Background Report on Zambia’s Power Sector: IPP Programs

The country has substantial unexploited reserves of hydropower, coal, and biomass. Zambia has an estimated total hydro power capacity of around 6,000 MW, yet only 1,948 MW have been installed in the country to date. These power plants represent 94% of the total installed capacity, and 99% of the total electricity generated in the country. The Zambian Ministry of Mines, Energy and Water Development (MEWD) is responsible for setting energy sector policy and providing guidance through one of its six departments, the Department of Energy. Within the Department of Energy, there are three dedicated units of particular interest to this background report. The Zambian Gender and Energy Network is involved in the advancement of gender concerns in energy policy, while the Office for the Promotion of Private Power Investors (OPPPI) works directly with private investors and seeks to provide support for projects within the ministry. The Energy Sector Advisory Group contains representatives from government ministries and authorities, development agencies, and commercial enterprises, and works to encourage cooperation on energy policy and provide expert opinion on energy matters to government officials involved in policy design. The Zambian electricity supply industry is composed primarily of three major players: ZESCO, the state-owned vertically integrated generator, transmitter, and distributor, which dominates the power sector and accounts for the majority of activity; Copperbelt Energy Corporation Plc (CEC), a privately owned power transmission and electricity distribution company that purchases electricity from ZESCO and delivers it to the mining industry based on the Copperbelt; and the Lunsemfwa Hydro Power Company (LHPC), an Independent Power Producer (IPP) which generates approximately 57 MW of power for sale primarily to ZESCO. The Energy Regulation Board (ERB) was created under the Energy Regulation Act of 1995, and is responsible for regulating all forms of energy, including electricity. The ERB regulates returns on investment for operators/utilities, the licensing of operators, the setting of tariffs, and the monitoring of competition in the market. The ERB reports directly to the MEWD. Zambia has an estimated 22% of its population with access to electricity in 2014, with 45% in urban and 10% in rural areas. The country hopes to reach 90% and 51% access by 2030 in urban and rural areas, respectively. The energy sector as a whole is dominated by biomass, making up over 80% of supply and 70% of demand. The country has substantial unexploited reserves of hydropower, coal, and biomass. The Zambian power sector faces significant challenges, including an electricity supply deficit and low electrification rates. The country has several cross-border power interconnects for power wheeling in the region, but petroleum is the only energy source imported into Zambia. The country has an estimated total hydro power capacity of around 6,000 MW, yet only 1,948 MW have been installed in the country to date. These power plants represent 94% of the total installed capacity, and 99% of the total electricity generated in the country. The Rural Energy Authority (REA) plays a role in developing policies and projects which expand access to electricity throughout the country. The ERB regulates returns on investment for operators/utilities, the licensing of operators, the setting of tariffs, and the monitoring of competition in the market. The ERB reports directly to the MEWD. The Zambian electricity supply industry is composed primarily of three major players: ZESCO, CEC, and LHPC.