Republic of Zambia

OPPORTUNITIES IN THE ENERGY

SECTOR IN ZAMBIA

Presentation Outline

COUNTRY PROFILE

KEY POWER SECTOR PLAYERS

OVERVIEW OF THE ENERGY SECTOR IN ZAMBIA

ZAMBIA ENERGY SITUATION PRESENTLY

RESULT OF SHORTFALL OF ELECTRICITY ON GENERAL PUBLIC

MITIGATION MEASURES

SOLAR SOLUTIONS

OFF-GRID SOLUTIONS

TARIFFS

CONCLUSION

Country Profile

• Brief

3

Location – Southern Africa

Size -752,610 sq.km

Population - 14 Million

Climate – Temperate , Tropical

Rain Season (November to April)

Political: Multi-Party Democracy

Stable & Peaceful

Economy

Mining, Agriculture, Energy,

Manufacturing, Tourism,

Infrastructure

GDP growth rate – 6% average

Key Power Sector Players

Overview of the Energy Sector in Zambia

Zambia’s energy resource potential includes Hydro, Solar, Wind

and Bioenergy resources.

Zambia’s hydropower resource potential is estimated at

6,000MW.

Despite abundant hydro-power generation potential, only 25% of

the population has access to electricity.

Population Distribution

Zambia’s Renewable Energy Strategy defines RE sources to

include:

Solar - thermal and photovoltaic

Biomass – agriculture waste, forestry waste,

industrial/municipal organic waste, energy crops and products

and animal waste.

Geothermal

Overview of the Energy Sector cont’d..

Overview of the Energy Sector cont’d…

Solar Energy

Zambia has:

Potential energy out put per unit area (Solar radiation)

average 5.5kWh/m²/day (MEWD,2008)

Up to 3000 sunshine hours per year.

This is significant potential for solar thermal & photovoltaic

exploitation

Overview of the Energy Sector cont’d…..

Geothermal

More than 80 hot springs occurrences associated with deep seated faults and fracture systems in Zambia.

35 were rated high in terms of surface water temperature, flow rate.

No detailed exploration done to determine potential for electricity generation.

Kapisya Project – 2.0MW potential for electricity generation.

Zambia Energy Situation Presently

Zambia is currently faced with a deficit of 560 megawatts in its energy

supply because of unusually low water levels in the Kariba Dam, the

world’s biggest man-made reservoir.

Of the total installed Electricity Generation Capacity of Zambia of 2,347

MW, hydropower is the most important energy source in the country with

2,259 MW (96%), followed by diesel contributing about 4% to the national

energy supply.

Demand for energy in Zambia has been rising due to robust GDP growth

of more than 6% per year for the past decade in the country, particularly

in the mining, manufacturing and agriculture sectors.

The Zambia Development Agency (ZDA) record that the demand for

electricity in the country has been growing at an average of about 3%, or

between 150 and 200 MW, each year.

Zambia Energy Situation Presently cont’d…

Power Deficit

Generation of electricity in Zambia is predominantly from 3 main

hydropower stations, namely:

Kafue Gorge,

Kariba North Bank and

Victoria Falls

These currently account for 96% of total supply of the country.

Due to the below average rainfall during the 2014/2015 rain season, water inflow into the reservoirs has not been adequate enough to meet the national power requirement till the end of 2015.

In response, the Zambezi River Authority, after carrying out hydrological modelling, reviewed the water allocation to ZESCO for hydropower generation from 45 billion to 33 billion cubic metres for the period March - December, 2015 in order to allow generation to last till the next rain season. This led to a shortfall in power generation of approx. 560 MW.

Result of shortfall of electricity on general public

ZESCO then began implementing revised load shedding schedules of between 5 and 6 hours for the domestic, industrial and commercial customers on a rolling basis through a 24 hours period.

Based on hydrological forecasts, ZESCO was further advised to reduce power generation beginning in July 2015, from the earlier recommended 700 MW to 540 MW and from 600 to 305 MW for Kafue Gorge and Kariba North Bank, respectively. This has led to a further reduction of 455 MW.

In order to mitigate the reduced power generation caused by the reduced water levels at the three major stations, ZESCO embarked on the load shedding programme country wide.

NOTE: The Mines supplied by ZESCO and Copperbelt Energy Corporation (CEC) still receive their full compliment of the contracted power. The mines are not load shed.

Result of shortfall of electricity on general public cont..

The projected demand for the month of October 2015 stands at an average of 2000 MW, while the current total generation stands at 985 MW, broken down as follows:

Kafue Gorge – 540 MW;

Kariba North Bank – 305 MW; and

Other stations – 140 MW

This translates into a deficit of 1015 MW for the month of October 2015.

Mitigation Measures

Short Term Measures

a) Importation of Power:

Government commenced the importation of power as follows:

i. 148 MW from AGGREKO off the coast of Mozambique (this power is available on a continuous basis);

ii. 150 MW from Southern African Power Pool (SAPP); and

iii. 100 MW from Electricidade de Moçambique E.P. (EDM) in Mozambique.

iv. The power indicated in (ii) and (iii) above is only available at off peak hours.

b) Load Shedding:

ZESCO has continued to implement the load shedding programme to mitigate the reduced power generation. However this has proven not to be effective as customers seem to be shifting the loads and simply postpone their consumption to the point when they get back power. This has led to an increase in the deficit of an average of about 260 MW.

