Part 2: The Importance of Diversifying Zambia’s Energy Mix
Alex Mwaba Chishya, Lusaka, 1st July 2024 — In The Previous Article, We explored the profound implications of Zambia’s energy crisis, driven by an overreliance on hydroelectric power and exacerbated by prolonged drought conditions. Further, how this crisis has disrupted daily life, hampered industrial production, and strained the country’s economic stability. As we continue to explore this issue, it is becoming increasingly clear that diversifying Zambia’s energy mix is not only a viable solution but an urgent necessity.
It’s now undeniable that Zambia’s dependence on hydroelectric power, which accounts for over 83% of its electricity, has rendered the nation vulnerable to climatic changes. The recent droughts have severely affected water levels in key reservoirs like the Kariba Dam and Kafue Gorge, resulting in severe power shortages and load-shedding. The economic impact has been staggering, with significant losses in sectors such as mining, manufacturing, and agriculture, leading to reduced GDP growth, increased operational costs for businesses, and heightened unemployment rates.
To mitigate these challenges and build a more resilient energy sector, Zambia must diversify its energy mix. This approach would reduce the country’s dependence on hydroelectric power and create a more stable and reliable energy supply.
Zambia is endowed with substantial solar energy potential, receiving an average of 2,000 to 3,000 hours of sunshine per year (International Renewable Energy Agency, “Renewable Energy Statistics 2020,” IRENA, 2020). Harnessing this potential through investments in solar power can significantly reduce the pressure on hydroelectric plants. The Bangweulu Solar Plant, for example, has already demonstrated the feasibility and benefits of solar power in Zambia (International Renewable Energy Agency, “Renewable Energy Statistics 2020,” IRENA, 2020), contributing to a more sustainable energy mix.
Although wind energy potential is not as significant as solar, certain regions in Zambia, particularly along the Rift Valley, possess favourable conditions for wind power generation. Developing wind energy projects can complement solar and hydroelectric power, enhancing the stability and reliability of the energy supply.
Zambia has a plethora of biomass resources, including agricultural residues and forestry waste. Utilising these resources for energy production can provide a renewable energy source while supporting waste management and reducing environmental pollution. This approach not only diversifies the energy mix but also contributes to a circular economy, a key concept the republican president, H. E. Hakainde Hichilema, has expressed interest in driving towards on numerous occasions and whose central ethos is eliminating waste and making the most of resources by designing products for reuse, repair, and recycling. Some key players in the biomass sector include Green Energy Africa, BioCarbon Partners, and the University of Zambia, which have been conducting research and pilot projects on biomass energy. The government should consider forming partnerships with these local entities, as well as international organisations such as the Global Bioenergy Partnership (GBEP) and the United Nations Industrial Development Organisation (UNIDO), to leverage expertise, technology, and funding for large-scale biomass projects.
Geothermal energy remains largely untapped in Zambia. Exploring and developing geothermal energy resources can add a valuable baseload power source to the energy mix, further enhancing energy security and reliability. Geothermal energy is climate-friendly, producing minimal greenhouse gas emissions compared to fossil fuels. This renewable source has the potential to provide consistent and uninterrupted power, crucial for industrial operations and economic growth.
Given Zambia’s existing coal resources, particularly through Maamba Collieries, coal could serve as a more cost-effective alternative to diesel for power generation. The cost of generating electricity using diesel ranges from $0.15 to $0.30 per kilowatt-hour (kWh) due to high fuel and maintenance costs, whereas coal-fired power generation is typically lower, ranging from $0.04 to $0.10 per kWh (World Bank, “Diesel Power Generation: Energy Solutions,” World Bank, 2021; IRENA, “Coal Power: Economic Analysis,” IRENA, 2021). For a 105 MW plant, using coal instead of diesel could save Zambia approximately $107.6 million annually in fuel costs. Furthermore, while diesel generators emit about 0.74 kg of CO2 per kWh, coal-fired power plants emit about 0.91 kg of CO2 per kWh (U.S. Energy Information Administration, “Carbon Dioxide Emissions Coefficients,” EIA, 2020). However, if Zambia invests in supercritical coal technologies, emissions can be reduced to levels comparable possibly lower than those from diesel. Without such technology, the increase in emissions would be a mere 0.001%, effectively maintaining the current carbon emission levels.
