Fourth Economic Panel Discussion on Power Sector

Points Raised by U.S. Ambassador Eric Schultz 
Fourth Economic Panel Discussion on Power Sector
April 6, 2016

Thank moderator and WECREATE — United States is a proud sponsor.

Fourth panel; purpose is to discuss way forward for Zambian economy.

Power is a critical sector. Electricity is the lifeblood of a modern economy. Mining, agriculture, tourism, and trade depend on secure access to power.

Also, Zambia has great potential to export power.

But instead the power deficits and load shedding of the past year have reduced productivity, and increased costs as producers (indeed the GRZ) are forced to seek expensive alternatives, such as diesel generators.

The result has been losses of profits, jobs and investments by small, medium, and large scale businesses, which has also meant lost tax revenue for the Zambian government (GRZ).

Investment in the energy sector has not kept pace with the growth in the demand for electricity, with a limited level of private investment to date. There is an urgent need to open the energy sector to leverage private capital to supplement scarce public resources.

To attract private investment, the energy sector requires steady, transparent policies focused on alternative renewable energy sources as well as cost reflective tariffs. The GRZ needs to encourage independent power producers by reforming inefficient procurement processes, offering viable prices, and reducing financing risks.

The power deficit also highlights the need for Zambia to increase and diversify its electricity generation capacity and enhance energy efficiency. The country is over-reliant on large-scale hydropower plants, which accounts for almost 99 percent of electricity generation.

Investment in solar power offers a solution. New technologies have driven down the costs of solar energy, and with over 300 days of sunshine per year, Zambia has untapped potential.

The innovative scaling solar venture, led by the Industrial Development Corporation, is an example of private sector investment potential in solar power generation. It has created a transparent, competitive bidding process to attract qualified solar power developers, offering adequate prices, a streamlined procurement process, and financing support. If it reaches its 600 megawatts (MW) target, it will increased electricity capacity in the country by 30%.

Three-quarters of Zambians are not connected to the national grid and less than five percent of rural Zambians are connected to electricity. Given the difficulty and expense of reaching remote populations, access to electricity in Zambia’s rural areas depends on beyond-the-grid solutions such as household solar.

Smaller-scale hydro, biomass, geothermal, and wind are also power alternatives where Zambia may have a competitive advantage.

The USG is committed to helping Zambia achieve its potential in the power sector through the Power Africa initiative, which we co-lead with the Swedish government in partnership with the World Bank and African Development Bank.

Through Power Africa, we are providing technical assistance, financing support, and transaction advisory services to promote private sector investment in clean, renewable power generation and to expand access to electricity throughout the country.

A highlight of our partnership with Zambia has been our support to the Ministry of Energy and the Energy Regulation Board for their development of the Renewable Energy Feed in Tariff (REFIT) policy, which has developed a standardized Power Purchase Agreement and the establishment of tariffs for solar and small-scale hydro projects of up to 20 MW.

With the right policy and investment climate, Zambia has the potential to become an energy powerhouse—one that meets its national energy requirements and exports to the entire Southern African Development Community.

A more enabling environment for private sector investment is the key to making this happen.