Online Reporter
Business Reporter
PILOT projects that will set the tone for the roll out of a standardised implementation agreement to accelerate energy generation projects worth US$1 billion by 27 independent power producers (IPPs), which are expected to produce 1 100 megawatts (MW), are now imminent, a Government official has said.
Last year, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube announced that the projects had been recommended for support under the Government Implementation Agreement (GIA) to establish reliable and sustained energy supplies, a key enabler for sustained economic growth as espoused in the National Development Strategy 1 (NDS1).
The country plans to generate 3 500MW by year-end, as Zimbabwe continues its march towards an upper middle-income economy.
The Zimbabwe Energy Regulatory Authority (Zera) has licensed over 100 IPPs since 2010, but most of the projects have failed to take off largely due to funding constraints.
The Government intends to speed up investments by the IPPs with a focus on solar projects.
The GIA has three major components — project development support agreement; power purchase agreement; and a Reserve Bank of Zimbabwe (RBZ) undertaking for foreign currency convertibility and transfer.
Zera chief executive officer Mr Edington Mazambani said, following the recommendation for support under the GIA, significant progress has been made.
“Sometime last year, in November, Professor Mthuli Ncube announced that the country is going to have a Government Implementation Agreement for power projects and that’s being implemented and there have been some progress,” he said.
“The projects went through some vetting process and now we have some few projects which have been earmarked for piloting because we have never done this before, so . . . we want to then analyse the impact of Government intervention through the Government Implementation Agreement.
“At a later stage, if it’s very useful, that could be considered at a larger scale, but we do have a few projects which have gone through the vetting process. Unfortunately, at this time I cannot say much because the results are not yet final . . .
“The evaluation team comprises of Ministries of Finance, Economic Development and Investment Promotion; Energy and Power Development; Environment, Climate and Wildlife Management; Zera and ZETDC (Zimbabwe Electricity Transmission and Distribution Company).”
Frequent breakdowns at Hwange Thermal Power Station and low water levels at Kariba Dam have adversely affected the country’s power supplies.
According to Zera, there are 46 operational IPPs with a capacity of 222,8MW, of which 15 are feeding 54,58MW into the grid, with the balance being for own consumption.
“For IPPs we don’t talk of cost-reflective tariffs, but tariffs which will give them a good return.
“Each project has a unique cost structure depending on the technology, capacity, distance the project is from the grid and also the source of the feedstock,” said Mr Mazambani.
“But what we advocate for as the regulator and also as required by the Government is that a project must be able to have a good return, and we don’t just take their (IPPs) figures at face value.
“We also interrogate the numbers to say do these numbers make sense. IPPs need to have a good return and that’s the only way we can attract capital into the power project.”
Former Energy and Power Development Minister Mr Edgar Moyo recently said through the GIA the Government is seeking to give IPPs the necessary guarantees to encourage implementation of the power projects.
“IPPs have not been functional because of the absence of guarantees but now that has been largely addressed, and we think they should begin to move in,” he said.
“In fact, there is a lot of excitement for private developers who want to come into the energy space. Some of the IPPs want to dedicate their production through private contracts that they have with different companies like mines.
“We also have others who want ZETDC to be the offtaker of their power and given such developments in the energy sector, the 3 500MW target the country requires under the National Development Strategy 1 will be met and we are likely to exceed that.
“The 3 500MW target that we set is a realistic benchmark which we think is achievable . . .”
