The Policy Monitoring and Research Centre (PMRC) has revealed that Zambia’s electricity demand will double by 2020 and triple in 2030 due to an increased population.
And PMRC has observed that government requires private-sector investment into the energy sector to meet rising demand in the country.
Speaking when he launched PMRC’s research paper in Lusaka, Wednesday, PMRC lead researcher Akabondo Kabechani revealed that Zambia’s electricity demand will double by 2020 and triple 10 years after that due to an increased population, among others.
“Economic transformation over the last 25 years that has seen national income more than triple and the country reclassified as middle-income status. Due to poor rains in 2015-16, the country experienced severe load shedding, which has been found to have caused economic losses of equivalent to 20 per cent of GDP. Underlying problems of dependency on hydropower and limited capacity remain and will continue to threaten economic growth. Rising demand with an average rate of more than 3 per cent between 2010 and 2017. Peak demand grew from 1,575MW (2010) to 2,300MW in 2017, largely driven by Zambia’s mining sector. Research shows that consumption forecast projections rising to 16,000GWh by 2020 and 26,000GWh by 2030, while high growth projections are 24,000GWh and 47,000GWh respectively,” Kabechani said.
“The government has successfully stabilised the country’s energy position since 2016. However, Zambia cannot afford to be complacent. Demand for electricity will only grow, driven by domestic consumption as population, income and electrification levels rise and underpinned by economic growth: this paper forecasts that demand will likely double, and may even triple, by 2030.”
And the research findings showed that government requires private-sector investment in the energy sector to meet rising demand Zambia.
“Zambia is faced with the challenge to meet rising demand for electricity as the economy, population and electrification continue to grow. Load shedding in 2015-16 demonstrated the enormity of Zambia’s economic losses, which amounted to 20 per cent of GDP. Therefore, government needs to look to increased investment in Independent Power Producers (IPPs) to develop energy capacity. This approach offers the opportunity to meet increased demand in a way that protects fiscal spending and, ultimately, promotes long-term economic growth. IPPs offer a sustainable route to increased energy capacity across sub-Saharan Africa, where public and utility financing has traditionally been the largest source of investment in power generation,” Kabechani said.
He, however, said government is struggling to attract investment in the energy sector because of its high debt position, below-cost tariffs and a cumbersome regulatory framework and procurement processes.
“Moreover, the country’s debt position has limited the scope for the government to increase capacity through public and utility investment as it has done traditionally. It is instead imperative that the government look to private-sector investment to meet Zambia’s energy generation needs. As noted in the 7NDP, there is widespread agreement that Zambia has plentiful resources for electricity generation, including hydropower, solar, biomass, geothermal and coal. The challenge is getting investment in power plants that can convert these resources into useful electricity,” Kabechani added.
“Zambia has faced significant challenges in attracting IPP investment for several reasons, including below-cost tariffs, its regulatory framework and procurement processes, all of which need to be addressed if Zambia is to better exploit the opportunities that IPPs provide. Establish a central planning function, most obviously in the Ministry of Energy, to develop a strategic vision and delivery plan for increasing and diversifying power capacity in the country through investment in IPPs.”
He recommended that government develop the governance of the Energy Regulation Board (ERB) to improve its independence and effectiveness in serving investor and consumer interests.
“Establish a central procurement function to sit alongside the planning function and secure investment in line with the government’s strategic vision. The procurement process is lengthy and opaque, which has discouraged investment across the board and created an environment in which deals are made through unsolicited direct negotiations. Improve the credit-worthiness of Zesco: as the sole off-taker, it is essential that investors have confidence that the organization can purchase the energy generated, which can be improved through increased financial transparency and providing more secure guarantees. Develop the governance of the ERB to improve its independence and, therefore, its effectiveness in serving investor and consumer interests. The government should consider having the board, rather than the Minister agree its terms of service and establishing an appeals tribunal, as well as updating legislation to secure its independence,” advised Kabechani.