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Lesotho (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Electricity
Total installed electricity capacity (2009): 72 MW

  • Hydro: 100%


There is abundant hydroelectric power which generates most of the country’s electricity needs. Lesotho Electricity Company’s own combined generation from four small-hydro power stations is 3.25 MW. ‘Muela hydropower plant has a maximum nominal generating capacity of 72 MW. However, in periods of national maximum demand, the generation capacity may be stretched (flat-out) to just over 80 MW. On the other hand, economic growth and increased access has meant that during peak times, especially in the winter months, demand can be as high as 120 MW.

Improving electricity access to the rural communities of Lesotho continues to be a major challenge. Even though Lesotho is a relatively small country (30,355 km2), with an estimated population of just over 2 million, two-thirds of the country is sparsely inhabited, comprised of rugged mountains and deep valleys with small scattered villages on mountain sides. The majority of the population (76%) lives in rural areas, but has strong links to urban centres in both Lesotho and neighbouring South Africa. The majority of these villages lack electricity and the probability of connecting them to grid electricity in the foreseeable future is very low. Grid electricity, being a commercial form of energy, requires users to have a regular income. The income levels in rural areas are generally lower than those in urban areas due to higher unemployment and underemployment levels.

The daily average energy demands in these villages are generally low, varying between 0.5 and 1.5 kWh per household. Where electricity is available, it is used mainly for lighting, TV and radio. Alternative energy options are limited to kerosene or candles for lighting, and biomass fuels, often burned in inefficient stoves, for cooking and space heating.

Primary energy
Lesotho’s energy balance is dominated by biomass energy resources, which is closely associated with environmental degradation in the form of deforestation and soil erosion, a phenomenon likely to continue until renewable energy technology becomes economically viable in the country. Energy comprises about 10% of Lesotho’s gross domestic product, creating employment for about 0.1% of the population. Energy consumption has grown at the rate of about 9.0% per annum, which has exceeded the GDP growth rate of 2.1% over the same period. The country’s primary energy base consists of hydroelectricity, biomass, and petroleum products.

Most households generally use a combination of energy sources for cooking that can be categorised as; traditional (such as dung, agricultural residues and fuel wood), intermediate (such as coal and kerosene) or modern (such as liquefied petroleum gas (LPG) and electricity). Electricity is mainly used for lighting and small appliances, rather than cooking, and represents a small share of total household consumption in energy terms.
 

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Reliance

Lesotho imports about 1,000 barrels of oil a day

Currently, Lesotho’s internal generation satisfies only 62.5% of its demand. The Lesotho Electricty Company (LEC) covers this short fall by purchasing electricity from Eskom, a South African power utility, and more recently from EDM, a Mozambique power utility. However, such dependence on external sources makes Lesotho insecure in terms of supply.

In 2010, LEC forecast that electricity demand would reach 160 MW by 2011, meaning that the imported capacity might increase to 88 MW, making Lesotho a net importer of electricity.
 

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Extend network

National electrification rate (2010): 16%.
Urban: 44%
Rural: 6%

As of June 2011, 22% of Lesotho households had access to electricity, primarily concentrated in the urban and growth centres where infrastructure services are relatively well developed in terms of transmission and distribution. Less than 6% of the area serviced by grid is defined as rural.
 

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Capacity concerns

Lesotho’s energy profile is characterized by a predominance of traditional biomass energy to meet the energy needs of the rural households and a heavy dependence on imported petroleum for the modern economic sector needs. As a result, the country faces challenges related to unsustainable use of traditional forms of biomass and exposure to high and unstable oil import prices.

Lesotho is a member of the Southern Africa Power Pool (SAPP), which interconnects the power utilities of the region. However, regional shortages of electricity mean that this supply cannot be guaranteed. The problem is further compounded by the country’s dilapidated electricity distribution network infrastructure.
 

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Renewable energy

Lesotho has identified hydropower, wind generation and solar power as potential renewable energy sources.

It is estimated that the hydro generation potential for Lesotho is approximately 450 MW. 

Wind power potential of a few hundred MW has been identified, and there are currently three sites being investigated. 

Solar power has been implemented in several schemes such as the World Bank project and the UNDP/GEF project.
 

