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Key energy indicators (1990-2016)1
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Total primary energy supply by source, excl. electricity and heat trade  |
Net Energy imports  |
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Total Energy final consumption by source  |
Production of crude oil and other products 
|
|
Electricity generation by fuel
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CO2 emissions from fuel combustible only
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1Source: IEA World Energy balances & global energy statistics
Macroeconomic performance
Real GDP growth has continued at an estimated 4.0% in 2018, compared with 4.1% in 2017. Agriculture output contracted by more than 35% due to a rain shortage in early 2018. Copper production continued to increase by an estimated 4%–4.5% in 2018. Construction also contributed to growth, thanks to public infrastructure projects and investment in commercial buildings and residential housing, towing cement production, which increased at an estimated 10% in 2018.
High capital investment, high debt servicing cost, and a large wage bill have contributed to fiscal deficits, which peaked at 9.3% of GDP in 2015 before declining to 7.8% in 2017 and an estimated 7.1% in 2018, thanks to a fiscal consolidation program. However, the 2018 deficit still missed its target, 6.1% of GDP, due mainly to high capital spending, rising debt servicing, and growing arrears. The debt-to-GDP ratio increased from 25% of GDP to 61% between 2012 and 2016, raising concern. In 2018, domestic debt was an estimated 20% of GDP, while external debt, including government guarantees, fell to an estimated 39.2% of GDP. High public and publicly guaranteed debt led to Zambia being classified as at high risk of debt distress in 2017.
Inflation increased to an estimated 7.6% in 2018 from 6.6% in 2017. The relative price stability led the central bank to reduce the policy rate from 15.5% to 9.75% in February 2018. Average lending rates fell from 29.5% in 2016 to 23.7% in September 2018. Gross international reserves continued to fall from $2.4 billion in 2016 to $2.1 billion in 2017 and were an estimated $1.7 billion by the end of 2018, corresponding to 2.5 months of imports.
Selected macroeconomic trends2
2Source: Africa Economic Outlook, 2019, African Development Bank accessible here: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/2019AEO/AEO_2019-EN.pdf and Zambia - Country Strategy Paper 2017-2021 combined with the 2017 Country Portfolio Performance Review accessible here https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Zambia_-_Country_Strategy_Paper_2017-2021_Combined_with_the_2017_CPPR.pdf
Country Strategy on the energy sector12
Electricity Access
National energy policy
The Seventh National Development Plan (7NDP) has outlined broad strategies and reforms to enhance the supply of electricity, which will expand installed capacity and generation to meet increased peak demand. The goal is to ensure universal access to clean, safe, reliable, and affordable energy at the lowest cost, consistent with national development aspirations. According to the Plan, the Government will implement measures to grow and diversify the energy sector to enhance its contribution to economic diversification by expanding power generation and transmission capacities as well as maintaining a stable supply of petroleum products. The plan will cover the period 2017-2021, during which the following broad strategies will be undertaken: (i) Enhance generation, transmission, and distribution of electricity; (ii) Enhance strategic reserves and supply of petroleum products; (iii) Promote renewable and alternative energy; and (iv) Improve electricity access to rural and peri-urban areas.
Expected electricity generation projects, as at 31st December 2018
|
Project Name |
Type |
Owner |
Capacity (MW) |
Expected Completion Date |
|
Kafue Gorge Lower Power Project |
Hydro |
ZESCO |
750 |
April 2020 |
|
Chishimba Falls |
Hydro |
ZESCO |
15 |
TBA |
|
Batoka Hydro Power Project |
Hydro |
ZESCO |
1,200 |
TBA |
|
Luapula River |
Hydro |
ZESCO |
1,200 |
TBA |
|
Maamba Coal-fired Power Plant II |
Thermal |
Maamba Collieries Ltd |
300 |
TBA |
|
Kabompo Gorge |
Hydro |
CEC |
34 |
TBA |
|
Luisiwasi Lower |
Hydro |
ZESCO |
15 |
TBA |
|
Luisiwasi Lower |
Hydro |
ZESCO |
86 |
TBA |
|
Mkushi |
Hydro |
Lunsemfwa |
65 |
TBA |
|
MASEN |
Wind/Solar |
ZESCO/MASEN |
200 |
TBA |
Source: ERB 2018
The current projections indicate that growth in demand will increase between 150 MW and 200 MW per annum. The peak demand for electricity in the country is likely to be 3,000 MW by 2021 and is expected to increase to over 3,525 MW in 2030.
