Initial Market Research for an Energy Electricity Project in
Zambia
1. Overview of Zambia’s Energy Sector
Zambia’s energy sector is predominantly driven by hydroelectric power,
which accounts for over 80% of the country’s electricity generation capacity.
However, the reliance on hydro has made the country vulnerable to droughts
and climate variability, leading to electricity shortages and prolonged load
shedding. The government, through institutions like Zesco (the state-owned
utility provider), has been focusing on diversifying the energy mix to include
renewable energy sources such as solar, wind, and biomass to enhance
energy security and resilience.
2. Electricity Demand and Supply
Electricity Access: As of recent reports, about 69% of the urban population in
Zambia has access to electricity, while only 6% of the rural population is
electrified. This disparity creates a strong need for rural electrification
projects, especially those leveraging renewable energy technologies.
Demand Growth: Zambia’s energy demand is projected to grow by 4-6%
annually, driven by population growth, urbanization, and industrialization,
particularly in the mining and agricultural sectors. The total installed
electricity generation capacity is approximately 3,000 MW, but Zambia often
experiences electricity deficits during drought periods, which affect
hydropower generation.
Energy Shortages: The periodic load shedding caused by drought-induced
hydropower shortages has led to reduced industrial output and affected
economic growth. This highlights the need for diversified energy sources to
stabilize the power supply.
3. Government Policy and Support
The Zambian government has prioritized energy development as part of its
Vision 2030, which aims to transform the country into a prosperous middle-
income nation. In line with this vision, the government, through the Ministry
of Energy, has rolled out several policies to promote investment in renewable
energy and reduce dependence on hydropower. These policies include:
National Energy Policy (NEP): Provides a framework for the development of
sustainable energy sources, emphasizing the need to increase private sector
participation in power generation.
Rural Electrification Master Plan (REMP): Focuses on increasing electricity
access in rural areas, with renewable energy projects being a core part of the
strategy.
Feed-in Tariff (FiT): To encourage private investment in renewable energy,
the government has implemented feed-in tariffs for small- and medium-scale
renewable energy projects, offering a guaranteed price for electricity fed into
the grid.
4. Role of Zesco
Zesco, Zambia’s primary electricity utility, plays a crucial role in the
generation, transmission, and distribution of electricity. Although Zesco is the
largest power generator in the country, its heavy reliance on hydropower has
exposed its vulnerabilities during times of water shortages. Zesco has
recently increased its efforts to diversify energy sources by exploring public-
private partnerships (PPPs) in renewable energy. It has also opened the door
for independent power producers (IPPs) to contribute to the national grid,
particularly in the solar and biomass sectors.
Zesco’s role as a potential partner in this project is critical for grid integration
and long-term sustainability. By collaborating with Zesco, your project could
tap into existing infrastructure and benefit from the utility’s established
market presence.
5. Renewable Energy Opportunities
Given the current challenges in Zambia’s energy sector, there is a significant
opportunity for renewable energy projects, particularly in solar and wind
power:
Solar Power: Zambia is located in a region with high solar irradiance, making
solar power an attractive option for both grid-connected and off-grid
solutions. The government has already supported solar projects through the
Scaling Solar program, developed in collaboration with the World Bank.
These projects provide a foundation for further solar energy investments.
Wind Power: Although wind energy potential is still being studied, the
highlands and open areas of Zambia have the potential for wind power
projects, particularly in off-grid or hybrid systems.
6. Competitive Landscape
Independent Power Producers (IPPs): Several IPPs are operating in Zambia,
primarily in the renewable energy sector. They are contributing to the
diversification of the energy mix, which was once dominated solely by
hydropower. For example, the Bangweulu and Ngonye solar farms, developed
under the Scaling Solar program, are two prominent solar energy projects
contributing to the grid.
International Development Organizations: The World Bank, African
Development Bank (AfDB), and other development finance institutions are
actively financing energy projects in Zambia, often in collaboration with the
government and private sector players. These organizations provide
concessional financing, grants, and technical assistance for energy projects
aligned with Zambia’s renewable energy goals.
7. Regulatory Environment
Zambia’s energy sector is regulated by the Energy Regulation Board (ERB),
which oversees tariffs, licensing, and compliance. The ERB plays a significant
role in ensuring that energy projects adhere to national policies and
regulations. For a new energy project, particularly one involving renewable
energy, obtaining regulatory approval and establishing a power purchase
agreement (PPA) with Zesco are critical steps.
Additionally, the Zambia Development Agency (ZDA) provides investment
incentives for energy projects, including tax holidays, import duty
exemptions on renewable energy equipment, and accelerated depreciation.
These incentives are designed to encourage investment in Zambia’s energy
sector and align with the government’s goal to increase electricity access
across the country.
8. Challenges and Risks
Climate Change: Zambia’s energy sector, particularly hydropower, is
vulnerable to climate variability. While renewable energy projects (like solar
and wind) offer a solution to this, they also face challenges related to initial
capital investment and technological capacity.
Financial Constraints: Although the Zambian government and Zesco are
supportive of renewable energy projects, funding constraints may limit the
scale and pace of new developments. Securing financing from development
banks and international donors is crucial for project success.
Regulatory Delays: Approval processes can sometimes be slow due to
bureaucratic hurdles, which may delay the implementation of energy
projects.
9. Conclusion
There is a strong case for developing renewable energy projects in Zambia,
especially in partnership with Zesco and the Zambian government. With a
growing demand for electricity, a government committed to energy
diversification, and untapped renewable energy potential, the country
presents a fertile ground for investment. However, it is important to navigate
the regulatory environment carefully and secure partnerships with key
stakeholders, including Zesco, the ERB, and international development
organizations, to ensure the successful implementation of any energy
project.
