Zambia Power Development Framework
Zambia Power Development Framework
CONTENTS
List of Figures vi
List of Tables vi
FOREWORD vii
ACKNOWLEDGEMENT viii
WORKING DEFINITIONS ix
ACRONYMS AND ABBREVIATIONS xi
CHAPTER ONE 1
INTRODUCTION 1
1.1 Introduction 1
1.2 Objectives 1
1.3 Scope 1
CHAPTER TWO 3
GENERAL INFORMATION ON ZAMBIA 3
2.1 Geographical Status 4
2.2 Population 4
2.3 Climate and Vegetation 4
2.4 Political, Economic, and Social Factors 4
2.5 Health and Education 5
CHAPTER THREE 6
ZAMBIAN ELECTRICITY SUPPLY INDUSTRY 6
3.1 Introduction 6
3.2 Structure of the Electricity Industry in Zambia 6
3.2.1 Ministry of Energy (MoE) 7
3.2.2 Other Ministries 7
3.2.3 Energy Regulation Board (ERB) 10
3.2.4 Other Regulators 10
3.2.5 Rural Electrification Authority (REA) 14
3.2.6 ZESCO Limited 14
3.2.7 Other Utilities 14
3.2.8 Independent Power Producers (IPPs) 15
3.2.9 Power Consumers 15
3.3 Electricity Situation in Zambia 16
3.3.1 Electricity Supply 16
This publication was produced with the financial support of the European Union. Its
3.3.2 Electricity Demand 19
contents are the sole responsibility of the Ministry of Energy of Zambia and do not
3.3.3 Tariffs 19
necessarily reflect the views of the European Union
II III
2 3
3.4 Energy Sector Reforms 19 5.5 Ministry of Mines and Minerals Development (MMMD) 35
3.4.1 Electricity Act No. 11 of 2019 20 5.6 Zambia Environmental Management Agency (ZEMA) 35
3.4.2 Energy Regulation Act No. 12 of 2019 20 5.7 Water Resources Management Authority (WARMA) 37
3.5 Private Sector Participation 21 5.8 National Heritage Conservation Commission (NHCC) 37
3.6 Legal Framework 21 5.9 Zambia Public Procurement Authority (ZPPA) 39
5.10 Zambia Development Agency (ZDA) 39
5.11 Public-Private Partnership Department 39
5.12 Patents and Companies Registration Agency (PACRA) 41
5.13 Zambia Revenue Authority (ZRA) – Tax Payers Identification 42
CHAPTER FOUR 23 Number (TPIN)
PROCESSES AND PROCEDURES FOR POWER 5.14 Department of National Parks and Wildlife 42
DEVELOPMENTS AND OPERATIONS 23 5.15 IPP, ZESCO Limited, Transmission System Operator (TSO) and 43
4.1 Introduction 23 any other off-taker
4.2 Process for Power Developments in Zambia 23
4.2.1 Government Initiated Projects (Solicited Process) 25
4.2.1.1 Site identification 25
4.2.1.2 Pre-feasibility Study 25 CHAPTER SIX 45
4.2.1.3 Development Strategy 25 BUSINESS ARRANGEMENTS 45
4.2.1.4 Bankable Feasibility Study 26 6.1 Tariffs 45
4.2.1.5 Procurement of a Developer 26
4.2.1.6 Optimisation Study 26
4.2.1.7 Implementation Agreement 26
4.2.1.8 Other Rights, Permits, Clearances, Licenses and Approvals 27 CHAPTER SEVEN 47
4.2.1.9 Power Purchase and Connection Agreements 28 GENERATION POTENTIAL AND POWER PROJECTS UNDER
4.2.1.10 Financial Closure 28 IMPLEMENTATION 47
4.2.1.11 Project Construction 28 7.1 Generation Potential 47
4.2.1.12 Project Commissioning 28 7.1.1 Hydropower 47
4.2.1.13 Project Operations 29 7.1.2 Coal to Power 47
4.2.2 Private Sector Initiated (Unsolicited process) 29 7.1.3 Solar Power 47
4.2.2.1 Site identification 29 7.1.4 Waste to Energy 47
4.2.2.2 Feasibility Study Rights 29 7.1.5 Wind Power 47
4.2.2.3 Review and Approval of the Bankable Feasibility Study 30 7.1.6 Geothermal Power 47
4.2.3 Self-Generation for Industrial Use and/or Local area Distribution 31 7.1.7 Uranium 47
4.2.3.1 Capacity Greater than 250 kW 31 7.2 Projects Under Implementation 48
4.2.3.2 Capacity Less than 250 kW 31
CHAPTER FIVE 35
PERMITTING PROCESSES BY SELECTED GOVERNMENT
INSTITUTIONS 35
5.1 Ministry of Energy 35
5.2 Energy Regulation Board (ERB) 35
5.3 Ministry of Finance and National Planning 34
5.4 Ministry of Lands and Natural Resources (MLNR) 34
IV V
4 5
LIST OF FIGURES FOREWORD
Figure 1: Zambia and its Neighbours A viable energy sector plays an important The development of the ZPDF was undertaken
3
Figure 2: Structure of the Electricity Industry in Zambia role in the development of any economy. It is through a wide legislative evaluation and
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Figure 3: Zambia’s Generation Mix (on-grid) therefore important for the policy framework consultative process as a way of fostering
16
Figure 4: Processes and Procedures for Power Developments which is in place to be responsive to the collective involvement and effective
24
in Zambia changing needs of the sector. participation of all relevant stakeholders.
Figure 5: ERB Licensing Process The Framework is an organic document and
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Figure 6: Land Acquisition Flow Chart The National Energy Policy 2019 (NEP 2019) will continue to be revised and updated to
35
Figure 7: Flow Chart for MMMD Licences and Approvals seeks to ensure that the sector’s potential to address concerns of stakeholders.
35
Figure 8: Summary of EIA Process drive economic growth and reduce poverty
36
Figure 9: Summary of the Water Permit Process is harnessed. The policy recognizes the It is my sincere hope that this framework will
37
Figure 10: Summary of NHCC Process for Power Projects important role that can be played by the clearly demonstrate Government’s intention
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Figure 11: Guiding Steps for Solicited PPP Projects private sector for the continued growth of for expanding and diversifying the electricity
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Figure 12: Guiding Steps for Unsolicited Proposal the electricity sector. In this regard, the policy subsector in Zambia for the mutual benefit of
41
Figure 13: Process of Incorporating a Company among other things, aims to further remove developers and the nation.
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Figure 14: Process for Power Projects in the National Park barriers for private sector investment.
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Figure 15: Flow Chart for ZESCO PPA Process In conclusion, I would like to take this
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Figure 16: Flow Chart for Grid Impact Study Therefore, the NEP 2019 requires additional opportunity on behalf of my Ministry to
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Figure 17: Flow Chart for Connection Agreement frameworks and strategies to impact thank the European Union for their support
44
Figure 18: Tariff Adjustment Process developments in the energy sector such in the development of the ZPDF through
46
as increasing the country’s electricity the Increased Access to Electricity and
generation capacity. Renewable Energy Production Project. I also
wish to thank all stakeholders that participated
The country has abundant resources for power in the consultative process leading up to the
development which include; hydropower, conclusion of this document.