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Ownership

Electricity market
The electricity supply system in terms of grid-transmitted power is dominated by two state-owned entities – the Lesotho Electricity Company (LEC), which is the monopoly transmitter, distributor and supplier of electricity; and the Lesotho Highlands Development Authority (LHDA), which is the main generator of electricity through the ‘Muela hydropower station (MHP). Attempts to privatise LEC in 2001 were not successful, and it was then turned into a company in 2002 that is wholly owned by Government.

Liquid fuels and gas market
As Lesotho does not have any natural gas, oil or coal reserves, there are no foreign oil and gas companies in Lesotho conducting exploration or refinement; rather they focus on the marketing of refined products. These companies include BP, Total, Chevron, Shell and Engen.
 

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Competition

LEC and the LHDA remain the main players in the Lesotho energy generation and retail market. Due to the planned extension of the electricity grid, and the goal of privatisation of the energy sector as set out in the Energy Policy for the Kingdom of Lesotho (2006), there might be room for development for small role players.

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Energy framework

Provision of modern energy services is in line with the strategic intervention pillars of the Poverty Reduction and Growth Strategy (PRGS) and Country Strategy Paper (CSP) for Lesotho (2008–12), which are, in turn, derived from the Lesotho’s Vision 2020.

The Vision 2020 energy target is to have at least 35% of the population connected to electricity by 2015 (up from the current 20%), 40% by 2020 and to reduce the rate of wood use in national energy consumption.

  • Lesotho Renewable Energy-Based Rural Electrification Project (LREBRE)

Under the UNDP/GEF-supported LREBRE Project, a total of 5000 solar home systems (SHS) will be installed by 2012. Since the start of the project, a total of 1537 SHS with a capacity of 65 W have been installed, and an estimated 500 SHS have also been independently installed as a result of the project’s influence.

The project’s main objective is to reduce Lesotho’s energy related CO2 emissions by promoting Renewable Energy Technologies (RETs) – in particular stand-alone solar PV systems for households – as an affordable substitute for fossil fuel-based energy sources in rural areas, which have a low load density and are remote from the national electricity grid. The activities proposed in the project, ranging from awareness-building and training for industry actors to support for the actual instalment of RET systems, were designed to remove critical barriers to the wide-scale utilization of RETs in rural areas and create the enabling environment for the long-term growth and sustainability of a market-based RET in Lesotho. The project is focused on MDG7 “Ensuring environmental sustainability” and supports the broader objectives of MDG1 “poverty reduction” through household income, health, education, gender, and the environment.

In its endeavour to support and assist the development of the solar industry in Lesotho, the reactivation and support of the Lesotho Solar Energy Society (LESES) has beeen an important development. The benefits are not restricted to the users, but also extend to those participating in sales and, more particularly installation activities. It is estimated that by late 2010, more than 100 PV installers and/or dealers were registered with LESES, which represents a significant increase from the pre-LREBRE period when only a handful of small companies and individuals were engaged in PV system installations and/or sales. More than 80% of the solar dealers in Lesotho are now members of LESES. One of the most significant impacts has been the project’s indirect influence on the successful introduction of renewable energy policy targets. The project has, in 2008, ensured that renewable energy technologies were featured in the National Rural Electrification Master Plan, and that local PV installers are aware and trained on the use of the Lesotho PV Code of Practice. There has been access to imported solar components. Community participation and the establishment of cooperatives are being encouraged.
 

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Energy debates

The Department of Energy, through Lesotho Meteorological Services and financial assistance from UNDP Lesotho, has engaged a consultant to develop the country’s Renewable Energy Policy which is expected to be ready during the first quarter of 2012.

While promoting demand management to cope with the immediate shortfall, the Government of Lesotho is currently exploring long term solutions to increase supply. These include expansion of the ’Muela hydropower station capacity, developing new hydropower stations, as well as examining the feasibility of building wind farm’s, supporting the use of off-grid renewable energy solutions such as solar and wind power, and re-commissioning existing mini hydro-power stations, of which there are four. The persistence of drought, which led to the original decision to shut down these mini-hydro plants, may still be a problem.
 

