High electricity costs pose major risk to industrial growth

Botswana Power Corporation’s (BPC) new maximum demand electricity tariff has emerged among the biggest operational risks facing businesses, especially mining companies such as Premium Nickel Resources (PNR), which is working to revive the defunct Selebi and Selebi North shafts near Selebi-Phikwe.Since the implementation of the revised tariff structure, PNR’s monthly power bill has soared by more than P1 million, climbing from around P3.2 million to P5.6 million despite the company not yet being in full production.The increase has raised serious concerns about the sustainability of high-energy operations in Botswana’s industrial sectors.PNR is one of 126 companies in Selebi-Phikwe out of a total of 253 subjected to the maximum demand component of the new BPC tariff.Historical records show that at its peak, the now-closed BCL Mine alone consumed roughly 25 percent of Botswana’s total national electricity usage, underlining the area’s dependence on energy-intensive industries.Speaking in an interview, PNR General Manager, Tidimalo Tito, said electricity consumption is a core aspect of their operations due to the nature of mining equipment and safety systems.“Our operations rely heavily on power, particularly for the ventilation fans at both Selebi North and South shafts,” he explained.Further, these fans are essential for maintaining air quality underground, but they consume enormous amounts of electricity. "With the new tariffs, our monthly bill jumped significantly, yet we are still in the exploration and preparatory phase, not even in full production.”Tito described the higher tariffs as a serious business risk, adding that discussions with BPC have not yielded any relief."We have engaged BPC in hopes of finding common ground, but we still have to part with large sums of money. The maximum demand charge is a major threat to most businesses, especially those that are not yet generating revenue.We are continuing operations because we believe in the long-term viability of reopening the mine, but the cost pressures are enormous,” he said.Tito noted that while renewable energy solutions such as solar are increasingly popular, they are not technically feasible for underground mining operations.“Mining requires a stable and reliable power supply, particularly during equipment start-up when base load demand is highest,” he said.Further, solar power, while cost-effective in the long run, cannot yet meet these requirements consistently.He added that once machinery is running, power demand drops, but starting operations requires significant, steady energy input that only grid power can provide.Another hurdle PNR faced in its preparatory phase was the processing of work permits for specialised foreign technical personnel. Tito acknowledged that while there were initial delays, the issue was resolved after constructive engagement with government authorities.We invited the relevant committee to our site and demonstrated that exploration drilling demands highly skilled and experienced personnel.If an error occurs due to a lack of expertise, a drill hole costing around P3 million could be wasted. Once the authorities understood the technical requirements, they responded positively and approved the necessary permits.”Concerns over electricity costs are not unique to PNR. During the recent Selebi-Phikwe trade show a fortnight ago, several small business owners also expressed frustration over the new powertariffs, describing them as unsustainable.The maximum demand charge, approved by the government, adds a cost component for medium and large businesses, while domestic, small business, government, and water pumping tariffs remain based on fixed and energy charges only.According to BPC records, the maximum demand charge is calculated based on the highest power demand recorded by a business during the billing period. This represents the peak capacity a company draws from the grid to run its operations.The rationale, the corporation says, is to recover costs associated with maintaining the infrastructure—generation, transmission, and distribution—needed to meet such demand levels.The charge varies depending on company size and voltage supply: large businesses supplied at 11,000 volts are charged 81.07 thebe per kWh, medium businesses supplied at 400 volts with loadsbetween 100 and 800 amps are charged 89.9 thebe per kWh.BPC maintains that customers are encouraged to manage their maximum power usage, as the cost is directly tied to the capacity drawn. It further argues that because it must invest in power infrastructure to provide the capacity applied for, whether used or not, the charges are necessary for the sustainability of the power sector.The corporation’s position is also grounded in the Electricity Supply (Licensing) Regulations, which empower licensees to recover both capital and recurrent expenditure through tariff structures that account for energy consumption and demand regularity.While BPC insists that the tariff adjustments are essential to cover operational and maintenance costs, affected businesses argue that the structure risks crippling industrial growth and investor confidence, particularly in regions still recovering from the collapse of major employers such as BCL Mine.For PNR, the stakes are high. The company continues with exploration and rehabilitation work at the two shafts, but Tito warns that persistent high energy costs could slow progress.“We are determined to reopen the mine and contribute to Botswana’s mining revival. But we believe a balance found between cost recovery and business sustainability, the current tariffs could discourage much-needed investment.”

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High electricity costs pose major risk to industrial growth