VI VII
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WORKING DEFINITIONS
ACKNOWLEDGEMENT
The formulation of the Zambia Power The successful implementation of this Bankable An extensive technical, economic, environmental, social, and
Development Framework (ZPDF) was framework document will depend on the Feasibility Study financial study to assess the commercial viability of a project,
based on a consultative process involving continued participation of the institutions of sufficient detail and integrity that it can be used to arrange
various stakeholders. Accordingly, listed above and the support of all the project financing.
appreciation is extended to all the Zambian citizens.
key stakeholders who took part in the Connection Agreement between the “Transmission Network Service Provider
framework document formulation process. Agreement or Distribution Network Service Provider as the case may be”
These included representatives from the and the power generation company on the construction of
following institutions: certain transmission and/or distribution lines and other related
infrastructure to connect the plant to the grid and the right of the
1. Cabinet Office; generation company to connect the plant to the grid.
2. Various Government Francesca CHISANGANO Zyambo (Mrs.)
Ministries/ Institutions; Permanent Secretary
3. Energy Utilities; MINISTRY OF ENERGY Environmental A process for predicting and assessing the potential
4. European Union and other and Social Impact environmental and social impacts of a proposed project,
Cooperating Partners; Assessment evaluating alternatives, and designing appropriate mitigation,
management and monitoring measures.
5. Private Sector;
6. Civil Society; and
7. Institutions dealing with Evaluation The systematic and objective assessment of an on-going
different aspects of private sector or completed project, programme or policy, its design,
investment promotion. implementation and results.
Generation License The license issued to the power generation company by the
Energy Regulation Board (ERB) in connection with the generation
of electricity at the power plant.
Investment License The license issued to the power generation company by the
Zambia Development Agency in relation to the development of the
power plant.
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8 9
ACRONYMS AND ABBREVIATIONS
Lease Agreement Agreement between the power generation company and any 7NDP Seventh National Development Plan
institution or organization in relation to the lease of land or
CA Contracting Authority
property for a specified period.
CPs Cooperating Partners
Monitoring A continuing function that uses systematic collection of data EA Electricity Act No. 11 of 2019
on specified Indicators to provide management and the main
Stakeholders of an ongoing development intervention with EoI Expressions of Interest
indications of the extent of progress and achievement of Goals
and correlation of such progress to the use of allocated funds. ERA Energy Regulation Act No. 12 of 2019
MW Megawatts
Power Purchase Agreement between the power generation company and the
Agreement power off-taker in relation to the sale and purchase of electricity. NEP National Energy Policy
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CHAPTER ONE
INTRODUCTION
1.1 Introduction 3. To aid the increase of power generation
Electricity access and use are capacity of the country; and
key indicators of socio-economic 4. To assist in the process of promoting
development for any country. For this the diversification of the national
reason, Government has taken measures energy mix as an additional strategy
to accelerate the development of power for security of supply and climate
resources and power infrastructure change mitigation.
through both the public and private
sectors. 1.3 Scope
The ZPDF has been developed following
Identifying the private sector as a key an extensive stakeholder review of all legal
partner in the development, financing and and regulatory frameworks governing the
implementation of projects, Government electricity sector in Zambia. The ZPDF
has expressed commitment to the provides an overview of the Zambian
promotion of private sector involvement electricity sector, entities and sector
in power projects in the Vision 2030, players. It documents the procedures to
National Development Plans, and the be followed by developers of primarily on-
National Energy Policy 2019. grid projects from inception to operation.
Although the focus of the document is not
The development of Zambia Power primarily on off-grid systems, some of the
Development Framework (ZPDF) is aimed procedures are common to both types
at re-affirming the Government’s support of projects. The major difference being
to investors and developers who wish in the type of operational licence issued
to carry out power developments in the to off-grid systems which combines
country. The document serves as an a generation, distribution and supply
investment prospectus as well as a guide licences into one. The rational for this
to prospecting developers. combination is premised on two points;
firstly, off grid systems are generally
The ZPDF will ensure effective and efficient small projects and secondly to ease the
private and public sector participation in regulatory procedures for these types
power development. of projects.
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CHAPTER TWO 2.2 Population has been dominated by the US Dollar,
The population of Zambia is estimated at however, the parties in such trading are at
GENERAL INFORMATION ON ZAMBIA 17.3 million and the annual population
growth was estimated in the 2010
liberty to use the Zambian Kwacha.
Census of Population and Housing The major export commodity for Zambia
2.1 Geographical Status Muchinga, Northern, North-western,
at 3.1%. Zambia is one of the most is copper which accounts for about 80%
Zambia is located in Southern Africa. It is Eastern, and Southern Province. The
urbanised countries in Africa with a sparse of the nation’s foreign exchange earnings.
a landlocked country, situated between capital city of Zambia is Lusaka City, which
rural population. As at the end of 2019, Zambia’s GDP was
latitude 8 and 18 degrees south and is a commercial centre of the country.
estimated at US$ 28.5 Billion, and mining
longitudes 22 and 34 degrees east. The Other major cities are Chipata, Choma,
Kasama, Livingstone, Mansa, Mongu, 2.3 Climate and Vegetation accounted for 12% of Zambia´s GDP and
country is situated on the great plateau
Zambia’s climate is sub-tropical, 70% of total export value.
of Central Africa, with average altitude Ndola, Kabwe, Kitwe, and Solwezi.
characterized by three distinct seasons:
of 1200m above sea level. The highest
the cool dry season, which stretches from Agriculture is an important economic
elevation ranges between 1525m to Zambia shares a boundary with eight other
May to August; the hot dry season from activity accounting for about 23% of GDP.
1650m above sea level. countries namely: Democratic Republic of
August to November and the rainy season About 85% of the country’s labour force is
Congo and Tanzania in the north; Malawi
from November to April. The annual rainfall employed in the agriculture sector while the
The country covers a total land area of 752 and Mozambique in the east; Zimbabwe
decreases from an average of 1000 mm predominant food crops grown throughout
612 km2 and is administratively divided and Botswana in the south; Namibia in the
in the northern parts of the country to an the country include maize, sorghum, finger
into ten provinces, namely: Central, south-west; and Angola in the west. This
average of 600 mm in the southern parts. millet, rice, beans, cassava, groundnuts,
Copperbelt, Lusaka, Western, Luapula, is as depicted in Figure 1 below:
and sweet potato. The cash crops include
The mean annual temperature ranges tea, tobacco, wheat, and sunflower. The
between 18o and 20o Celsius. The highest important fruit tree crops are mango,
annual average temperature is 32o Celsius banana, papaya and avocado.
and the lowest is 4o Celsius.
The major staple food for Zambia is maize,
Miombo woodlands, a sub-category of the ground in powder form and prepared as
Savannah is the predominant vegetation. a thick porridge served with vegetables
The next in predominance is the grassland, and meat. Cassava and millet are also
followed by closed forest and lastly the consumed in a similar manner in parts of
termitaria bush group. the country.
