IMPROVEMENT PROGRAMME WORKSHOP NYANGA, DECEMBER 16 17,1993 - VOLUME 2. THE WORKING PAPERS (Ministry of Transport & EnergyIWorld Bank) CONTENTS Page I. Acknowledgement 11. List of Acronyms 111. Introduction IV. Opening Session A. OpeningRemarks; 3. Moyo B.. Official Opening Speech; The Hon. D. Norman V. The Working Papers DOERD Position Paper; C.T. Mzezewa World Bank;S. Brushett World Bank;K.F.Schenk ETSU Paper I: A, Gilchrist ETSU Paper 2: R. Spencer ZESA Presentation :D.D. Madzikanda ZABO Energy Task Force: R.H.A. Williams Zimbabwe Phosphate Industries: G.T. Rushwaya DOERD: Economist Point of View: J.J. Mangono Consumer Council of Zimbabwe: M. Nyambuya VI. Annexe Annex I: Agenda Annex 11. List of Participants Annex 111. Workshop Discussion Groups I. ACKNOWLEDGEMENT These working papers are a result of a two-day symposium on "National Energy Efficiency Improvement Programme (NEEIP)", held at Nyanga, 16-17 December 1993. A host of experts in the energy and related fields participated: energy economistsand planners, farmers,energy scientists, engineers, donors, industrialists,policy makers, bankers, financial analysts and academics. Particular thanks are due to the World Bank which sponsored the workshop, SIDA who provided funding through the Bank and the Department of Energy Resourcesand Development (DOERD) within the Ministry of Transport and Energy (MOT & E), which organizedthe symposium. We are specially indebted to those'persons who authored sessionpapers: J. Moyo, C.T. Mzezewa, K.F. Schenk, S. Brushett, A. Gilchrist, R. Spencer,D.D. Madzikanda, R.H.A. Williams, G.T. Rushwaya, J.J. Mangono, M. Nyarnbuya. C. Murove (DOERD) did the painstakingjob of pre-workshop organization. The workshop was steered well on courseby the able chairmanshipof J. Moyo. The rapporteur of the workshop was G. Mandishona, who fieely edited the session papers. Any errors or omissionsare regretted. Special thanks are extended to all participants whose deliberations and comments were occasionally caustic,often critical, but always stimulating. The Report is compiled in two volumes: Vol. 1:Summary of Proceedings Vol. 2: The Working Papers. ..................G. Mandishona. (Rapporteur) arv 1. 1994 LIST OF ACRONYMS ADB: African Development Bank. BUN: Biomass Users Network. ccz: Consumer Council of Zimbabwe. CIDA: Canadian International Development Agency. DOERD: Department of Energy Resourcesand Development. DSM: Demand Side Management. ESAP: Economic and Structural Adjustment Programme. ESMAP: Energy Sector Management Assistance Programme. ETSU: Energy Technical Support Unit. GEF: Global Environmental Facility. MOT & E: Ministry of Transport and Energy. NEEIP: National Energy pfficiency Improvement Programme. NOCZIM: National Oil Company of Zimbabwe. NRSE: New and Renewable Sources ofznergy. R & D Research and Development. SAZ: Standards Association of Zimbabwe. SIDA: Swedish International Development Agency. SIRDC: Scientific and Industrial Researchand Development Centre. TQM: Total Quality Management. UNDP: United Nations Development Programme. ZABO: Zimbabwe Association of Business Organizations. ZEEP: Zimbabwe Energy Efficiency Project. ZESA: Zimbabwe Electricity Supply Authority. INTRODUCTION The Ministry of Transport and Energy, in collaboration with The World Bank, jointly resolved to hold a workshop to discuss the objectives, aims and goals of the National Energy Efficiency ImprovementProgramme WEIP), taking into considerationthe modes of its implementation. The NEEIP is expectedto focus on all sectors of the Zimbabwean economy. The workshop objectiveswere to develop: - a strategic M e w o r k for the NEEIP. - institutional guidelinesand mechanism for ensuring effective implementationof the programme. - strengtheningof the institutional capacity to identify strategic issues in the energy sector. - integrationof energy efficiency activitiesinto policy formulation. - ability to formulatepresent and future viable integrated energy strategies. Participants to the workshop were drawn from a multiplicity of disciplines: energy engineers, economists,farmers, industrialistsand energy consumers. The findings of the workshop were expected to include observations on energy use in Zimbabwe, identificationof major actors and Governmentstructuresrelated to energy efficiency. The symposium further deliberated on generictypes of energy efficiency improvementprogrammes undertaken world-wideand some models to implement them. The overall objectiveof the workshopwas to arrive at a consensus as to what will work vis-a-vis, energy efficiencyprogrammes. It was not the intentionof the workshop to impose recommendationson the best approaches, but rather to provide a platform for free debate whereby participants thought through key issues. IV. OPENING SESSION A. OPENING REMARKS: J. MOYO, PERMANENTSECRETARY, MINISTRY OF TRANSPORT AND ENERGY NATIONAL ENERGYEFFICIENCY IMPROVEMENTPROGRAMME The Honourable Ministerand Distinguished guests. The aim of this Workshop, Ladies and Gentlemen, is to establish a strategic frameworkfor efficient use of energy. The h e w o r k will encompassall energy sectors such as electricity, coal, liquid he1and biomass. At this workshop, we hope to come up with policies and strategiesthat would act as guidelinesto efficient utilisation of energy. We are also going to discuss how these policies and strategiescould be implemented. Thereare a number of models that can be adopted, which include agency based information programme, grant-based programme, utility-based demand side management (DSM)programme, stimulation of supply industry, contract energy management or regulation/standards. It is the onus of this workshop to determinewhich programme model is the best for Zimbabwe. Donors and financial institutionsshould also play a major role since the implementation has to start off with initial capital. Ladies and Gentlemen, there are also a number of energy efficiency initiatives that are already under-way e.g. the ZEEP and the SADC. These activitiesshould also fall under the frameworkthat we are going to formulateat this NEEIP workshop. It should also be noted that someprogrammes have worked well in other countries but this does not necessarily mean that they should follow suite in Zimbabwe. So I encourageyou to considerall the necessary aspects of Zimbabwe when formulatingthe policies and strategies. Remember this frameworkthat we are going to establish at the workshop shall also cater for futureprogrammes. Thank you. B. OFFICIAL OPENING SPEECH: THE HON. D. NORMAN, MINISTER OF TRANSPORT AND ENERGY NATIONAL ENERGY EFFICIENCY IMPROVEMENTPROGRAMME Mr. Chairman, Distinguished delegates, Ladies and Gentlemen. It is a great pleasure for me to be availed this opportunity of officially opening this important workshop, on the National Energy Efficiency Improvement Programme. May I take this opportunityto extend to you all a warm welcome to this workshop. Mr. Chairman,there is a growing appreciation of the role that improvements in energy efficiencycan play, in bridging the gap between the energy supply and demand. At the same time, there is an increasing realisation that these improvementsare not penetrating societyas rapidly as they should. Attention is therefore being turned to the factors that determine the implementation, acceptanceand spread of these improvements. Ladies and Gentlemen, energy consumption is shaped by the behaviour of a number of factors at various levels, including: energy consumers, end-use . equipment manufacturers, power utilities, 1ocaVfinancialinstitutions, Government and fundinglaid agenciesof International and Multinational organisations. To achieve improvementsin the efficiencyof energy use, action is required at one or more levels fiom the lowest level of the consumerthrough to the highest level of global agencies. Mr. Chairman,as you are aware, energy literally fuels the global economy, securing us a steady flowof goods and services. Without energy, prosperity would cease and economicdevelopment would come to a grinding halt. Energy helps growth and refrigerates our food, pumps our water, removes our wastes, mines our minerals, manufactures and transportsour goods, and gives us incredible mobility world-wide. It should be noted, however, that these manifold services come at a price. Energy is expensive, consumesenormous sums of capital and is one of the major causes of damageto health and environment. The 1973Arab oil embargo and subsequent oil disruptionsraised serious global security concern. These issues of cost, environmental damage, and energy insecurity are speciallytroubling for developing countries, like Zimbabwe, which are debt-strapped and face acute shortage of capital. In an effort, therefore, to minimize these soaring costs and risks, there is need to supply energy servicesthat are more efficient, lower in cost, and safer. - Scientificadvancement and technological innovations have produced a steady flowof more efficientand less polluting commercial products and services. These range from highly efficient gasturbines and pollution trapping equipment . on the supply side, to a severd-fold increase in the energy efficiency of end-use deviceslike lights, electric appliances; buildings, windows, vehicles, electric motors, and ofice as well as manufacturingequipment. The resource pool of cost-effectiveenergy-saving options continues to grow, and the technical innovations show no sign of slowing. This isprofoundly good news, because it offers a sound means of satisfyinga substantial hction of rapid growth in demand for energy services expected in the coming decades. Mr. Chairman, a common feature of a successful energy efficiencyprogramme, in a country like ours is Government commitment, and my Ministry has already embarkedon such an initiative. Empowering the implementingagency with the legislative, administrativeand long-term funding authority, needed to design and implementeffective energy efficiencyp r o ~ ~ iisevital. Energy users must s understand that energy efficiency is an important national priority. My Ministry is also awareof the need for Governmentnot only to endorse energy efficiency practices at the highest level, but also to set the example by improving the efficiencyof its own buildings and enterprises. In this regard, Mr. Chairman, my Ministry has embarked on a nation-wide lighting audit of major Government buildings and enterprises,beginning with Kaguvi Building where my Ministry is housed, to prove the case for demand side management. Mr Chairman, commitment to energy efficiency programmes must exist on the donor side as well. A programme without continuity of support in terms of funding will not succeed. According to conventional approach to energy followed by financial institutions, the purpose of the energy system is to increase energy consumption,that means, increasing the energy supply. Efficiency improvements, which serve to reduce the supplies are therefore automatically ignored. I urge all financial institutionsrepresented at this workshop to place more emphasis in futureon energy efficiency improvements, on the list of options for providing services and pursuing least-cost planning. Ladies and Gentlemen, the formulation of energy efficiency programmes require technical and managerial skills of a higher order, which are in extremely short supply within my Ministry. My Ministrywill endeavour to tackle this problem through the implementation of extensive and intensive training programmes. In conclusion, Mr. Chairman, I would like to re-emphasize the point that efforts to promote energy efficiency programmes, should not stop at paper studies or energy audits of individual facilities. There is need for an overall strategy for inducing, persuading, mandating, financing,or otherwisemanaging the implementation of the study and audit recommendations. The effectiveness of efficiency investments should be analysed with respect to energy savings achieved, and the cost per unit of energy saved so that mistakes are not perpetuated, and the cost of savings can be comparedto the cost of providing additional supply. Mr. Chairman, Ladies and Gentlemen, I would like, on behalf of the Government of Zimbabwe, to express my thanks and gratitudeto the Energy Sector Management Assistance Programme (ESMAP), and all those who have made the organisation of this workshop possible. I wish you all a good stay and successful deliberations in your workshop. Ladiesand Gentlemen, with these remarks. I declare the workshop on the National Energy Efficiency Improvement Programme officiallyopen. Thank you. THE WORKING PAPERS DOERD POSITION PAPER: C.T. MZEZEWA (DIRECTOR, DOERD). NATIONAL ENERGY EFFICIENCY IMPROVEMENT PROGRAMME ZIMBABWE'S ENERGY RESOURCE BASE Zimbabye's energy resources base is made up of vast quantities of coal reserves estimated at 10.6billiontons in situ of which 2 billion tons is mineable. The only meaningful hydropotential is on the Zambezi river and it is estimated that a potential of 39 TWh per annum can be realised. It is also estimated that the country canproduce on a sustainable basis 13million tons per m u m of fuelwood. 