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Energy studies

The UNDP / GEF project have released various studies.

There is also a “Project Appraisal Report” for the Lesotho Electricity Supply Project done by the African Development Bank Group in 2008.
 

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Role of government

The Department of Energy (DOE), which falls under the Ministry of Natural Resources, is the government department responsible for the implementation of all the energy policies. DOE is responsible for overall national energy policy, coordination and monitoring of energy programmes and projects. DOE is fully responsible for the planning and implementation of rural electrification in Lesotho.

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Government agencies

The National Rural Electrification Fund and the Rural Electrification Unit have both been established to assist and implement electrification in the rural area. These projects include sustainable energy sources such as solar power. The National Rural Electrification Fund’s role is to channel capital subsidy resources into rural electrification.

  • Rural Electrification Unit (REU)

As part of its drive to increase rural access to electricity and expand the use of PV in rural electrification, the Government established the Rural Electrification Unit (REU) within the Department of Energy (DOE). The goal was to use subsidy to turn rural electrification into an attractive business opportunity. This newly established unit is faced with the challenge of capacity. The local Government structures are not ready to take the responsibility of being a distribution utility. This kind of service is not even included in schedule of services that can be rendered by the local Government.
 

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Energy procedure

The Lesotho Government is cognisant of the effect a lack of access to energy services has on the economic and social development of rural people. This is amply demonstrated by the increased budget allocation for rural electrification projects. In the 2010/11 national budget the government allocated about USD 6.5 million towards rural electrification projects, which is about 50% more than the previous financial year. It is worth noting that the increase came at a time when budgetary cuts were being affected in all governments departments, a reflection of serious commitment by the government.

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Energy regulator

The Lesotho Electricity Authority (LEA) is the independent authority that regulates the electricity sector. It was established through the Lesotho Electricity Authority Act of 2002.
http://www.lea.org.ls/ [Accessed 15th April 2012]
 

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Degree of independence

The LEA Act means that its members are appointed by the Minister of Natural Resources, who also has the power to appoint tribunal members. While it purports to be independent, the fact that there is quite a high level of governmental involvement does put the independence of the LEA into question. It receives its funding from licensed electricity operators and a levy paid by electricity customers.

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Regulatory framework

LEA is currently in the process of devising a regulatory framework which provides certainty to suppliers while at the same time protecting the interests of electricity customers.

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Regulatory roles

LEA is tasked with:

  • Promoting the expansion of electricity supply in Lesotho, where this is economic and cost effective.
  • Ensuring the operation and development of a safe, efficient and economic electricity sector in Lesotho.
  • Ensuring the security of the supply of electricity in Lesotho as well as reviewing the provision of electricity supply in Lesotho.
  • Issuing and enforcing licences.
  • Establishing technical standards, reviewing and monitoring safety standards.
  • Implementing customer care standards.
  • Regulating prices charged to consumers of electricity.
     
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Energy regulation role

The Energy Planning Unit, a division within the Ministry of Water, Energy and Mines, is responsible for implementing appropriate energy policy and a program for the use, production, storage and distribution of all forms of energy.

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Regulatory barriers

The UNDP / GEF Rural electrification-based project report identified four main barriers to the large scale utilisation of renewable energy-based technologies in Lesotho, namely, institutional; economic, commercial and market; technical and information; and education and training.

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References

Alfstad, T (2005) Development of Least Cost Energy Supply Model for SADC Region, IEA, Energy Technology Network, Page 17. Available at http://www.iea-etsap.org/web/Docs/ERC%20SADC%20energy%20supply%20model.pdf [Accessed 4th September 2013]

The International Monetary Fund's World Economic Outlook, April 2011: Tensions from the Two-Speed Recovery: Unemployment, Commodities, and Capital Flows. Available at http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf [Accessed 4th September 2013]

Taele, B.M; Mokhutˇsoane, L. et al (2012) Grid electrification challenges, photovoltaic electrification progress and energy sustainability in Lesotho. Renewable and Sustainable Energy Reviews 16 (2012) 973– 980. Available at http://www.sciencedirect.com/science/article/pii/S1364032111004692 [Accessed 4th September 2013] Close References