The deal gives fresh momentum to Zambia’s push for energy diversification. For investors, it signals rising demand for bankable renewable projects under innovative private-led financing structures that limit upfront fiscal strain.
Financing model aims to ease pressure on the state
ARC Power and Kiyona Energy signed a FUSE agreement in June 2026 targeting an initial investment of up to US$60 million to accelerate solar generation in Zambia, as part of a broader programme to deploy new solar infrastructure in the country. The partnership targets new solar infrastructure across the country to support energy security, expand access and reduce exposure to hydrological risk.
Hydropower still provides around 85–90% of Zambia’s electricity, leaving the system highly vulnerable to drought-driven output swings. Recent dry spells have forced Zambia to ration power and cut exports, highlighting the need for diversification. Policymakers have since moved solar up the agenda, backed by regulatory reforms and a clearer project pipeline.
ARC Power plans to use its FUSE (Future Utility Solutions for Electrification) investment model to structure the investment. Under its FUSE model, ARC Power designs, finances, builds and operates energy assets under long-term contractual arrangements with offtakers, providing predictable cash flows for investors while reducing upfront public spending. This approach lowers the requirement for immediate public spending and shifts early project risk to the private sector, while securing predictable cash flows for investors over time.
The structure aligns with wider efforts by lenders such as the World Bank and the African Development Bank to crowd in private capital through programme-based electrification and risk-sharing tools. For Zambia, it offers a way to accelerate grid-strengthening and generation capacity without overloading the sovereign balance sheet.
Drought risk turns solar into a strategic asset
The deal lands as prolonged droughts across Southern Africa strain hydropower reservoirs, including Zambia’s Kariba dam. Lower water levels have cut available capacity and exposed the cost of reliance on a single dominant technology. Solar, by contrast, benefits from the country’s high irradiation and short construction timelines, making it attractive both as baseload support and as a hedge against climate volatility.
The ARC Power and Kiyona transaction adds to a growing pipeline of utility-scale projects in Zambia’s solar sector. Recent utility-scale solar schemes in Zambia include projects such as the 54 MW Bangweulu and 34 MW Ngonye plants under the Scaling Solar program, along with additional IPP-led projects under development backed by development financiers and commercial lenders. Kiyona Energy has been involved in developing renewable energy projects in Zambia, underscoring its local credentials.
These projects support Zambia’s wider push to expand access, reduce load-shedding and underpin industrial growth. As more miners, agro-processing companies and manufacturers seek reliable power, demand for independent producers and corporate offtake structures is set to rise. In that context, the ARC Power model could provide a template for bundling smaller grid and generation assets into bankable portfolios.
For investors, this Zambia solar investment with ARC Power and Kiyona Energy highlights three key signals. First, energy diversification is now central to Zambia’s macro and industrial strategy, which supports continuity of policy for renewables.
Second, deal structures that blend private capital with eventual public ownership are gaining traction, potentially creating repeatable platforms rather than one-off projects. Third, drought risk is no longer a tail event but a planning assumption, which strengthens the case for climate-resilient infrastructure across the region.
Further phases under the partnership are already anticipated. The performance of this first tranche — on execution, grid integration and tariff stability — will be closely watched. Investors should track how quickly capacity is added, how FUSE contracts are priced and whether similar models emerge in neighbouring markets, as these will shape the next wave of scalable utility-scale renewables in Southern Africa.
