Zambia needs billions for power projects

Lusaka ‑ Zambia will require an estimated US$14 billion investment to expand transmission and power distribution infrastructure countrywide to meet increasing demand for energy.

A recent World Bank report has noted the need for Zambia to upgrade its generation, transmission and distribution infrastructure to meet the escalating demand for power both for local and export consumption.

Zambia is failing to meet demand, which peaks at 1 750 megawatts against a production of 1 400 megawatts daily – resulting in a shortfall of 250 megawatts.

This has prompted the power utility, Zambia Electricity Supply Corporation (ZESCO), to ration power ‑ disadvantaging many end-users, especially mining that gobbles 50 percent of the total energy produced.

World Bank estimates that power generation expansion would need US$11.5b, while the transmission and power distribution could cost US$2.7b and US$60b, respectively.

The report also notes the need for an agreement among stakeholders and policy makers on the barriers to financing and calls on the government to devise a policy to make it mandatory for the power company to increase tariffs annually by at least nine percent.

According to Robin Mearns, the global lender’s representative, “Tariff increases of nine percent per annum is required to perform debt service for new investments and maintain cost-reflective pricing necessary to cover debt obligations.”

Zambia has the lowest tariff rates by Southern African Development Community (SADC) standards ‑ with US$0.3-US$5 per kilowatt hour (kWh), which is pushing away potential investors due to lack of real returns on their investments.

In the report, Mearns highlights the importance for Zambia to manage its power supply and demand gaps through proper planning; especially that Southern Africa is 95 percent hydropower-dominated, which makes the power sector very vulnerable to climatic variations. Zambia has budgeted about US$5b to upgrade energy services up to 2020. Among the projects is the Batoka Gorge electricity power plant being constructed in collaboration with Zimbabwe and is due for completion by 2017. The project is expected to generate an estimated 1 800 MW.

The country is also part of the ZIZABONA Transmission Project, together with Zimbabwe, Botswana and Namibia.

However, with new mining projects and the government’s zeal to grow the economy by an average 7-9 percent by 2015, it is increasingly difficult for Zambia to meet power demand, forcing it to import energy from its neighbours.

Daily, Zambia on average imports 100 MW from Mozambique and the Democratic Republic of Congo (DRC) to meet its energy deficit, though not sustainable in the absence of improved infrastructure.

Some of the major mining projects coming on stream include a smelter in north-western Zambia by First Quantum Minerals and the Sentinel mines, all near the border with the DRC, which will need more power upon completion in 2018.

The Zambia Environmental Management Agency (ZEMA) has also approved the construction of Mwekera Copper Mine in Ndola by Chinese-owned Macrolink Resources Limited, which will invest in excess of US$5b.

However, ZESCO says it is making frantic efforts to improve the situation through various interventions in the short, medium and long-term. Among the initiatives underway or in the pipeline, as part of the US$5b programme, include commissioning of the remaining 180MW generator at Kariba north bank power station, while Ndola Energy would add 50 MW to the national grid.

The power utility is expected to commission 180 MW machines at Kariba by November 2013, increasing local capacity to 2 015 MW

Other initiatives include the completion and commissioning of the 360MW Kariba north bank extension project by January 2014.

ZESCO managing director, Cyprian Chitundu, has projected ZESCO to spend US$1.98b on the construction of the Kafue George lower hydroelectric power station due for completion in 2017.

August 2013
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