1 The countryhas very high solar radiation averaging 3 000 houdyear of sunshine or 20MJ/m2/day. Wind speeds are generally low averaging 3m/S, which is considered too low for &nd-based power generation but moderate for water pumping applications. Zimbabwe importsall its petroleum fuel requirements. The search for'hydrocarbondepositsin the Zambezi Valley revealed only a limited chance for perhaps natural gas. The potential for geothermalhas not yet been evaluated. There has also been reports of uranium findings. Coalbed methane findings have been reported in the Hwange area and South Eastern loweveld (Chiredzi). ENERGY UTILIZATION The latest (1991) energy balance for Zimbabwe shows that the main sources of energy used in the country compriseof coal, electricity, fuelwood, petroleum fuels, making a total national consumption of 261 000 TJ. The consumption patterns for the various fuelsare worthy to note. Some of the salient points are:- The contribution of solar energy to the total national energy consumption is negligible in spite of the high radiation levels. The contribution of coal especiallyto the domestic sector (1.2%) is also neglibible . In spite of the high levels of investment and foreign currency requirements, petroleum fuels and electricity only benefit a disproportionately small percentage of the population. For example only 13-16% of the population has access to electricity for domestic use. GOVERNMENTENERGY POLICY Overall objectives of the energy policy centrearound the following: Ensuring adequate, secure, reliable and safe supplies of energy to all sectors of the economy at least cost, and consistentwith economic growth and equity objectives of the Government. Efficient utilization of all energy resources including inter-fuel substitution, more particularly of imported fuels. Utilization of indigenousenergy resources such as coal, hydro-electricity and biomass to enhance national self sufficiency in energy supply. Research, development and promotion of new, renewableand environmentally friendly energy technologies. Plan in an integrated manner the optimal mix of energy supply through appropriate energy policies and pricing signals. Facilitate regional and crossborder cooperation in the production and supply of energy where it is economicand strategic to do so. 3.7 Encourage and promote the establishment of manufacturing and trading organizations in the energy sector. 4. ENERGY EFFICIENCY 4.1 The efficient utilization of all forms of energy is one of the pillars of the energy policy cited above. The economic structural adjustment programme brings into sharp focus the need not only to supply adequate energy to meet the anticipated economic growth, but also to reduce the energy costs of production so that our goods can compete on the international market. Environmental requirements also call on us to reduce carbon dioxide emissions into the atmosphere as we strive to meet our production targets. This can be achieved in part by ensuring efficient production and utilization of energy. 4.2 The Department of Energy is doing some work into the diffusion of efficient wood burning stoves in rural areas. The commercial sector is also receiving increasing attention. The main fuels in this sector in Zimbabwe are electricity, petroleum fuels and coal. Biomass is little used. 4.3 Many of you will be aware of the devastating drought in our region whose consequences are still playing havoc with our economies. To us in Zimbabwe the adverse effects were felt across the whole economy including the electrical energy supply system. Hydro-electricity production accountsfor about 40%of electrical energy generating capacity in Zimbabwe. Hydro generating capacity has reduced to a level where the country was placed in a serious electricity energy supply deficit situation. We had to resort to a power curtailmentprogramme which meant load shedding for domestic consumers in order to make power available to the productive sector. The productive sector itself was also subject to power rationing through a quota system where, dependingon the tariff category, a consumer had his supply reduced by between 20%and 30%. 3.4 The situation resulted in lost revenue to the economy as some industries and mines reduced production althoughthe reduction was also in part due to recession brought about by the drought. What the situation did was to bring to light the fact that there are ineficiencies in terms of electrical energy use as some companies changed management habits and were able to meet production targets within their reduced quotas. The situationalso brought into sharper focus the need for us to accelerate programmes in the area of energy efficiency and conservation in order to capture the potential energy savings so evident in the economy. 4.5 Earlier, the SADC pilot project on industrial energy conservationunder which 20 audits were undertaken in Zimbabwe had demonstrated potential for energy efficiency improvementsof the magnitude of 15% to 25%. .Some of these energy savings could be achieved with little or no investments by the companies. The case for systematic energy efficiency programmes was therefore strengthened. 4.6 Thus, the Zimbabwe Elelctrical Energy Efficiency Project known by the Acronym ZEEP took form. What is ZEEP? This is an initiative between the Department of Energy and the International Energy Initiative (IEI) which is aimed at developing and implementinga comprehensiveelectrical energy efficiencyprogramme. 4.7 What is the Expected Outcome? The Zimbabwe Electricity Supply Authority (ZESA) is included as a major player from the onset. It is intended that the ZEEP Programme will evolve into a utility driven demand side management (DSM)programme. 4.8 ZEEP Programme Organization Programme development is phased. The first phase is looking at project design and the action plan consists of priority programmes on efficiency demonstration projects through an energy audit based approach, efficiency projects through a device based approach (motors, lights, refrigerators, water heating systems) and training. Demonstration projects are intended to prove the case for energy efficiency and demand side management. Use of local consulting capacity is being made to implement project elements. 4.9 To move the programme forward a number of tasks have been identified and hereunder described. There are early action programmes as well as energy efficiency policy studies to be undertaken. The early action programmes reflect the intention of the project to commence implementation and "learn while doing" rather than to attempt to anticipate all the variables that must be managed to create a successful and comprehensive programme. 4.1 0 The project tasks are as follows: Task 1 is Project Design and Implementation Demonstration Sub-projects (Task 2) This task involves the design and implementation of electrical energy efficiency improvements in enterprises. We have initiated scoping audits (facility profiles, process descriptions, electric end-use allocation, identification and screening of energy conservation opportunities). There have been site visits to six companies and more scoping audits willsbe undertaken before selecting three to four companies for detailed auditing and implementation of energy conserving measures. The demonstration sub-projects will input into the training activity which is discussed later. Task3 - Analysis: Critical Path Item On The Work Plan. This task involves the determination of appropriate measures necessary to value both the benefits and cost of energy efficiency investments. This is being referred to as a screening tool. The screening tool determines the value of demand savings (KW) and energy savings (KWH) that result from the installation of an efficiency measure on a year to year basis. With this information the present value of benefits to - end-user - the utility - the nation (and society as a whole) can be calculated. This brings to play the possibility of cost-sharing of efficiency investment.' In addition, the screening tool will quantify avoided - transmission - distribution - environmental (if appropriate) and - other costs (risk mitigation). 4.11 This information can then be used to value savings to customers (reductioc.in energy bill versus required investment). savings to utility (avoided fuel or energy purchases, avoided generation carrying costs and avoided transmission and distribution costs vs required investment). savings to society (avoided fuel or energy purchases, avoided capital outlay (generation/transmission/distributionsavings from avoided environmental impact and preservation of foreign exchange vs cost of investment). 4.12 The screening tool is essential for converting audit observations into investment opportunities. A draft tool has been developed in the form of a spreadsheet containing the parameters and formulae required to make the necessary calculations. Using project specific data in the spreadsheet the viability indicators quantified as present value of net benefits will be generated. It is also possible to run sensitivity tests which may lead to improvements in project design. The model is not without its problems because of data difficulties. Accurate figures of the LRMC of supply are needed, notjust for electricity as a whole, but for each category of consumers, and these will have to be updated as more accurate information becomes available. 4.13 Task 4 Training and Public Awareness - This task involves increasing the available pool of technical resource persons able to perform audits, while also increasing the number of Government and utilityprofessionals well-versed in electrical energy efficiency methods and the requirements for implementation. This task will assess training need for ZEEP in Energy auditingknergy efficiency among local engineers in consulting, industry, agricultural and commercia~institutionalbuildings. - Energy management generally DSM (integrated resource or least-cost) planning, resources and skills assessment, quality of training resources currently available in Zimbabwe to deliver the required energy auditindenergy efficiencytenergy management DSM training for ZEEP would be assessed. (University, Polytechnics, Private Sector Training Institutions, ZESA, In-house Programmes). - Potential Linkages with Other Programmes ESMAP SADC (in developing and delivering training courses on these subjects). 4.14 The training task will have a short early action training component whose objectives are: to provide background informationand ZEEP philosophy, and brief personnel on the procedures and outputs of typical "energy audits" of the development of demonstrationprojects. to enable interpretation and assessment of energy audits and resulting demonstration projects themselves. to provide information on the financial analysis of energy efficiency projects. 4.15 Task 2 is employing the audit based approach whilst tasks 5 8 are being referred - to as the device based approach and seek to determine programs to capture energy savings (in lighting, water heating, motors and refrigeration). 4.16 Task5 - Motor Investigation Assessment of the potential impactof improved motors, fans and rewind practices, and of the evaluation of alternativeapproaches to capture this potential. Task 6 Domestic Water Heating Investigation - It has been estimated that water heating constitutes 30% 50% of the domestic - electricity bill. Assessment of the potential of improved hot water geysers andlor replacing these with solar hot water units, and of the mechanism to realize this potential. Task 7 - Lighting Investigations Assessment of the potential of efficient lighting and the methodology to capture the potential. This will involve looking at improved lighting technologies and optimal lighting levels. 4.17 Task 8 - Refrigerator and Freezer Investigation Assessment of potential for improvements regarding the end-use devices and ways to capture these improvements. Under this activity the following elements will have to be addressed:- share of energy use - relative efficiency local and foreign supply quantification best technologies - barriers to implementation. 4.18 Task 9 Independent Power Production (IPP) Identification of opportunities for co-generation and possible sale of excess electricity to the national grid. The activity will review any initiatives in progress and identify barriers. Potential test cases will be assessed. 4.19 Task I0 - Decentralized Power Prod~cction(DPP) In addition to the programs cited above, government has also runjointly with NOCZIM, public awareness programs especially for the petroleum fuels. ZESA has also run the 'Switch-Off-Switches' program aimed at encouraging people to switch off unnecessary lights and other loads. 5 . What Have We Learned From These Programs? It is clear from these programmes and work carried out elsewhere that: 5.1 There is a largepotenlialfor energy saving in all sectors of the economy. mese savings translate into financial savings for both the consumer and the utility, in either avoided or delayed investments. There are also economic benefits to the nation derived from the saved foreigncurrency (for power and petroleum fuels, power imports ($200M,) petroleum fuels,over Z$1,5 Billion, and avoided carbon emissions). 5.2 In spiteof the obvious savings cited above and the relatively attractive pay-back period, the adoption of energy conservationprojects and practices has not been as wide as would otherwisebe desirable. 6. Barriers to Adoption of Energy Conservation Certain barriers were identified which work against adoption of energy efficiency measures and practices: 6.1 Lack of information or awarenessnot only on energy utilisation patterns, but also of the opportunitiesavailable. 6.2 Low Energy Cosfs For some industries, energy is a smal! component(5% 10%of their production - costs)and especially with hitherto artificially low energytariffs, there has been little incentivein giving it the desired attention. Energy tariffs are bound to increase to reflect their true economiccosts, and will therefore become a significantcost element in the production process. 6.3 Lack of Forex This was identified as a constraint especially during the SADC CIDA project - where companies cited serious foreign currency shortagesfor equipmentthat needed to be imported. This seems to be getting less significant, but the shortage or high cost of capital on the local market seemsto have taken over. Where an energy saving measure has been implemented through a retrofit, sometimes the equipmentcan be very expensive and so discourage a company from pursuing the option. What can be done to ease the burden of high costs involved in implementingenergy conservation programs? 