The positive side of Zambia’s energy crisis

Few would disagree that Zambia needs to find sustainable, innovative ways of generating more electricity for both domestic and industrial users, and that this is arguably the most urgent task facing the country.

However, what is often less understood is that this energy crunch has a positive side to it, for it shows that the country is developing both economically and socially – that is why it needs the additional electricity.
That’s according to an article posted today on the industry website www.miningforzambia.com.
“It’s no coincidence that Zambia’s electricity consumption started climbing around 2000, when mining investment picked up again, and new investors in the previously nationalised mining industry poured billions of dollars into expanding and modernising the country’s mining base,” the article says.

This wave of investment boosted economic growth, business creation and employment throughout the economy.

“Figures by the World Bank show that from 2000 to 2013, Zambia’s GDP per capita – which measures the average income of the population – grew more than fivefold, from $340 to $1 840 – the biggest and fastest increase in average incomes since independence,” the article says.
Industrial investment and increased production drove energy consumption by industrial users (whose mines and factories are powered by electricity) and kickstarted an economic boom, which led to increasing demand from domestic users too.
The big question now is this: how does Zambia ensure a plentiful, reliable, affordable supply of energy into the future?
The scale of the problem is apparent when one realises how far behind the country has fallen in the task of renewing its energy infrastructure. According to a 2015 report by the World Bank Group, entitled Powering the Zambian Economy, prior to the 360 MW Kariba North Bank Extension that was completed in 2015, the last major plant to be commissioned was the Kariba North Bank in 1977.
The report adds: “Until 2006, Zambia had surplus power, and this partly explains why the history of surplus has also contributed to low tariffs, which have been one of several barriers to investment in the grid and new generation capacity to meet rising demand.”
With the problem posed so emphatically, the answer to Zambia’s energy crisis would seem straightforward – build more power capacity and raise tariffs.
Additional capacity is already on the way. The World Bank report notes there are at least six power plants at various stages of preparation and development, some of which have been in the pipeline for more than a decade.
The issue of tariff increases, however, is less straightforward, because of the potential effect on both domestic and industrial users. If tariffs are set too low, the incentives for investment are reduced; if they are set too high, they put both businesses and households at risk, and compromise the continued economic growth on which both depend.

“Ultimately, the cost of electricity to domestic and industrial consumers in Zambia cannot be divorced from the cost of producing it; the one informs the other,” the article says.
There are many elements to this cost. The electricity has to be generated, then transmitted, distributed and ultimately supplied to customers. These costs are not the same for all users.

It is no doubt with such questions in mind that a Cost of Service Study is being commissioned by the Energy Regulation Board (ERB). The last time such a study was done was in 2006. This new study will, it is hoped, be penetrating and wide-ranging in its analysis, and bold in its conclusions and recommendations as to how Zambia can achieve a sustainable, affordable and reliable electricity supply well into the future.
“In the meantime, Zambia can be proud of the fact that it has actually produced enough economic growth over the past 15 years to make energy supply such as an important issue. Without that growth, we would probably be in surplus now – but would also be a lot poorer as a nation,” the article concludes.