The economic benefits of diversifying Zambia’s energy mix are significant. According to the International Renewable Energy Agency (IRENA), transitioning to a renewable energy-dominated mix could increase Zambia’s GDP by up to 1.3% annually by 2030. Moreover, the World Bank estimates that every dollar invested in renewable energy can yield economic returns of up to $3, considering job creation, reduced energy costs, and improved public health outcomes.
Investing in renewable energy sources can also attract Foreign Direct Investment (FDI) in the energy sector, further boosting economic growth. For instance, the European Union has pledged support for renewable energy projects in Africa, highlighting the potential for international partnerships and funding. Diversification of its energy portfolio will enable Zambia to create a more attractive investment climate, enhancing economic stability and growth.
Countries like Kenya and South Africa offer valuable lessons in the successful diversification of energy mixes. Kenya’s investment in geothermal energy has made it a leader in renewable energy in Africa, with geothermal power contributing over 40% of its electricity. South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has attracted significant investment, leading to the development of numerous wind and solar power projects. These examples demonstrate the transformative potential of a diversified energy mix in driving economic growth and sustainability.
The economic and financial implications of diversifying Zambia’s energy mix extend beyond macroeconomic benefits. For rural communities, the expansion of renewable energy projects can provide access to electricity, fostering economic development and improving quality of life. Electrification of rural areas can spur local businesses, enhance educational opportunities, and improve healthcare services, contributing to overall social and economic escalation.
Moreover, the diversification of the energy mix can drive innovation in the energy sector. Investment in renewable energy technologies can stimulate research and development, leading to the creation of new industries and job opportunities. For instance, the establishment of solar panel manufacturing plants or biomass processing facilities can create employment and stimulate local economies.
From a financial perspective, the adoption of renewable energy can lead to long-term cost savings for both the government and consumers. While the initial investment in renewable energy infrastructure may be high, the operational and maintenance costs are relatively low compared to traditional energy sources. Additionally, renewable energy projects can reduce the need for costly energy imports and decrease the vulnerability to volatile global energy prices. Diversifying the energy mix can make the overall cost of electricity cheaper in the long run. As renewable energy technologies advance and economies of scale are achieved, the cost of generating electricity from renewable sources continues to decline. This can translate into lower electricity tariffs for consumers and businesses, alleviating the financial burden on households and enhancing the competitiveness of Zambian industries.
It cannot be stressed enough that a diversified energy mix can enhance industrial productivity and attract new investments in various sectors. Stable and reliable power supply is a critical factor for businesses when deciding on investment locations. A diversified energy portfolio can therefore enhance Zambia’s competitiveness in attracting both local and foreign investments.
It is commendable that the Zambian government is taking steps to spur this diversification. Initiatives such as the proposed policy allowing individuals and businesses to sell their excess electricity back to the national grid demonstrate a forward-thinking approach. This policy can incentivize investment in renewable energy at the micro level, fostering a decentralised and resilient energy system. Additionally, the government’s efforts to streamline regulatory processes and provide financial incentives for renewable energy projects are crucial in accelerating the transition to a diversified energy mix.
Diversifying Zambia’s energy mix is not just a solution to the current crisis but a strategic move towards sustainable economic growth and development. Investing in renewable energy sources such as solar, wind, biomass, and geothermal, Zambia can reduce its dependence on hydroelectric power, mitigate the risks of climatic variability, and ensure a stable and reliable energy supply for its citizens.
This transition requires substantial investment, supportive policies, and international partnerships. However, the long-term benefits, including increased energy security, economic growth, and improved quality of life for Zambians, make it a worthwhile endeavour. It is imperative that Zambia takes decisive action now to safeguard its economic future and enhance the well-being of its citizens.
Diversifying its energy mix can help Zambia turn its energy crisis into an opportunity for sustainable development, ensuring a brighter and more prosperous future for all.
Alex Mwaba Chishya is a seasoned economics and finance professional analyst with a strategic and analytical approach, possessing extensive experience across both the private and public sectors. He is a key contributor for financial and economic analytics for Financial Insight. For further insights, contact Alex at alexchishya@yahoo.com or +260978824571.