6.5 Lack of Followup Service For any programme to be sustainable, there is a need for sustained and consistent followup. This requires the presence of full-time organisation, not only to keep the interest high, but also to assist where problems are encountered. This brings us to the main objective of our workshop today. What mechanism would be most effective in formulatingand implementing energy conservation programmes? 6.6 Lack of Skilled Manpower There is a dearth of energy specialists in our institutions. However, with an intensive training and dedication this problem can be alleviated. 7. How is Government Gearedfor Energv Eflciency Programs? 7.1 The Department of Energy (Ministry of Transport and Energy) is the Government arm in all energy programs. The Department has recently established an energy conservation section whose broad terms of reference are: - formulate national energy conservation policy and programs to cover all sectors of the economy initiateldesign and monitor energy conservation programs and projects, including fuel substitution - design/conduct~coordinateenergy efficiency awarenessprograms, .. including exhibits - produce technological efficiency standards in all sections of the economy. These functionsshould be seen in the general framework of the role of DOERD as coordinator,facilitator and initiator. 7.2 Other sectionsof the Department which play complementary roles are: - energy economicsand planning - energy research and development - energy administration. In the SADC - CIDA energy conservation project, an officerfiom the Department was seconded to the project and devolted all his energiesto it. He received valuable training, but the rest of the staff inthe Department played a rather peripheral role. 7.3 In the ZEEP programme, an officer is working fulltime on the project, but within DOERD. Other staffwithin the Department have an opportunityto participate and leam. These arrangementsshould be taken into account in consideringinstitutional arrangementsfor the proposed National Energy Efficiency Improvement Programme. 8. Conclusions 8.1 Large Potential Existsfor Energy Saving in Zimbabwe which would not only reduce the energy costs of production to all sectors of the economy,but would also save the country foreigncurrency/and reduce the country's contribution to the emmission of greenhousegases. 8.2 Barriers have been identified which militate against adoption of energy conservationpracticessuch as; - the relatively low costs of energy lack of awareness - absence of an effective programme funding. 8.3 This workshop should therefore come up with recommendations to Government on a sustainable strategicframe\vork for an implementable and effectiveenergy conservation improvement programme, which among other things; - identifiesthe key players, classifies their respective roles, - strengthensand improvesthe effectiveness of each role player, ensuresthat the programme is adopted nationwide on a sustainablebasis. B. WORLD BANK: S. BRUSHETT NATIONALENERGY EFFICIENCYIMPROVEMENTPROGRAMME: OUTLINEPAPER Pleasure to be here andjoin in part of the deliberations. Recognise Minister of Transport and Energy, PS for Transport and Energy, guests, ladies and gentlemen. Bank very happy to be associatedwith this endeavourthrough ESMAP. Subject is critical and the level of interest shown in Zimbabwe is encouraging. Many have asked about future Bank Groupsupport. If GO2 favourable we can start preparation of a Power IV project in 1994 - thisis understood on both sides to have a strongenergy efficiencyfocus. Opportunity to bring together various strands in Bank assistance to power sector over the recent past - lending (principallyto Hwange and distribution);refom and commercialisationof ZESA; energy efficiencypromotion (through ESMAP); power sector investment planning; reviewing alternative energy sources (GEF). Strong link to adjustmentprocess to be stressed. Industry in particular needs new investment and technology to compete-retooling in the direction of more energy efficiency has been spurred by competition,but also by rising power tariffs. Key question is nature of support needing to be provided for the transition to be effected. A good start has been made on plugging the informationgap, but more needs to be done. What other support functionshave to be fulfilled? Recognise key role ESMAP assistancehas been playing in this regard. Will follow discussions on this closely. Concern in era of civil service reform, downsizingand redefinition of functionthat we keep adding bits here and there. Need a lean and mean approach, with perhaps some private sector funding like ZIMTRADE. C. WORLD BANK:K.F. SCHENK NATIONAL ENJ3RGY EFFICIENCY IMPROVEMENT PROGRAMME Introduction 1. This short paper reviews briefly the lessons learned from recent years' experience in energy effrciencyby the World Bank with reference to identifyingthose elements in energy efficiencypolicy and strategythat would assist in achieving a sustainableimpact in the promotion of energy efficiencystrategy objectives.' TheBank's interest in energy effrciencydates back to its earliest loans in the 1950s. Bank policies have clearly evolved in these four decades with various policy instrumentsadded in response to changing circumstances and the evolution of new ideas and concepts. Regarding countrypolicy prioritiesto improve energy efficiency, the underlying conceptthat has withstood the test of experience is that decisions should be made within an overall integrated energy strategy which would establishthe priority objectivesto direct the energy sectortowards the most efficient, equitableand sustainableuse of resources. 2. The availability of a reliable and diversified energy supply is vital for sustained economic and social development. Since energy permeatesthe whole economy, the formulationof an integrated energy strategy and policy is the responsibility of Government. For an integrated energy strategy, subsectoral plans and policies must be consistentwith economicdevelopmentobjectives. For this, close coordination must be maintained between the various ministries of government. 1 This shorc paper is based mainly on two Bank Policy Papers: (i) Energy Eficicncy and Conscrviition in the Developing World, and (ii) The World Bank's Role in the Electric Power Sector. 1993. 3. The World Bank experiencein energy efficiency2 and conservationactivities clearly indicate that to obtain continued benefits, consistent policies must be maintained over the longer term. Without a sustainedeffort within a well defined strategy to promote energy efficiency at all levels, including technical and managerial, developmentobjectives will inevitably be compromised. It is also .-clear from the evidencethat those countrieswhich have set priorities and have formulatedstrategies that point the energy sector towards the most efficient, equitable, and environmentally-compatibleuse of scarce resources, have a comparativeadvantageover those that do not. This comparative advantageis reflected in increased efficiencyand productivity which enhancethe competitive position of the country. In Africa in general, the lack of competitivenesshas caused a reduction of about 50% of market shareto other developingregions since 1970.3 4. Energy eficiency should be the cutting edge of a country's national energy policy and sustainable development and measures to achieve it deserve the highest priority on national agendas. There are several reasons for seeking to improve energy eficiency, of which the followingarethe most important: Improving economic eficiency and international competitiveness; Enhancing national energy security by reducing dependenceon imported energy; Increasingthe efficiencywith which scarcedomestic resourcesof energy are used; 2 The concept of efficiency should be applied to the entire process of producing, managing, delivering and consuming energy. In this process there is a continuum of activities -from investment in energy supply capacity to end-use energy efficiency technology including improvement in management practices. 3 The challenges of African develop men^ E.V.K. Jaycox, The World Bank February 1992. Recent analysis indicates that if low-income Africa had only maintained its 1970market share of non-oil commodities, it would be receiving today an additional USS9 10billion per ycar in export revenues repardless of price fluctuations. - - Conserving finite global energy reserves, and inhibiting future energy price rises;4and Reducing adverse environmentalimpacts. 5. The cost effectivenessof energy efficiencyis well established. There are many cases where the energy consumption per unit of output of 'best practice' technologiesis half or less of typically availableequipment. In line with this, good management (including managementcommitmentto energy efficiency)is as central to achievingefficiency as it is to managing the whole organization effectively and profitably.5 In many cases,the time required to pay back the additional investmentin energy savingsis often less than two years and is frequentlymeasured in months or weeks. Critical Factorsfor performance in Energy EIjiciency 6. The lessons learned from the World Bank's experiencein developed and developing countries' performance in energy efficiency has highlighted four critical factors that relate directly to differencesin the efficiencyof energy production and end-use. These areas follows; . (a) Energypricingpolicies. The best way to improve energy efficiency is to set prices at levels as close as possible to economic costs, that is, to the long-run costs of additionalsupplies. Such prices should take into account the environmental sideeffects of energy production and use. A sensible and efficientpricing policy is basic to revitalizingthe energy sectorand developmentand is a priority item for an effectiveenergy efficiency programme. Prices should thus reflect the total cost of producing1 4 This is of global strategic importance. Although developedcountriesw much more energy than developing countries. it must be kept in mind that an average family in sub-SaharanAfrica uses five times morc energy as an American or European family to prepare the evining meal. This. however. is the tragic paradox of poveny. It is not energy, but rather poverty which is the limiting factor for the poor. 5 Managing and motivatingstaff to save energy. Energy Eficiency Ofice. Depanmcnt of the Environment. UK. 1993. importing and delivering energy in the absenceof subsidies. It is clear from the Bank's experience that subsidies encourage an increase in energy consumption and its inefficientuse - the efficient use of energy does not require a subsidy. (b) Mechanisms for regulating energy supplyenterprises The essential - featuresfor such a regulatoryframework are, inter alia: (i) Transparency and openness, with clear and well-defined reform objectives, including tariff policy; (ii) , Legal frameworkthat clearly defines the procedures for reducing Government involvement in management of enterprise operation and increasingthe autonomyand accountability of energy enterprise directorsand managers; and (iii) Accounting for environmental issues. (c) Extent ofprotectionfiom competition of energy users World Bank - experience indicates that the efficiencywith which energy is consumed is directly related to the existenceof private sector firms operating in competitive markets.6 Opening to private sector investment increasesthe likelihood of good commercial practices which raise the technical and managerial efficiency of the enterprise. The evidence shows that many industrial processes in developingcountries with protected industries require far more energy per unit of output than do similar industries in more developed c~untries.~ 6 Privatization -The Lessons from Experience. The World Bank, 1992. Note that in principle. a state-owned eneterprise (SOE) should be able to operate as efficiently as a private firm if both play the same game under the dame rules. But experience shows that governments find it dimcult to level the playing field or to keep it level. The poor performance of SOEs may in many cases be attributed to the fact that governments have (i) awarded SOEs monopoly status in competitive or potentially competitive markets; (ii) provided SOEs with subsidies, cheap loans andloan guanrantees and tax and duy exemptions; (iii) have failed to penalize SOEs for unpaid taxes and utility bills; and (iv) have burdened SOEs with noncommercial objectives such as employmentcreation and regional develop men^ 7 For example. steel and ammonia production oRen requiretwice as much energy input per unit of output pulp and paper production often require three times as much. (d) Barriers to the elficientfunctioning ofmarkets The inefficiencies are - usually caused by legal, institutional and information barriers. Market imperfections usually include: (i) Information gaps on energy efficient technology and process options, the benefits, costs and ways of implementingenergy efficiency measures as well as information about financing and joint venture opportunities; (ii) Lack of a consistent, credible, and predictable govenunent track record about policies to encourage energy efficiency; (iii) Lag of consumers' response to price changes, when energy costs represent a small proportion of total costs andor there is a limited availability of efficiency equipment andor electricity substitutes; (iv) Consumers' high implicit discountrates for energy efficiency investments; and (v) General availability of energy inefficientappliances,equipment and structures due to the absence of minimum energy efficiency codes and standards andor a weak institutional capacity to enforce such codes and standards. Main Elements of Policyfor Achieving Energy Eflciency In the formulation of an energy efficiency policy, the Bank supports eight elements of policy that form key requirements for achieving energy efficiency.8 They have as common elements the four critical factorsmentioned previously. The eight elements are: 8 Based on a dmfl note prepared by DennisAnderson. The World Bank. November 1993. (a) Economic srability and growrh This will be the basis for creating an - enabling environment that promotes the establishment of a strategic agenda for sustainable developmentincluding an efficient utilization of energy resources. In this regard, the challengeof good governance demands that attention be paid to those aspects that are crucialto the effectivenessof a government in achieving development, namely; accountability, transparency, predictability, opennessand adherence to the rule of law. (b) Soundpricingpolicies In the demand side, inefficient prices can spawn - distortions in consumptionpatterns that lead to poor investment decisions; and in the supply side, by producing an unbalanced mix of energyfuels. (c) Sound regulatorypolicies Governments have a choice of regulatory - optionsto achieve the objectivesof increased efficiency of supply and end-use, control of environment and social impacts and mobilizationof financialresources for sectordevelopment. The important point is to establish arm's length regulationthat is publicly accountable and independent of special interest groupswhetherthey are governmental, industrial or other. (d) Consumerservices, on a commercial basis to encourage end-use efficiency-These programs are essentially required to overcome the barriers to investment resulting from the lack of information and misinformation. They can also provide material that enable end-usersto both handle and process information. The main aim of an information program is to encourage end-users to take actionsthat are in their own economicself-interest and use existing market mechanisms to stimulate the uptake of energy efficient technologies and techniques? 