Botswana should fast track instruments to facilitate investment in energy infrastructure development which among others includes independent power producer (IPP) licensing, and procurement guidelines.
This is according to a recent report by the World Bank Group titled Country Private Sector Diagnostic; Creating Markets in Botswana. The World Bank Group penned the report in conjunction with its member institution in International Finance Corporation.
“The capacity of the Projects and Energy Development Unit (PEDU) under the Ministry of Minerals and Energy (MME) should also be increased to implement large electricity infrastructure projects including all projects under the Integrated Resource Plan, and the Sustainable Mega Solar Program,” the World Bank Group continued to advise. “In the medium term, the PEDU should be transformed into a full-fledged IPP office.”
The report further advises the country to enhance the institutional capacity and governance model of the Botswana Energy Regulatory Authority (BERA). “A short- to medium-term objective should be to implement full independence of BERA away from the government to give investors and industry players confidence in the regulator,” the report recommends. “This would include, among other things, moving it from dependence on government subvention to a sustainable and independent revenues-from-fees-and-levies model, as well as making BERA the final decision maker in tariff determination.”
Meanwhile, the World Bank Group report shows that energy is a growing industry in Botswana with tremendous potential and importance as an input to other industries. “This is because of steady population and Gross Domestic Product growth, overall power demand in Botswana has been on the rise and is expected to further grow by 4 percent per year over the next decade,” reads the report.
At the same time, the report says the country is facing diminished generation capacity, forcing the national power utility Botswana Power Corporation (BPC) to increase its energy imports with more than 50 percent of Botswana’s power requirements being imported from South Africa and Zambia. “This increase in energy imports has resulted in high import costs and operational efficiencies that have affected BPC’s financial performance, which in turn is affecting consumer tariffs and draining public finance resources,” shows the report.
Additionally, the report indicates that key growth industries, services, and households suffer from a lack of sustainable, cost-effective, and reliable energy. “Despite a higher electrification rate than the regional average, most firms in the country are not satisfied with their access to electricity,” shows the report. “Interruptions stemming from importing electricity as well as transmission and distribution losses continue to be important barriers to growth in Botswana because the grid lacks appropriate investment and maintenance.”
Furthermore, the World Bank Group says the generation and import of fossil-fueled power is threatening the international marketability of Botswana’s diamond industry, a key contributor to Botswana’s GDP (20 percent) and exports (90 percent). “To address the energy supply shortage, Botswana has set ambitious targets to grow domestic power generation capacity and to accelerate the move toward renewable energy resources contributing at least one-half of total electricity by 2036,” reads the report. “With an abundance of sunshine, Botswana has a comparative advantage in producing solar energy while also supporting energy diversification in the region.”