Supply of petroleum products
Zambia imports its petroleum products to support socio-economic activities. Concerning petrol and diesel, 50 percent is refined locally, and 50 percent is imported. In 2015, consumption of petroleum products stood at about 366,524 metric tons (MT) of unleaded petrol, 818,418 MT of diesel, 18,300 MT of kerosene, 44,160 MT of jet fuel, 3,230 MT of liquefied petroleum gas and 129,149 MT of heavy fuel oil. The domestic prices of fuel are determined by several factors, among them the international oil prices and the exchange rate of the Zambian Kwacha to the United States Dollar. This has resulted in fluctuation in prices and intermittent supply of petroleum products. To maintain a stable supply, there is a need to maintain an efficient and cost-reflective mechanism of pricing petroleum products.
Use of renewable energy
Zambia is endowed with a range of energy resources, particularly woodlands and forests, water, coal, and renewable sources, such as geothermal, wind, and solar energy, and has the potential to generate about 6,000 megawatts (MW). However, as of 2016, the country’s installed capacity stood at 2,742 MW, of which 97 percent was from hydro and 3 percent from other sources. In 2018, installed generation capacity was recorded at 2,892.94 MW (82.9% Hydro, 10.37% Coal, 6.69% Diesel-HFO, 0.04% solar).
Availability and Utilisation of Renewable Sources in Zambia13
To increase the supply of electricity from renewable energy, the Government needs to promote investment in hydro, geothermal, wind, and solar energy generation. Consequently, The Government initiated several programs that aimed at increasing the energy mix in the Electricity Supply Industry (ESI) in Zambia such as scaling solar program by Industrial Development Corporation (IDC), off-grid energy solutions, approval of Renewable Energy Feed-In Tariff Strategy, and import duty waiver on selected solar systems.
12Source: Extracted from the 7th National Development Plan, 2017-2021 accessible at http://www.zambiaembassy.org/document/seventh-national-development-plan-2017-2021
13ERB statistical Bulletin 2018
14Source: IRENA, Zambia Renewable Readiness Assessment, 2013
Regional integration with the Southern African Power Pool (SAPP)15
2018 Highlights
Zambia is an active member of the SAPP regional market through three utilities, namely Zambia Electricity Supply Corporation Limited (ZESCO) as an operating member, Copperbelt Energy Cooperation (CEC) as independent transmission company and Lunsemfwa Hydro Power Company (LHPC) as an independent power producer. The following table shows the SAPP utility generation mix for the year 2018.
Integration challenges
Reduction in load-shedding - This year (2018), the aggregate peak demand for SAPP Operating Members (excluding non-operating members) was 47,495 MW against an operating or available capacity of 57,045 MW. This peak demand is a simple summation of peak demands of individual member power systems usually occurring at different times. The peak demand excludes loads that were curtailed or reduced mainly due to generation capacity constraints and, in isolated cases, due to insufficient transmission capacity. Compared with the previous year, the peak demand rose by 3,993 MW. This was attributed partly to the commissioning of a new generation, especially in South Africa and Zambia, and partly to improved hydrology in the Zambezi catchment area, which resulted in a considerable reduction of load-shedding in the region.
Updating of the SAPP Methodology for Handling Energy Interchange Imbalances - The SAPP implemented the power-frequency-based methodology for handling energy interchange imbalances in the year 2010. Over the years, some issues that were not pertinent at the very beginning cropped up. These included: (i) imbalances caused by tripping of generation on over-frequency protection in one area following a disturbance in another area; and (ii) interruption of scheduled interchange mid-way in an hour or several minutes from the top of the hour, having already delivered some energy. Therefore, on 24 April 2017, the SAPP Markets Sub-Committee (MSC) and the Operating Sub-Committee (OSC) met jointly in Johannesburg, South Africa, and resolved cross-cutting issues on the handling of inter-Control Area energy imbalances. The joint meeting also developed a procedure for handling intra-Control Area energy imbalance within a Control Area. The developed procedure would apply where there are no bilateral arrangements for handling intra-Control Area energy imbalance between SAPP members.
Quality of Power Supply - Power quality issues are becoming more prominent to regulators, power utilities, and customers. A few years ago, the OSC formed a working group on power quality. The working group developed a SAPP standard for power quality as well as a specification for a SAPP power quality meter. By the end of the period under review, power quality meters were installed on almost all interconnectors in SAPP. Monitoring and measurement of power quality were being done. ZESCO, Eskom, SEC, EDM, NamPower, CEC, HCB, and BPC also installed central online databases for power quality. SAPP members agreed to focus on the identification of common power quality problems and associated mitigation measures.