9 Energy Efficiency Strategic Framework for Zimbabwe. Dmft report by ETSU (Energy Efficiency Support Unit, UK). 14 October 1993. (e) Openness to private investment (tofoster market discipline and economic efficiency) - A major argument for private investments is that private firms which are subject to shareholderscrutiny are more efficient than state-run firms. Another argument for privatisation that is specificto developing countries states that governmentsin these countrieshave sometimes used public funds to subsidize consumersby pricing below costs, thus adding to their own losses. The economicbenefitsof privatization are maximized when governments make improved efficiency the number one goal through using privatizationto enhance competition and by ensuring a .competitivemarket that reinforcesthe benefits of privatization. Maximization of revenues should not be the primary consideration. It is better to eliminate monopoly power and to unleash potentially competitive activities than to maximizerevenues from sales into protected markets.10 (0 Addressing and improving rural energy supplies Although traditional - (i.e., non-commercial mainly woodfuels) fuels still play a significant role - in the energy economy of many developing countries, a fast growth in commercial energy (i.e., petroleum, natural gas, hydro, coal, and geothermal) is required to maintainenvironmentallysustainable development. The increased use of commercialenergy is related to income. The use of commercial fuels and electrical appliances are only possible if the incomes and assets of the lowest incomegroups grow. Enlightened policies for rural electrification, for the rational use of ' biomass and other renewable energy resources (such as solar), and for increased use of commercial energyare required. (g) Environmental Policy- Improvingenergy efficiency normally produces environmental benefits since less pollution is achieved by the same level of economic output with less energy. The Bank's experience is that Two main questions arc usually posed: (i) will privatized companies tend toward monopolistic behaviour, or arc they under some pressures to be more competitive? and (ii) do managm of privue sector firms have incentives to make efticicncy gains that arc a key clement in strategies preferringprivate ownership? Clculy, the main factor likely to increase competitiveness is an increase in the numberof firms selling into the same market. Rcfcr to 'Compantivc Bchaviour of Firms under Public and Private Ownership'. ESMAP RcponNo. 155193. rational environmental policies have the decisive effect on pollution abatement. The use of clean fuels and low polluting technologies offer the best prospects for decoupling energy production and use from environmental pollution. (h) R & D in energy eficient technologies and toformulate and establish - - priorities To encourage improved end-use energy efficiency, enlightened - policies for R & D in energy efficiency technologies are required. Both publicly supported R & D aswell asprivate sectorR & D involvement are necessary. R & D efforts are commonlyrequired in (i) transportation. (ii) choice of policy instruments. (iii) energy efficient building codes and retrofits,(iv) energy efficiencyprogram dissemination, and (v) financing energy efficiency. Broad Prioritiesfor Energy Eficiency Programs 8. Taking into accpuntthe potential for energy savings, net economic benefits, and probability of successful implementation, broad priorities can be established as guidelines for energy efficiencyprograms. It is clear that energy efficiency programs must be tailored to the specificcountry situation taking into account the macroeconomicenvironment, maturity of the legal and regulatory frameworks and a rational energy sector strategyfor the promotion of energy efficiency.11 Nevertheless, in broad outlinethe followingpriorities can be established. (a) Energy intensive industries - steel, cement, pulp and paper, fertilizerand petroleum refineries; (b) Electric power sector including(i) improvementof plant availability, - thermal efficiency, and emission controlsof generatingplants; (ii) transmission and distributionloss reduction; (iii) improvementof power systemoperating practicesthrough merit order dispatch and better hydro II Experience indicatesthat roughly 20% (20-80 rule) of the effort (i.e. in an energy savings activity), can lead to 80% of the action (in actual energy savings) - following our good old friend Pareto. As well, experiencealso indicates that it is not unreasonable to expectedat leasta 5% duction ofenergy use through the device of allocating ownership of energy problems. Refer to foolnote 5 above. 28 resource management; (iv) load management by efficient price signals and tariff structuringto provide incentives for efficiency consumption, and remote control of consumer loads; (v) natural gas development; (c) Large commercial andpublic buildings including (i) energy efficiency - building codes for new construction; (ii) audits and retrofits for existing buildings; - (d) Transportation including (i) traffic management in cities; (ii) vehicle fleettune-ups and equipment modifications; (iii) fuel quality monitoring; (iv) fuel pricing and taxation policy; (v) taxes and duties on vehicles; (vi) fuel efficiency standards for new vehicles; . (e) Electricity end-use eflciency of lights, pumps, appliances, and water heating in smallerindustries, commercial establishmentsand high income residencesthorough; (i) appliance labelingprograms, (ii) technical assistanceto local manufactures; (iii) technical standards for energy efficiency; (f) Residential building design includingefficientlighting, water heating - and air conditioningsystems; (g) Households improved fuel efficiencythrough (i) interfuel substitution, - (ii) improved cookstoves, (iii) more efficient lighting systems; D. ETSU PAPER 1. A. GILCHRIST This is an outline summary of the ETSU document : "Energy Efficiency Strategic Framework for Zimbabwe." (ETSU, 14October 1993). 1. ETSU is involved in energy efficiency projects in Africa and in Europe. Steep rises in energy costs and concern for pollution abatementhave resulted in increased awareness of energy efficiency. Energy efficiency also implies efficient use of electricity, e.g. in electric motors and meters. 2. So far very little information exists on energy management or on how to measure and monitor energy efficiency. However, there are six basic generic methods for energy efficiency improvement programmes: (i) Agency-based information Programmes: These are marketing, seller-buyer types. They are characterized by a variety of salientelements: distrust, literature/leaflets, advertisements,demonstration/case study programmes. Advantages are high benefit-to-cost ratio, wide coverage of sectorlfuel publicity. They cover a variety of technical and management issues; information is readily available and results are quick to come by. Disadvantages: no guaranteed action; need for an efficient central focus; some sectorsare difficult to deal with in terms of savings; difficult to encouragemajor investment decisions, e.g. major process change. (ii) Grant-based Programmes: Governmentshave encouraged investment in energy efficiency through grants, low-interest loans and tax reductions. Major objective is to reduce the payback and risk of an investment. Summary: For: - stimulatesequipmentlservice supply industry - can be targeted at specific groups, e.g. low income groups - can be targeted at specific measures, e.g. novel technologiesand long payback/ high return measures. - stimulatesequipment supply industry - can deliver savings. Against:- expensiveper saving generated. - costsand savings difficult to predict - can distortmarket, leading to long-term uncertainties. - actionnot always in users' commercial self-interest. - does not guarantee optimum uselaction - coverage generally patchy. (iii) Utility-based Demand Side Management (DSM) Programmes: (a) Fuel SubstitutionProgrammes: in multi-fuel usage countries,programmes can be undertaken to promote, say, use of electricity or a rival fuel (e.g. gas). These programmes tend to offer the electricity utility benefits, and are not aimed at reducing the cost of electricitysupply, thoughthere are environmental benefits. (b) Load Management Programmes: electricity utilities can implement programmes to reduce costs; e.g. power-factor correction, tariff incentives. (c) Energy SavingProgrammes:these programmes reduce the total costof electricitysupply by undertakingDSM measures that cost less than the cost of new generating plant. Costs are recovered through regulatory mechanisms. Examplescan be drawn from: - Industrial sector (high efficiency motors, downsizing, audits, waste heat recovery). . - Commercial sector(energy-efficientbuildings, water heating recovery systems, coding/ventilation). - Domestic sector (solarwater heating, audits, high eff~ciencyappliances). Advantages: reduces need for government intervention focus on mass volume products - can provide quick savings can allow measures with low rates of return. Disadvantages: needs substantial - technical and planning resources. - requires knowledgeof energy usage and market - requires regulated price formula to recoup costs. - possibility of market distortion. (iv) Support for Equipment Supply Industry: Governmentscan allow companies to write-off costs incurred against tax. Supportfor R & D gives the possibility of energy savings in the longer term. Advantages: - stimulates equipment supply industry - projects can generate long-term viability Disadvantages: - energy savings only in the long term. no guarantee of technical/cornmerciaI success could be expensivecompared with savings gtnerated. (v) Contract Energy Management (CEM)/Energy Service (ES) Company: Such companies are sub-contracted by a host company to take over responsibility for the operationJmanagementof energy services. Advantages: - CEM companiesbring expertiseto energy efficiencyprogrammes. - they target utility-type services - can accommodatelong payback. Disadvantages: - risky, and needs creation of a new market - relevant only to industrial, commercial sectors - savings difficult to establish - needs a change in host management culture to accept a CEM company. (vi) Legislation, Regulations and Codes: ' These can furtherthe uptake of energy efficiency. The main areas of activity are: - Industrial and Commercial Processes brocesses, emissions, combustion) - Buildings (insulation standards, temperature control, lighting) - Equipment Standards (appliances) - Transport (speed limits, exhaust emissions). For: - guarantees energy savings in the long term - ensures "level" playing field for manufacturers Against: - often long term - difficult to get agreement on standards - costly to enforce - limited applicability. 3. Critical Success Factors in National Energy Efficiency Programmes (i) Policy and Institutional Framework: 33 There must be a separation of responsibilitiesbetween policy formation and setting of programme objectiveson the one hand; and design and implementationof programme activitieson the other hand. (ii) Individual Programme Formulation and Implementation: - meet market needs. - developsupporting technology and services infrastructure. - . establishformal targets and assessmentprocedures. - developskilledpersonnel with expertise and motivation. - ensureprovision of independent and authoritative information on energy efficiency programmes. (iii) Successat Company Level: - ensuresenior management commitment. - Energy champion: encourageinitiativesof highly motivated staff in energy efficiency activities. access to information:ensure energy champions have easy access to information. ETSU PAPER 2: R. SPENCER 1. There is a subtle relationship between utility and consumer. In a country like Zimbabwe, energy efficiency efforts should be targeted to rural energy consumers. We need to optimizeon what they are using now. 2. Load limiting has been used as a means of conserving energy in the urban areas of Zimbabwe. This is common only in the high density areas. ZESA is gradually moving away from load-limiting to meter-limiting supplies. .. 