HomeOpinion & AnalysisEnergy co-operatives: A solution to Zim’s energy crisis?

Energy co-operatives: A solution to Zim’s energy crisis?

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By Mitchell Mahachi

THE recent directive by President Emmerson Mnangagwa to Energy and Power Development minister Soda Zhemu to ensure Zimbabwe has not only enough electricity but the capacity to export, conjured images of the biblical Nebuchadnezzar ordering his magicians to interpret his dream. Indeed, such are the difficult times that the Energy minister and his team have to endure at this moment given the COVID-19 pandemic and the harsh economic environment.

Currently, Zimbabwe produces 1 100MW of power against a national peak demand of 2 100MW. The deficit is catered for by imports from Mozambique and South Africa. Due to hyperinflation in recent years, Zimbabwe Electricity Supply Authority (Zesa) has reeled under huge debt that has seen it failing to pay its suppliers from time-to-time plunging the country into perennial blackouts.

Government efforts

The government in order to remedy the crisis teamed up with Namibia to resuscitate the Hwange Thermal Power Station. It has embarked on an expansion of the Kariba Hydropower Station under Chinese funding. It has even come up with a renewable energy policy ahead of other countries in the region to provide support for the renewable energy sector. In addition, government has also put its weight behind renewable energy particularly solar energy by making solar products imports duty free.

All these efforts have yielded positive results with a number of renewable energy projects such as the Harava Solar Park, Guruve Solar Park and Cross Mabale at various levels of completion. However, for the country to achieve energy self-sufficiency, more has to be done. While all may seem gloomy, the current rise of renewable energy particularly solar energy gives hope for countries like Zimbabwe.

The success of the German EEG

In order to alleviate the situation, Zimbabwe may take a leaf from Germany which established the EEG (Renewable Energy Act) of 2000. This has been described as one of the most successful pieces of energy legislation aimed at promoting electricity from renewable energy sources (RES-E) in Germany. As evidence of the EEG’s success, since its implementation in 2000, renewable energy in Germany rose from a mere 38TWh to 243TWh by 2019.

From a financial standpoint, total investment into renewable energy technologies rose from US$40 billion in 2004 to US$244 billion in 2012 (REN21, 2013).

Citizen-owned power plants

Surprisingly, a key factor to the success of the German EEG was the inclusion of citizens in the power production mix. The EEG supports a decentralised “Bürger-Energiewende”, a transformation towards an energy system owned and maintained by citizens. This resulted in the increase in participation from citizens till 2012, citizens and co-operatives held a record 47% of the total 73GW installed capacity. From 2000 to 2012, the number of energy co-operatives rose from 60 to 700.

This rise in participation of citizens in the energy mix was based on several supportive structures. Firstly, a payment of market premium and cost covering feed-in tariff was mandatory for all net operators as outlined in section 19 of the EEG Act. Secondly, under the EEG Act, grid system operators were obligated to purchase, transmit and distribute physically, without delay and as a priority, all electricity from renewable energy sources. Energy co-operatives play a significant role in countries like Belgium and the United Kingdom.

 Zimbabwean version of EEG

For energy independence to succeed in Zimbabwe, its success is largely dependent on a combination of supportive legislative instruments and a sound financial backup. The government could improve investor confidence by replacing the renewable energy policy with an Act that is more binding. Zimbabweans are familiar with co-operatives mostly from the housing sector which assisted a number of urban dwellers to own properties though they have faced numerous challenges of late.

Citizens may be encouraged to form energy co-operatives much in the same way as building co-operatives. Under the right conditions, these energy co-operatives will raise funds for rooftop solar installations connected to the grid as well as solar parks. All excess electricity to the grid will be reimbursed at a special feed-in tariff allowing for cost recovery and profit margin instead of receiving credit towards electricity consumption alone as is currently experienced.

Energy co-operatives have numerous benefits as observed in other countries. A community-owned model maximises local citizen engagement in energy projects, and promotes social innovation and social entrepreneurship. In addition, a community-led project helps citizens acquire new skills and knowledge, and also builds capacity within the community for the realisation of future citizen-led initiatives. Moreover, a community-owned model maximises the local community’s ability to reap benefits from RE projects, including direct financial benefits, and increased employment and regional development opportunities.

In Zimbabwe, the market premium could be funded using the current 6% rural electrification levy or some other similar levy. Long-term compensation guarantee increases the banks’ willingness to invest and more co-operatives’ participation. The diaspora community could also be roped in to invest in this sector. The feed-in tariff will be adjusted regularly in line with international prices of raw materials.

As a case in point, Nhimbe Fresh, a Zimbabwean farming venture, struck a deal with South African solar leasing platform Sun Exchange to install 1,9 MW of solar-plus-storage project for its cold store and packhouse facilities. Under the deal, investors around the world are set to receive a forecast internal rate of return (IRR) of 12,33% from an investment of $1,4 million. Similarly, the government should have no part in maintenance and construction of the power plants but only pay for electricity provided. This way co-operatives take care of their equipment for longer periods to ensure protection of their investment.

With the current perception of Zimbabwe being an investment risk destination, the Zimbabwe EEG version will not succeed without other factors being implemented.

The commitment for renewables means that there should be no other subsidies being directed to fossil fuels as is being seen currently.

There also needs to be political and economic stability without which low levels of investment will continue to cripple the sector.

An increased installation of renewables could ameliorate the problem of endemic power outages and help bring much of energy-rich Zimbabwe out of darkness. Citizens and the diaspora community, currently unheralded players in the energy mix, could ultimately prove to be the missing link in solving the energy crisis. The impact of power shortages and interruptions to the economy and attracting investment should be enough motivation for all stakeholders to put their heads together to ensure not only energy independence but also energy exports.

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