Clashing imperatives
Some of the SAPP member countries have outlined their emissions targets and initiatives they will be putting in place to adapt to the impacts of climate change, including the required means of implementation. However, the SAPP is committed to continuing development in a sustainable manner that results in a benefit to the economy, society, and the environment. The SAPP's approach is to contribute to global efforts to combat climate change while ensuring the sustainability of the region's economies. Climate change efforts specific to SAPP activities are coordinated by the SAPP Environmental Sub-Committee, subject to oversight by the SAPP Management Committee.
Network integration
Currently, the SADC region is not fully integrated as Angola, Malawi, and the United Republic of Tanzania are not connected to the regional power grid. Approved by SADC leaders at their 32nd Ordinary Summit held on August 2012 in Mozambique, the Energy Sector Plan of theRegional Infrastructure Development Master Plan (RIDMP), covering the period 2012 to 2027, is an ambitious program to develop cross-border infrastructure in the region. Some of the planned transmission lines are the Zimbabwe-Zambia-Botswana-Namibia (ZiZaBoNa) interconnector project, the Malawi-Mozambique interconnector project, the Mozambique-Zimbabwe-South Africa (MoZiSa) transmission project and the Zambia-Tanzania-Kenya interconnector project. Most of the SADC regional interconnection projects that are under consideration by the AfDB are contained in the RIDMP.
The following table indicates the chronology of the existing power network in the region.
Chronology of regional power network integration in Southern Africa
|
Year |
Interconnexion line construction |
Event |
Countries interconnected |
|
1956 |
1x220kV AC |
220kV line constructed between Northern Rhodesia and Katanga province in Congo. |
DRC, Zambia |
|
1960 |
2x330kV AC |
2x330kV grid construction to connect Northern & Southern Rhodesia |
Zambia, Zimbabwe |
|
1975 |
533kV HVDC |
533kV line between Cahora Bassa and Apolo |
Mozambique, South Africa |
|
1996 |
400kV |
400kV line constructed between Matimba and Insukamini |
South Africa, Zimbabwe |
|
1997 |
400kV |
400kV line constructed between Matimba and Phokoje |
South Africa, Botswana |
|
1997 |
330kV |
The 330kV Mozambique-Zimbabwe interconnector |
Mozambique, Zimbabwe |
|
2000 |
400kV |
400kV line between Camden via Edwaleni to Maputo |
South Africa, Swaziland, Mozambique |
|
2001 |
400kV |
400kV line between Arnot and Maputo |
South Africa, Mozambique |
|
2001 |
400kV |
400kV line between Aggeneis and Kookerboom. |
South Africa, Namibia |
|
2006 |
220kV |
220kV line between Livingstone and Katima Mulilo |
Zambia, Namibia |
Source: SAPP and various sources
Regional electricity market16
Traditionally, SAPP utility members are mainly trading electricity (about 90-95% of energy trade) through fixed co-operative bilateral contracts. In April 2001, the SAPP introduced the short-term energy market (STEM) as a precursor to a fully competitive market. The STEM was designed to allow for the trading of electricity on a shorter timeframe between SAPP members (in addition to bilateral contracts). The development of the competitive electricity market started in January 2004 when an Agreement between the Government of Norway and SAPP provided SAPP with a grant to the amount of NOK 35 million for this purpose. Under this Agreement, NordPool developed the ‘Day-Ahead Market’ (DAM) trading platform for the SAPP. The goals of the SAPP DAM are to (i) establish an efficient & competitive marketplace, and (ii) ensure that consumers benefit from the market. The SAPP DAM replaced the STEM market in 2009 and operated as a firm energy market that trades (via double-sided auction process) hourly energy contracts for the following day inclusive of existing bilateral contracts (cleared first), transmission capacity constraints, and wheeling fees. Since December 2015, the SAPP market architecture was updated with several new sub-markets established. The sub-markets included in this new SAPP market architecture are:
- Bilateral contracts: To meet long-term energy supply-demand balance between market participants. This sub-market pre-dates the establishment of the SAPP and has been the legacy sub-market within which most electricity trading in the SAPP occurs.
- Forward Physical Market Monthly (FPM-M): A sub-market where market participants can trade either an Off-Peak product for a single month (same volume and price in Off-Peak hours for the month) or a Non-Off-Peak product for a single month (same volume and price in Non-Off-Peak hours of the month). This is a sub-market that acts as a bridge between bilateral contracts and the FPM-W (outlined next) and has been operational since April 2016.
- Forward Physical Market Weekly (FPM-W): A sub-market where market participants can trade Off-Peak, Standard, and Peak products for a particular week (with the same volume and price for all Off-Peak, Standard and Peak hours of the week respectively). This is a sub-market that acts as a bridge between the FPM-M and Day-Ahead Market (DAM) and has been operational since April 2016.
