Power tariffs in the country are set to go up during the fiscal year 2023/2024 due to high inflationary pressures and poor rainfall, which could weigh on electricity production from the Ruacana power station, analysts have warned.
This comes as NamPower has requested a 16% increase in electricity tariffs, which is subject to the discretionary approval of the Electricity Control Board (ECB) in April 2023.
“Depending on what the ECB approves, we do see higher electricity tariffs – which would be effective July 2023 – as a risk to inflation in the second half of 2023. This is due to the fact that the housing and utilities category has the largest weight in the consumer price basket (28.36%).
Based on statistical models used by the International Research Institute for Climate and Society (IRICS), there is a 40% probability that Namibia will receive below-average rainfall, which could pose a risk to the production of electricity from the Ruacana power station,” said Simonis Storm Economist Theo Klein said.
He notes that local demand for electricity is increasing with a seasonal effect in winter and spring seasons, where 2023 electricity demand increased notably due to the recovery of business and mining activity.
“According to the National Statistics Agency (NSA), the composite mining production index, which tracks diamonds, gold bullion, uranium, and zinc, grew by 32.2% y/y in February 2023. This is indicative of the recovery of the economy, which substantiates why demand for electricity is on an increasing trend,” Klein said.
This comes as last year, the ECB resolved to increase the average bulk tariff by 7.30% from the approved tariff of N$1.6982 per kilowatt-hour to N$1.8222 per kilowatt-hour for the period 2022/2023.
The increase is despite, NamPower having submitted a tariff application for an effective bulk tariff increase of 12.78%, which would have resulted in an increase from an average of N$1.6982 per kilowatt-hour (kWh) to N$1.9153 per kilowatt-hour for the financial period 2022/2023.
“Future tariffs are expected to increase in line with inflation and to cater for new generation as per the National Integrated Resource Plan. However, we must realise that external factors such as the weather, foreign exchange fluctuations, and other unforeseen circumstances may affect the projected price path and must be taken into consideration when reviewing future tariff applications,” said then ECB acting CEO Rachel Boois.
