PRESENTATION TO 6 TH GERMAN-AFRICAN ENERGY FORUM, 23 RD APRIL 2012, GERMANY

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1 PRESENTATION TO 6 TH GERMAN-AFRICAN ENERGY FORUM, 23 RD APRIL 2012, GERMANY INVESTMENT OPPORTUNITIES IN THE ENERGY SECTOR PRESENTED BY DEPUTY MINISTER OF MINES, ENERGY & WATER DEVELOPMENT HON. CHARLES ZULU, MP ZAMBIA

2 Presentation Overview 1. Introduction 2. Current Energy Scenario 3. Zambia s Experience in the Energy Sector 4. Opportunities in Zambia s Energy Sector 5. Future Energy Strategy 6. Conclusion

3 1. Introduction Zambia s average real GDP growth rate has been 5.1 % between 2001 to date. The peak national electricity demand for power has risen from 1,100 MW in 2001 to 1,500MW to date. Growth in the economy and the need to be a middle income country by 2030 necessitates the development of new power generation plants and transmission lines. The growth is largely driven by new mines. Source:

4 2. Current Energy Scenario National Energy Consumption Renewable energy utilisation still remains negligible accounting for less than 1% of total consumption Biomass - 80% Electricity - 10% Petroleum - 8% Coal & Others - 2%

5 2.1 Electricity Generation Capacity Installed electricity generation capacity is 1983 MW, of which 99% is hydro. Power Plant Capacity (MW) Type Kafue Gorge 990 Hydro Kariba North Bank 720 Hydro Victoria Falls 108 Hydro Lunsemfwa & Mulungushi 50 Hydro Small Hydros 25 Hydro Isolated Generation 10 Diesel Gas Turbines (standby) 80 Gas

6 2.3 Generation Projects Under Implementation ITEM NO. PROJECT NAME CAPACITY (MW) COST (US$) EXP. COMM. DATE 1 KNBE (Zesco) m ITT (Zesco/TATA) m Kalungwishi (IPP) m Maamba Coal Fired Station (IPP) m KGL (Zesco/Sinohydro) 750 2bn Lusiwasi (Zesco) m Heavy Fuel Oil (IPP) 50 60m Shiwang andu Minihydro (ZESCO) 1 4m Kabompo Gorge (CEC) m Lunzua (Zesco) 15 50m Lunsemfwa (IPP) m

7 2.4 Transmission Projects Under Implementation ITEM NO. PROJECT NAME length(km) Livingstone Muzuma Kafue Town line upgrade (ZESCO) Pensulo Chipata 330kV line (ZESCO) Pensulo - Kasama 330kV line (ZESCO) ITT Mumbwa Lusaka West line (ZESCO) KNBE Kafue West 330kV line (ZESCO) Maamba Muzuma 330kV line (MCL) COST (US$) EXP. COMM. DATE m m m m m m ZIZABONA (ITC) m Leopards Hill Luangwa 132kV line (ZESCO) m

8 2.6 Challenges in Zambia s Energy Sector Historically the sector has faced the following challenges; Low energy tariffs Lack of investment in the sector resulting in power supply deficit Lack of diversity in generation sources (99% hydro) Low Transmission Capacity to certain parts of the country Low electricity access rates especially in the rural areas Heavy dependence on biomass as the major source of energy especially for households Limited information on alternative energy sources

9 3. Zambia s Experience in the Energy Sector Cost reflective tariffs key to attracting investment Low tariffs have in the past discouraged investment in the energy sector. In the last few years the tariff has been increased with the aim of attaining cost reflective levels. The tariffs will continue to migrate upwards over the next few years. PPP implementation models could unlock investment opportunities. Inadequate Government resources are supplemented by Private resources. The Government is doing some projects on PPP basis e.g Kafue Gorge Lower (750MW), Itezhi-Tezhi (120MW)

10 3. Zambia s Experience in the Energy Sector (2) Diversification of energy supply key to sustainable development Over reliance on one source of energy supply could spell catastrophic consequences for an economy. Zambia relies 99% on hydro, in the advent of a drought our ability to keep the economy running would seriously be impaired. Investment has commenced in thermal power plants e.g., Maamba (300MW). Lack of investment in the sector resulting in power supply deficit For a long time Zambia had power generation surplus and did not invest in additional generation capacity resulting in power supply deficit. There is need to monitor economic and population growth and match with generation capacity.

