of Ethiopia reintroduced the latest round of power rationing measures that rotates every two shifts during the course of a day. Although not new to Ethiopia, the power outage is already taking its toll on some of the major industries in Ethiopia like cement, metal and grinding mills, threatening the overall economy in terms of exacerbating the already built-up inflationary pressure and deteriorating export sector.
The tattering sounds of mostly old and perhaps over-used diesel generators are back once again. Generators of all sizes with their lumbering and thick dark smoke emissions are once more becoming the hallmark of door ways and backyards of shops and malls in Addis Ababa; a practice that is expanding to the rest of the major cities in Ethiopia.
But this time around, the rattling sounds of small generators could also be heard from ordinary households deep in the suburbs of Addis Ababa. In fact, these days, diesel power generators are not restricted to lavish villas or five-star hotels anymore;modest condominium houses are also becoming dependent on them as power sources.
Businesses starting from small barbershops all the way up to skyscrapers are now forced to acquire or contract the services of these diesel-powered generators,incurring a cost of 1,500 to 3,500 birr per day, depending on the capacity.To added insult to injury, most of them have to combust their diesel fuel through most part of the business day, giving the cost of electric power a whole new meaning. To make matters worse,restaurants and bars are typical customers of rented generators mostly in the center city.
If it is not clear by now, Addis's noisy generators come out to play when the country faces a major power shortage; and when mandatory power rationing protocols are in effect.
It has been a week now since the government of Ethiopia has reintroduced the latest rounds of power rationing that rotates every two shifts during the course of the day. Power outages, which South Africans call "load shedding"are a direct result of water shortages in hydro power dams. Hence, currently, a deficit of 400 to 1,000 megawatts is what Ethiopia is facing; and the Ministry was forced to cut down on power consumption affecting both households and industries. Based on the statement issued by Sileshi Beksele (PhD), Minister of Water, Irrigation and Energy, a deficit of 400 to 1000 megawatts has also prompted power export cuts to Sudan and Djibouti.
At the moment, Gibe-III hydro power plant, which has an installed capacity of 1870 megawatts, contributes about 46 percent of the hydro-generated power in Ethiopia. Not only that, Gibe-III is also facing a deficit of 426 megawatts.Despite 20 power-generating plants that Ethiopia has so far,it has managed to generate only 4,300 megawatts, out of the potential 1.4 million megawatts of electricity that could have been obtained from hydro, geothermal, wind and solar sources. However, the actual supply remains to be somewhere around 2,500 megawatts. Gibe-III is prone to technical faults and deficits. Last year alone, a technical failure has caused several days of outages as a result of Gibe-III's faulty issues.
Exactly one year later, the same plant is experiencing issues;but this time around the blame seems to rest squarely on water shortages. According to the minister, a low level of water elevation (16-meter) has triggered the power deficit at the Gibe-III plant. In fact, Koka and Fincha power plants have also experienced similar challenges leading to the nation-wide problems.
Some argue that both South Africa and Ethiopia are facing more or less similar power outage challenges. The one thing that they have in common is the fact that both have state-owned enterprises running their power utilities with monopoly rights. The South African Eskom and the Ethiopian Electric Power (EEP) control the generation and distribution of electric power in their respective countries. Both have issues dealing with maintenance and obsolete power plants. Both have introduced power rationings. In the case of Ethiopia, the ration will last at least for the coming two months with schedules of five to six hours of blackout everyday. With regards to Eskom, it is facing a 4,000 megawatts power deficit- a potential volume believed to bring light to three million households and the entirety of Ethiopia's installed power generation capacity. The company says it has been generating some 34,000 megawatts of power from all energy mixes but 90 percent of the generated power coming from thermal sources. That huge capacity is some 690 percent of what Ethiopia has as a total capacity, where some 90 percent of the electricity is sourced from hydro plants.
Solomon Mulugeta, general manager of Ethiopian Basic Metals Manufacturing and Engineering Association, says that the newly introduced power rationing protocol has further intensified the growing challenges of local manufacturers. The power rationing system, which rotates twice in every 24 hours, is totally unrealistic and risky to heavy industries, according to Solomon."It probably forces the likes of reinforcement bar manufacturers, which depend on huge and preheated furnaces that need to fire up and melt bulk of metals, to suspend operations. Since the heating furnaces depend on receiving uninterrupted power supply."
According to Solomon, it would be reasonable to expect factory layoffs for as long as the rationing which is at least one month.