3. There is need for energy consumersto have easy access to information generated by DSM programmes. Question is; how do we finance the energy efficiency programme? F. ZESA PRESENTATION: D.D. MADZIKANDA NATIONAL ENERGY EFFICIENCY IMPROVElMENT PROGRAMME 1 . INTRODUCTION The title of this workshop "NATIONAL ENERGY EFFICIENCY IMPROVEMENT PROGRAMME, could be translated as System Development Plans for the Zimbabwe Electricity SupplyAuthority. It is a subject that not only involves the end users, but also can be guided by the utility in regard to tariff policies and pricing. 2. GOALS 2.1 What are the goals that one wishes to achieve with Energy Efficiency and Demand SideManagement within ZIMBABWE? Some Utilities have set targets for Demand SideManagement which they would like to obtain over a period of time. As an example, ONTARIO HYDRO from CANADA 30,000 megawatt system, had set a target of 5,200 megawatts by year 2000. This has since been found to be too excessive in costs and in these times of recession is not required immediately since growth has fallen on its own. This target has since been deferred to 2005 or later. On the other hand, another CANADIAN Utility MANITOBA HYDRO, has set a target of 100 megawatts reduction by the year 2000, for a 5,000 megawatt system, a 2% reduction. What must be considered in ZIMBABWE is what is a reasonabletarget and will it be cost effective, given the high load factor of the system, 72% annually and as high as 83% on a daily basis. When considering Demand Side Management where the load may be shifted from on-peak to off-peak it must be assessed whether truly there are gains in system operationalcosts. Here is an example of a typical days load shape on December 8 of this year 1993. The load up to the minimum load is supplied by 200 MW of import and the remainder by thermal power of 573 - 700 MW, up to 773 - 900 MW, from here the remainder of the load is supplied by Kariba Hydraulic energy and any shiftingof the load merely results in reallocating the energy from on-peak to off-peak, at the same incremental cost of hydraulic energy and thus no reduction in operational costs. Here is the daily load curve on the peak day 23rd July 1993,the sameconclusion may be drawn for this day, that any shifting of load will have very little effect on operationalcosts. This is given as an exampleso we don't go off on the wrong track assuming anythng we remove from peak and shift to off peak, has to result in savings in operational costs. On the contrarywe should study very carefully what we wish to accomplish. .- 2.2 This is not meant to indicate that nothing can be done to help keep our tariffs down. There are many ways that tbe growthrate can be reduced by proper conservationprogrammes such as new building designs, in such areas as air conditioningand heating, lighting, etc., as well as programs to educatethe consumerson conservation. A reduction of demand including line loss reduction programmes, the installation of co-generation projects and end-use efficiency schemescan effect the timing of new generationon the system and result in savingsto the utility's costs, and the resulting savingsto the consumer in tariff increases. 2.3 The other side of the equation is the reduction in energy use due to more efficient appliances,motors, power factor correction,etc; which in the final analysis is a function of tariffs regarding the incremental savings vs the incremental investment. What the Utilitymust do is provide the consumera low energy cost, which can be accomplishedby proper planning, and in some casesby building new generating stations, and additionally convincingthe consumerto conserve. If both-are consideredtogether in a cost effectivemanner, this should be the ultimate goal. 3. PRESENT AND FUTUREPLQNS OF ELECTRICITY DEMAND & ENERGY 3.1 The installed CAPACITY in 1995of 1993MW, will be made up of 927 MW of - Thermal, 666 MW of Hydro and 400 MW of Imports. 3.2 From 1995to the year 1998,the only capacityadded to the system is 120 MW at the Old Thermal Plants, an additional 31 MW at Hwange and 84 MW at Kariba, all involving upgrades and refurbishment at existing stations. The remainder of the growth is met by imports, all of which have Firm Agreements in place. The first real opportunity to see any effect of Demand Side Management and Conservation in the plan would be around the year 2000, the time at which Hwange units 7 & 8 are scheduled. The problem, however, becomes one where plant must be committed 5 to 6 years prior to commercial operation, and Batoka Hydro Plant must also be committed to very soon, therefore the time horizon for our Target should be somewhere in the time-frame 2000 to 2003, when Batoka is planned to be commissioned. Such a Target would provide some assistance should there be an unforseen delay in Batoka. 3.3 Table 2 (overhead) indicates the available energy supplies from Thermal, Hydro and Imports, and it indicates that Energy Supply is not a problem even under drought conditions. Table 3 (overhead) indicates the increase each year in System Load both for Demand and Energy, and one can see that a possible target that might be attainable could be one year's Load Growth, (i.e.) 100ME and associated energy. 3.4 The target can be assigned a value in today's dollars equal to approximately SUS13.6 milliodyear or $ZIM 93.0 milliodyear, approximately 4.4% of the estimated 1994ZESA Sales Revenue. 4. TARIFFSAND THEEFFECT ONLOAD W A G E M E N T 4.1 In the same way as the Utility attempts to optimize the System losses and provide a Least Cost Expansion Plan through Engineering studies of alternatives, so must the Consumer study the return of installing energy efficient motors, energy efficient lighting, etc, and analyse the overall costs vs the operating costs. This is where the Utilities tariffs appear in the equation. How does the Government, Supplier and the Consumer get together to encourage wise Energy Use? Other Utilities have met this problem with some of the following incentives: (a) Customer rebates for installation of Energy Efficient Appliances through subsidies. (b) Vendor Incentives for the purchase of these appliances. 4.2 The rebates in (a), can take the form of a reduction in the Demand Tariff based on a calculated basis of what is already installed at the business vs what could be installed. The energy saving would be a direct saving, since less energy would be -.consumed and their monthly bill lowered. 4.3. Since the Utility depends upon its revenues from tariffs to sustain its operation, and the money is generated from the Demand and Energy meters, the method of and amount of rebates must be properly assessed so as not to ROB PETER TO PAY PAUL, as there will be consumers who cannot make a commitment to such - an undertaking. Equally so, Cost of Service Studies and Tariff Pricing must form a large part of the study to properly administer any undertakings. 5. CONCLUSION In conclusion, I am sure many of the points mentioned and many more not covered in this presentation, will be the subject of discussion over the next few days,. I thank you for the opportunity to present this paper on behalf of ZESA's Chief Executive. G. ZABO ENERGY TASK FORCE: RH.A. \WLLLAMS. NATIONAL ENERGY EFFICIENCYIMPROVEMENT PROGRAMME 1. Firstly this presentation is on behalf of the ZABO Energy Task Force (and not ZABO itself). At short notice, it is difficult to get quantitative information, and thus this will in the main be qualitative in treatment. 2. I will briefly deal with two basic areas: (a) The electrical energy rationing, leading on to; (b) Energy efficiency for industry in the broad sense The energy rationing that occurred in 1991and at the beginning of 1992did have an impact. However, unfortunately the task force has been unable to totally quantify the impact due to other factorsthat occurred at the time. 3. Several major consumers were affected earlier than the rest with the effective appropriationof their interruptibledemand from beginning of April. In the case .of union carbide, major maintenanceprograms were brought forward. However, there was still a furtherreduction in production which resulted in a loss of production of $45 million of ferrochrome. The other major consumersalso had production drops. In the case of Sable,this may have been a blessing in disguise. Following the previous season's drought, there was a surplus of fertilizer in the system, and the demand in 1992was lower than normal. 4. Zimbabwe Alloys also brought fornard major furnace work, which under normal operationscould have been delayed a year or two. At this time, there was also voluntary actionfrom the private sectorto promote and try and encourage energy conservationacross the country. 5. At the end of 1992the impact of the Confederationof Independent States (CIS) dumping affected the ferrochromeproducers and further cuts in production were then due to the uncertainty and instability in that arena. When the energy quotas were introduced in consultationwith ZESA, Zimbabwe Alloys and Bindura Nickel rearranged the combined allocationto minimise the impact and keep Bindura Nickel at full production. 6. Similar arrangementswere made in other large mining houses, but this still affected operations. 7. Virtually every mine was affected. The reduction in energy curtailed operations and one of the main effectswas a shorter working week, affecting employees' earnings. Many gold mines high graded their operations, and whilst this may have given an indication of no effect on the mine as gold output remained normal, the high grading would affect the long term prospects of those mines. 8. Smaller industries were affected in different ways. But the reduction in available energy initiated in many industriesthe need for trying to identify where wastage was occurring. Small operationsbanned the use of air conditioners in offices. Those using compressors sorted out air leaks. If there were any positive effects of the national energy shortage, it was to create an awareness for conservation of energy. However, I believe that with the "crisis" going away - Karibafilling and thermals stations having improved operations, the incentive for energy efficiency and conservation may have evaporated. Office lighting continues all night. Maybe only a small percentage of energy is utilised, or lost through this, but it illustrates the faded awareness to conservation and the next step, efficiency. 9. It has been suggested that only when electrical energy plays a role in the input costs of industry, does it get attention. When its input costs are small, 1-2%of input cost, or it is part of overheads, it gets lost and forgotten about. When the next round of tariff increasesoccur, there is the general complaint, but for many it's really a symbolic protest. 10. Those for whom electricityplays a significant role do not forget, and they try to improve their efficiencies in many cases if they don't, they may not survive. - Therefore, two areas need to be tackled: (a) Educating those for whom the energy impact is small (b) Creating an environmentwhere, for those who both want to andlor need to be more efficient, are encouraged to do so. 11. Let me deal with the latter group first: Many industries are fightingfor survival, be they in the mining, manufacturing or agricultural fields. All have been affected by some or all of - high cost of money increasing cost of capital resulting from devaluation - high local inflation - local and internationalrecession drop in internationalcommodity prices None of this is new to any one here. 12. A large organisationlooked at replacing some of its motors for new energy efficient replacements. The payback period - 15years. The result, the project is scrapped. The organisationjust can't afford that sort of investment, and they will continue with the old equipmenttill a crisis occurs. As these motors were imported they would have incurred high import duties - somewhere in the order of 60%. Until there is a real reduction in these tariffs, new technology for efficiency will not get off the ground. There has to be an incentive - areal incentive for these - companies to be encouraged to procure efficient equipment. 13. Take those organisationswhere a major change to the process could have really significant savings and be nationally measurable. Forgive indulgence, but may I return to'union Carbide. To install equipment to have a significant impact on the process and save somewherein the order of 12%of energy requirements for the same output (on a full operationthat's about 1%of that current national usage), would currently cost Z.5300 million, and like the previous example has a payback period that prohibits further investigation, particularly in a survival mode. It took 12years (1973 - 1985)for the mature economies of North America to achieve a large improvement of 20%; but they also showed that it is possible. 14. If the incentive,reduction of duties, and educational campaigns could build reasonably rapidly to that sort of figure annually, then there is no reason why although possibly slower but sufficiently sure, improvements in energy efficiency must occur. 15. Can I digress on to what I refer to as a possible incentive? Zimbabwe has one of the highest effective solar hours per annum in the world. A solar boffin advised me we were in fact second after Dubai. There should be encouragement for conventional, and unlagged - and wonderfully inefficient geysers, to be replaced with solar geysers. The imported components are subject to about 60% import duties. If this were reduced they would become more attractive. Then if ZESA were to actually create a separate tariff (and add another meterjust for that circuit), but one that actually encouraged a change, the resultant benefits to both ZESA and the solar geyser owner must be an ultimate win-win situation. 