- Day-Ahead Market (DAM): An open and competitive sub-market traded on a day-ahead basis (can forward bid up to 10 days if desired) to meet short-term supply-demand balances between SAPP market participants.
- Intra Day Market (IDM): A sub-market that allows market participants to trade up to one hour before delivery. The IDM matches market participants automatically on a first-come-first-serve basis if a seller’s offer price is less than a buyer’s bid price and a seller’s volume is lower (or equal to) a buyer’s volume.
Between April 2016 and January 2017, the SAPP market revenues amounted to USD 69 million, with the following market share: DAM (74%), FPM-W (11%), FPM-M (8%), and IDM (7%). The SAPP market average prices were as follows: Off-Peak (3-6 USDc/kWh), Standard (4-10 USDc/kWh), and Peak (10-14 USDc/kWh).
15Source: Southern Africa Power Pool website accessible at http://www.sapp.co.zw
16Source: SAPP and various sources
Key stakeholders in the power market
Institutional framework17
In 1995, the Parliament of Zambia had enacted the Electricity Act (Chapter 433 of the Laws of Zambia) that regulates the generation, transmission, distribution, and supply of electricity in the country. The Electricity Supply Industry (ESI) in Zambia comprises generation, transmission, distribution, and supply of electrical energy. ZESCO Limited is wholly state-owned and vertically integrated power utility through the Industrial Development Corporation (IDC), the holding company for the majority of state-owned enterprises in Zambia. ZESCO owns and operates over 90 percent of the generation, transmission, and distribution assets in the country and supplies electricity to all grid-connected consumers, with the exception of some of mining consumers in the Copperbelt Province, which are served by Copperbelt Energy Corporation (CEC), a private company that purchases bulk power from ZESCO for onward supply to the mines. CEC also exports power to the Democratic Republic of Congo. North Western Energy Corporation Limited (NWEC) is also a private utility company that owns and operates power distribution and supply infrastructure that provides electricity to the residential mining townships in the North-Western Province of Zambia. NWEC purchases power from ZESCO as a Maximum Demand (MD) customer and supplies to its clients.
As of December 2017, the Zambian ESI had five (5) IPP’s namely: Lunsemfwa Hydro Power Company (LHPC), Ndola Energy Company Limited (NECL), Maamba Collieries Limited (MCL), Itezhi-Tezhi Power Corporation (ITPC) and Zengamina Power Limited (ZPL).
Key stakeholders18
The Ministry of Energy (MoE) is responsible for the formulation and implementation of the energy policy, compiling inventories of energy resources, detailing patterns of production, distribution, consumption, and pricing of energy to maintain an energy information system used for planning, forecasting and policy analysis. It is also responsible for monitoring implementation of the rural electrification program, promoting the development and wide utilization of new and renewable sources of energy, promoting the efficient management of energy, monitoring and evaluating energy programs, and coordinating regional energy programs.
Energy Regulation Board (ERB) is responsible for regulating the electricity, petroleum, and other forms of energy, including renewable energy. The ERB is responsible for ensuring a reasonable return on investment for operators/utilities, quality service at affordable prices to the consumer, licensing of operators/utilities, proposing tariffs, and monitoring competition in the market.
The Rural Electrification Authority (REA) was established by the Rural Electrification Act of 2003; REA houses the Rural Electrification Fund (REF). REA’s main mandate is to carry out rural electrification, develop rural electrification mechanisms through the extension of the grid network, and other methods, as well as by applying a subsidy for capital costs on rural electrification projects. The rural electrification program encourages the use of solar technology; however, so far, only a limited number of solar projects have been implemented by REA.
The Industrial Development Corporation (IDC) is an investment company wholly owned by the Zambian government, incorporated in early 2014. IDC mandate is to play a catalytic role in supporting Zambia’s industrialization. The IDC plays its role through evaluation, pricing, and lowering the investment risk profile by serving as co-investor alongside private sector investors. Concerning the energy sector, the IDC is government shareholder in ZESCO Limited and is currently spearheading the Scaling-up Solar Initiative with a target of installing a total 600MW grid-connected Solar PV.
The Zambia Development Agency (ZDA) is an agency responsible for fostering the country’s economic growth and development by promoting trade and investment, innovations promoting high skills, and productive investment. The ZDA is expected to be a one-stop-shop for all investors, including those in the energy sector.
The Zambezi River Authority (ZRA) is the authority responsible for the operation and maintenance of the Kariba Dam complex. ZRA is also investigating and developing new hydro sites on the Zambezi River. ZRA also analyses and disseminates hydrological and environmental information on the Zambezi River and Lake Kariba.