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2.5 Health and Education Other subsidiary government owned
The major health facilities in Zambia are educational facilities are technical and CHAPTER THREE
the University Teaching Hospital (Lusaka),
Levy Mwanawasa Hospital (Lusaka),
vocational colleges around the country.
There are also private universities
ZAMBIAN ELECTRICITY
Ndola Teaching Hospital (Ndola) and the
Kitwe Teaching Hospital (Kitwe). Selected
and colleges. SUPPLY INDUSTRY
health facilities located in provincial and These educational institutions offer 3.1 Introduction
district headquarters do offer specialised a diversity of qualifications relevant The electricity industry in Zambia is
treatment. Other specialised health to the electricity sector and project overseen by the Ministry of Energy 3.2 Structure of the Electricity
facilities can be found around the country development, ranging from bachelors and (MoE). The MoE is responsible for the Industry in Zambia
operating as fee paying private hospitals. master’s in electrical, civil, and mechanical development and management of the The structure of the electricity industry in
engineering, finance, management, and National Energy Policy and implementation Zambia is as shown in Figure 2 below:
The major government owned educational law. Technical colleges also produce skilled of various strategies.
facilities are the University of Zambia technicians in electrical engineering,
(Lusaka), Copperbelt University (Kitwe), plant operators, lines men and women
Mulungushi University (Kabwe) and Levy and other non-engineering skills such as Ministry of Energy
Mwanawasa University (Lusaka) where a account technicians and social sciences.
pool of skilled labour can be harnessed.
Other
Ministries Legal &
Regulatory
Rural
Electrification Energy Regulation
Authority Board
Other Regulators,
Agencies, Commissions
and Authorities
Mining
CONSUMERS
Consumers
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https://www.zamstats.gov.zm/ Figure 2: Structure of the Electricity Industry in Zambia
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3.2.1 Ministry of Energy (MoE) the Government and the Private Sector. ii. Ministry of Justice (MOJ) Through the Lands and Deeds Act Chapter
The MoE is charged with the responsibility b. Undertake feasibility studies to create The Ministry of Justice (MOJ) is charged 185 of the Laws of Zambia, MLNR also
of development and management a pipeline of projects for development. with the responsibility of facilitating the regulates any land leases above a lease
of energy resources in a sustainable c. Develop Implementation strategies administration of justice and promoting period of twelve (12) months which is
manner for the benefit of the people of for the development of power projects. the observance of the rule of law. required to be registered with the Lands
Zambia. MoE plays a policy setting and d. Procure developers through the and Deeds Registry. Failure to register
facilitation role in the Zambian energy granting of implementation Agreements Government contractual agreements and can render such lease unenforceable in
sector. The Ministry comprises the to developers and investors. all legal components of energy sector case of a dispute.
Departments of Energy, Planning and e. Coordinate with other government projects and dealings are undertaken
Informatics, Petroleum, Human Resources institutions for the grant of relevant by the Ministry of Justice through Power projects, just like any other
and Administration, Finance, and the permits, licenses, rights, and approvals administrative channels established infrastructure development, will require
Office for Promoting Private Power required for the development of power between the Ministry of Energy and the land and therefore power project
Investment (OPPPI). Other government projects; and Ministry of Justice. developers are required to comply with
institutions in the electricity subsector f. Monitor the life cycle of power the prescriptions of the Lands Act.
that fall under MoE are Energy Regulation projects with respect to government iii. Ministry of Lands and Natural
Board (ERB) and the Rural Electrification agreements, permits, licenses, Resources (MLNR) iv. Ministry of Mines and Minerals
Authority (REA). rights, and approvals granted to The Ministry of Lands and Natural Development (MMMD)
power projects. Resources is responsible for the The Ministry of Mines and Minerals
i. Department of Energy (DOE) administering and management of Land Development (MMMD) is responsible for
The DOE is a technical department 3.2.2 Other Ministries and Natural resources in Zambia. The the development and management of
in the Ministry of Energy which is The operation of the electricity sector Lands Act Chapter 184 of the Laws of mineral resources in Zambia. The Ministry
responsible for the development requires the collaboration of other Zambia governs the issuance of leases for regulates the establishment and operation
and implementation of policies, government ministries such as: use of state land from the Government or of mines. Mining products such as coal
programmes and projects in renewable any titled land. can be harnessed to produce power.
energy, energy efficiency, electricity, i. Ministry of Finance and National
and power development. Planning (MFNP) In Zambia, land is allocated by the State The MoE and the MMMD collaborate on
The Ministry of Finance and National through the MLNR and through traditional power projects anchored on resources
ii. Department of Petroleum (DOP) Planning (MFNP) is responsible for leaders responsible for customary land. derived from mining activities. Developers
The DOP is a technical department public finances and finance related Customary land can be converted of such projects are expected to own
in the Ministry of Energy which is activities in Zambia. In respect of the into state land through a process that the respective mining licenses,
responsible for the management and energy sector, the MFNP is responsible involves the respective traditional leaders concessions, approvals, rights and
development of the petroleum industry for formulating tax policy for the energy giving written consent which is then permits in accordance with the Mines and
in the country. DOP coordinates the sector in Zambia as part of the fiscal submitted through the local council Minerals Act.
development and implementation of policy of the country. Through the before the Ministry of Lands can issue a
petroleum programmes and projects. Ministry of Energy, the MFNP also certificate of title. v. Ministry of Water Development
plays the role of guarantor of state The Ministry of Water Development and
iii. Office for Promoting Private enterprises which may include financing The land tenure system in Zambia Sanitation (MWDS) is responsible for the
Power Investment (OPPPI) requirements of ZESCO Limited and provides for leasehold tenure for a development and management of water
OPPPI is a unit in the MoE specifically its operations such as in the case maximum of ninety-nine (99) years. Land resources, provision of water supply and
established to be a link between of power off take from Independent in Zambia cannot be leased to a foreigner sanitation. The development of power
Government and the private sector to Power Producers (IPPs). The award unless to one holding a residence permit projects has an impact on the existing
promote private sector investment in of guarantees to power projects takes or a company incorporated or registered water resources. Power projects thus
the electricity subsector. various forms which include provision of in Zambia. Companies incorporated require licenses, permits and approvals
sovereign guarantees under the Power in Zambia and whose controlling from the MWDS and the subordinate
The primary function of OPPPI is to: Purchase Agreement, tax exemptions shareholding is owned by non-Zambians Water Resources Management
and/or stabilization periods. will require an investment license from the Authority (WARMA).
a. Identify projects for development by Zambia Development Agency (ZDA) to
acquire land, unless the land will be used
for charitable purposes.
