By DAVID KANDUZA –
DEMAND for power in Zambia has been growing steadily over the past few years and currently stands at around 1,300 megawatt (MW).
Generation capacity, on the other hand, has remained fairly stagnant over the past 30 years. Only 25 per cent of the Zambian population has access to electricity.
In the rural areas, the level of access is less than five per cent.
Given the cardinal role electricity plays in socio-economic development, the Energy Regulation Board (ERB) is working closely with all industry stakeholders to promote investment in power infrastructure.
Zambia has potential hydro power capacity of about 6,000 MW. However, the country has an installed generation capacity of only about 1,788 MW, which is just a third of its potential.
Currently, the country is predominantly hydro and the majority of the power stations (1,640 MW) are state owned through Zesco Limited, which is involved in generation, transmission, distribution and supply of electricity.
With only a third of Zambia’s hydro potential developed, coupled with the low levels of access to electricity in the country and the fast growing demand, locally and at regional level, Zambia faces a challenge, as well as an opportunity, to accelerate the pace of new investments in the power sector.
The Zambian government sees renewable energy as an important part of the country’s future energy mix.
The country’s Vision 2030 document, National Energy Policy 2004, and Revised Sixth National Development Plan 2013-2016 each acknowledge a need to diversify generation in the sector and increase electricity access nationally.
Since 1995, Zambia’s energy regulations have allowed Independent Power Producers to feed electricity into the grid, but low electricity prices and the resulting constrained financial situation of Zesco Limited have hampered private investment.
Currently, four IPPs contribute 186 MW (seven per cent) of installed capacity to the sector. Otherwise, power supply is a rather centralized and state-owned business. The state-owned utility, Zesco Limited, operates the power grid and generates the bulk part of electricity supplied.
The National Energy Policy was a crucial step for the development of the energy sector in the last decade.
It liberalised the electricity sector by opening all market segments to private operators and set the ground for the establishment of two new key institutions: The ERB, established under the Energy Regulation Act, was later tasked with regulating the operations and pricing of the electricity sector while the OPPPI was created to manage additional investment.
The act formally established the ERB and defined its functions and powers as regulating the energy sector in a fair, transparent, effective and efficient way to safeguard the interest of all stakeholders.
The ERB is responsible for establishing fuel prices (including electricity tariffs), establishing and monitoring the application of the Zambia Grid Code, and designing standards in regards to the quality, safety and reliability of supply of energy in conjunction with the Zambia Bureau of Standards.
In 2014, the Government commenced the process of drafting a Renewable Energy Feed-in Tariff (REFIT) mechanism with the support of the Power Africa initiative (USAID). The top-up on electricity prices is meant to lower barriers for private sector investment in renewable energy generation, and diversify Zambia’s energy mix.
Standardised Power Purchase Agreement (PPA), grid connection guidelines, generation license, and grid connection agreement documents have been developed and are available in draft from the ERB website.
FiTs have been proposed for wind, solar, hydro, and biomass technologies, formal implementation of these tariffs are expected over the next few months.
Many investors are interested in the energy sector. Global demand for energy is growing, particularly for alternative energy according to“green,” “renewable,” “clean”.
Promoters run campaigns extolling investment in traditional and alternative energy sources. They highlight the growth potential of companies operating in such fields as wind energy, solar power collectors, ethanol, biodiesel, oil fields, geothermal energy, natural gas, etc.
The global renewable energy industry reached US$476.3 billion in 2014 and is expected to grow at a 10.3 per cent compound annual growth rate to $777.6 billion by 2019, according to British Broadicasting Corporation Research.
With many forms of renewable energy becoming economically viable, consumers have started to embrace these technologies amid growing concerns over carbon dioxide emissions.
Investors have also started to reconsider the market as reliance on government subsidies diminishes.
In this case it’s important we look at how investors can capitalise on these trends and invest in the global renewable energy industry.
The need for alternative energies is quickly becoming apparent world over. While carbon dioxide levels have been rising since the Industrial Revolution, the last station on Earth without a 400 parts per million reading reached it.
The event marked the first time that carbon dioxide reached these kinds of levels in four million years, suggesting beyond a doubt that these problems stem from human emissions rather than natural phenomena.
Governments have increasingly embraced these concerns by passing mandates to limit the amount of harmful emissions.
In December 2015 for example, representatives from 195 countries at the 21st Conference of the Parties of the UNFCCC in Paris adopted the Paris Agreement to deal with greenhouse gas emissions, adaptation, and finance starting in the year 2020, which could set the stage for a growing number of regulations around the world.
At the same time, governments have played a role in destabilising parts of the alternative energy industry.
China famously disrupted the solar industry in 2013 by selling massive amounts of photovoltaic solar modules and pressuring other manufacturers around the world following its chronic oversupply.
The industry also relies on a number of subsidies from various countries around the world, including Germany’s heavy subsidies for solar power.
The global renewable energy sector is expected to see ongoing growth as governments push to meet new mandates.
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