Following the success of the first competitive auction held in July 2015 in Zambia, in which private organisations, known as Independent Power Producers (IPPs), were able to submit bids for the chance to develop, build and operate solar power plants across the country, a second auction was recently held.
Like the first one, the second auction was organised in partnership between the Government of Zambia – through its Industrial Development Cooperation (IDC) – and Scaling Solar, an initiative of the World Bank. To date Scaling Solar has already contributed to the addition of 73 MW of renewable energy power to the national grid and the successful hosting of a second auction will also help the Government of Zambia meet its overall objective of adding 600 MW of renewable energy to the national grid.
Commenting on the success of the first auction, Mateyo C. Kaluba, Acting Chief Executive Officer of IDC Zambia, is quoted by CNBC Africa, as having said “Completing a first solar public-private partnership in a country is a massive undertaking. The package of bankable documents, transaction structuring advice, and research that Scaling Solar provided saved us considerable time, attracted more competitors, and ensured a successful process. The biggest benefit has been having the Scaling Solar team every step of the way to keep the process moving forward.”
The agreements between the winning IPPs and the relevant Zambian government agencies are in the process of being concluded and are expected to be finalised by May 2017. The World Bank Group’s Board, through the Scaling Solar initiative, have already approved a financing and guarantees package for one of the two winning bidders and is set to review the terms and conditions of the other winning bidder’s deal in the next few weeks.
Oumar Seydi, IDC Director of Eastern and Southern Africa, also speaking to CNBC Africa believes “The partnership between Scaling Solar and IDC Zambia is successfully delivering the affordable renewable energy needed to ease the country’s ongoing energy crisis.” He adds that “Access to electricity is vital for achieving development goals. In Zambia, Scaling Solar has helped create a market that will make it easier for the public and private sectors to work together to meet the country’s energy needs and expand opportunities for families and businesses.”
The second auction was organised partly due to the success of the first auction in which attracted 48 solar power developers of which 7 submitted final proposals and two were selected with their bids yielding the lowest solar power tariffs recorded across Africa at the time. But perhaps more importantly Zambia faces chronic energy shortages – only 22.1% of the total population has access to electricity and Zambia’s national grid only has a total capacity of 1,850 MW – and has an urgent need to increase its total capacity. Increasingly so, independent power producers are able and willing to become involved, and develop solar power plants which are affordable, take less time to develop and become operational and are better for the environment than coal power plants.
In his testimonial on the Scaling Solar website, CEO of IDC Zambia, Andrew Chipwende, says ”For quite a long time, we’ve had quite a bit of interest from the private sector in terms of investing in renewable energy in general, and in solar in particular. We haven’t had the coherent structure within which to implement this. I think with Scaling Solar, what we’ve been able to do is to develop a coherent, transparent process that the investor and investing public, the private sector, are able to work towards as well as the public institutions on the government side — that is, the IDC as investment vehicle and the state utility as off-taker, to have predictability and to have a clearly defined process that should be followed towards the attainment of this 600 megawatt target which has been set for renewable energy in Zambia.”
Zambia is not the only African country that Scaling Solar is partnering with. Indeed, other solar power renewable energy developments are currently in progress in Ethiopia, Madagascar and Senegal. Including the two bidding rounds in Zambia, these developments enabled through the support of Scaling Solar will help contribute to the development of over 1.2 GW of solar power bringing increased opportunities to these countries which are currently struggling to meet their electricity generation needs. Such has been the success of the Scaling Solar initiative to date that it is going to be expanded to other regions with countries in Asia and the Middle East already in discussions to join.