Zambia’s manufacturing sector, a cornerstone of the nation’s economy, is facing unprecedented energy uncertainties. A combination of factors, including the Energy Regulation Board’s (ERB) approval of the Zambia Electricity Supply Corporation (ZESCO) Limited’s multi-year electricity tariff for retail consumers and a severe drought, is challenging the sector’s resilience. The result? Power shortages lasting up to 10 hours daily and increased electricity tariffs have led to a heightened cost of production and delayed production processes for local manufacturers. However, amid these challenges, Renewable Energy emerges as a beacon of hope, offering a path to stability, sustainability, and economic growth.
Challenges in the Status Quo
Zambia’s energy landscape is heavily dependent on hydroelectric power, which accounts for about 83% of the nation’s electricity. This reliance on hydropower has historically worked well, but recurring droughts have disrupted this balance, leading to drastic drops in water levels at the country’s main reservoirs, such as the Kariba dam. With President Hakainde Hichilema declaring the drought as a state of emergency on March 1, 2024, the power situation has become even more critical, affecting manufacturing processes leading to production delays.
The Energy Regulation Board’s approval of ZESCO Limited’s multi-year electricity tariff for retail consumers, despite being aimed at addressing a projected power deficit of 700MW, will add to the manufacturing sector’s burden. High tariffs not only increase production costs but also put Small and Medium Enterprises (SMEs) at risk of exiting the industry. These businesses, already grappling with load shedding, unstable exchange rates, and rising fuel prices, now face the possibility of being priced out of the market by cheaper imported goods.
Renewable Energy: A Strategic Solution
Despite the dire circumstances, renewable energy presents a compelling solution for Zambia’s manufacturing sector. Solar power, in particular, offers significant potential due to Zambia’s abundant sunshine throughout the year. ZESCO Limited’s ambition to increase its power generation mix with at least 800MW of solar energy, 500MW of wind energy, and 500MW of hydro in the next 10 years demonstrates a commitment to diversifying the country’s energy sources. But rather than wait for a 10-year plan there is a greater need to invest in renewable energy now than ever before.
Investing in solar energy can reduce the manufacturing sector’s dependence on hydroelectricity, providing a more stable energy source and mitigating the risks of power outages. While the initial investment in renewable energy infrastructure may be high, the long-term cost savings from reduced energy bills and minimal maintenance are substantial. Moreover, renewable energy aligns with global sustainability goals and can attract environmentally conscious customers and investors.
Learning from Kenya’s Success
Zambia can take inspiration from Kenya’s progress in renewable energy. Kenya’s transformation is largely due to the Kenya Energy Act of 2019 and reforms in its power sector. These reforms were premised on renewable energy investment and restructuring the main power company, Kenya Electricity Generating Company PLC. Key factors include tax incentives for renewable energy, guaranteed purchase of all electricity generated by renewable sources, and feed-in tariffs ensuring investor access to the national grid. Additionally, net metering has boosted local clean energy production, driving the growth of renewable energy businesses and lowering energy costs. Net metering is an energy system which allows economic agents who produce their own renewable energy to supply surplus units into the national grid. Owing to these policies, Kenya had about 71.44% of its population with access to electricity by 2020, a framework that Zambia could emulate. Currently, only 34% of Zambians have access to electricity, indicating a significant opportunity for improvement through renewable energy adoption.
Navigating the Transition
Switching to renewable energy in Zambia’s manufacturing sector will require collaboration between the Government, Industry Stakeholders, and Energy Providers. The Government will be required to play a key role by creating policies and offering incentives that promote renewable energy, as has been done by the Kenyan government. Solid commitment from the Government is crucial to spark a positive cycle, with support from low-cost and concessional climate finance to drive the transition. This approach strengthens electric utilities and networks, paving the way for a range of affordable clean energy projects. Manufacturers should also play their part by investing in solar and other renewable technologies to ensure their operations are sustainable in the long term.
Conclusion
Zambia’s manufacturing sector faces significant energy uncertainties, but by embracing renewable energy, it can navigate these challenges and build a more stable and sustainable future. The transition demands commitment and cooperation, but the benefits, for both industry and the environment are undeniable. As Zambia’s manufacturing sector leads the way in embracing renewable energy, a way will be paved for a greener, more resilient future.
The Author is Assistant Policy Analyst, Zambia Association of Manufacturers