16. It has almost become conventional wisdom that the investments in saving energy tend to be lower than the investment to produce and supply it, hence the suggestion of the need for that special and maybe lower tariff. In the USA the utilities relate subsidies for energy conservation with equivalent generation reduction. This also needs to be addressed in some way here. 17. Earlier, I was generally referring to the big consumers. But what about the small consumer who may have also become energy conscious? He actually pays the high duties and imports a modem energy efficient motor, and has it installed at his operation at a growth point say, Juru. Key time to test - and the motor does not run.It's been saturated. This motor is a 380 volt motor, but as it has now been designed to modem tolerances, it has to operateat 380 volts. On test and no load it draws the rated full load current at 405 volts. The result to be able to withstand the voltage fluctuations and operate the motor is to rewind to 405 volts in Zimbabwe. Therefore, if there is going to be encouragement to move to high efficiency equipment, ZESA will need to look at the voltage tolerances. 18. There also needs to be some guidance/control on ensuring that suitable equipment is imported. There is also a need for information. Many industries in Zimbabwe are operating with equipment that was installed many years ago. They need access to information on modem techniques, both for their operations, and how to utilise energy more efficiently. Up-to-date information is not easily or readily accessible in Zimbabwe. 19. And if we ask the question, why the need for energy efficiency? Kariba's improved - thethermals are running, there is no more rationing or regular.load shedding - why save energy? Unless there is really a genuine commitment from all participants here to achieve a way of encouragingand educating the users of electrical energy, that they can and must conserve and use this commodity for the ultimate good of Zimbabwe, the NEEIP program will never achieve any goals or improvements. 20. The Guru of the economic recovery and quest for zero manufacturing defects in Japan, Edwards Demming, advocates a win-win relationship between supplier and customer. I sincerely hope that this approach can be followed, so there is a way forward to encourage the business sector to conserve energy, both for their own gain, and in the electrical energy area, ZESA's and thus ultimately a gain for Zimbabwe. H. ZIMBABWE PHOSPHATE INDUSTRIES VIEWPOINT: G.T. RUSHWAYA NATIONAL ENERGY EFFICIENCY IMPROVEMENT PROGRAMME 1. I am pleased to share with you this morning the experiences,efforts and results of our energy conservation programme in general, and the measures taken to cut electricityconsumption withoutaffecting production during the 1992Energy Crisis, which came about as a result of the most severedrought in this country, iri living memory. 2. Zimphos is a fertilizerand chemicalmanufacturingcompany, with fertilizer making 80% of its business, and has 750 employees on its payroll, 35% of whom live on company premises where water and electricity are supplied fiee. 3. The core of the factory is on an area of 300 000M2with other installations, a distance of up to 1,5kmfiom the factory. - 75% of total energy consumption is steam and 25% electricity. Before 1990,the only managementsystem we had was power factor correction and Maximum Demand monitoring. - In 1990,an energy audit was carried out by ShawMont, under the general framework of the SADCC Industrial Energy Pilot Project. - The audit was fairly extensive and came up with recommendationswhich would save 60 776 GJ per annum, which is 24.6% of our energy consumption. 4. The recommendations from the energy audit were split into "no cost" and "low cost" measures. Zimphos undertook to implement the "no cost" and "lowcost" measures immediately,and by the end of 1991all "no cost" measures had been implemented, as well as some of the "low cost"measures. However, some "low cost" measures were postponed because of cashflow problems experienced,as a result of the economic situation prevailing in the country then. 5. Examplesof "no cost" measures which were implementedimmediately, were repairs to steam leaks, air leaks, switchingoff of unnecessary lights, and recovery of condensate for re-use in certainareas of the plant. - Low cost measuresincluded insulation of somepreviously uninsulated . vessels, replacing outdoor lighting with more energy efficient lights, and revamping boiler instrumentation. 6. To implement the energy conservation programme, we assigned one of our SectionEngineers the extraresponsibility of being Energy Engineer, who would report on a monthly basis the progress and savingsachieved. Part of his responsibility was to make a monthly audit and submit his findings to management for action. 7. In early 1992we forecasted an electricity rationing scheme because of the low water level in Kariba and Kafbe Dam in Zambia. - We were in a very difficult position because with the anticipated good rainy season in 1992/93,we were to run at maximum capacity in order to satisfy the Agricultural Industry's needs on which the economic recovery of the country was so heavily dependentupon. 8. We then went into overdrive on an energy saving campaign. - We re-evaluated our energy conservationmeasures and our energy usage. Recognizing that the plants were going to run at maximum capacity, it was by no means any easy task, because having implemented most of the energy saving measures we had cut our energy usage to the bone. We began by analysing our electricity usage half-hourly going back about a year. - The results showed that we were using more electricity between 6:00 p.m. and 10p.m., and also between 2 am. and 6.00 a.m. - Though we have several meters in the factory they were not adequate enough to give us all the information we would have desired. 9. We realised that our success was going to be considerably dependent upon the co- operation and involvement of every employeeand resident of factory houses and flats. - Chaired by the highest authority of the factory, we organised meetings' which included representativesfiom Workers' Committee, Village Committee, and Company Primary School. - A wealth of ideas, and various energy saving measures came up. 10. Besides the locking away of office fans and heaters, other measures implemented were:- - Switching off of Welding Machines when not in use (which were normally kept running during tea-breaks and lunch-breaks). - Switching off of Office Machinery suchas Computers(when not in use). - Switching on Village Street LightsBetween 9.00 p.m. and 5 a.m. (instead of 6.00 p.m. to 6.00 a.m.). - Improvement in effluent control i.e. in effluent suppression. - Switching off certain machinery in a process or plant when on planned maintenance, or on breakdown which were likely to take more than an hour. - Immediate repairs to be done to leaking water taps or pipes, both at home and at work, in order to save both water and energy at Municipal Pump Stations. - General water conservation. 11. The above measures yielded an 11% energy reduction against a calculated 15%. - I need to emphasize that energy conservation like any fire, has to be added fuel on a continuousbasis to keep it burning all the time. 12. We have not stopped looking for more energy conservation measures. We have currentlyembarked on a TQM programmecompany-wide. As you might be aware, zero defects is one of the aims of Total Quality. - We are convinced we are going to get a sizeableamount of energy saving by reducing reworks and eliminating break-downs. (e.g. shaft misalignment and vibration). The most important factor of high energy efficiency is of cause, the fact that you lower the input cost of your product. - By increasing plant uptime, you obviously use more energy per given day than previously, but the energy usage per tonne of product comes down. 13. SUMMARY Our success is greatly attributed to:- (i) Top Management Commitment,the driving force. (ii) The CIDA sponsored SADC Energy Audit, the catalyst. (iii) The awarenesscampaign we carried out at the factory; from top management down to the shopfloor, in particular, that, we encouraged participation by all; resulting in many ideas coming foward. .. I. DOERD: ECONOMIST POINT OF VIEW: J.M. MANGONO SOME ECONOMIC AND NON-ECONOMIC BARRIERS TO ENERGY- EFFICIENT INVESTMENTS WITHIN FIRMS 1. INTRODUCTION 1.1 Severalestimatesavailableto date suggest that Zimbabwe is using a lot Wre energy than would be the case if attention were paid to energy-eficiency practices and energy-efficient investments. The sectors that have been identified as potential areas for potential electric conservation in Zimbabwe are as follows: Industrial Sector (12% of total consumption),Domestic Sector (7%) and the Commercial Sector (3%). The total reduction in electricityconsumption that can be achievedtherefore is of the order of 22% of total consumption (World Bank Mission of April 1993). It may be worth observing that many of these potential savings appear to have very high rates of retum in comparison to the ecommy- wide averagecost of capital. It is surprising that most of the consumers reject . energy saving investments that have rates of retum of 30 40% or more. - The existenceof such sizeableunrealized profits poses both theoretical and policy problems. On the theoretical side, how can we account for such a deviation from standard economic presumption of cost minimizationor profit maximization? What characteristics of markets, agents, or of the observationsthemselves account for the discrepancy? On the policy side, it is natural to ask how government might interveneto improve the situation. The differencebetween what is and what could be realized suggest that well designed policies to improve energy efficiency might achieve one of the most sought after objectives of economic policy- Pareto improvement with gains for all concerned. Before ambitious policy goals can be set, however, it is necessary to examinethe causes for the apparent gap between actual and theoretical performance. 2. BARRIERS TOPROFITABLE INVESTMENT 2.1 Firmsdo not Behave Like Individuals In thinking about why firms may not alwaysbehave optimally, it is important to remember that a firm is a collection of individuals, brought together under a 'complex set of contracts both written and unwritten, but that the firm itself is not an entity acting with a single mind. Economistsoften talk about "the firm" as though it had its own consciousness, but this is either a (often very useful) theoretical simplificationor an exampleof sloppy thinking. The behaviour of the firm is the outcome of the interplay of the motivations of the individuals comprising it, the rules and conventionsgoverning their interaction, and the environment within which the firm operates. The fm makes choices and decisions; but these are generatedthrough its rules of procedure, rather than being the products of an individuated volition. The top decision makers of the firm exercise a considerabledegree of control, but that is not sufiicient to transform it into a conscious entity with a unitary will. Recognizing this possibility has importantconsequences. The individuals making up a business firm may all be rational seekersafter their own interest, but the outcome of their collectiveaction may be suboptimal. The logic of collective action is such that, in general, rational, self-interested individuals will not act to achieve their common or group interests. This principle applies to private sector corporations as well as to governmentbureaucraciesor political collectives. The presence of public goods, externalities,and the clash between individuals'private incentives and the good of the whole all combineto produce outcomes that fall short of what could be obtained if all the resources of the group were deployed by a single guiding intelligence. From a mathematical point of view, it is not possible to maximize for two or more variables at the same time. This was clearly stated by von Neuman and Morgenstern (1947), but the principle is implicit in the theory of differentialequations, dating back at least to D'Alembert (1717 - 1783). Failures of CompleteMmcimization are to be fipected Deviations from profit maximizing should not be surprising. Indeed, a long- standing and respected tradition in economicthought holds that business organizations can only approach or approximate profit maximizing behaviour, because of the complexityof the environmentthey face and limitationson the decision making resourcesthey command. The most famousproponent of this view is Herbet Simon,the Nobel laureatewho pioneered the notion that 'satisficing'rather than maximizing is descriptiveof how f m s actuallyoperate. Accordingto this paradigm, economicagentsresort to satisficing when approximationmust replace exactnessin reaching a decision. Insteadof the profit miucimkhg firstorderconditions of the standard economicmodel, fums employ avariety of expedientsin carryingout their activities;severalprocedures of rather , general applicationand wide use have been discovered that transformintractable decision problemsinto tractable ones. One procedure is to look for satisfactory choices instead of optimal ones. Anotheristo replace abstract, global goals with tangible subgoals, whose achievement can be observed and measured. A third is to divide up the decision-making taskamong many specialists,coordinatingtheir work by means of a structureof communications and authority relations. All these, and others, fit the general rubric of 'bounded rationality,' and it is now clear that the elaborateorganizationsthat human beings have constructed in the modern world to carry out the work of production and governmentcan only be understood as machinery for copingwith thelimits of man's abilities to comprehend and compute in the face of complexityand uncertainty. Under this view of the operation of the fm,an understandingof the forces that lead to any particular pattern of behaviour(regarding,say, energy management) could only be obtained by a carehl, microlevel examinationof the actual decision making processes of the f m s themselves. It would be necessary to see, in specific instances, exactlywhat sort of informational,computational and -- organizationalconstraintswere faced by the particular f m s in orderto understandwhy they did or did not make particular investments. 