2
Gazette Notice No. 6526 of 2016 delegates responsibility for the energy sector to the Ministry of Energy
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The development of power projects has The operation of the energy sector in x. Ministry of Foreign Affairs and undertakes monitoring and compliance
an impact on the existing water resources Zambia is subject to the guidelines of MCTI International Cooperation (MFAIC) audits to ensure adherence to the
and the ecological balance in the through institutions such as the Business The Ministry of Foreign Affairs and license conditions.
environment. Power projects thus require Regulatory Review Authority (BRRA), International Cooperation (MFAIC)
licenses, permits and approvals from the Patents and Companies Registration is responsible for the formulation and The ERB collaborates with other
Ministry of Water and the Agencies under Agency (PACRA), Competition and administration of Zambia’s foreign policy. regulatory agencies such as the Zambia
it. The agencies under this Ministry that Consumer Protection Commission The ministry promotes and protects Environmental Management Agency
influence the electricity sector are the (CCPC), Zambia Bureau of Standards Zambia’s interests and maintains good (ZEMA), the Competition and Consumer
Water Resources Management Authority (ZABS), Zambia Metrology Agency (ZMA), international relations. The ministry Protection Commission (CCPC), the
(WARMA) and the Zambia Environmental Zambia Compulsory Standards Agency oversees the Zambia Diplomatic Corps Zambia Bureau of Standards (ZABS)
Management Agency (ZEMA). (ZCSA) and the Zambia Development and provides overseas services on behalf and the National Heritage Conservation
Agency (ZDA) all of which fall under of the Country. Commission (NHCC), among others .
vi. Ministry of Tourism and Arts (MOTA) this Ministry.
The Ministry of Tourism and Arts (MOTA) is Developers abroad are encouraged In Zambia, all energy undertakings must
responsible for the development of tourism viii. Ministry of Transport and Logistics to utilise the Zambian embassies in be approved and licensed by ERB.
and art in Zambia. The development The Ministry of Transport and Logistics their home countries on investment The approval processes and license
of power infrastructure impacts on the is responsible for the formulation and opportunities available in the energy procedures are outlined in Chapter 5.
tourism industry. Hydropower projects administering of policies in the transport sector in Zambia.
built across waterfalls may diminish sector in Zambia. 3.2.4 Other Regulators
the falls while the development of such xi. Ministry of Green Economy and The operation of the electricity sector in
infrastructure becomes tourist attractions The development of power projects may Environment Zambia is subject to other government
when designed with a concept of tourism. impact or be impacted by transport and The Ministry of Green Economy regulators, authorities and agencies
communication networks in the country. and Environment is responsible for that include:
The Ministry of Tourism has statutory Principal regulators under the Ministry are management of environmental protection
bodies such as the National Heritage the Civil Aviation Authority (CAA), Zambia in Zambia. The development of power i. Zambia Environmental
Conservation Commission (NHCC) and Airports Corporation Limited (ZACL), Road projects has an impact on the ecological Management Agency (ZEMA)
Department of National Parks and Wildlife Transport & Safety Agency (RTSA), and balance in the environment. Therefore they The Zambia Environmental Management
(DNPW) with which power developers Zambia Chartered Institute of Logistics. require licences, permits and approvals Agency (ZEMA) established by the
will need licenses, lease agreements, from Ministry of Green Economy and Environmental Management Act
concessions, rights and/or approvals ix. Ministry of Home Affairs and Internal Environment and the subordinate Zambia (EMA) No. 12 of 2011, is the principal
before projects can be implemented. Security (MHAIS) Environmental Management Agency environmental regulator and coordinating
The Ministry of Home Affairs and Internal (ZEMA) and Meteorological Department, agency in Zambia. ZEMA is responsible
vii. Ministry of Commerce Trade and Security (MHAIS) is charged with the which is a resource for weather and for the integrated environmental
Industry (MCTI) responsibility of providing and maintaining climatic information to power projects management, protection and conservation
The Ministry of Commerce, Trade, and internal security in Zambia. during design and operations. of the environment and the sustainable
Industry (MCTI) is responsible for the management and use of natural resources.
development of a globally competitive, Through the Immigration Department, the 3.2.3 Energy Regulation Board (ERB)
sustainable, commercial, trade and (MHAIS) is responsible for issuance of The Energy Regulation Board (ERB) is In Zambia, all developments that
industrial base in Zambia. MCTI is Zambia’s immigration documents as well as work a statutory body established under the potentially have an impact on the
principal Government body responsible permits for foreign project staff working on Energy Regulation Act, No. 12 of 2019 environment are subjected to the approval
for administering national policy for project developments. of the laws of Zambia, to regulate the of ZEMA through the submission of an
private sector development. It coordinates provision of energy and services including Environmental Impact Assessment (EIA)
industrial, commercial and trade matters Project developers are required to satisfy electricity generation and supply industry. that takes the form of an Environmental
and liaises with various public and private the requirements and guidelines of Project Brief (EPB) or Environmental
sector organisations to facilitate the the (MHAIS). The regulation of the sector is achieved Impact Statement (EIS), depending on the
implementation of government sector primarily through licenses and permits nature of the project.
policies related to trade and industry. which prescribe conditions for technical,
economic, and other regulatory ZEMA approval processes are outlined
compliance benchmarks. The ERB in Chapter 5.
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ii. Water Resources Management The process and procedures for NHCC vi. Zambia Development Agency (ZDA) and social services, through private
Authority (WARMA) approvals and permits are highlighted The Zambia Development Agency (ZDA) sector participation.
The Water Resources Management in Chapter 5. is responsible for fostering economic
Authority (WARMA) created pursuant to development through promoting and The procedure for the procurement of
Statutory Instrument No. 7 of the Water iv. Department of National Parks & facilitating investments, trade, and PPP projects is highlighted in Chapter 5.
Resources Management Act No. 21 of Wildlife (DNPW) competitiveness of businesses in Zambia.
2011, is responsible for the preservation The Department of National Parks & The ZDA was established through the viii. Competition and Consumer
and protection of Zambia’s ground Wildlife (DNPW) is a department under Zambia Development Act No. 11 of 2006. Protection Commission (CCPC)
and surface water resources. WARMA the Ministry of Tourism & Arts which is The Competition and Consumer Protection
regulates the abstraction, allocation, use, mandated by the Zambia Wildlife Act ZDA grants investment licenses and Commission (CCPC) was established with
development, and management of water No. 14 of 2015 to manage and conserve Investment Promotion and Protection a dual mandate to protect consumers and
in a sustainable manner. Zambia’s wildlife. Agreements (IPPA) to investors in Zambia. to protect the competition process in the
The licenses issued by ZDA carry Zambian economy.
WARMA grants water permits from inland Zambia’s wildlife covers about 31% of investment incentives applicable to the
water bodies to power developers when the country’s land mass and projects that respective sectors while the IPPA offers The CCPC was established in 1997
required, following specific procedures are earmarked for development in wildlife protection of the investment. Developers under the name Zambia Competition
and timelines. The procedures and management areas require permits are encouraged to register with ZDA at Commission (ZCC). The name was then
timelines are outlined in Chapter 5. and approvals from DNPW. The initial an early stage to unlock the subsequent changed in 2010 to CCPC following the
contact with this department is ordinarily services offered by Government. enactment of the new Act called the
iii. National Heritage Conservation during the feasibility study phase and Competition and Consumer Protection
Commission (NHCC) EIA preparation and approval process Procedures for applications and guidelines Act (CCPA) No. 24 of 2010 and repeal of
The National Heritage Conservation through ZEMA, however developers are are available on ZDA website (www.zda. the old Act.