The blackouts are results of backlog problems. And Solomon is of the view that the government has to send appropriate alert signals beforehand when there is the possibility of power supply shortage and rationing. In fact, he argues that power supply has to adopt sector specific approaches.
Sadly, Getahun Hussein (Engineer),President of the Confederation of Ethiopian Employers' Associations,thinks that the situation is already far more dire than it looks. According to him, the problem is exacerbating the already existing challenges of the Ethiopian business environment; and claims that many factories are having a hard time to retain their operations going. Hence, with the hope of easing the mounting challenges, the Confederation is considering to have a formal meeting with high-level officials to help address power and various other setbacks manufacturers are facing in Ethiopia.
Getahun fears, the power rationing might not necessarily be over after July. The wear and tear conditions of many of the power plants and the highly sought after maintenance of the turbines and generators would further prolong the scheduled rationing, he indicates.
"The manufacturing sector, specifically the metal industry,is often beleaguered with multifaceted challenges, bureaucratic red tape, lack of prioritization and deeply-rooted biases in favor foreign investment such as in the allocations of hard currency, inputs and the likes," he argues.As a result, some among the negated local manufacturers are on the verge of exiting the metal processing industry, Solomon warns.
MogesMekonnen, head of communications directorate with the EEP, and MelakuTaye, head of communications with Ethiopian Electric Utility (EEU), defend their respective agencies with regard to the rolled-out power rationing protocols arguing, nature is to blame for the power outages sincedire weather conditions is at the heart of the problem. Mogesasserts that it is not lack of planning or failing to issue an early warning that is the problem. However, he argues, "the weather forecast for mid-year rainy season was positive that rains will come in time. But, they did not. The two-month rainy season of March and April was actually delayed and came unexpectedly in early May."
Whereas Melaku responding to the much criticized rationing said, "No one could take power rationing for granted". Melaku goes even further to explain, between the 13 percent annual power demand growth and the outdated and congested distribution networks, the power supply system has been due for maintenance for a long time.
Nevertheless, he also recalled that some considerations have been made for manufacturing industries. "Grind mills are totally prohibited from using uninterrupted power until July. Half of the cement factories are likely to have access toa two-week constant supply and while the remaining half will endure rationed power supplies. Hence, the likes of Dangote Cement which requires some 45 megawatts of electric power from national grid, are required to pass through this process."
Melaku, however, denies the power outages and rationing are abrupt to heavy industries. They have been notified and told to get ready for the likely outcomes, he said. And as for export-oriented manufacturers, hospitals, water utility and the likes, they will not be facing the rationing program, Melaku noted.
Tewodros Mekonnen (PhD), an economist with the International Growth Center (IGC),is rather concerned about the economic implications of the recurrent power outages in Ethiopia. Referring to studies made by the World Bank Group (WBG) and survey data by the Central Statistics Agency (CSA), Tewodros maintains that power shortages and outages are the second most impeding set backs affecting the manufacturing sector next to raw materials. The growing impact gets severe when power interruption is added to it. "The small and medium sized manufacturing enterprises are less likely in a position to afford and install power backups."
Tewodros is sure that the manufacturing sector is the most challenged sector by the recurrent power outages. He says urban areas and the service sector are also more prone to face the ugly outcomes of the power interruptions. "Cost of production keeps mounting due to increasing drifts and shits to fuel consumption in times of power outages. It is obvious that electric power is less expensive than fuel and the more economic sectors depend on fuel, the higher their cost of production becomes,"Tewodros explains. That scenario will contribute to the already building up inflationary pressure since the likes of logistics which the economic expert calls "supporting and administrative services" will see a change in the existing prices.
The short term remedy according to Tewodros will be the provision of relevant and reliable information to the public to help early planning so that likely damages could be abridged. The government needs to disseminate accurate information and guarantee that the rationing is certain and will end on the schedule as announced.
"The progresses and expected outcomes as well should be continuously communicated to the public and in the medium and long term periods, while power projects that are nearing completion utterly need to see the light of the day," he recommends.
From the point of view of the economy, Tewodros advices that such incidents need to be well documented and the impacts should be measured so that future decision of power outages will be backed by hands-on data and the government would need to think seriously and consider economic repercussions. "I assume the government is facing difficult circumstances and the current challenge should serve us a lesson for future undertakings", he advised.
According to Solomon, sector specific interventions could be one approach to look at in terms of possible solution. "The government has to implement explicit solutions centering manufacturing industries. We cannot force large manufacturing plants to install alternative power sources since that requires huge sums of money", hereiterates.
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