Last March, the African Development Bank secured $52.5 million to finance 100-MW of renewable projects from Zambia’s brand-new FIT program (launched Dec-2017). But what’s really interesting here is the underlying story…
During 2015/16, Zambia was hit by a massive drought, along with other countries across southern and eastern Africa. Since hydroelectric power accounts for more than 90% of generation in Zambia, the country took a big hit. Generation at the largest hydro station – which accounts for 40% of Zambia’s total electricity generation – fell by 75%. After the crisis, Zambia’s government effectively said: “we’ve had enough”, and turned to sun for a solution. The government mandated the procurement of 600-MW of solar PV.
In Feb-2016, Zambia released its first competitive procurement tender for utility-scale, solar PV projects, for up to 100-MW of combined capacity – Zambia’s Scaling Solar program. The process was over-subscribed and produced Africa’s lowest solar PPA rates: a record-low 6.02¢/kWh for a 45-MW project (by First Solar and Neoen), and 7.84¢/kWh for a 28-MW project (by Enel Green Power).
The first phase of Zambia’s Scaling Solar program set a gold-standard across Africa for the procurement of renewable energy projects; efficient, transparent, and well-orchestrated. In May-2017, a second phase of Scaling Solar was released for 300-MW of capacity. This second round is still underway, but initially attracted twenty-one (21) different applications for projects.
In Dec-2017, Zambia launched a FIT program for projects smaller than 20-MW, including 100-MW earmarked for solar PV projects. The USD$52.5 million of capital raised by the African Development Bank will be used to finance this initial round of the FIT program. $50 million will be provided as a loan, and $2.5 as a grant.
While it might be a bit early to judge the success of Zambia’s renewable energy programs, there’s no doubt the country is moving in the right direction, and with great momentum. Zambia’s Scaling Solar and FIT programs have set up an attractive business environment for private investment and are playing a critical role attracting independent power producers (IPPs) to its power sector.