Commission (NHCC) is responsible for encouraged to initiate preliminary project org.zm).
the protection of heritage sites, national screening with the DNPW at an early stage CCPC is responsible for acting as a
monuments, and historical remnants of the project. vii. Public-Private Partnership primary advocate for competition and
in Zambia. The National Heritage Department (PPPD) effective consumer protection in Zambia
Conservation Act Chapter 173 of the Laws The process and procedures for DNPW The Public-Private Partnership Department ; advise Government on laws affecting
of Zambia established the NHCC. approvals and permits are highlighted (PPPD) is responsible for the promotion, competition and consumer protection
in Chapter 5. facilitation, implementation and monitoring and provide information for the guidance
Project developers planning a project in the procurement, contracting and delivery of consumers regarding their rights under
or near national heritage sites must apply v. Zambia Public Procurement of public infrastructure and social services this Act among other things. Also, in
for a permit pursuant to section 37 of Authority (ZPPA) through partnerships between public cases where a developer seeks to take
the Act. Notwithstanding the prohibition The Zambia Public Procurement Authority sector and private sector entities. over an already existing entity, approval
to disturbance of such sites, there are (ZPPA) is a regulatory agency that for merger/acquisitions purposes will
exceptions provided for under section 41 regulates procurement procedures in The PPPD is a department under the have to be obtained from the CCPC.
which permit “engineering” operations to public institutions. ZPPA was created by Ministry of Finance, established under the
be undertaken on or near heritage sites. the Public Procurement Act No. 8 of 2020. Public-Private Partnership Act No. 14 of In power projects, CCPC through
2009 as amended by the Public Private administrative channels with ERB ensures
The initial contact with this agency is The regulation of public procurement Partnership Act No. 9 of 2018. One of competition in business models and tariff
ordinarily during the feasibility study phase and tendering for project concessions the primary objectives of the PPPD is setting. Section 30(c) of the Electricity
and EIA preparation and approval process is undertaken through administrative to facilitate the effective and efficient Act requires the ERB to take into account
through the Zambia Environmental channels established by Government and delivery of public infrastructure and and encourage competition and to
Management Agency (ZEMA), however, therefore developers may not have direct related services and promote innovation enforce standards.
developers are encouraged to initiate relations with the agency for purposes of in the development of infrastructure
preliminary screening processes at an energy sector projects.
early stage.
5
Section 5 (f) of Competition and Consumer Protection Commission Act No. 24 of 2010
6
Ibid, Section 5 (g)
4
S.4 ERA and s.3 of the EA
7
Ibid, Section 5 (h)
11 12
22 23
ix. Patents and Companies Electrification Authority and used for 3.2.5 Rural Electrification Authority their own power off-takers and use the
Registration Agency (PACRA) the expansion of the Rural Electrification (REA) ZESCO transmission line for wheeling,
Patents and Companies Registration Programme.” The Rural Electrification Authority (REA) at a fee. ZESCO is also a member of
Agency (PACRA) is an agency under the b. Value Added Tax (VAT) which is at is mandated by the Rural Electrification the Southern African Power Pool (SAPP)
MCTI and is established under the Patents 16% and remitted to ZRA. Act No. 20 of 2003 to provide electricity which is an association of public utilities
and Companies Registration Agency infrastructure in rural areas. The functions and private power producers located in
Act No. 15 of 2010 with the mandate As an initial step, the power project of REA include managing the Rural Southern Africa.
of providing business registration and company must apply for a Tax Identification Electrification Fund (REF); and developing,
intellectual property protection services. Number (TPIN) with the ZRA which is updating, and implementing the Rural 3.2.7 Other Utilities
also a prerequisite for opening of bank Electrification Master Plan (REMP). i. Copperbelt Energy Corporation Plc
The incorporation process is governed accounts and other operational matters. (CEC)
by the Companies Act No. 10 of 2017 Projects under REA include grid extension CEC is a private company incorporated
that came into force in June 2018. The xi. National Council for Construction aimed for rural areas, solar home systems, under the Companies Act and listed on
guidelines for company registration and/or (NCC) mini grids and off-grid systems which the Lusaka Securities Exchange (LuSE).
incorporation are highlighted in Chapter 5. National Council for Construction (NCC) is may be implemented by REA itself or in It is a power distribution company that
a statutory body set up under the National partnership with the community in the purchases bulk power from ZESCO
x. Zambia Revenue Authority (ZRA) Council for Construction Act No. 13 of area or the private sector. and supplies it to the mines through its
The MFNP is responsible for tax policy 2003 under the Laws of Zambia. Some transmission and distribution grid on
and law whilst the ZRA established under of the functions of the NCC relevant to REA identifies potential projects and the Copperbelt. CEC also owns 80MW
chapter 321 of the Zambia Revenue IPPs is the registration and monitoring of facilitates formation of appropriate of stand-by diesel generation assets
Authority Act is an agent responsible for tax contractors and maintenance of a register institutions to generate, distribute or for supply of emergency power to the
administration and collection. Companies of projects. supply electricity and is mandated to mines to support critical operations. 45%
in Zambia are subjected to corporate and provide smart subsidies for capital costs of the national electricity consumption
other taxes. The following is a list of taxes Engineering Procurement and Construction on projects that are designed to supply goes through CEC’s transmission and
that a power project company may be contractors must be registered with the energy for development of rural areas. distribution network.
amenable to: NCC in order to operate as contractors
in Zambia. Developers targeting generation, At present CEC does not own base load
i. Corporate tax at 35%; transmission and/or distribution of power generation assets but is in the initial
ii. Value Added Tax (VAT) at 16%; xii. The Engineering Institution of to rural areas in Zambia are advised to process of developing a 20-40 MW hydro
iii. Withholding Tax on Dividends at 15%; Zambia (EIZ) liaise with REA considering the existing project at the Kabompo Gorge in the
iv. Property Transfer Tax at 5% of the The Engineering Institution of Zambia (EIZ) REMP. However, it must be pointed North-western province of Zambia.
value of asset subject of transfer; is a statutory professional body mandated out that REA is not a regulatory or
v. Employee Taxes (Personal Income with the promotion and regulation of licensing agency. ii. North-western Energy Corporation
Tax) ranging from 0% to 37.5%; the engineering profession in Zambia Limited
vi. Import Duties - 0% to 5% (Capital in accordance with the Engineering 3.2.6 ZESCO Limited North-western Energy Corporation
equipment and raw materials). Note that Institution of Zambia Act No. 17 of ZESCO Limited is a vertically integrated (NWEC) is a private electricity distribution
importation of Solar Energy Equipment 2010. The EIZ registers all engineering national electricity utility, which company incorporated under the
is currently zero rated (0%); and professionals and entities engaged in the generates, transmits, distributes and Companies Act and it purchases power
vii. Other taxes – Applicable depending practice of engineering. supplies electricity in Zambia. ZESCO from ZESCO for distribution to mine
on sector and the taxable item. is established under the Companies Act townships and commercial entities that
Electricity tariffs in Zambia are subject An IPP being an entity practicing and 100% of its shares are owned by were developed around the Lumwana
to two taxes which are borne by the engineering will have to be registered as an the Government through the Industrial Mine in the North-western Province of
consumers but collected by the power entity and the engineers and contractors Development Corporation (IDC). Zambia. Currently, NWEC does not own
company and remitted as follows: it employs must also be individually electricity generation assets.