11 4. Opportunities in Zambia s Energy Sector 1. Hydro Power Generation; Hydropower with an estimated potential of 6,000 MW and of which about 30% is exploited. Project name Estimated Capacity Location Status Mombututa & Mambilima 950 MW Luapula River Feasibility study to be done by CEC Batoka Gorge 800 MW Zambezi River Open for investment Devils Gorge Hydro 800 MW Zambezi River Open for investment Mpata Gorge 550 MW Southern Province Open for investment

12 4. Opportunities in Zambia s Energy Sector 2. Transmission lines; Project name Length Cost (US$) Status Mumbwa Kasempa Kalumbila 330kV line Grid Connection of North Western Province Chipata Lundazi Chama 132kV Second Kabwe Pensulo 330kV line Kasama Nakonde 330kV line MFEZ Lusaka South Substation ZIZABONA Project Zambian portion 400kV line m Tender documentation ready m Tender documentation ready m Open for investment m Open for investment m Open for investment - 36m Open for investment m Open for investment

13 4. Opportunities in Zambia s Energy Sector 3. Distribution System Expansion; Project name Capacity (MVA) Cost (US$) Status Establishment of new 33/11kV substations m Open for Investment Reinforcement of 11 & 33kV overhead lines and cables Distribution Loss Reduction and Improvement of Safety in the Mine Township N/A 38.2m Open for Investment N/A 20m Open for Investment Firming up of distribution primary substations (33/11kV) m Open for Investment Replace obsolete 11 & 33kV switchgear N/A 33.4m Open for Investment 13

14 5. Future Energy Strategy Diversify Electricity Generation sources Attain Cost Reflective Electricity tariffs Explore policy measures aimed at boosting development of nontraditional sources of energy such as renewable energy 14

15 5.1 Renewable Energy Renewable Energy Source Solar Thermal Electricity Biomass Combustion and gasification Biomass Biomethanation Biomass Extraction, processing for transport Opportunities Increasing Rural electrification rates Back up supply Lighting, refrigeration and Electricity generation Electricity generation Heating and cooking Ethanol for blending with gasoline to replace leas as octane enhancer Resource Availability 6-8 sunshine hours a day Potential Energy Output 5.5kWh/m 2 /day 50 million hectares -woodlands Agro Waste, Forest Waste & Sawmill waste Animal, municipal, Industrial Waste & Waste water Sugar cane, Sweet sorghum Jatropha Geothermal Electricity generation 80 Hot springs. Wind Water pumping and maize grinding Average 3m/s Specific areas with averages of 6m/s

16 5.1 Renewable Energy (2) Investment opportunities include: Development of mini grids e.g. solar, small hydro and biomass Importation of technologies to harness renewable energy sources such as solar, wind, geothermal, biomass and small hydro. Setting up manufacturing plants for renewable energy technologies such as wind mills, biogas digesters, solar systems and Gasifiers among others Renewable energy enterprises in rural areas providing both sale and back up services As commitment to promote renewable energy: The Zambia Development Agency provides incentives for electricity generated from Solar Energy. There are also tax exemptions on solar equipment and other equipment that will assist in energy management.

17 6. Conclusion 1. Even though there is a deficit in power generation, the Zambian power sector is vibrant with many projects at various stages of implementation expected to be completed by 2018 and there are also opportunities for new projects. Due to the good policies that the government has put in place, the private sector has started investing in power generation projects. Completion of these projects will add more than 1700MW to the National Grid. 2. Renewable energy development is still insignificant in Zambia. The Government will continue exploring ways of boosting its development.

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