Zambia’s annual energy generation expands 11.4% in Q1:2018

  • The electricity and gas sector expanded by 11.4% y-o-y in 2018 Q1, compared to 22.6% y-o-y in 2017 Q4
  • Kariba dam is now 86% full according to the Zambezi River Authority compared to 56% a year earlier

Energy generation in Africa’s second largest copper producer, Zambia expanded 11.4% year on year in Q1 of 2018 according to a half year report on Zambia issued by NKC African Economics. This was on account of improved rainfall that saw most water bodies that support hydroelectric power generation such as the Kariba. The electricity and gas sector expanded by 11.4% y-o-y in 2018 Q1, compared to 22.6% y-o-y in 2017 Q4 and 25.6% y- o-y one year earlier. Energy generation improved substantially during H1:2017. The Kariba dam is now 86% (486.9metres) full according to the Zambezi River Authority compared to a level of 56%  (483.17m) one year earlier and a meagre 29% two years ago.

During Zambia’s energy poverty era 2015-2016 period, power generation declined by 16.1% y-o-y to 11.6 million megawatt hours (MWh) in 2016. This was partially due to power rationing also dubbed as load management by the power utility ZESCO in a bid to conserve water as a precautionary measure to mitigate declining dam levels. Power generation from major hydro sources declined by 15.7% to 10.7 million MWh while imports of power surged by more than 100% to 2.2 million MWh. The power deficit was estimated to exceed 1,000 MW at the height of the crisis in 2016. However Zambia’s current generation capacity exceeds 2,200Mwh absorbing peak demand.

Weak power infrastructure and a surge in commercial power demand have resulted in inadequate and erratic power supply in recent years. As a result, business sector activity contended with severe power outages over 2015 to early 2017 as dam levels declined rapidly, necessitating the emergency importation of fuel at high cost to fiscal authorities. In line with fiscal targets, energy subsidy reform is ongoing and will result in further cost adjustments in 2018 H2. Power tariffs were revised higher by a cumulative 75% in 2017 in a move towards a more cost-reflective cost structure aimed at luring foreign investment into the sector.

Zambia has access to a third of southern Africa’s water resources, so its energy generation potential is enormous. Untapped generation potential is estimated at 6,000 MW, while installed capacity is estimated only at one-third of potential, or 2,200 MW. Hydro power accounts for more than 95% of installed power generation capacity. The energy sector is regulated by the Energy Regulation Board (ERB) while regulated utilities include the state-owned ZESCO and the Copperbelt Energy Corporation (CEC). The mining sector accounts for more than 57% of power consumption, followed by the services sector (around one-third of overall consumption), finance & property, manufacturing, agriculture and trade.

Zambia will in alignment with other SADC member states implement cost reflective tariffs by year end this year. The power utility currently underwent a cost of service study whose findings are expected to be shared in H2:2018 with the aim of improving operational efficiency of the power utility which has for a long time incurred losses. Zambia increased tariffs by 75% in a 2 phased approach 25% (March) and 50% (September) as a first step.

More articles on Zambia’s energy sector.

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