registered with the EIZ. ZESCO is the off-taker of choice by most
a. Exercise duty which is at 3% collected Independent Power Producers (IPPs).
as electricity levy under the Rural However, IPPs are at liberty to identify
8
S.4(h) RE Act
9
S.15(2)(b) RE Act
13 14
24 25
3.2.8 Independent Power Producers of two projects that were facilitated by the 3.3 Electricity Situation in Zambia in Lusaka Province and North Western
(IPPs) World Bank Scaling Solar Program. The Zambian electricity industry is Energy Corporation (NWEC) which owns
i. Maamba Coal Fired Power Plant dominated by ZESCO Limited the state- and operates electricity distribution
The Maamba Coal Fired power plant is vi. Bangweulu Solar Photovoltaic Plant owned utility, which owns and operates infrastructure in North Western Province.
owned by Maamba Collieries Limited, a The Bangweulu Solar PV Plant is a joint generation, transmission, and distribution
private company incorporated under the venture between Neoen and IDC. It is infrastructure across the country. In the recent past, the electricity industry
Companies Act and jointly owned by Nava located in the Lusaka South Multi-Facility has seen a sharp rise in mini-grid power
Bharat Singapore (Pte) Limited (65%) and Zone. It generates 54MW of power that is Private sector utilities that are operating plants which include Zengamina mini-
ZCCM-Investment Holding Plc (35%) a fed into the national grid. It is one of two in the country include Copperbelt Energy hydro in North-western Province, Mpanta
subsidiary of the Government owned IDC. projects that were facilitated by the World Corporation (CEC) which owns and off-grid solar plant in Luapula Province and
It generates 300MW of electricity into the Bank Scaling Solar Program. operates transmission and distribution Sinda, Katamanda, Solera and Chitandika,
national grid from its mine -mouth coal infrastructure in the Copperbelt Province, mini-grids in Eastern Province and many
fired power plant. 3.2.9 Power Consumers Maamba Collieries Limited (MCL) which others that are owned and operated by
The power consumers are divided into owns and operates a coal fired power public and private sector institutions.
ii. Lunsemfwa Hydro eleven (11) sectors with the largest being generation plant in Southern Province,
Lunsemfwa Hydro Power Company mining which consumes 51% of the power Lunsemfwa Hydropower Company 3.3.1 Electricity Supply
(LHPC) is a private power generation generated in the country, followed by (LHPC) which owns and operates two i. Generation
company that has an installed capacity domestic consumers at 33%. The other power generation plants in Central The installed on-grid generation capacity
of 56MW which is supplied into the nine sectors consume a combined 16% Province, Ndola Energy Company Limited in Zambia is 2,981.23 MW. This comprises
national grid. of the power generated with Finance and (NECL) which owns and operates a 80.45% hydro, 10.06% coal, 3.69%
Property at 6% and manufacturing at 5%. thermal (Heavy Fuel Oil) power plant in heavy fuel oil, 2.8% diesel and 2.99%
iii. Itezhi Tezhi Power Corporation Copperbelt Province, the Ngonye and solar PV. The generation mix is as shown
Limited This structure of the electricity consumers Bangweulu Power Companies which own in Figure 3 below:
Itezhi Tezhi Power Corporation Limited thus has a significant bearing on power and operate solar power generation plants
(ITPC) is a private joint venture (SPV) projects in the country. Developers may
established in 2007 and is jointly owned enter into power purchase agreements
by Tata Africa (50%) and ZESCO Limited with mining companies, or the power Coal 10%
(50%). It generates 120MW from its distribution companies such as ZESCO
hydro power plant on the Kafue River and and Copperbelt Energy Corporation (CEC) HFO 4%
supplies into the national grid. that supply the mines. Diesel 3%
iv. Ndola Energy Company Limited The other significant markets are Solar 3%
Ndola Energy Company Limited (NECL) is the domestic consumers who are
a private company owned by Great Lakes predominantly serviced by ZESCO. This
(GL) Africa. It generates 105 MW into the customer category is responsible for the
national grid from its heavy fuel oil (HFO) two-peak daily demand curve of 06-10hrs
power plant located next to the INDENI and 17-22hrs on the national grid. This
Petroleum Refinery in Ndola. demand curve presents the opportunity
for the establishment of peaking
Hydro 80%
v. Ngonye Solar Power Plant plants that can potentially charge a
The Ngonye Solar Power Plant is a joint premium tariff.
venture power company owned by Enel
Green Power (EGP) (80%) and IDC (20%). The price of electricity to these and the
It is located in the Lusaka South Multi- other non-mining customers are governed
Facility Zone. It generated 34MW of power by a tariff model approved by the energy
that is fed into the national grid. It is one regulator as discussed in 3.3.3. Figure 3: Zambia’s generation mix
10
Energy Regulation Board, 2019 Energy Sector Report.
15 16
26 27
The power stations making up the national installed capacity for both on-grid and off-
grid are shown in Table 1 below:
Installed Installed
Power Station Enterprise Technology Power Station Enterprise Technology
Capacity Capacity
Kafue Gorge (Upper) ZESCO Limited 990 Hydro Bangweulu Solar Plant Bangweulu Power Company Ltd 54 Grid tied Solar
Kariba North Bank ZESCO Limited 720 Hydro Ngonye Solar Plant Ngonye Power Limited 34 Grid tied Solar
Kariba North Bank ZESCO Limited 360 Hydro Kitwe Copperbelt Energy Corporation 1 Grid tied Solar
Extension
Victoria Falls ZESCO Limited 108 Hydro Samfya Rural Electrification Authority 0.06 Off-grid Solar
Lunzua River ZESCO Limited 14.8 Hydro Sinda Village Muhanya Solar Limited 0.03 Off-grid Solar
Lusiwasi ZESCO Limited 12 Hydro Kafue Standard Microgrid 0.02 Off-grid Solar
Chishimba Falls ZESCO Limited 6 Hydro
Luangwa bridge Solera Power 0.01 Off-grid Solar
Musonda Falls ZESCO Limited 10 Hydro
Chirundu Mugurameno 0.01 Off-grid Solar
Shiwang’andu ZESCO Limited 1 Hydro
17 18
28 29
iii. Distribution The regulated tariff structure of the national 3.4.1 Electricity Act No. 11 of 2019 The EA also governs the prior approval
The distribution network is made up of utility ZESCO excludes the mining sector. The Electricity Act No. 11 of 2019 of Power Purchase Agreements (PPAs) or
power lines with capacities below 66 kV. This tariff structure is divided into four (EA) provides for additional functions Supply Agreements, setting and mode of
Although the distribution infrastructure is consumer categories which are: of the ERB in relation to regulation of adjustment or variation of electricity tariffs
predominantly owned and operated by generation, transmission, distribution and charged by an enterprise. In addition to
the national utility, ZESCO, the Electricity i. Residential (domestic consumers); supply of electricity , the powers of the regulating the export of power, the EA
Act does provide for establishment of ii. Commercial; Minister to grant feasibility study rights also provides the mechanism for the ERB
power distribution enterprises and there iii. Social Services; and and obligations of licence holders in the to review and approve PPAs for both local
are presently two licensed by the ERB iv. Maximum demand. sector. The establishment of an enterprise and export of power.