2.3 Asymmetric information and divergent incentives The conflict between individual rationality and the optimalityof the firm's aggregate behaviour can manifest itself in other, quite distinct, ways. Even without limitations on the ability of individualsto "comprehendand compute" the complex reality they face, institutionalor other restrictionson information .availabilityand real differencesin underlying interests of the parties can lead to suboptimal results contrary to the formal goalsof the organization. A wide variety of circumstancescan lead to a failureof the organizations to maximize profitsor minimize cost, even though the individual agents are fully rational wealth maximizers. A major task of organizationaldesign is to induce the managers of a stockholder owned corporation to act in a manner as consistent as possible with the interests of the owners. This manifestationof the principal-agent problem leads to a variety of reasons why profitable investmentsmight not be made. One frequently cited factor causing underinvestment in energy saving technologies is the alleged shortsightednessof management. This myopia is usually thought of a being manifested in very short payback periods required for energy (and other) investments,or unduly high internal hurdle rates that must be met for investments to be undertaken. Take the case of the U.S.A. firmswhere recent data shows that the after tax hurdle rate is around 12%and the median payback period is two years. A payback of two years for a project with a 10year lifetime is equivalentto a post-tax real rate of return of 56%. The question is why such overally stringent investment criteria, despite the fact that the cost of capital faced by the firms is considerably lower than the hurdle rates that projects are required to meet in order to be accepted. Managerial compensation is often tied to recent performance, and in many corporations,managers are rotated through differentjobs every few years. This sort ofjob turnover may lead managers to prefer projects with short payback periods even if those projectsare inferior, in some global profit maximizing sense, to others of longer duration. A manager who only expected to be in a particular job for two or three years would have no personal incentive to promote a project having a more distant payoff (projects with longer gestation periods). Therefore the manager hopes that if he selects the quick-return project, the stockholders may attribute the extra dollars to his ability and pay him higher wages not only in that period but also in subsequent period, since his pay is based on current and past performance. 2.4 Problems of Focus and Artenrion Another hypothesis frequently offered to explain the failure of firms to exploit fully the cost saving energy investments available to them is that top management gives low priority to relatively small cost cutting projects such as energy saving ones. 2.5 Selection Bias in Estimating Investment Returns It has been suggested that the optimistic bias results primarily from "myopic euphoria" in which the individuals responsible for preparation of the forecast were simply too involved with the projects to be totally objective. Optimistic bias can also result from erroneous information provided to forecasting staff members by upper management - the'pet project' phenomenon. 2.6 Standard Barriers Let me now turn to the standard barriers that are often listed in the literature on energy conservation. I will not discuss these in detail, hoping that these have circulated in the public domain, and therefore will make a cursory reference to them for the sake of completeness. (a) lack of information or awareness among consumers, especially about recently available or rapidly evolving energy technologies. (b) Uncertainty regarding savings and cost effectiveness, as well as future energy prices. (c) lack of capital and resistance to buying equipment with a greater purchase cost. (d) Separationof responsibility for making capital investments and paying operating costs (e-g.tenant occupied offices and buildings in city central districts). 3. Policy Implications 3.1 In my opening remarks I pointed out the potential savingsthat can be achieved economy-wide. I would hastily say, indeed such savings are very desirable,but faced with the host of barriers pointed above, what then is the way forward? One such alternative is to increasethe participation of Government in a way that is both innovativeand courageous. I am sure the representativesof Government here woulh ask why they should be asked to play a greater role. There are several reasons why this should be the case, some of which are the following; (a) Energy efficiencyis a proven resource, with substaritialopportunitiesfor future gains. (b) Many problems (externalities)associated with the production, transportation, and conversion of fuels are not reflected in the retail prices for fuelsand electricity. 3.2 These externalties include air, water pollution and dependence on foreign oil supplies. Thus, improved energy efficiency brings many benefits to society in general. Market imperfectionskeep energy consumers from making what would otherwise be economically rational choices. Fuel prices generally do not fully reflectsocial costs. In addition, they often do not reflect the marginal economic costs (let alone the Long Run Marginal Cost) of providing the energy. - Unlike most supply projects (e.g. development of power plant), energy efficiency improvementsare very small and use a variety of technologies, affecting different end-use and economic sectors. 4. Some Suggestionsfor the Role of Governmenr 4.1 I understand that one of the topics that this gathering is going to discuss is the question of institutional arrangements for canying out energy conservation nation-wide. I will therefore not attempt to define any institution that will carry out the suggested actions, I will for the time being call that institution Departmentof Energy Resources and Development (DOERD). 4.2 The suggested future DOERD activities are as follows; (a) Make a national commitment to energy efficiency - a clear statement of energy efficiency must be embodied in the national energy policy - make funds availablefor the energy efficiency programmes - state clear goals that such a programme needs to achieve, e.g. reduction in energy use through energy efficiency improvements of some percentage to the GDP (say, 2.5% per annum) (b) Institute a National Energy Management Programme create a variety of energy conservation programmes, e.g. industrial energy conservation, household energy conservation, conservation in the transport industry, etc. use of innovative financing methods (including loans, rebates, grants, and performance contracting) to pay for the incremental costs of energy-efficient systems adoption of strategiesthat will lead to the construction of more energy efficient domestic and office buildings. (c) Increase DOERD energy-conservation R & D (copy the example of Agritex) - government should ensure a DOERD conservation R & D programme that is stable in funding, focus and government support. Secure funding would permit DOERD to: (i) work more closely with industry to demonstrate new energy efficient technologies; (ii) assessthe long term performance of energy efficient technologies;and (iii) carry out research on the patterns and determinants of energy related decision-making and barriers to adoption of energy efficient actions. set up demonstrationunits for each prototype industry (in a manner similarto the way AGRITEX operates). 4.3 Promote least-cost energy planning ensure least-cost energy planning capabilities are available within government - ensure energy conservation is part of the least-cost planning options ensure that environmentalcosting is part of the least-cost planning scenarios 4.4 Increase DOERD technical assistanceactivities - DOERD should be a centre for dissemination of technical information - demonstratethe efficiency of individual energy components - sponsoringdemonstrationsto practitioners - working with trade allies to encourage dealers to stock these products - sponsor programmes at vocational/technical schools to train those who install and maintain energy efficient systems - sponsor inclusion of energy conservation in the curriculum of institutionsof higher learning, i.e. universities. 4.5 Improve coordination between DOERD and firms' R & D programmes. 4.6 Strengthen energy-efficiencystandards 4.7 Collect more information on energy use - information on the pattens, trends, and determinants of energy use would be very useful in managing energy conservation programmes. Such information might indicate whether and why consumers participate in various programmes, what factors influence their purchase of energy using equipment, and what factors affect their operation and maintenance practices. 5 . CONCLUSION Fellow workshop participants, suqh then are the challenges that we face as energy efficient proponents in our country. However, implementing such programmes will save millions of dollars for consumers, reduce emissions of greenhouse gases and other pollutants, reduce considerably our dependence on imported oil, improve productivity and enhance international competitiveness of our products. Improving energy efficiency adds diversity and flexibility to the nation's energy system, insurance that is both inexpensive and valuable. J. CONSUMER COUNCIL OF ZIMBABWE: M. NYAMBUYA NATIONAL ENERGY EFFICIENCY IMPROVEMENT PROGRAMME 1. Distinguished Guests Ladies and Gentlemen It is my great pleasure to address you at this important workshop on Energy Efficiency Strategic Framework for Zimbabwe. Energy in Zimbabwe and the World over is very crucial in keeping the wheels of industry, Commerce, and Agriculture as well as all the entire nations going. 2. Shortages and price escalations of fuel and electricity have been witnessed, and have adversely affected the economy, not to mention the vulnerable consumer who has to bear the adverse effects in the form of unsatisfactory services and unwarranted price escalations. 3. Ladies and Gentlemen,the 1991/1992drought highlighted the Southern Africa region's vulnerability to shortages of power. The ZimbabweElectricity Supply Authority was faced with a dilemma of trying to supply sufficientpower to both the commercial and domestic industry, while at the sametime aiming to acquire enough electricity from neighbouring Zambia and Zaire. ZESA subsequently introduced the ration system in a bid to save electricity. During this period blackouts were experienced and many places went without electricity, leaving consumersat a very big disadvantage. 4. However, with good rains which we have experienced,Kariba and Kafue River are filling and the entire country has become optimisticthat electricity supply problems would be reduced but are not over as yet. I would like to point out that the problem with the parastatal began to emergesome years back, and my organisation questioned the efficiencyof ZESA with regards to the supply of electricity meter reading and the billing system which left a lot to be desired. I feel ZESA must come up with an efficientsystem of recording units of electricity consumed and an accurate billing system which does not victimise imocent consumers. 5. 1want to point out that since the takeover by ZESA with effect from the 1st of October this year, of the billing system,revenue collection and meter reading, already loud and painful cries have been heard from the exploited consumers. Some consumers who have been paying average bills of $80 to $150 a month, suddenly have received bills ranging between $700 and $800, of which they are expected to pay or else they risk having electricitycut-offs. 6. Everyone knows that ZESA is in serious financialdeficits, but exploiting consumers by making them pay for sins they did not commit must not be the way for the parastatal to recoup its financesand equilibrium. To add salt to injury, the October statements are accompanied by a statementwhich wishes consumers a Meny Christmas, and yet in actual fact it might be a gloomy festive season without electricity. 7. The fact that ZESA is a monopoly should not empower the parastatal to act as a dictator to the vulnerable consumer, who under these tough times, is trying very hard to make ends meet. At the beginning of the year, my organisation questioned ZESA's move to impose .Penalty Charges on domestic and industrial consumers who had exceeded given quotas under the rationing scheme. The majority of Harare consumers suffered as they were made to pay exhorbitant bills based on estimates. 8. What worried the CCZ and consumers in general was that ZESA's billing system based on estimates could not be validated, and thus increased the risk of consumers paying for units of electricity they did not consume. For example, where the bill would have been assessed, it means the parastatal accounts department would have looked on the consumption trend of the consumer during the previous months and then calculate the average consumption. 