In order to alleviate the power deficit and load shedding situation in the country,

Government through ZESCO, has been implementing the following short term

and medium term measures:

Medium Term Measures

a) Commissioning of Maamba Coal Powered Station in November, 2015 - 150 MW;

b) Promotion of Renewable Energy Technologies – Minimum of 100 MW;

c) Further Contracting of Emergency Power from KAR-POWER starting on 1st January 2016 - 160MW;

d) Government has further initiated the procurement process for the deployment of up to 300 MW from Solar; and

e) Up to 200 MW of inland thermal power stations (HFO, Diesel and Gas)

Solar Solutions

The International Finance Corporation (IFC) (World bank) is assisting Zambia to set up two of its first Utility-Scale Solar Power Projects in an attempt to help deal with the electricity shortage.

Zambia’s Industrial Development Corporation (IDC) recently partnered with the IFC in an programme called “Scaling-up Solar”. Under this programme the IDC and IFC intend to package and bring on board 600 MW of solar power.

At the same time ZESCO with the Ministry of Energy are involved in a parallel effort to bring on board 300 MW of solar power into the grid

IDC + IFC Solar Power Projects For Zambia

+

INVESTMENTS IN SOLAR PV

Off-grid Solutions

The Rural Electrification Authority has been

mandated to spearhead development of off-

grid solutions in far flung areas. Particular

incentives can be negotiated on a case by

case basis.

Renewable Feed-In Tariff (REFIT) Policy

Tariffs

REFIT:

Government is collaborating with stakeholders to develop initiatives that will diversify the country’s electricity generation through investment in the energy sector and expand the electricity supply industry in order to reduce over dependence on hydroelectricity.

Equally, the GET-FIT Zambia Initiative aims to promote grid connected renewable energy with a focus on small grid–connected RE Generation Projects (1 MW – 20 MW).

The adoption of an effective REFIT policy and finalization of the REFIT regulations will enable the Zambian Government to buy renewable energy from small-scale independent power producers at predominant prices to meet the high energy demand by the public.

The paper should be tabled before cabinet within a month.

Required Investments and Funding in Electricity Sector

Generation Projects requiring funding or strategic partners

PROJECT PROJECT OWNER

COST ESTIMATE IN US$ (MN)

CAPACITY (MW)

COMMENT

Kafue Gorge Lower (hydro) – SPV

GRZ will hold 60% shares through ZESCO

2,000 750 Transaction adviser has been engaged to secure an equity partner for the remaining 40%. Debt/equity ratio 70:30 Debt funding of US$1.4bn required. EPC tender to be advertised.

Batoka Gorge (hydro) Shared between Zambia and Zimbabwe

2,400 1600 Draft updated feasibility study complete. The structure of this project is yet to be finalised by the two Governments

Mambilima and Mumboto Hydro scheme – Private Sector

Not yet awarded

1,000 GRZ to award concession and decide on structure

Required Investments and Funding in Electricity Sector cont’d

Generation Projects requiring funding or strategic partners

PROJECT PROJECT OWNER

COST ESTIMATE IN US$ (MN)

CAPACITY (MW)

COMMENT

Kalungwishi Power Project (hydro)

Private sector - LPA

750 247 Power Purchase Agreement negotiations with ZESCO in progress. LPA is seeking funding

Lusiwasi Lower (hydro) ZESCO 253.5 83 Requires funding

Lusiwasi Upper (hydro) ZESCO 47 15 Requires funding

Chishimba Falls Power Expansion (hydro)

ZESCO 65.1 14.8 Requires funding

TOTAL EXPECTED 7728.1

Required Investments and Funding in Electricity Sector cont’d

Transmission Projects requiring funding

PROJECT COST ESTIMATE IN US$ (MN)

COMMENT

Zambia-Congo DRC 330kV Line Interconnector 64.0

Requires funding

Zambia-Tanzania-Kenya 330kV Line Interconnector 93.0

ZESCO has completed the

larger portion of the work

from Pensulo to Kasama.

Funding for the line from

Kasama to Nakonde is

required.

Connection of Lundazi and Chama to the National Grid 63.0

Tender document

completed,

Requires funding

Required Investments and Funding in Electricity Sector cont’d

Transmission Projects requiring funding

PROJECT COST ESTIMATE IN US$ (MN)

COMMENT

Kafue Gorge Lower-Kafue West 330kV Line 46.0

This line is required for the

evacuation of power from

the planned US$ 2 billion

Kafue Gorge power plant

Funding required

Kabwe-Pensulo 330kV Line 125.0

Feasibility and EIA studies

pending

Funding required

Muzuma-Kafue West 330kV Line 80.0

Feasibility and EIA pending

Funding required

Connection of Nyimba-Petauke to Transmission Grid. 40 Requires funding

TOTAL EXPECTED 471

Conclusion

Zambia remains a remarkable investment destination in the

energy sector

Zambia’s Location and the development of new interconnectors

coupled with power deficit in the region makes for good export

market potential.

Thank You