Key Institutional Stakeholders in the Zambia Power Sector
Key project finance lenders19
AFRICAN DEVELOPMENT BANK (AfDB)
- AfDB will invest USD 100 Mn (USD 50 Mn each from GCF and AfDB) for Projects and TA in the Off‐grid sector.
- Additionally, SEFA could potentially fund USD 1.5 Mn TA (for REA and Sector Off‐grid Task Force).
- Discussions with the GVT on the following topics are on-going:
- ZESCO emergency rescue and reforms
- Off‐Grid Renewables
- Supported Government Zambia launch a 20 MW Renewable Energy Feed-in Tariff (REFIT) Strategy aimed at accelerating private investments in small and medium-sized renewable energy projects in Zambia
- Technical assistance to the government to develop a standardized power purchase agreement (PPA)
- WORLD BANK/IFC
- IFC Industrial Development Corporation (IDC): Scaling up solar program (objective 600MW of solar projects). The First Scaling Solar project was auctioned in May 2016 for two solar PV plants of 50 MW each and was awarded to international energy developers.
- Scaling-up Renewable Energy Program for Low-Income Countries (SREP): Facilitating the development of an Investment Plan (IP) for projects and programs on Renewable Energy in Zambia. Under the SREP program, a total amount of up to $40 million will be made available for Zambia through the World Bank
- Lusaka Transmission and Distribution Rehabilitation Project (LTDRP)
- GET-FiT: $34.8 Million to implement a Renewable Energy Feed-in Tariff (REFiT)-Strategy which aims to cope with climate change and the energy scarcity in the by supporting private investment in renewable energy facilities
- Finance the Phase 1 of ZESCO Southern Division distribution rehabilitation and extension project
- Finance the Phase 1 of ZESCO Southern Division distribution rehabilitation and extension project and ZESCO Lusaka Transmission and Distribution Rehabilitation Project (LTDRP)
- Implement the China Zambia South-South Renewable Energy Technology Transfer Project on Solar and small-hydro: providing investments to policy and regulatory reforms and capacity building aimed at improving the enabling environment for private sector participation and public officers being ready to provide required.
- Energy for Agriculture (E4A) project, supported by SIDA, supports the construction of 3,375 bio-digesters
Increased Access to Electricity Services (IAES) project: Working in collaboration with the Government through the Ministry of Energy and ZESCO to increase access to electricity
17Source: Scaling-up Renewable Energy Programmes available at http://www.moe.gov.zm/wp-content/uploads/2019/02/Zambia-SREP-IP.pdf and ERB at www.erb.org.zm
18Source: Scaling-up Renewable Energy Programmes available at http://www.moe.gov.zm/wp-content/uploads/2019/02/Zambia-SREP-IP.pdf
19Source: The Africa Energy Market Place (AEMP) available at https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/AEMP/AEMP_Zambia_Orientation_Paper_.pdf
Electricity regulatory Index
The Government commenced in 2017 the review of legislation, the implementation of the Distribution Grid Code, the Electricity (Grid Code) Regulations, and movement toward Open Access Regime. The legislative reviews of the Electricity and the Energy Regulation Acts embarked upon by the ERB were expected to be completed by December 2018. The review targets are to enhance the legislative mandate and improve industry efficiency.
Open access and transmission pricing framework - The envisaged Open Access Regulations would complement the Electricity (Grid Code) Regulations, SI No. 79 of 2013, in facilitating non-discriminatory access to the electricity transmission network in Zambia. This will ultimately result in improved efficiency in the operation of the electricity network and is expected to encourage more investment in the electricity sub-sector.
Licensing framework - The ERB issues licenses to undertakings engaging in entrepreneurial activities in the energy sector as provided under the Energy Regulation Act, Chapter 436 of the Laws of Zambia as reading together with the Energy Regulation (Licensing) Regulations of 1998. During the period 2016-2017, a total of one hundred and fourteen (114) license applications were processed, of which eighty-five (85) were initial applications while twenty-nine (29) were renewals. Also, twenty-five (25) retail sites were approved for inclusion onto existing retail licenses.
Complaints handling – In 2017, the ERB received complaints through the following: offices located in Lusaka, Chinsali, Livingstone, and Kitwe; Competition and Consumer Protection Commission (CCPC); and the toll-free line 8484. A total of 240 complaints were received and investigated. A total of 169 were resolved following the complaint handling procedures. The complaints resolved represented a resolution rate of 70.4 percent against a set target of 70 percent.
