Private sector intensifies renewable energy investments

From the newsletter

Zimbabwe's private sector is switching to self-power generation, focusing on renewables. Currently, there are 29 ongoing projects with a total capacity of 1,688 MW. Solar is the dominant choice, with 25 projects contributing 403 MW.  Coal has only three projects, but accounts for the largest capacity at 1,265 MW.

• The trend of self-generating power is growing across Africa, especially among large energy consumers like mining companies. There's a significant shift in South Africa, DR Congo, Zambia, and even in countries without substantial mining activities like Kenya and Nigeria.

• While Zimbabwe has installed approximately 1,250 MW of renewable energy, the majority of this comes from hydropower. Solar energy accounts for only 70 MW, but its growth rate has been significantly faster, increasing sixfold compared to its capacity five years ago.

More details

• Data from the Zimbabwe Energy Regulatory Authority (ZERA) shows that the surge in private power investment is driven by the need for a reliable supply due to national grid limitations and the long-term advantages of renewable energy. The mix of energy generation, though, remains questionable as coal and gas, despite having fewer projects, dominate in expected capacity additions.

• Solar is widely adopted by many large-scale consumers as it is affordable and relatively easy to install, requiring no extra land for those with sufficient rooftop space. On the other hand, mining companies have larger land areas to utilise for solar panels. For example, Caledonia Mining Corporation is building its second solar plant with a capacity of 5.3 MW. The first, a 12 MW plant (pictured above) commissioned in 2022, provides 25% of its total electricity demand.

• The adoption is not limited to mining companies. Beverage producing companies like Schweppes Zimbabwe have also included solar in their energy mix. Telecommunications companies have also joined the race. Econet Wireless Zimbabwe has installed a 466 kW solar plant by Distributed Power Africa (DPA). Earlier this year, TelOne put out an advertisement inviting bids for solar power systems with battery storage for its network facilities. Agro-processing giant Tongaat Hulett, horticultural firm Nhimbe Fresh, and petroleum company Puma Energy have also invested in solar solutions for their own energy needs.

• The market for self-generation has seen a remarkable completion rate of projects, almost 100%. Most IPPs have encountered challenges securing financing for their projects for grid supply. Faced with ongoing power challenges, several corporations have turned to investing in solar energy to secure a reliable supply.

• Speaking during the launch of the report, ZERA CEO Edington Mazambani said that “The 100 percent success rate is attributable to the fact that these companies made a strategic business decision to invest in self-use power plants to ensure a reliable supply.”

• The national power utility, ZESA Holdings, has grappled with financial constraints, a substantial debt burden, and difficulties in securing foreign currency for essential maintenance and upgrades, hindering its ability to ensure a consistent power supply.

Our take

• Large-scale power consumers across Africa are driving renewable investment as they move away from the expensive grid. This is disadvantaging national grids as they lose their quality customers. National power utilities are therefore stuck in loss-making and cannot grow their generation or transmission capacity.

• Independent power producers should explore opportunities to provide power for these companies, given that current regulations in most African countries allow own electricity generation. This is the biggest and most reliable market.

• However, there should be regulations on the uptake of polluting sources like coal. With global policies favouring sustainable products, companies that seek to generate their power from dirty fuels will end up paying more to access strict markets.