The month of June was quite eventful for the power sector in Africa, with several developments standing out.
The Africa Single Electricity Market (AfSEM) was launched, meant to ensuring reliable, competitive, and affordable electricity for African households, industry and commerce.
There was a monumental announcement to introduce the 100 megawatts (MW) generation license exemption for Independent Power Producers (IPPs) in South Africa and its potential to help alleviate the prolonged power crisis in the country.
However, only five IPPs in Zimbabwe are expected to become operational by year end.
The Permanent Secretary in the Ministry of Energy and Power Development,Dr. Gloria Magombo (pictured), was quoted in local media saying, “There are about five IPPs that are likely to be commissioned before end of the year adding 71.5 MW to the grid.”
The article was widely shared by the Zimbabwe Energy Regulatory Authority (ZERA), who in a LinkedIn post, provide a breakdown of the generation technologies for the five IPPs. “….. a 50 MW thermal power plant and solar PV plants — Solgas (5 MW), Guruve (5.5 MW), Harava (6 MW) and Richaw (5 MW). More solar PV projects to be commissioned in 2022…”.
A quick tally shows that only 21.5 MW of this new additional generation capacity would be Solar PV.
In the LinkedIn post, ZERA omits the ownership and generation technology of the ‘50 MW thermal power plant’. However, a close look at the ZERA IPP licensees webpage reveals that the 50 MW thermal plant expected to come online would be the coal-fired Zimbabwe Zhongxin Electrical Energy Thermal Power Station.
The unstructured procurement process has seen the regulator accommodating unsolicited proposals and granting licenses without adequate technical and financial due diligence.
As a result, a fraction of licensed IPPs are operational and the capacity of licensed coal-fired IPPs by far surpasses that of licensed solar PV IPPs.
As of September 2020, ZERA, through their website, indicated the total generation capacity of the 55 licensed Solar IPPs to be 1 190.88 MW, of which only five, are currently operational with a total generation capacity of 6.14 MW.
There are also five licensed coal-fired IPPs, none of which are yet operational.
The total generation capacity for the licensed coal-fired IPPs as of September 2020, was a whopping 5 650 MW, which dwarfs the total generation capacity for licensed Solar IPPs significantly.
The distribution of technologies across the 18 operational IPPs, indicates that bagasse/thermal technology contributes the largest share with a combined 74 MW installed generation capacity.
Operational mini-hydro and hydro IPPs together have a 31.28 MW share while Solar PV remains at only 6.14 MW.
Under construction are seven solar PV IPPs totalling 66.1 MW, one coal-fired IPP with a capacity of 50 MW and a State owned 600 MW coal-fired generation facility.
Interestingly, as of May 31, 2021 the ZERA IPP licensees dashboard makes no reference to the progress of licensed IPPs which are neither operational nor under construction.
Why is this a problem?
Zimbabwe’s National Renewable Energy Policy (NREP) targets to achieve an installed renewable energy generation capacity of 1 100MW (excluding large hydro) by 2025 or 16.5% of the country’s overall electricity supply, whichever is the greater.
For 2030, the target for installed renewable energy capacity is 2 100MW or 26.5% of the overall electricity supply.
The lack of clarity on the status, ownership and capacity of licensed IPPs who are neither operational nor under construction raises doubts on the progress towards meeting the NREP targets.
What is clear, is that the paltry 6.14 MW of operational solar PV IPPs (excluding the 2.25 MW Solar PV/Diesel plant) is a far cry from policy targets.
The outlook on generation facilities under construction paints a gloomy picture for renewables, with only 66.1MW of licensed Solar PV IPPs and no mini-hydro or wind IPPs under construction.
Meanwhile, coal-fired thermal generation continues to dominate the energy mix with a whopping 650 MW under construction, 50 MW of which is expected to be operational by year end.
This is in sharp contrast with global trends as the rest of the world exploits falling costs for wind and solar generation technologies.
What kind of reform does Zimbabwe need?
“The success of the proposed power sector reform program and the ability to promote private investment to expand the system through new generation, transmission and distribution investment, are critically dependent upon restoring and maintaining the financial viability of the power sector” Zimbabwe-Power Sector Reform Program, World Bank, 2000.
What was true at the on-set of the Zimbabwe-Power Sector reform remains true today, as the regulatory trilemma of balancing electricity access, affordability and reliability remains far from being resolved.
Power sector reforms in Zimbabwe have yielded an independent regulatory authority, ZERA and a partial vertically unbundled State-owned enterprise with private sector participation.
However, Zimbabwe still grapples with a low electrification rate of 40% (80% urban and 14% rural).
A lack of cost-reflective tariffs has rendered the incumbent utility unable to meet critical maintenance and power purchase obligations.
ZERA must insulate tariff-setting from opportunistic political interventions to ensure more predictable revenue streams. With increasingly reduced costs of wind and solar PV generation technologies, as well as disruptive innovation in enabling technologies and business models, IPPs have potential to drive access to electricity.
Perhaps the question we should all be asking, is how to improve generation expansion planning and competitive procurement?
Unless Zimbabwe runs international competitive tenders (or reverse auction) for new capacity, and replaces the existing licensing criteria with well-structured technical and financial qualification criteria, bankable stapled contracts and risk mitigation measures, the renewable energy policy targets may well be out of reach.
Christine Juta is a PhD Candidate at Power Futures Lab, based at the Graduate School of Business of the University of Cape Town. Her research explores the role of new business models and enabling technology innovation in the political economy of the next wave of power sector reforms in Africa, especially focused on market design, system operation and regulation.