Regulatory Assessment
The Electricity Regulatory Index for Africa (ERI) is a flagship publication of the Power, Energy, Climate Change and Green Growth Complex of the African Development Bank, which seeks to empirically evaluate the performance of African utility regulators, benchmark their performance against international best practices as well as a peer-to-peer comparison of their performance. For the first time, Zambia participated in the ERI survey 2019, which is the second edition of the study. Over 34 participating countries in the 2019 study, Zambia ranked 13th with an overall score of 0.618, which denotes that some elements for a supportive regulatory framework are established, although with weaknesses that do not permit the regulator to have strong capacity, legal and institutional structures. The ERI 2019 report is under preparation. The first edition of the study (and the subsequent report) is available here.
The ERI 2019 regulatory index
About the market
-
Who is responsible for creating energy policy?
The Ministry of Energy (MoE) is responsible for the formulation and implementation of the energy policy, compiling inventories of energy resources, detailing patterns of production, distribution, consumption, and pricing of energy to maintain an energy information system used for planning, forecasting and policy analysis.
-
What laws, regulations, and plans/programs exist for clean energy?
The Electricity Act (1995) and the Energy Regulation Act (1995) did not include a provision to encourage investment in renewable energy. In 2008, the government of Zambia recognized the need for promoting renewable energy and clearly stated its intentions in the National Energy Policy of 2008. As part of the implementation of the new National Energy Policy, the Government decided to develop the Power System Development Master Plan (PSDMP), whose objective is to provide a blueprint for Power System Development in the country up to the year 2030. The plan highlights the least cost expansion options for Generation, Transmission, and Distribution in the country. The policy implementation was reinforced and outlined in the 4th strategy of the Seventh National Development Plan (7NDP), which aims at promoting the development and use of renewable and alternative energy sources, such as solar, wind, biomass, geothermal as a way of diversifying the energy mix and improving supply. During this Plan period (2017-2021), the government will develop a comprehensive national energy strategy, including a master plan for sustainable alternatives to charcoal and other household energy needs. The Plan targets the following programs: (i) Policy and legal framework review and enhancement; (ii) Renewable and alternative energy development promotion; (iii) Woodfuel sub-sector management; and (iv) Energy efficiency and conservation promotion.
-
What is the structure of the sector? To what extent have generation, transmission, and distribution activities been unbundled?
Zambia’s electricity sector operates under the single buyer model, with five independent power producers (Lunsemfwa Hydro Power Company (LHPC), Ndola Energy Company Limited (NECL), Maamba Collieries Limited (MCL), Itezhi-Tezhi Power Corporation (ITPC) and Zengamina Power Limited (ZPL)), and transmission and distribution operators (Copperbelt Energy Corporation (CEC), North Western Energy Corporation Limited (NWEC)). The single buyer functions are assumed by ZESCO, which owns and operates over 90 percent of the generation, transmission, and distribution assets in the country and supplies electricity to all grid-connected consumers. ZESCO Limited is wholly state-owned and vertically integrated power utility through the Industrial Development Corporation (IDC), the holding company for the majority of state-owned enterprises in Zambia. The structure of the sector is shown here.
-
Who owns and operates the grid-connected generation, transmission, and distribution assets?
Two utilities own the grid-connected generation, transmission and distributions assets in Zambia: ZESCO limited and CEC.
ZESCO limited22: The ZESCO transmission grid comprises transmission lines and substations at 330 kV, 220 kV, 132 kV, and 66 kV voltage levels. The backbone of the grid is built on a robust 330 kV system from the southern part of the country where the major generating stations are located through Lusaka and Central provinces to the Copperbelt. The transmission grid is a highway for electricity delivery across the country and also forms part of the regional grid used for power exchange with other countries. ZESCO is responsible for the development and maintenance of the infrastructure for use for efficient and reliable transportation of electricity from generating stations to bulk supply points and large mining and industrial customers.
ZESCO transmission assets
Source: ZESCO
CEC23: CEC owns, operates, and maintains power transmission, generation, and distribution assets servicing customers in Zambia and the DRC. CEC assets comprise a modern control center, employing cutting-edge technology to monitor and an emergency power generation capacity of 80MW, transmission and distribution network of around 1,000km of overhead power lines, 42 high voltage substations and electricity network carrying capacity over 700MW. CEC operates an interconnector with the Democratic Republic of Congo (DRC), which handles bulk power flows into and out of the DRC. It is the only network link between DRC and the rest of Southern Africa. -
Are tariffs cost-reflective?
ZESCO Electricity tariffs are not cost-reflective. The Energy Regulation Board commissioned a Multi-year Tariff Framework (MYTF) methodology in 2016, to be implemented from 2017 onward. The MYTF will provide stability and predictability of the tariff determination framework by way of presetting tariffs for a longer period and allowing for the automatic cost pass through when there is a change in the agreed factors.
