Columnists Features

Zambia’s future economic prospects tied to energy

SCHULTZ

ERIC SCHULTZ, LENA NORDSTROM
PRESIDENT Obama’s visit to Nairobi, Kenya, last week was highlighted by two connected events: the Global Entrepreneurship Summit (GES) and Power Africa, one of the signature initiatives of his presidency.
The GES celebrated the rapid growth and great economic potential of Africa, driven increasingly by a bright, dynamic group of young businesspeople – men and women – and including a large contingent of Zambians. Power Africa is one of the keys to the continent’s future growth. The lack of reliable power sources is a major impediment to business activity. Moreover, far too many Africans, especially the rural poor, simply have no access to power at all.
Power Africa began in just a handful of countries a few years ago, but its accomplishments and its promise led President Obama to expand the initiative to other countries, including Zambia, and to increase its already ambitious goals.
In Nairobi, he announced new targets to increase the continent’s generating capacity by an additional 30,000 megawatts and to connect 60 million new African households and businesses to electricity.
To accomplish these goals requires strengthening the roles played by the Government and different state-affiliated institutions, cooperating partners, as well as the private sector. In Zambia, Sweden and the United States have agreed to co-lead this effort.
Sweden and the US bring different qualities to this collaboration. In the case of Sweden the collaboration has covered many areas but the fact that both Sweden and Zambia are so reliant on hydropower has probably tilted some of our long cooperation towards renewables – not least the Kariba Dam and Kafue Gorge. Both Sweden and the US also have a long interest in promoting energy reforms and supporting projects in Zambia and together we hope to contribute to the Zambian government and the Zambian people achieve Power Africa’s twin goals for themselves: more generating capacity and more people having access to electricity.
We believe the expansion of Power Africa to Zambia is especially timely given the widespread load-shedding that currently plagues the country. Zambia’s development and the quality of life of its people require widespread access to reliable power. Electricity is the lifeblood of any modern economy, and Zambia’s future economic prospects are closely tied to development of the energy sector. Industries from manufacturing to mining to retail services all depend on it. This year’s power outages have already cost Zambia dearly in terms of productivity, jobs and government revenue.
However, even without load shedding, less than 25 percent of urban households and only four percent of rural households in Zambia are connected to grid power. Another four to five percent of the rural population rely on solar technology for their lighting. Beyond the economic limitations that this lack of electricity imposes, the social effects are likewise devastating.
Without power, school children cannot study at night, clinics cannot properly store medicines, and the cost of living increases, with particularly harsh impacts for low-income households who must buy expensive fuel to heat and light their homes. Moreover, the environmental impact is enormous as well, as people without access to power must rely on charcoal – leading to deforestation that in turn harms efforts to protect Zambia’s wildlife – the treasure of its tourism industry.
For all the challenges Zambia faces at the moment in the power sector, there is great potential as well. Zambia has enormous untapped sources of power that could in fact make it an electricity exporter – however unlikely that prospect might seem today. Moreover, that electricity would be much “greener” than in many other countries, for much of Zambia’s power potential lies in renewable sources of energy: solar, hydro, bio-mass, wind, and geo-thermal. And Zambia, indeed Africa as a whole, is poised to benefit from recent advances in renewable energy that make it both more cost-effective and easier to distribute.
For instance, once considered an expensive option, new technologies are increasingly bringing down the cost of solar power. Solar power also offers greater flexibility in scale – from the smallest hand-held devices to relatively large solar farms that can supply power grids. And with over 300 days of sunshine per year, Zambia has particularly great potential in solar energy. Development of solar energy systems offers Zambia an opportunity to leapfrog over dirty energy and immediately go to clean energy, and to achieve long-run cost savings at the same time. Solar energy also offers a viable alternative for the country to diversify generation beyond hydro which is very susceptible to climate variability, as evidenced by the current generation deficit brought about by low water levels. To this end, the Zambian government’s recent signing of a memorandum of understanding (MoU) with the World Bank, another Power Africa partner, to develop the country’s first utility-scale solar photovoltaic cells is an important step in the right direction.
An experience shared by both the US and Sweden is that energy can almost always be used more efficiently. The same is true for Zambia: huge gains can be made by adopting energy efficiency measures that have a potential of providing cheaper and quicker solutions for making energy available when compared to building new power plants.
Hydropower is another energy source where technological advances play to Zambia’s advantage. Zambia has long been reliant on large-scale dams to generate power, especially the Kariba dam. Engineering marvels and sources of great amounts of “clean” power, large dams are nonetheless expensive to build and maintain and there are environmental costs to consider as well, including the destruction of farming communities and wildlife habitats. Smaller “scale run-of-the-river” hydro-electricity projects are less environmentally problematic and substantially less capital intensive.
Moreover, small-scale hydropower projects can be distributed regionally so as to reduce distribution costs. Indeed, all of these renewable forms of energy, though perhaps especially solar, have “beyond-the-grid” characteristics that can improve distribution of power by reducing the need for expensive transmission lines. Instead, Zambia could see a series of regional and local “micro-grids” that would provide power to even the most remote of rural villages.
As Zambia’s economy grows, so does the demand for more power. Keeping up with this demand will require more flexible, dynamic approaches that harness these new innovative technologies – and also the capacity of private sector independent power producers (IPPs) to bring them to life. Numerous IPPs either have plans for, or are currently developing, renewable energy investments here. Added together, these potential investments could generate over 900MW (about half of the nation’s current electricity supply) with estimated total capital investments of over US$3 billion. There are still more private sector resources that are potentially available for investment in Zambia’s power sector – many are our partners and Power Africa can and will help attract them to Zambia.
Involving the private sector reduces the need for the government to provide the investment needed to grow Zambia’s power sector. To bring these IPPs on board, government needs to address the pricing issue and to create an enabling business environment for power producers. Zambia’s current underpriced energy tariff structure does not allow for profitable investment by the private sector, or even for the state-owned power company, Zesco, in the power sector.
This is an area where Power Africa plans to help, by providing the government with technical expertise that opens the power sector while safeguarding the interests of Zambians.
Despite the current difficulties, it is not hard to envision a Zambia in which clean, reliable energy is available to the country as a whole and is sufficient to under-grid the country’s continued rapid economic growth. Sweden and the United States, through Power Africa, are committed to supporting Zambia in any way possible to make that vision a reality.
The authors are US and Swedish ambassadors to Zambia, respectively.




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