April 16, 2019 SREP INVESTMENT PLAN FOR ZAMBIA REVISED THE REPUBLIC OF ZAMBIA SCALING-UP RENEWABLE ENERGY PROGRAM IN LOW INCOME COUNTRIES INVESTMENT PLAN MINISTRY OF ENERGY 2019 ACRONYMS AND ABBREVIATIONS AfDB African Development Bank BOZ Bank of Zambia CEC Copperbelt Energy Corporation CIF Climate Investment Funds CO2 Carbon Dioxide COP Conference of the Parties CSO Central Statistical Office DOE Department of Energy EE Energy Efficiency ESAP Electricity Service Access Project ERB Energy Regulation Board ESMAP Energy Sector Management Assistance Program FAO Food and Agriculture Organization of the United Nations GDP Gross Domestic Product GHG Green House Gas GRZ Government of the Republic of Zambia GTF Global Tracking Framework ICS Improved Cookstoves IDC Industrial Development Corporation IFC International Finance Corporation NDC Nationally Determined Contribution IP Investment Plan IPP Independent Power Producer IRENA International Renewable Energy Agency KPI Key Performance Indicator LCMS Living Conditions Monitoring Survey LCOE Levelized Cost Of Electricity LPG Liquefied Petroleum Gas M&E Monitoring and Evaluation MDB Multilateral Development Bank MOE Ministry of Energy MW Megawatt MWh Megawatt hour NAMA Nationally Appropriate Mitigation Action NEP National Energy Policy OBA Output Based Aid OECD Organization for Economic Cooperation and Development OPPPI Office for Promoting Private Power Investments PPA Power Purchase Agreement PSDMP Power Systems Development Master Plan PV Photovoltaic RBF Results Based Financing i REA Rural Electrification Authority REFIT Renewable Energy Feed-In Tariff REMP Rural Electrification Master Plan SADC Southern Africa Development Community SAPP Southern Africa Power Pool SE4ALL Sustainable Energy for All Initiative SHS Solar Home System SI Statutory Instrument 7NDP Seventh National Development Plan SCF Strategic Climate Fund SIDA Swedish International Development cooperation Agency SREP Scaling-Up Renewable Energy Programme in Low Income Countries UN United Nations UNDP United Nations Development Programme UNEP United Nations Environment Programme UNFCCC United Nations Framework Convention on Climate Change WB World Bank ZABS Zambia Bureau of Standards ZDA Zambia Development Agency ZEMA Zambia Environmental Management Agency ii TABLE OF CONTENTS ACRONYMS AND ABBREVIATIONS .................................................................................................... i LIST OF TABLES ..................................................................................................................................... vi LIST OF FIGURES .................................................................................................................................. vii FOREWORD............................................................................................................................................ viii EXECUTIVE SUMMARY ........................................................................................................................ x Chapter 1 INTRODUCTION .................................................................................................................... 1 Chapter 2 COUNTRY CONTEXT ........................................................................................................... 2 2.1. Demography ................................................................................................................................... 3 2.2. Socio-Economic Context and the National Development Plans ................................................. 4 2.3. National development plans, policies and strategies ................................................................... 7 2.5. Climate change agenda .................................................................................................................. 8 2.5 Energy Sector Overview .............................................................................................................. 10 2.6. Energy Sector Institutional Framework .................................................................................... 12 2.7. Policy, Legal and Regulatory Framework ................................................................................. 14 2.8. Electricity Tariffs and Pricing .................................................................................................... 16 Chapter 3 RENEWABLE ENERGY SECTOR CONTEXT ................................................................ 19 3.1 Zambia RE potential and technology options ........................................................................... 19 3.1.1 Solar Energy ................................................................................................................................. 19 3.1.2 Mini/micro hydro ......................................................................................................................... 21 3.1.3 Biomass ......................................................................................................................................... 22 3.1.4 Wind Energy ................................................................................................................................ 25 3.1.5 Geothermal Energy ...................................................................................................................... 26 3.2 Barriers Affecting Renewable Energy Development ................................................................ 29 3.3 Role of Private Sector and Leverage of Resources ................................................................... 30 3.4 On-Going and Planned Initiatives by GRZ and Development Partners ................................ 31 Chapter 4 ECONOMICS OF RENEWABLE ENERGY TECHNOLOGIES AND THE PRIORITIES FOR SREP IN ZAMBIA.................................................................................................. 36 Chapter 5 CONTRIBUTION TO NATIONAL ENERGY ROADMAP.............................................. 41 4.1 Likely Development Impacts and Co-Benefits of SREP Investment ....................................... 41 4.1.1 Increased Energy Generation from Renewable Energy ........................................................... 42 4.1.2 Improved access to electricity and other modern services ....................................................... 43 4.1.3 Energy Security ............................................................................................................................ 43 4.1.4 Poverty Reduction and Community Development ................................................................... 43 4.1.5 Employment Opportunities and Job Creation .......................................................................... 44 iii 4.1.6 Enhanced Gender Equality ......................................................................................................... 45 4.2 SREP as Initiator of Process Leading Towards Transformational Low Carbon Growth .... 47 Chapter 6 PROGRAMME DESCRIPTION .......................................................................................... 49 5.1 Component 1: Energy Access in Rural and Peri-Urban Areas ............................................... 50 5.1.1 Background .................................................................................................................................. 50 5.1.2 Objectives ..................................................................................................................................... 50 5.1.3 Scope ............................................................................................................................................. 50 5.1.4 Parallel activities to be funded by GRZ and/or other development partners ........................ 51 5.1.5 Expected Outcomes ...................................................................................................................... 52 5.2. Component 2: Wind Power Promotion ...................................................................................... 53 5.2.1. Background .................................................................................................................................. 53 5.2.2. Objectives ..................................................................................................................................... 53 5.2.3. Scope ............................................................................................................................................. 53 5.2.4. Parallel activities to be funded by GRZ and/or other development partners ........................ 53 5.2.5. Expected Outcomes ...................................................................................................................... 54 5.3. Component 3: Investment in Geothermal Development .......................................................... 54 5.3.1. Background .................................................................................................................................. 54 5.3.2. Objectives ..................................................................................................................................... 55 5.3.3. Scope ............................................................................................................................................. 55 5.3.4. Parallel activities to be funded by GRZ and/or other Development Partners ....................... 55 5.3.5. Expected outcomes ......................................................................................................................