In May 2017, The Energy Regulation Board (ERB) had decided to increase the electricity tariffs from ZESCO by an average of 75 percent. In its application, ZESCO increased non-mining electricity tariffs in two phases starting with 50 percent on 1st May and a further 25 percent in September 2017. However, mining companies are excluded from this tariff increment due to the prevailing bilateral Power Purchase Agreements (PPAs). Negotiations with mining houses are nearing a conclusion that will raise their tariffs. These measures will help reduce the pressure on the fiscal deficit in the medium term.
The Cost of Service Study (CoSS), funded by the African Development Bank, will determine the least cost generation, transmission, distribution, and supply programs to meet the forecasted electricity demand in Zambia over the medium to long-term. See 2018 ZESCO tariffs here.
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What is the status of the grid, and is it capable of handling intermittent (renewable) energy resources?
The grid is already capable of managing intermittent hydro-electricity as it is dominating the country’s electricity generation mix. The challenge for the government is the integration of new non-hydro sources in the system to face the growing demand for electricity. The renewable energy strategy has defined targets for the deployment of renewable energy power generation. However, the targets have been set without any thorough investigation of the economic potential of each renewable energy resource considered (solar, small hydro, geothermal, and biomass). In 2016, the Electricity Regulatory Board developed the Zambia Distribution Grid Code (“Distribution Code”). The “Distribution Code” provides a framework for addressing some of the challenges being faced in the distribution network arising from various developments in the ESI, including the integration of renewable energy-based generation into the distribution network and net metering to allow domestic customers with renewable energy-based generation to supply part of their production into the distribution network. The adoption of the “Distribution Code” was an essential step towards the grid integration of non-hydro renewable energy-based power, which requires a thorough assessment of the grid’s ability to include variable power.
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Who is responsible for planning and procuring additional capacity to meet demand?
The Ministry of Energy (MoE) is responsible for compiling inventories of energy resources, detailing patterns of production, distribution, consumption, and pricing of energy to maintain an energy information system used for planning, forecasting, and policy analysis. MoE developed the Power System Development Master Plan (PSDMP), whose objective is to provide a blueprint for Power System Development in the country up to the year 2030. The plan highlights the least cost expansion options for Generation, Transmission, and Distribution in the country.
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Who is responsible for supplying electricity to consumers?
ZESCO supplies electricity to all grid-connected consumers, except the mining consumers in Copperbelt province, which are served by Copperbelt Energy Corporation (CEC), and the residential mining townships in North Western Province, which are served by the North Western Energy Corporation Limited (NWEC).
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Is there an independent regulator? Which activities are subject to economic regulation?
The Energy Regulation Board (ERB) is the regulatory agency of the energy sector. The mission of the ERB is to regulate the energy sector to ensure the efficient provision of reliable and quality energy services and products. The ERB major functions in the economic regulation include: (i) monitoring the efficiency and performance of undertakings; (ii)price regulation; (iii) assessment of licence applications for their financial and economic viability; (iv) evaluation of licence fees; (v) monitoring and promoting competition within the energy sector; (vi) fostering investment in the energy sector; and (vii) protection of consumer interests, in terms of affordability and sustainability of energy services. According to the Energy Regulatory Act on ERB financial provisions, the agency has no financial autonomy.
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Is net metering allowed in the country?
Yes, net metering is allowed according to the Distribution Grid Code (“Distribution Code”).
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Does the country belong to a regional power pool?
Zambia is an active member of the Southern Africa Power Pool (SAPP) regional market through three utilities, namely Zambia Electricity Supply Corporation Limited (ZESCO) as an operating member, Copperbelt Energy Cooperation (CEC) as independent transmission company and Lunsemfwa Hydro Power Company (LHPC) as an independent power producer.
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Are there any interconnectors in place?
Yes. Zambia’s physical grid interconnections are with the Democratic Republic of Congo (DRC) in the north and Zimbabwe in the south. On-going projects seek to interconnect the country to Tanzania in the northeast, Malawi in the east, and Namibia in the west through the Zimbabwe-Zambia Botswana-Namibia interconnector. See the map below.
22Source: http://www.zesco.co.zm/ourBusiness/transmission
23Source: https://cecinvestor.com/businesses/
About opportunities in the country
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Is installed generating capacity adequate to meet existing demand?
By the close of 2017, the nation’s power deficit had been eliminated. In 2016, there was a deficit of 526 MW. This deficit was, however, mitigated by the electricity imports from within the region. It is worth noting that during the 2016/2017 rainy season, the main water reservoirs had significantly risen in the levels as a result of improved rain patterns and increased water inflows. The Itezhi Tezhi reservoir was filled to the extent that excess water was spilled, and Kafue Gorge Power Station operated at full capacity. The improvement in ZESCO’s hydropower generation and expansion in the IPP’s generation capacity ended Zambia’s power deficits that were experienced in the preceding years of 2016 and 201524.
