Zambia secures $292m for Tanzania interconnector project

From the newsletter
The Zambian government has received a $292 million grant for the Zambia-Tanzania Interconnector Project (ZTIP). This comes after Zambia experienced the worst drought in 2024, which affected its hydropower generation and cost the country approximately $1.3 billion, roughly 5% of its GDP.

• The funding consists of $245 million from the International Development Association (IDA), $17 million from the UK Foreign Commonwealth & Development Office (FCDO) through the Energy Sector Management Assistance Program (ESMAP), and $30 million from the European Union (EU).

• It is expected to lift Zambia’s low access to sustainable and affordable energy and support the country's energy needs and regional connectivity.

More details

• The ZTIP project is a component of the World Bank's Regional Energy Transmission, Trade, and Decarbonisation-Southern Africa-Multiphase Programmatic Approach (RETRADE-SA MPA) and it targets enhancing power trade, bolstering climate resilience, and promoting low-carbon development within the Southern African Power Pool (SAPP) electricity grid.

• The funding comes a month after the World Bank stepped up support to increase Zambia’s resilience to natural disasters in December 2024 further solidifying the bank's ties with Zambia since 1955.

• The partnership seeks to increase power transmission capacity between Zambia and Tanzania and East and Southern Africa in the long term.

• Over 80% of Zambia's power comes from hydropower making it highly susceptible to droughts. By 11 December 2024, the lake’s water volume had decreased from 12% of its normal capacity to 3% over the year, a reduction of approximately 75%.

• The outcome is a reduction in electricity generation via the lake’s dam, leading to as much as 21 hours of daily load shedding. This has affected over 80% of Zambians, who depend on hydroelectric power for their electricity needs.

• The ZTIP transmission line will revolutionise Africa’s energy markets by finalising the last segment of the transmission corridor that links the Eastern Africa Power Pool (EAPP) with the Southern African Power Pool (SAPP), thereby establishing the largest geographic energy market globally from Cape Town to Cairo ultimately reducing electricity costs throughout the entire region.

• Several countries are pursuing international power connections for energy security and trading. The Ethiopia-Kenya interconnector has a capacity of 2,000 MW in both directions at high voltage. The Kenya-Tanzania interconnector also has a capacity of 2,000 MW both ways and is linked to the East Africa Power Pool. West Africa has a power pool that connects 27 national utilities from the West Africa region, and the North Africa pool connects over 6 countries in the north

• The East Africa Power Pool is nearing completion of an open electricity market that will allow countries in the region to trade electricity freely, to promote energy security and regional integration.

Our take

• The ZTIP project has the potential to solve Zambia's electricity problems. Through it, Zambia can access a large pool of electricity from its neighbouring countries. With an open electricity market expected to start for the East Africa Power Pool, competition between electricity sellers is expected to lower prices.

• Energy companies and investors in these countries can explore the opportunities that the open electricity market brings. Generation capacity needs to be ramped up to meet the expected demand.