9. Regrettably, the system has its own flaws because the consumers, may change the electricity consumption panern and the assessment mechanism may have serious distortions on the bill received by the consumer. Hence, my organisation felt it would be almost 'fraudulent' to impose a penalty on consumers whose bills are based on estimates and not empirically determined. As a result of pressure fiom the CCZ, ZESA advised Harare City Council the then ZESA agent; to exempt assessed bills from penalties. 10. However, of late, the CCZ has beeri receiving complaints from consumers who have been threatened with electricity cut-offs if they do not pay penalties based on assumption. ZESA's public relations department should devise a way of handling consumer complaints instead of turning hopeless consumers away without offering any sound solution to their queries. 11. However, my organisation feels very little has been done in terms of legislation to protect consumers against restrictive business practices, which to a greater extent, are perpetrated by monopolies such as ZESA. The consumer has been forced to contend with the aggressive powerful monopolies which continue to exploit consumers. I strongly feel this must come to an end idorder to protect the vulnerable consumer. Since these restrictive acts have the tendency of excluding others, they automatically deny the consumer the "Right to Choose", "The Right to Basic Commodities" and the "Right to be Heard". I want to take you back to ZESA during the time when penalties were forced on consumers and my organisation questioned such a move. ZESA referred its action to the Electricity Act of 1985 Section 39 (1) which states that: "If at any time the Minister is satisfied that for w e s beyond the control of an authorised undertaker is or will be unable for a period exceeding seven days to supply electricity to all consumers to whom he or it is obliged to supply electricity, the Minister may permit the authorised undertaker, by notice in writing and subject to such conditions as the Minister may from time to time fix to lessen or discontinue the supply of electricity to any consumer or class of consumers in accordance with such plan or scheme as the authorised undertaker considers to be equitable in the circumstances". 13. ZESA went ahead and misinterpreted Section 39 (1) to mean giving the parastatal powers to impose fines on consumers. The CCZ failed to take ZESA to court because of the non-existence of a "GROUP PROCEEDINGS ACT", in Zimbabwe. In addition, ZESA's monopolistic characteristic left consumers with no option but to bear the burden imposed on them. 14. NOCZIM Experience has shown that when the fuel industry catches a cold the economy sneezes, but the worst affected are consumers who have to come face to face with price increases. As you know, fuel and lubricants have such immense effect to keep the wheels of commerce and industry turning. The role played by the National Oil Company of Zimbabwe in economic development cannot be underestimated, as it is the cornerstone of the economy, and every sector in the economic system focuses attention on the organisation. 15. It should not go without mention the NOCZIM's efforts in acquiring petroleum outside the country is of paramount imponance. NOCZIM imports and distributes fuels, base oils, and bitumen within Zimbabwe which is a very important role. It is also commendablethat the govement consults NOCZIM to determine the price of the company's products so that it operates viably. 16. However, Ladies and Gentlemen, my organisation's concern on fuel is the issue of affordability and availability. Consumers need an assurance that there will be enough stocks of fuel to meet their present and future consumption needs. Consumers need an assurance that the pricing structure on fuels are kept within their reach so that the final goods and services are affordable to them. 17. I am of the opinion that the fuel industry may become more viable through competition under ESAP, to avoid a crisis during times of shortages. NOCZIM should be geared to meet the challenges of changing economic times, and offer a highly appreciated service to consumers. 18. In addition, we greatly appreciateNOCZIM's efforts to achieve viability in industry, commerce and agriculture. This is seen through the company's facilitation of government's control in fuel logistics through the physical and operational control of storage tanks in the country and ensuring that fuel reserves are maintained. I also understand that most of the company's purchases are made on the basis of term contracts while a small proportion is supplied on the spot market where both terms of contracts and spot purchases are subject to competitive bidding. This govemment company is understood to have done its best to source products wherever market conditions have been favourable. Such an idea is rational and has foresight, because the consumer may benefit by purchasing fuel at reasonable prices. 19. As the issue of affordability is indeed of paramount importance for industrial and commercial needs, I would take this opportunity to urge NOCZIM to continue with the spree of shopping around for cheaper fuel sources for the benefit of consumers. It is not an absurd idea to also shop for other fuel outlets while the old ones are maintained. In fact it is a way of rationalising the marketing of fuel which may prove very useful. I have often said it is advisableto have blind faith in old supplierswhen new ones cannot bring a change for the better, and I stand firm on this reasoning. As a way of meeting the fuel consumption needs of this country I propose that oil companies such as Total, Mobil, Caltex, BP and Shell, should be consulted in the importation and distribution of fuel to users, as a way of encouraging ESAP. Openingup of the industry would be to the benefit of consumers as the oil companies would compete to get the best possible share market. There is increasing demand for efficiency in the fuel industry and a monopolistic/ oligopolisticsituationis very unhealthy for economic development. 21. Let me not be misconstruedthat I am also proposing a wholesaleremoval of control on fuel prices - Itotally agree with everyone that fuel is an important resource. There is continued need for price stipulations or a system of subsidisation to keep the transport costs low and affordable to consumers. My proposal is also that fuel - prices be constantly reviewed so that a degree of equilibriumcan be achieved in the fuel and transport industry, and that the costs be maintained at affordable levels. The fact that fuel prices affect the prices of other goods and services makes it imperativethat they should be checked on a regular basis. 22. It is also an unfortunate featureto note that devaluation has tended to make fuel imports more expensive to the detriment of consumers and the business con~munity.NOCZM should therefore, be seen taking bold steps in advance in anticipation of devaluation changes so that when there are negative developments in the world markets, the impact does not become severe to disturb the economic fabric and harmony of the country. 23. With these words ladies and gentlemen, J conclude by recommending that there is need to boost electricity importation from neighbouring countries such as Zambia, South Afiica and Mozambique; since we are now free to carry out trade with any country in Southern Africa. Surplus importation of electricity from countries with surpluses, will augment .. existing supplies of electricity. The CCZ organisation is not suggesting that we should become over-dependent, but we will be encouraging interdependence since self-sufficiency alone can prove to be a failure. Thank you! VI. ANNEXE ANNEX I: AGENDA NATIONAL ENERGY EFFICIENCY IMPROVEMENT PROGRAMME JOINT DOERDnVORLD BANK WORKSHOP 15 17DECEMI3ER 1993 - MONTCLAIR HOTEL NYANGA Day 1Thursday 16th December 1993 Chairman Mr. J. Moyo Permanent Secretary, Ministry of Transport & Energy 0800 - 0830 Registration Opening Remarks. Purposes and objectives of the NEEIP Workshop The Permanent Secretary, Mr. J. Moyo Opening Address: The Honourable Minister of Transport &: Energy Mr. D. Norman 0850 - 0855 Administrativearrangements DOERD Position Paper Director of Energy, Mr. C.T. hkezewa World Bank Mr. K.F. Schenk/Mr. S. Brusbett Presentation ETSU Overall situation in Zimbabwe & critical success factors for energy efficiency programmes Presentation Chairman Mr. J. Moyo Permanent Secretary Ministry of Transport and Energy Questionson ETSU's presentation and report Z E S A Senior Manager (Corporate Planning) Mr. D.D. Madzikanda Presentation ZABO, Chamber of Mines, CZI Mr. R.H.A. Williams Presentation Zimbabwe Phosphate Industries The Chief Engineer, Mr. Rushwaya Presentation Economist Point of View of NEEIP Mr. J.J. Mangono (Departmentof Energy) Consumer Council of Zimbabwe Director, Mr. M. Nyambuya Presentation 1300 1400 - * * * Lunch Break Delegates are placed into four (4) discussion groups 10- 12 people. Each group chooses the Chairperson for the particular session . 1400 1500 - AimsRurpose of NEEIP 1500 1530 - Report back, agree definition of NEEIP 1545 1645 - Type of activity desired for NEEIP 1645 - 1715 Report back, agree desired activities Announcements for tlie followingday. Thc formal DINNER Day 2 Friday 17 December 1993 Chairman Mr. J. Moyo Permanent Secretary Ministry of Transport and Energy Plenary Session:- Review of previous day Then continue to work in groups NEEIP Coordination and relevance to existing programmes 0930 - 1000 Report back, and agree * * * 1000 1030 - Tealcoffee break 1030 1130 - Individual programme implementation 1130 1200 - Report back, and agree 1200 - 1230 ETSU summary of recommendations Closing remarks Ministry of Transport & Energy * * * 1300 1400 - Lunch Break 1430 Delegates leave for home ANNEX I1 NATIONAL ENERGY EFFICIENCY IMPROVEMENTPROGRAMME LIST OF PARTICIPANTS . 1. Mr. D. Norman 2. Mr. J. Moyo Permanent Secretary .- The Honourable Minister Ministry of Transport & Energy Ministry of Transport & Energy 3. Mr. C.T. Mzezewa 4. Mr. C.S. Murove Director of Energy Assistant Director Ministry of Transport & Energy Ministry of Transport & Energy 5. Mr. J. Chirara 6. Mr. T.W. Samunyai Assistant Director Assistant Director Ministry of Transport & Energy Ministry of Transport & Energy 7. Mr. J.J. Mangono 8. Miss E. Muguti Principal Energy Dev. Officer Principal Energy Dev. Officer Ministry of Transport & Energy Ministry of Tranport & Energy 9. Mrs D. Kayo 10. Mr. S.R.Wadesango Principal Energy Dev. Officer Principal Energy Dev. Officer Ministry of Transport & Energy Ministry of Transport & Energy 11. Mr.F.N.Maziweyi 12. Mrs J.Z. Mawema Principal Energy Dev. Officer Senior Energy Dev. Officer Ministry of Transport & Energy Ministry of Transport Br Energy 13. Miss E. Zhande 14. Mr. C. Phaira Planner Energy Development Officer Ministry of Transport & Energy Ministry of Transport & Energy 15. Miss S. Madau 16. Mr. H. Gonye . Energy Development Off~cer Energy Development Officer Ministry of Transport & Energy Ministry of Transport & Energy 17. Mr. N. Msakwa 18. _Mr. E. Bunjira Energy Development Officer Energy Development Officer Ministry of Transport & Energy Ministry of Transport & Energy 19. Mr. F. Mambwere 20. Mr. A.F.N. Mangena Energy Development Officer Assistant Secretary Ministry of Transport & Energy Local Govt. Rural Br Urban Dev. 21. Miss E.M. Hlazo 22. Mr. W.T. Vengesai Senior Economic Planner Director of Professional Services National Economic Planning Commission Min.of Public Const. & Nat.Housing .- Mr. L.D. Mwaita 24. Mr. A.Z. Matiza Under Secretary Design Policy Analyst Ministry of Mines Min. of Environment & Tourism Mr. M.I. Muzondo 26. Mr. 0.Gomm Project Officer Programme Coordinator Biomass Users'Network Energy Programme Zimbabwe Mr. I. Dube 28. Mr. D. Madzikanda Research Engineer Senior Manager (Corporate Plan.) Z E S A Z E S A Mr. M. Mushambi 30. Dr. E.G. Mtetwa Marketing Manager Member NOCZIM Research Council of Zimbabwe Mr. M. Chateuka 32. Mr. T. Mutiti Lecturer Marketing Manager University of Zimbabwe Wankie Colliery Co. Pvt Ltd Mr. L.K. Chirombo 34. Mrs M.P. Mutasa PartnerIArchitect Director of Standards The Institute of Archetects StandardsAssociation of Zimbabwe Mr. H.R.A. Williams 36. Mr. D. Chigodora Production Manager Production Manager ZIMASCO Kwekwe Division Sable Chemicals Mr. G. Stiles 38. Mr. M. Nyambuya Industrial Energy Consultant Director S A D C Consumer Council of Zimbabwe Mr. C. Manzira 40. Mr. S. Brushen Chief Economist Deputy Resident Representative Ministry of Finance World Bank Mission 41. Mr. K.S. Ndoro 42. Ms. A. Muskwe Senior Economist Assistant Secretary Commercial Farmerstunion Ministry of Industry & Commerce 43. Mr. P. Karhamrnar 44. Mr. 0.Onyango Resident Representative Principal Financial Analyst S I D A African Development Bank 45. Ms. P. Hensnen 46. Dr. C. Mukora The Chief Executive Director Zimbabwe Institution Engineers Zimbabwe FarmerstUnion 47. Mr. G.T. Rushwaya 48. Mr. B. Kanu Chief Engineer Programme Officer Zimbabwe Phosphate Industries U N D P 49. Dr. G. ~ k d i s h o n a 50. Mr. S. Moyo National Project Manager Research Fellow Global Environmental Facility Z I D S 51. Mr. L. Sibanda 52. Mrs. J. Madzongwe Senior Agricultural Economist Energy Specialist Min. of Lands, Agric. & Water Dev. C I D A 53. Mr.C.S.Moyo 54. Dr. C.B. Thornton Maintenance Manager Technical Director Monomatapa Hotel Hunyani Holdings Ltd. 55. Mr. Kurt F. Schenk 56. Dr. A. Gilchrist Power Specialist Industrial Utilities Specialist WB ESMAP OperationsDivision Energy Technology Support Unit 57. Mr.R.Spencer Energy Efficiency Marketing Specialist Energy Technology SupportUnit. NB SADC ,- SouthernAJnco Developmrnr Community SIDA .-...- Swedish InternationalDrvelopnunt A~ency IBDC,,,... Inde~enousBusincrr DcvelopnuntCentre UNDP,- - UnitedNationsDrvelopmrntPro~rammc ZIDS ZimbabweInstituteoJDmlopmcnt Studies CIDA ,,- Canadian lnternotiond Dmlopmcnt A ~ e n q WB --. World Bank =MAP .- - Energy Smor Mana#emurt Assistance Pro~rammc NOQlht National Oil Conqwny oJZimbabw ANNEX Ill