Business suffers as Liberia struggles with power woes

Earlier in the year, state-owned Liberia Electricity Corporation (LEC) announced load shedding – a planned series of supply disruptions – for the first months of 2022 as a result of power generation cuts.

As a result, many Liberian businesses have had to deal with a reduction in their electricity supply, a situation the Liberian Electricity Regulatory Commission (LERC) described as “unacceptable” in a statement issued in February. The commissioners criticized the company and asked it to urgently implement solutions to end the “power generation nightmare”.

According to the LEC, the load shedding occurred as a result of the dry season causing a drop in water levels at the Gunung Kopi Hydroelectric Power Station, the country’s main source of electricity.

However, the LERC commissioners stated that they had “on many occasions expressed concern about seasonal variations affecting Gunung Kopi’s power generation capacity especially during the Dry Season” and that the LEC had assured them that fuel stocks would be available.

The Mount Coffee Hydroelectric Project, a hydroelectric power plant on the Saint Paul River Liberia, in Harrisburg, about 40 km from Monrovia. (Photo: ZOOM DOSSO / AFP)

Impact of load shedding on Liberian businesses

The impact on Liberian businesses has been devastating.

Fatu, who runs a bottled water business in Monrovia, said the reduction in electricity meant fewer hours at the company.

“Problem with [electricity] currently making business difficult. We used to work from 8 in the morning until late at night, sealing water in plastic bags. We can’t use the generator all day – we start work at 11am and we have to stop production at 4pm,” he said.

To make matters worse, in March, citing the effects of the war in Ukraine, the government raised gasoline prices by $1.16 to wholesale selling prices of $5.48 per gallon and retail prices of $5.66 per gallon.

The increase in fuel prices adds to the cost of operating generators when the electricity supply goes out. Roland Washington, who operates an art and design production house, said the situation was causing a spike in production costs.

“Depending on our workload, we burn an average of 10-12 gallons of gas per day. So many businesses are suffering from a lack of electricity. We have to meet the production target, so we have to buy gallons of fuel,” he said.

Rising prices to offset high fuel costs trigger inflation. The IMF predicts that consumer price inflation will increase by 8.2% in 2022 compared to 7.8% in 2021.

Chronic problems with power supply in Liberia

Liberia’s electric woes are nothing new. During civil war which ended in 2003, Liberia’s electrical infrastructure was largely destroyed. After the war, only about 10% of the urban population and less than 2% of rural Liberia had access to electricity, most of which was generated by expensive and inefficient private generators.

In 2016, the Mount Coffee Hydro dam – the country’s main source of electricity – was refurbished and back in operation with the government’s aim of increasing access to electricity. However, although access to electricity is growing year on year, overall generation remains low. According to data from the World Bank, only 27.5% of Liberia’s estimated 4 million population had access to electricity in 2020.

Lack of investment and electricity theft exacerbates Liberia’s electricity problem

So far, the LERC has blamed the LEC for the reduction in power supply.

In its February press release, it stated: “The load shedding performed by the LEC as observed violated the minimum service level in Schedule Two (2) of the Customer Service and Supply Quality Regulations (CSQOSR), which ensures that the duration of the outage cannot exceed eight hours and by the commission therefore directed the LEC to take urgent steps to reduce this (sic) burden relief.”

In a Senate hearing, Monie Captan, chair of the LEC board, argued that the operations of state-owned institutions had suffered from a lack of adequate investment from the government and a lack of logistics infrastructure. He called for the company’s shareholder base to diversify.

“If we had more shareholders, there would be more investment being made in the company,” he said.

But supply problems are also exacerbated by the theft of electricity through illegal connections, costing the LEC much-needed revenue and overloading and damaging distribution equipment. The failure has drawn international comment. Speaking in April, the US ambassador to Liberia Michael McCarthy said a major effort was needed to end electricity theft.

“If electricity is not taken seriously and if some important decisions about infrastructure are not made, I don’t understand how the LEC will continue to operate. Who would you attract to this country if you didn’t have reliable and reliable electricity? I do not know.

“Unfortunately, I think this country needs to redouble its efforts and take electricity theft very seriously. People need to turn corners – people need to turn corners on electricity theft and it hasn’t happened yet.”

Debt problems threaten Liberia’s power supply from regional partners

To improve access to electricity, Liberia is part of the $500 million CLSG Interconnector project with neighboring states. The project, which covers Ivory Coast, Liberia, Sierra Leone and Guinea, involves the construction of a 1,350 km transmission line that will enable the export of electricity from Ivory Coast to Liberia, Sierra Leone and Guinea. Liberia is also a member of the West African Power Pool, which coordinates supplies between the 14 member states.

However, in January it was reported that Liberia owed Ivory Coast $9 million for electricity deliveries, putting future deliveries in jeopardy unless the debt was written off.

During his Senate hearing in March, Jacques Philip, LEC chief financial officer said: “That is a significant amount of money that the LEC does not have, and it also requires a security deposit for three months of supply, and that is a significant amount. which the LEC does not have. The unit price they want to charge Liberia is significantly higher than it is worth.”

LEC ‘in bad financial situation over the last decade’

In September 2021, the US Millennium Challenge Corporation reported a $257 million Liberia Compact, which aims to increase access to electricity between 2016 and 2021.

The organization reports that while rehabilitation at the Mount Coffee hydroelectric plant is ongoing, “ongoing operations and maintenance are underfunded, increasing the risk of turbine or generator failure, additional rehabilitation costs, and potential emergency situations”.

MCC added that the LEC “has been in a bad financial situation for the last decade…. The LEC requires funding for operations and capital expenditures, and a systematic response to theft and corruption to ensure functionality and sustainability now and after the Compact in 2021.”

Multilateral institutions also play their part. In 2021, the World Bank will launch the Liberia Power Sector Access and Strengthening Project, with the aim of providing 632,500 Liberian citizens with sustainable, reliable and affordable electricity.

The project will rehabilitate and expand electricity infrastructure and target two key areas – electrification of the grid in the wider Monrovia region and providing a sustainable business model for scaling up mini grids based on renewable energy and standalone solar systems in remote areas.

Significant reforms needed

When contacted by African BusinessThe LEC noted that load shedding had ended with the arrival of the rainy season, and stated that “there are ongoing plans to resolve the load shedding issue as there are steps underway to improve services and power generation during the dry season.”

But without significant reforms at the national power company, prompt payments to neighboring countries and government intervention to properly fund the LEC or expand its shareholder base, the Liberian generation’s woes are likely to continue.

“They have to improve the flow. The country is tough, we depend on our business to survive. If they don’t give us current and our business suffers, how will we survive?” asked Fatu.

Business suffers as Liberia struggles with power woes

Source link Business suffers as Liberia struggles with power woes

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