eBusiness Weekly
Luke W Gumbo
Zimbabwe is presently in the grip of a power crisis that has been decades in the making. The country is mainly dependent on coal, petroleum, hydroelectric power and fuel-wood to meet its energy needs. A lack of investment in the energy sector to maintain existing infrastructure and adequately expand it over the years has seen the country increasingly rely on imports to cover the power deficit.
In cases where investment has been forthcoming, such investments have tended to focus on power distribution into the rural areas and other underserved segments resulting in a surge in demand without the concomitant increase in generation capacity.
Zimbabwe currently has a national electrification rate of 42 percent. While electricity has reached 83 percent of the urban households, rural electrification is still around under 15 percent.
The country has an installed capacity of about 2,300 MW, with Zimbabwe Power Company (ZPC), a generation subsidiary of ZESA, owning around 95percent of this. More than 50 percent of electricity is generated from hydropower power while the remainder is from thermal power plants.
Bagasse, mini hydropower and small sized grid connected solar systems have an installed capacity of about 130MW. Against this background, the actual power generation capacity is about 1 400MW against a peak demand of about 1 700MW.
The limited capacity is attributed to water availability issues, old equipment which needs rehabilitation and limited coal supplies.
In 2017 Zimbabwe Energy Regulatory Authority annual report stated that the country’s energy consumption was 7,863GWh against 7,245GWh in 2016. Mining and Industrial sectors consumed 41 percent in 2017 followed by consumption by the domestic sector which was 29 percent.
In both 2017 and 2018 Zimbabwe sourced 24 percent of its power supply from imports. In 2018 and to date 2019, the macroeconomic conditions in the country have grown more tenuous, with the exchange rate the most prominent indicator of the depth of our present malaise. The energy sector has not been spared. Power cuts have come to characterise the daily routine of the various sectors in the country.
Due to the frequent power shortages, business and domestic consumers have resorted to purchasing and operating diesel generators as an alternative to grid power.
Diesel generators are expensive to operate and pollute the environment. The Government, alive to the challenges in the energy sector and the pivotal role it will play in making the 2030 Vision of making Zimbabwe a middle class country a reality, has in recent times made various interventions to ameliorate the challenges in the energy sector in the short term while long term measures play out.
Part of the solutions in the short term involve harvesting present technologies in the Renewable Energy sector. Primarily, the renewable energy sector in Zimbabwe consists of solar, hydro, wind, geothermal and biomass (which includes bagasse (sugarcane based), biogas, forestry and sawmill waste).
Zimbabwe has vast renewable energy resources that are presently under utilised and present a big scope for investment.
In its renewable energy policy statement, Government has outlined a number of incentives and policy measures to promote investment and adoption of renewable energy sources in the country.
Hydroelectric power remains the cheapest source of renewable energy, at an average of $0,05 per kilowatt hour (kWh), but the average cost of developing new power plants based on onshore wind, solar photovoltaic (PV), biomass or geothermal energy is now usually below $0,10/kWh. Not far behind that is offshore wind, which costs close to $0,13/kWh.
These figures are global averages and it is worth noting that the cost of individual projects can vary hugely.
However, in this article, particular attention is drawn to renewable energy and in particular, solar energy and how in its various formats can be exploited given our present climatic conditions and economic constraints.
The Government has in the past issued numerous independent power producers licenses hoping that the private sector would add to the country’s present power generation.
But capital raising efforts have tottered in light of the country’s high risk perception resulting in few IPPs being built. Few entities have demonstrated the capacity to raise significant low interest funds to cost effectively set up power plants given the small margins in the utility sector. These efforts also fall into the long term intervention bracket.
Solar energy technologies fall into two categories, active and passive. Active solar includes photovoltaic cells and other systems that convert the sun’s energy into more usable forms, such as electricity, while passive solar covers home design features aimed to take advantage of the sun’s natural heat and position in the sky.
The shift to solar energy will be due to two complementary economic drivers in the energy industry that affect the configuration of energy supply and demand.
The first driver relates to what types of energy source are used to power modern industrialised and developing economies. Pressure to develop sources of clean, renewable energy is growing because of the increasing costs and risks of securing traditional energy supplies, the increasing need for more energy as countries like China and India continue to industrialise, and a growing understanding of the environmental effects of traditional sources of energy.
The second driver relates to how and where energy is being generated. Over the next few decades, industrial economies will shift away from large, centralised energy production toward smaller, distributed energy generators, primarily because end users will increasingly have cost effective options to avoid the embedded costs of the existing energy infrastructure.
This trend toward distributed energy is also true for the billions of people who live in developing economies (where most of the global growth in energy use is projected to occur) and who do not currently have access to large, centralised electricity grids and distribution systems.
As these two drivers combine to change the economics of energy, much of the world will find it economic to use locally generated, clean, renewable energy.
Perusing through the National Renewable Energy Policy, Government has proposed a number of incentives that include the setting up of a green fund that will fund businesses in the renewable energy space. Tax rebates and relaxation of licensing fees have also been proposed. But the policy falls short in incentivising the consumer to take up the solar option when a choice is available.
The biggest hurdle in early adoption of solar energy is the upfront cost at the unit level. A recent review quoted a 100 percent off the grid solar installation at US$10 000 for a standard 4-bedroomed house. A fund supported by Government through either matching funds or a guarantee could lower the cost of adoption and spur a huge demand for solar.
Similar interventions could be made for commercial entities. By allowing households to access low interest loans for the installation of solar applications, it lessens the power generation required from government sponsored entities.
An example is apt at this point. When the government of the USA wanted to encourage the development of electric vehicles, introducing a tax credit formed part of their incentivisation policy.
A $7 500 tax credit for buyers of electric vehicles which phased out over 15 months once a carmaker sold 200 000 electric cars was introduced.
Now as companies like Tesla have exceeded the limit a bipartisan group of lawmakers plans to introduce a bill to expand federal tax credits for buyers of electric vehicles.
The bill, dubbed the Driving America Forward Act, would grant each carmaker a $7 000 tax credit for an additional 400 000 vehicles after it exhausts the first 200 000 vehicles eligible for tax credits. It would shorten the phase-out schedule to nine months. The credits are paid directly to consumers, who can write them off on their tax returns.
◆ Luke Gumbo is an economist and financial analyst. His view are personal and in no way represent and of the institutions he is associated with.
