New plan to increase Zimbabwe's power generation

Published: 06 July 2017

GOVERNMENT has announced a series of tax exemptions, licence fee cuts and a raft of financing measures to drive renewable energy development.

This comes as authorities have been battling to address a growing power deficit in the country, which has emerged as a major threat to economic recovery.

The draft renewable energy policy released by the Ministry of Energy and Power Development (MoEPD) last week indicates that government seeks to unlock opportunities in renewable energy for domestic and industrial consumption.

Renewable energy projects are cheaper compared to the conventional hydroelectric and thermal power projects.

And given the dire state of the energy sector, investments into renewable energy projects are key to improving access in a country where 83 percent of rural people are still unconnected to the electricity grid, nearly 40 years after independence.

According to the draft policy, Zimbabwe wants to increase renewable energy generation by almost 27 percent in 13 years as part of efforts to bolster sagging electricity output from its aged thermal and hydroelectric plants.

Clean energy generation is projected to increase by 26,6 percent to 4 640 gigawatts hour (GWh) in 2030, from the current capacity of 850 GWh.

The policy says there would be a power supply deficit of 1 000 megawatts (MW) in 2025, which would rise to 1 600 MW in 2030.

This has to be addressed through investment in renewable energy, according to the draft policy.

Renewable energy sources include solar, hydro, wind and biogas.

In 2015, government published the National Biofuel Policy of Zimbabwe, which focuses on the production and use of liquid bio-fuels in the transport sector for 15 years until 2030, and is seen complementing the latest national blueprint.

The bio fuels policy assumes that following a period of economic decline into 2008, the country's economy was recovering, with demand for fuel rising.

Since 2009, when the country adopted a multicurrency system, energy demand has been rising.

The country's fuel prices have remained high even during times when global prices have declined.

Under the policy, to run from 2017 to 2030, community funded off-grid renewable energy projects, as well as those bankrolled by non-governmental organisations, would benefit from a waiver of import duties on equipment and taxes.

It says licencing fees would be reviewed downwards to attract investors.

Clean energy generation is projected to increase by 26,6 percent to 4 640 GWh in 2030, from the current capacity of 850 GWh.

The draft does not specify new fees, but currently, investors into small hydro projects pay $13 750 in licencing fees, biomass projects pay $15 000 and geothermal projects pay $18 000.

Investors in solar projects pay $5 570, while those in convectional power plants pay $20 000 licencing fees, according to the draft policy.

State controlled power monopoly, Zesa Holdings, is currently generating about half of its peak electricity demand estimated at about 2 000 megawatts (MW).

As a result, rolling power blackouts have affected key economic sectors such as mining and manufacturing.

Government has licenced several renewal energy projects, which are yet to take off, while Zesa is currently carrying out refurbishment and expansion projects in its plants, including the $550 million Kariba South hydro expansion.

But according to the MoEPD, even if all the projects were brought online, Zimbabwe would continue to experience a crisis, hence the aggressive moves towards renewable energy.

To bridge the gap, government has signed power imports deals from regional producers, including South Africa.

This has strained the foreign currency situation and worsened the current account deficit, estimated at about $3,5 billion per year.

Government, which has been aggressively squeezing the remaining firms to pay taxes under difficult conditions, has agreed to forego tax revenue to stimulate investments into the "underutilised" renewable energy sector.

"The policy aims to promote investment in the renewable energy sector by providing specific incentives. The policy recommends providing national project status to all the renewable energy projects, tax exemptions for all renewable energy projects and capital subsidy for community projects," says the draft policy.

"(The policy) encourages MoEPD to recommend renewable energy projects on case to case basis to the Ministry of Finance and Economic Development for according prescribed asset status," says the policy.

It says financing was one of the major constraints in the development of renewable energy.

"The policy recommends to explore both domestic and foreign financing resources. The policy also recommends to set up a separate fund called Green Energy Fund of Zimbabwe. This fund will be used in promoting, developing and extending financial assistance for setting up of projects relating to new and renewable sources of energy and off-grid sources.

"For a period of one year from its inception, the fund shall be administered by the Rural Electrification Fund and the Ministry of Finance and Economic Development shall also oversee the management of the fund. Thereafter, it shall be managed by the Infrastructure Development Bank of Zimbabwe," says the plan.

Funding will also be taped from pension funds, insurance funds and bond markets through the prescribed asset status route.

Through this route, government hopes that the projects will have access to sufficient capital to fund development.

Pension funds have to invest 30 percent of their money in prescribed assets.

Funds will also be raised through the issue of bonds, according to the draft policy.

Wind has the potential to generate up to 40 000MW, while biogas could produce about 150MW in addition to significant opportunities in solar energy.

"The National Renewable Energy Policy is holistic in nature and its provisions address various national socio-economic issues and the needs of stakeholders involved across all value chains. Some of these include providing national project status to renewable energy projects and providing specific incentives to local entrepreneurs in the development of renewable energy projects. In order to protect the interests of the local community, the policy recommends at least one percent of the revenue to be spent on the affected communities," it says.

The policy sets a target to develop additional 1 000 MW or 16 percent of total generation to meet electricity demand, whichever is higher, from renewable energy sources by 2025 and an additional 1 600 MW or 23 percent of overall generation to meet electricity demand, whichever is higher, from renewable energy sources by 2030.

"These targets are in line with the country's SE4ALL action agenda report which has set a grid-connected renewable energy target of 700 MW to 1 100 MW over the next 10 to 15 years. To begin with, technology neutral targets shall be considered. This will promote competition between different technologies."

SE4ALL is an acronym for sustainable energy for all.

Generation deficits have affected the provision of electricity, especially in rural areas.

The draft policy says the country's electrification rate was currently at 40 percent, with supplies reaching 83 percent of urban households, while only 13 percent of rural households have access to electricity.

"Based on intended nationally determined contribution target of achieving emissions 33 percent below the projected business-as-usual level, clean energy sources need to generate additional energy of around 2 400 GWh by 2025 and around 4 600 GWh by 2030," the policy reads.

"The yearly generation targets from clean energy sources…have a lower gestation period compared to thermal and large hydro projects."

The policy sets a target to develop additional 1 000 MW or 16 percent of total generation to meet electricity demand, whichever is higher, from renewable energy sources by 2025 and an additional 1 600 MW or 23 percent of overall generation to meet electricity demand, whichever is higher, from renewable energy sources by 2030.

"To begin with, technology neutral targets shall be considered. This will promote competition between different technologies and will therefore help in development of least cost technology, leading to least or no impact on the consumer tariff."

- fingaz

Tags: Zesa,