Zambia Power Sector Assessment: Stakeholder Recommendations

The Report on the Current State of Zambia's Power Sector revealed that the country is unlikely to meet its goals unless it addresses selected gaps in its institutional design and transforms the performance of ZESCO to make it commercially viable. This assessment builds on the sector assessment and provides overall recommendations for the Zambian power sector to meet its aspirations going forward. Key areas of improvement identified in the sector assessment include the absence of a long-term Integrated Resource Plan (IRP), which would provide a view on the long-term supply-demand scenarios and the preferred energy mix. The report recommends creating an IRP that provides transparency over potential future shortages and clarity on the size of future independent power producers (IPP) programs. Additionally, the absence of an up-to-date power sector masterplan and a single source of quantified targets and aspirations for the sector are major concerns. The report suggests creating and communicating a power sector masterplan, including an aggregated view of the sector's overarching aspirations across generation, transmission, distribution, and retail. The report also highlights the need to strengthen the project market entry process, accelerate the implementation of REFiT (solar), and provide clarity on the timing and nature of regulatory and institutional reforms. Furthermore, the risk of supply-demand gap (estimated at 90 to 500 MW by 2022) is a major concern, and the report recommends developing and prioritizing a list of solutions that could be implemented to close the supply-demand gap. Some of these solutions include leveraging solar technology, implementing energy efficiency and demand-side management strategies, and improving water release management at the Kariba Dam. In terms of implementation, the report recommends resolving bottlenecks that hinder IPP development by facilitating a dialogue at the highest levels between Southern Africa's Energy Program, development partners, and Zambian authorities. Additionally, the report suggests allocating risks among IPPs, the government, ZESCO, and financiers by creating a clear statement about which party bears which risks. The report also recommends reviewing competitive bidding and unsolicited bidding regulations and documentation to facilitate the closure of Scaling Solar 1 (100 MW) and 400 MW in future rounds. The report emphasizes the need to address the management of ZESCO's collection losses, which have led to large bad debt write-offs. The report recommends resolving the current legal dispute between the mines and ZESCO, strengthening ZESCO's internal collections function, and engaging the Ministry of Energy, the Ministry of Finance, and the Cabinet to identify solutions for managing ZESCO's collection losses. Overall, the report provides a comprehensive set of recommendations for the Zambian power sector to meet its aspirations going forward. The recommendations focus on four dimensions of the sector assessment: Structure and Institutions, Long-term Supply-Demand Balance, Challenges along the Value Chain (ZESCO), and Challenges in the Delivery of Electrification. The report emphasizes the need for a collaborative approach among stakeholders, including the Ministry of Energy, ZESCO, development partners, and the private sector, to address the challenges facing the Zambian power sector.