Sector Reform and Utility Commercialization (SRUC) Background Report on Namibia’s Power Sector: IPP Procurement

The Namibian economy has experienced steady growth, with a GDP of $9,490 per capita in PPP dollars in 2013. The services industry, particularly tourism and government services, drives the economy, while the mining industry, historically a major contributor, has declined from 47% of GDP in 1978 to 11% in 2012. The country's urban population has grown at an annual rate of 4-5% over the past few decades, while rural populations have grown at a slower rate of 1-2% per year. As a result, the energy-intensive mining sector and limited domestic electricity generation capacity have led to a significant reliance on imported electricity. Between 2002 and 2011, electricity demand grew at a compound annual growth rate of approximately 6% per year, while domestic generation has remained largely flat. The Ministry of Mines & Energy (MME) regulates minerals and energy resources, manages mining, petroleum, and geothermal industries, and is responsible for collecting royalties and ensuring safety, health, and environmental standards. The Energy Directorate within the MME is responsible for enforcing the White Paper on Energy Policy of 1998, which aims to achieve security of energy supply, social betterment, effective governance, investment, and growth. The Directorate is divided into three divisions: Electricity, Renewable Energy, and National Energy Fund. The Electricity Control Board (ECB) is a legal regulatory authority established through the creation of the Electricity Act of 1989. The ECB is responsible for regulating the electricity sector, including the licensing of electricity suppliers, the setting of tariffs, and the enforcement of safety and environmental standards. The ECB is also responsible for promoting the development of the electricity sector, including the promotion of renewable energy sources. The Independent Power Producer (IPP) procurement program is a key component of Namibia's power sector, with the aim of increasing the share of renewable energy in the country's energy mix. The program involves the procurement of electricity from independent power producers, who are responsible for generating and selling electricity to the grid. The IPP program is governed by the Electricity Act of 1989 and the Electricity Regulations of 1994, which provide for the licensing of IPPs, the setting of tariffs, and the enforcement of safety and environmental standards. The IPP procurement program has been implemented through a series of tenders, with the aim of attracting private sector investment in the electricity sector. The program has been successful in attracting investment, with several IPPs having been licensed to generate electricity in the country. However, the program has also faced challenges, including delays in the implementation of projects and disputes over tariffs and other contractual issues. The World Bank and USAID have provided support to the IPP procurement program, with the aim of promoting the development of the electricity sector and increasing the share of renewable energy in the country's energy mix. The World Bank has provided funding for several IPP projects, while USAID has provided technical assistance and capacity-building support to the MME and the ECB.