THE NEED TO SPARK

Zambia 2014 | MINING, ENERGY & INDUSTRY | REVIEW: ENERGY

While Zambia is currently suffering from an electricity deficit problem, a number of projects set to come online in 2017 should cover demand.

Zambia's government has reached the tipping point when it comes to its energy supply. Demand at peak times has edged over total capacity, with peak demand for capacity running between 1,800 MW and 1,900 MW, and the country's installed energy capacity at around 1,800 MW according to the Policy Monitoring and Research Centre (PMRC), producing a power deficit of around 165 MW-200 MW. While a number of projects are set to come online before the end of the decade, the government and the energy companies must do much more to not allow the deficit to run out of control.

Currently, only 25% of the population receive electricity, of which only 14% receive this through the national grid. Almost 70% of Zambians produce energy through the burning of biomasses, such as wood and charcoal, which has led to increased deforestation across the country. The main reason for the increased demand in electricity is because of the growing economy in Zambia, which according to government figures has been growing by 6.4% annually over the past decade. In 2013, by far the largest consumer of electricity was the mining industry, which accounts for 54.5% of demand; this was followed by the services sector with 27.5% of demand, and then manufacturing on 6.6%. Demand is expected to grow by 150 MW to 200 MW per year, meaning the deficit is going to increase unless more capacity is made available. Due to an undersupply, the Zambia Electricity Supply Corporation (ZESCO) has had to use load shedding and intermittent black outs to deal with demand peaks. It is feared that unless the problem is addressed and new mining and industrial projects are hooked up with a steady supply, then the problem could start to affect the country's growth.


POWER SOURCES

Zambia is a country with a great potential. It has over 3,000 sunshine hours annually, average wind speeds of 2.5m/s above 10 meters, over 80 hot springs, and ample rivers flowing through the country. While recent reports suggest that solar and wind does have the potential to produce commercially viable plants, the most likely use for them would be in rural areas that are off the grid. Zambia may try to adopt “mini grids," such as those being established in Tanzania and Mozambique. The idea being that villages have their own solar or wind farm, and eventually all these would connect up over time creating an extensive national grid that would still be able to supply electricity locally. However, the greatest potential for Zambia is in hydropower. The country has the total potential to produce 6,000 MW using hydropower plants, but currently only harnesses less than 2,000 MW at most. The main reason for this is due to a lack of investment and infrastructural upgrades. By 2017, however, three new hydropower plants are expected to be online bringing the total energy generation capacity to 3,116 MW, which should satisfy energy demand for a number of years to come. Currently, the country's main hydropower plants are Kafue Gorge Upper with a generation capacity of 990 MW, Kariba North Bank with a generation capacity of 720 MW, and Victoria Falls with a generation capacity of 108 MW. Add to this a number of smaller hydro plants and the total generation capacity for hydropower is 1,841.75 MW when accounting for seasonal variations. This accounts for 99.6% of electricity produced in the country.

Over the next two years, three more hydropower plants will come online, the largest of which is Kafue Gorge Lower with a capacity of 750 MW. Located 9 kilometers downstream of the existing Kafue Gorge Upper, the initial feasibility studies were carried out by SWECO of Sweden between the 1960s and 1970s, and were later updated by Harza Engineering in the 1990s, and then Sinohydro Corporation. The project will cost an estimated $1.94 billion, and is being developed using a public-private partnership (PPP) on a Built, Own, Operate, Transfer (BOOT) basis between ZESCO and Sinohydro. The next largest project on the books is the extension of the Kariba North Bank hydropower plant. It will add an addition 360 MW and cost $278 million to build. The first generator was commissioned in December 2013 and was a PPP deal between the Zambian government and Sinohydro. The final project currently under development is the Itezhi Tezhi hydropower plant. The project is a PPP between TATA Africa and ZESCO and should produce a further 120 MW for the national grid. The plant will produce 460 direct jobs for the local population and will also play a role in creating clean water and sewage facilities for the surrounding communities. A loan was granted to Zambia for $142 million from the African Development Bank, the Netherlands Development Finance Company (FMO), the Development Bank of Southern Africa, and Propaco of France in April 2014. In December 2012, another loan was issued to the government of $56 million to build 200 kilometers of transmission lines to connect the Itezhi Tezhi generation site to the capital, Lusaka.

OIL & GAS

Unlike many of its neighbors, Zambia does not have many oil and gas reserves to speak of. In 2006, it discovered it had some reserves near its border with Angola. Under microbial analysis works, 12 oil sites and six gas sites were discovered. The government has been keen to develop these reserves as well as find more. Exploration has continued since, but no firm numbers on the reserves have been produced. In July 2013, the government issued a default notice to 12 firms on 17 licenses spread across seven of the country's 10 provinces. The reason for the written default notices was a failure by the companies to begin exploration work within 90 days of being issued the license, which is a key part of the country's regulations. The investors behind these licenses were initially given the permits in 2006. The government believed that the companies either lacked the know-how or financial backing to carry out the required exploration or that they were possibly holding onto the licenses for speculative purposes. In December 2013, the government was looking at ways to move in and revoke the licenses and reassign them to either UK- or China-based companies. Currently, Zambia has to import all of its oil and gas needs. In 2013, the country imported oil worth $793 million.