namely CEC and Northwestern Energy in the electricity sector is subject both
Corporation Limited (NWEC). The mining companies and other bulk to this Act, the ERA and compliance Furthermore, the EA provides for ancillary
consumers enter into bilateral supply with the Environmental Management Act issues of importance to licensees such as
3.3.2 Electricity Demand agreements with the power suppliers. (EMA). Sections 5(1) and 6(1) of the EA compulsory acquisition of land, wayleaves,
The installed generation capacity as at the respectively provides as follows: and rights of way for transmission lines and
end of 2019 was 2,981.23 MW which was 3.4 Energy Sector Reforms interference of municipal infrastructure
an increase of 2.9% from the previous The Government of the Republic of Zambia “A person shall not generate, transmit, to allow for inspection and maintenance
year. However, despite this increase there is concerned about streamlining decision distribute or supply electricity or trade works to electricity infrastructure.
was a 7.1% decline in generation due to making and promoting investment in the in electricity as an intermediary or
low water levels in the hydro power plants energy sector of the country. The energy establish or carry on an activity for or 3.4.2 Energy Regulation Act No. 12 of
which resulted in a deficit of 425MW by sector is gradually moving towards a less related to the generation, transmission, 2019
September 2019. vertically integrated electricity sector distribution or supply of electricity, The Energy Regulation Act No. 12 of 2019
with a clear ambition to increase power trading in electricity as an intermediary (ERA) creates a regulatory body entrusted
According to estimates from the Seventh generation, transmission and distribution or the operation of a transmission or with the regulation of the Zambian
National Development Plan, 33.1% of and supply capacities as well as encourage distribution system, except as provided electricity generation and supply industry
Zambian households had access to grid private sector participation. in this Act and the Energy Regulation , the ERB. The regulation of the sector
power in 2016, with 67.3% accessing Act, 2019.” is achieved primarily through licensing,
electrification in urban areas but only In 2019, Government replaced the 2008 economic and technical regulation, and
4.4% in rural areas. It was noted that a National Energy Policy with the 2019 “Subject to the provisions of the compliance monitoring as well as through
further 7.4% of rural households may have National Energy Policy (NEP 2019) which Environmental Management Act, collaboration with other regulatory
access to electricity through some form of continues and enhances the objective 2011, or any other written law, a agencies such as ZEMA, CCPC, ZABS
solar PV, but the form of this technology of promoting private sector participation person who intends to construct and and NHCC among others.
is not specified (it is assumed that the in the energy sector. The NEP 2019 establish a generating station shall do
majority have access to small Solar Home recognises the important role that can so in accordance with this Act, and any A developer of an energy enterprise such
Systems (SHS) or solar lamps). be played by the private sector for the requirement of the Energy Regulation as an Independent Power Producer (IPP),
continued growth of the electricity sector. Board which is consistent with mini-grid or other renewable energy project
3.3.3 Tariffs Therefore, among other things, the policy this Act.” must obtain a licence from the ERB to
Tariffs between power generation plants, aims to further remove barriers for private establish and operate an undertaking.
distributors and consumers are governed sector investment. The requirement to obtain a licence does Section 10(1) provides that:
by connection agreements and Power not apply to generation, transmission, “A person shall not establish or operate
Purchase Agreements (PPAs) which are The NEP 2019 set ground for the distribution, or supply of electricity an enterprise without a licence issued
approved by the regulator, ERB. enactment of the Electricity Act of 2019 solely for an enterprise’s own use of under this Act.”
and the Energy Regulation Act of 2019. two hundred and fifty kilowatts (250kW)
or less. However, for own generation, Subsection (2) makes it an offence to
transmission, distribution, and supply of establish or operate an enterprise without
electricity above this quantity, or a capacity a licence.
below 250kW intended for supply to a
11
USAID Zambia Power Africa Fact Sheet at https://www.usaid.gov/powerafrica/zambia third party, the activity shall be undertaken
in accordance with regulations made
under the Act.
19 20
30 31
The ERA prescribes in detail the process 3.6 Legal Framework
12
The Electricity Act No. 11 of 2019.
13
S.3 EA
that needs to be followed to obtain a The following are the key legislation that 14
s. 6(1) EA.
licence, which includes publication of the form the backbone of the power sector
15
S.3(i) & (j) EA
16
S.19(1)
proposed licensed activities in the Gazette legal framework: 17
S. 22(1)
as part of a compulsory process that must 18
Not only electricity is regulated, but also petroleum, coal and firewood
19
S.4 ERA and s.3 of the EA
be followed . The application process 1. The Constitution of Zambia 20
Section 2 of the ERA defines an “enterprise” as “an entity engaged in the production, generation, transmission, distribution,
is augmented by the Energy Licensing (Amendment Act No. 2 of 2016). supply of energy, intermediary power trading, refining, transportation, storage, trading or supply of fuel or any other licenced activity
under this Act”.
Regulations that provides further detailed 2. The Electricity Act, No. 11 of 2019. 21
Depending on the activity performed, different types of licences are required. An IPP needs a generation licence, whilst a mini grid
process requirements to apply for an 3. The Energy Regulation Act No. 12 of would need a combined generation and distribution licence.
22
Section 8 of the ERA. Note the Act is clear on both “establish” and “operate” as activities that need licensing.
operational licence . 2019. 23
S.12 ERA
4. The Environmental Management Act Statutory Instrument No. 2 of 1998.
24
25
The regulation seems limited to applications for the “…operating of an undertaking…”, i.e., it does not include a process to apply
Licences are issued subject to licence No. 12 of 2011. for a construction licence
conditions, of which some are set out 5. Water Resources Management Act No.
in the ERA itself and others determined 21 of 2011.
by the ERB unique to each project site 6. The Rural Electrification Act No. 20 of
and enterprise. 2003.
7. The Lands Act Chapter 184 and the
3.5 Private Sector Participation Lands and Deeds Act Chapter 185 of
The Government’s strategy for increased the Laws of Zambia
private sector participation in the electricity 8. The National Heritage Conservation
sub-sector was captured in the 2008 Commission Act, Chapter 172 of the
National Energy Policy’s objective on the Laws of Zambia.
electricity sub-sector as “to expand the 9. The Zambia Development Act No. 11
electricity generation and transmission of 2006.
capacity and access to electricity through 10. The Public Procurement Act No. 8 of
the public and private sector participation”. 2020.
The 2019 National Energy Policy re-affirms 11. The Public Private Partnership Act No.
Government’s commitment to promotion 14 of 2009 as read with Public Private
of private sector in the development of the Partnership (Amendment) Act No. 9 of
energy sector. 2018.
12. Zambia Bureau of Standards, Chapter
Despite Government’s efforts, the private 416 of 1994; and
sector has faced several challenges in 13. The Compulsory Standards Act No. 3
actualising their respective projects. of 2017.