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What is the current energy production mix?
Installed generation capacity was recorded at 2,892.94 MW in 2018 (82.9% Hydro, 10.37% Coal, 6.69% Diesel-HFO, 0.04% solar).
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What is the projected demand?
The current projections indicate that growth in demand will increase by 150 MW to 200 MW per annum. The peak demand for electricity in the country is projected at 3,000 MW by 2021 and is expected to increase to over 3,525 MW in 2030.
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Is there a proposed new energy mix?
he Government envisaged that non-hydro sources of energy, which include geothermal, wind, solar, and coal, would grow to about 15 percent by 203025.
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Will the current pipeline of renewable energy projects be sufficient to achieve plans?
The current pipeline of new renewable energy projects available as of 31 December 2018 is as follows:
Note: PSDMP 2010-2030 stands for Power System Development Master Plan 2010-2030
The current capacity of 2,893 MW plus the Kafue Gorge Lower Hydro Project generation capacity of 750 MW (completed by 2020) will suffice for the projected 3,000 MW peak demand by 2021 and 3,525 MW peak demand by 2030. By developing the remaining renewable projects, the country will be able to secure its domestic energy demand and further service the neighboring countries through the SAPP market.
However, the energy mix by 2030 will be as follows: 89.2% Hydro, 4.6% Coal, 3% Diesel-HFO, and 3.2% Wind/Solar. According to the above pipeline alone, the target of 15% for geothermal, wind, solar, and coal will not be achieved. This target requires the development of new geothermal generation projects over the period 2022-2030, as envisaged by the Government of Zambia under the Scaling-Up Renewable Energy Programme in Low-Income Countries (SREP). -
What is the investment potential associated with meeting Zambia’s renewable energy goals?
The Ministry of Energy has developed an Investment Plan (IP), a country-level and outcome-focused programmatic approach, to scaling up renewable energy through the Scaling-Up Renewable Energy Programme in Low-Income Countries (SREP). The IP is in line with Zambia’s Vision 2030; the Seventh National Development Plan (7NDP) 2017- 2021, and the 2008 National Energy Policy. The SREP identifies renewable energy technologies and projects that will contribute positively to the sustainable economic development of Zambia. The SREP aims to demonstrate, through pilot operations in selected countries, the economic, social, and environmental viability of a low-carbon development pathway to increasing energy access using renewable energy and creating new economic opportunities. The SREP is a funding window of the Strategic Climate Fund, which operates under the Climate Investment Funds (CIF).
The IP outlines investment areas and activities that have been prioritized by the Government of Zambia (GRZ) for SREP support and have the potential to leverage significant concessional and private sector financing. The Government of the Republic of Zambia (GRZ), in line with the objectives and criteria of SREP, prioritizes the following three areas/components: (i) Energy Access in Rural and Peri-Urban Areas ; (ii) Wind Power Promotion; and (iii) Geothermal development project.
IP Financing plan (US$ million)
Notes: All SREP funds are assumed to be grantsSource:Scaling RE Program in Zambia
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What short and long-term opportunities for investment exist?
According to the above Investment Plan and the current pipeline over the period 2020-2030, potential investment opportunities exist in the solar and geothermal generation. See also.
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What is the tender process, and where are they announced?
Any type of tendering process is available at the government’s Public Procurement Authority e-GP System, a web-based, collaborative system to facilitate the full lifecycle of a tendering process for both buyers and suppliers.
24Source: ERB Energy Sector Report 2017
25Source: 7th National Development Plan 2017-2021.
About private sector participation
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What are the incentives for foreign and private investment?
The Government of Zambia is undertaking regulatory reforms that will provide private sector support programs to business operations, which include tax, non-tax and facilitation of services (zero percent tax rate on dividends for 5 years, zero percent tax on profits for 5 years, zero percent import duty rate on capital equipment) once a company acquire a certificate of registration. Incentives are granted to both domestic and foreign investors and are administered through the Zambia Development Agency Act of 2006 Statutory Instrument No. 15 of 2011, which classifies energy as a priority sector and confers it financial and fiscal incentives to create a conducive environment. The following table depicts an overview of the administration of fiscal and financial incentives.
Source: UNCTAD; Note: OPPPI stands for Office for promoting private power investment -
Can a foreign registered company submit an Expression of Interest to develop a renewable energy project?
Yes, a foreign company can submit an Expression of Interest to develop a renewable energy project. Foreign companies can find the current tenders posted on theMinistry of Energy website.
Last update: May 2019
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