The third International Renewable Energy Conference, which was held in the resort town of Victoria Falls last week, laid bare the challenges facing players in the industry who want to invest in the sector and fight Zimbabwe’s power deficit.
The problem stems from a decision by International Chamber of Commerce (ICC) in Johannesburg to allow the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) to pay independent power producers in local currency instead of US dollars. This has ramifications that reverberate across the sector, showing how regulatory hurdles continue to hinder prospects for private energy investment.
As part of its submissions, Zimbabwe Independent Power Producers Association (ZIPPA) noted that ZETDC is constrained in its ability to collect electricity tariffs in US dollars and is prohibited from paying local IPPs in US dollars so that IPPs in turn can honour their loan commitments.
ZIPPA described it as conundrum where the government supports ZETDC paying external suppliers of electricity in US dollars, some of whom are foreign IPPs, while refusing to allow ZETDC to pay local IPPs in US dollars.
It argued that it now makes good business sense to develop generation capacity in neighbouring countries and export power to Zimbabwe.
But, considering the IPP projects could add up to about 7 000MW worth of power, Zimbabwe has a chance to become a net exporter, generate foreign currency and provide adequate electricity for the whole country by supporting these power producers. That is more than enough to meet demand for electricity, but many of the projects have not taken off.
This fundamental issue needs resolution for Zimbabwe to unlock its renewable energy potential.
Zimbabwe’s need for renewable energy has never been greater. The country is subjected to regular power cuts because of failure by Zesa to meet demand.
Private electricity has the potential to transform the industry in the country, and could help repair an economy that’s yet to recover from a collapse that has been two decades in the making.
There is a need for clarity around payment for power generated by IPPs and authorities have to be proactive in crafting a resolution that not only allows IPPs to operate profitably, but creates an environment where all approved projects can come on board.
The conference simply highlighted the opportunities available, but only if the government plays ball and make the business environment attractive. While government’s response showed that there was goodwill on its part to address the problem, we await its action with bated breath.