The Zambia Chamber of Commerce and Industry – ZACCI has urged the Government to address the problem of power deficit resulting in loadshedding through the private sector by offering fiscal and non-fiscal measures to help unlock investment in alternative sources of electricity.
Last week, the power utility, Zesco Limited, started affecting daily load-shedding of up to six hours countrywide because of low water levels at Kariba Dam, the country’s main power plant.
And reacting to this development, ZACCI President Chabuka Kawesha stated that the private sector is key to addressing any power deficit and enhancement of energy security, adding that there is need to give the Independent Power Producers (IPPs) bankable and credits worthy Power Purchase Agreements (PPAs).
“The introduction of cost-reflective tariffs is one of the key bottlenecks we sought to address in ensuring the financial sustainability of electricity energy generation, and it will help to unlock private sector investments in alternative sources of electricity generation and improve the Zambian energy mix and energy security,” he said
Mr Kawesha explained that the introduction of cost-reflective tariffs and private sector engagement will in turn enable the electricity sub-sector to start providing bankable offtake structures that will allow private-sector Independent Power Producers (IPPs) to enter into purchase agreements with various off-takers.
He further explained that without the market having the ability to enter into bankable off-take agreements and eased access to power-trading platforms like the Southern Africa Power Pool (SAPP), the proposed Fast Tracking of Generation Projects of by the various private Independent Power Producers (IPPs), the desired diversity form hydro to clean / renewable energy and positive mitigatory impact through the private sector is far from starting. No financial institution, local or foreign, will finance an Independent Power Producer’s project without guarantee support and bankable offtakers.
“Therefore, we need to create a creditworthy environment for electricity projects to be implemented,” he said
Mr Kawesha said that ZACCI recommends that Cabinet, in direction to the Ministry of Energy (MoE), Ministry of Finance and National Planning (MoFNP), Ministry of Commerce Trade and Industry (MCTI) and Ministry of Green Economy and Environment (MoGEE) agree on the minimum Megawatts (MW) each of the 10 Provinces must generate to meets its Commercial, Industrial and Residential power needs as well as potential Power exports over the next 10 years. Additional guidance by recommendations of the Integrated Resource Plan (IRP) which the Ministry of Energy must equally conclude if still open must unfold moving forward.
“We appeal that Cabinet must agree a quantum in Megawatts (MW) that ZESCO will offtake from Independent Power Producers (IPP) for provincial and national needs, as well as ease the IPPs Wheeling Agreement processes and support instruments for IPPs entry and power export to the Southern Africa Power Pool (SAPP). This is an aspect of ease of doing business in the electricity sub-sector,” he said
He further said that the Cabinet must provide a procurement schedule with a short timeline on when competitive tenders will be launched for procurement of energy from IPPs for the provinces and nationwide needs. Resultant should or must be an approved position with a figure or number that ring-fences approximately 2600 Megawatts (MW) in energy mixed projects supported by a bouquet or mixed types of guarantees for IPPs electricity projects to be developed between 2022 – 2026 for the near-term energy planning with Power Purchase Agreements or Offtake Agreements (PPAs) at cost reflective offtake tariffs.
“IPPs and Banks need the guarantees just as assurance that if ZESCO defaults then there is an instrument that the electricity supplier can call upon. And as private sector we have reassured government of our trust in their ability to handle ZESCO’s restructuring and reforms,” he stated
Mr Kawesha noted that this cannot be achieved in isolation, so, the Government must immediately open discussions with the Cooperating Partners on how to unlock current constraints related to funding from foreign and local financing institutions as well as tapping into available guarantee instruments for private sector-lead electricity power plants and transmission power line project.
“The consultancy and discussions on guarantees which the Ministry of Finance and Ministry of Energy must lead is unavoidable because the power crisis is real and without immediate resolution, projects cannot access funding, the same for PPP power projects, building power plants will be more effective if they are private sector lead, independent or through joint ventures and/or consortiums with fellow local or foreign energy entrepreneurs, or public entities were needs be. So let private sector money come in but ease the operating framework,” Mr Kawesha said