Power generation from IPPs increased by
73.77 GWh from 3,519.26 GWh in 2018 to Other pieces of legislation that supplement
3,593.04 GWh in 2019. the above are:
Isolated mini-grids owned and operated 14. The Forestry Act No. 4 of 2015.
by the private sector are found around the 15. The National Parks and Wildlife Act
country. These include Zengamina mini- No. 14 of 2015; and
hydro, Sinda, Katamanda, Solera and 16. The Competition and Consumer
Chitandika solar mini-grids. Protection Commission Act No. 24 of
2010.
11
USAID Zambia Power Africa Fact Sheet at https://www.usaid.gov/powerafrica/zambia
21 22
32 33
The processes and procedures except for Self-Generation are summarised in
CHAPTER FOUR Figure 4 below:
PROCESSES AND PROCEDURES
FOR POWER DEVELOPMENTS AND
OPERATIONS
4.1 Introduction projects. These development models may
The Vision 2030 aims to set Zambia as include Public Private Partnerships (PPP),
a prosperous middle-income nation by Build Own and Operate (BOO/IPP) and
2030. Because energy cuts across most Build Own Operate & Transfer (BOOT).
economic and social activities, the Vision
2030 has recognised energy as one of the The ZPDF has been developed to
important driving forces necessary for the attract private sector investment by
development of the economy. providing clearly set out power projects
development and operation processes
Strategies to actualize the vison 2030 are that may be applicable to the energy
contained in the 7th National Development sector. It is envisaged that the ZPDF
Plan whose development outcomes will provide a clear procurement and
include Economic Diversification and regulatory environment for both private
Job Creation through Improved Energy and public sector power developments.
Production and Distribution in which
the Government seeks to enhance the 4.2 Process for Power Developments in
generation, transmission and distribution Zambia
of electricity and the promotion of The development of power projects in
renewable and alternative energy. Zambia takes many forms depending on
the project needs and requirements. The
Programs for the enhancement of development forms include:
generation, transmission and distribution
of electricity and the promotion of 1. Government initiated (Solicited)
renewable and alternative energy have through the Ministry of Energy, PPPD
targeted the synergies with the private and other government agencies such
sector that can be exploited. as IDC, ZESCO, REA, Local Authorities
and Provincial Administrations.
The Government of Zambia has set 2. Private Sector Initiated (Unsolicited) as
deliberate policies and measures to IPPs; and
ensure power projects are offered to the 3. Self-Generation for industrial use and/
private sector using various development or local area distribution.
models that may be appropriate for given
26
Although ZESCO, IDC and REA have corporate character, they are entities whose shares are owned by the Government, or in the
case of REA is a statutory body established to fulfil a state function. The process by which the state allocates access to resources to
these entities to establish energy infrastructure is outside the scope of this document,
Figure 4: Processes and Procedures for Power Developments in Zambia
23 24
34 35
4.2.1 Government Initiated Projects options and by partnering with the private 4.2.1.4 Bankable Feasibility Study are then given a timeline of six to nine
(Solicited Process) sector through shared equity contributes Upon the recommendation of the weeks to prepare and submit their
4.2.1.1 Site identification for the project development. Prefeasibility Study findings, the Ministry offers in accordance with the specified
The Ministry of Energy in collaboration or Government entity will undertake technical requirements.
with other stakeholders identifies The projects to be developed by a detailed feasibility to include other 5. Submitted responses to the RfP are
priority areas for the development of Government institutions utilize the public project components as geotechnical evaluated by the procuring entity
the electricity sector depending on the investment procedures for procurement assessments, financial and economic and the bidder whose technical
national plans to meet the current and of the project implementation. The assessment culminating into a bankable offer matches the RfP requirements,
projected national power demands. The procurement process highlighted in document ready for public tender. and whose financial offer will be the
MoE then undertakes reconnaissance section 4.2.1.5 may be applied. After most attractive, is selected as the
studies to determine the sites power completing the approval process, the 4.2.1.5 Procurement of a Developer winning bidder.
generation capacity, evacuation options projects feasibility studies are undertaken The development of power projects
and environmental assessments. Other as highlighted in section 4.2.2.2. through Government Institutions and IPP 4.2.1.6 Optimisation Study
sites can also be identified by other development strategies will be through The successful bidder is issued with
Government related entities like ZESCO, ii. Public Private Partnership the ZPPA procurement guidelines and a letter of offer pending signing of the
REA or IDC. Development processes. It should be noted that the Implementation Agreement (IA). The
Power projects development in which procurement processes outlined here do successful bidder will be required to
4.2.1.2 Pre-feasibility Study the Government enters into a partnership not cover Open Access as the regulatory undertake an optimisation study at their
Power project sites with positive agreement with the private sector may regime, the Open Access mechanism is own cost and risk. The letter of offer
reconnaissance study results proceed be developed in accordance with the still being developed by the ERB at the granted to the successful bidder outlines
to Pre-feasibility Study stage in which Amended Public Private Partnership Act time of this report. among other issues the timeline for
the preliminary project parameters are No. 9 of 2018. The development of the completing the optimisation study and the
confirmed. These parameters include projects is facilitated by the Public Private The usual procurement process shall be submission of quarterly progress reports
the resource availability, accessibility of Partnership Department (PPPD) under the employed as follows: to the Ministry of Energy.
the project location, project generation, Ministry of Finance.
transmission, distribution capacity and 1. Procuring entity publishes an 4.2.1.7 Implementation Agreement
the environmental and social aspect of The power projects would be procured Expression of Interest (EoI) or the Pre- The procurement process of a developer
the project. and developed in accordance with the qualification Tender Document and for a power project by IPP and
PPP development flow charts highlighted advertise it in the local and international Government Institution development
4.2.1.3 Development Strategy in section 5.10. media for not less than three and not strategy is finalised by the signing of an
The Government through the responsible exceeding five weeks. Implementation Agreement (IA) between
Ministry and/or institution determines iii. Independent Power Producer 2. In response to the EoI, the power Government, represented by the Ministry
the project development strategy to be Development development companies with the of Energy and the successful bidder, the
applied on the implementation of the The Ministry of Energy upon undertaking required technical expertise and Developer. An IA is a comprehensive
project. The development strategy will the necessary consultations with relevant financial integrity will prepare and agreement that incorporates, among
determine among other factors how stakeholders would determine to develop submit their EoI documents as bidders. other things:
the project will be developed and the power projects through the independent 3. After the close of the EoI submission
operations of the projects after the expiry power producer development strategy. timeline, the submitted bids will be 1. The exclusive concession or
of the project development Agreements. The MoE would proceed to procure a evaluated by the procurement entity development right granted to the
The project development strategies to be project developer in accordance with the and shortlisted after which the shortlist developer;
considered are as follows: Zambia Public Procurement Guidelines will be published. 2. Obligations of the parties;
for solicited projects as highlighted in 4. The procuring entity then launches the 3. The extent of Government Support to
i. Development by Government section 4.2.1.5. Request for Proposals (RfP) tender the project;
Institutions to the shortlisted bidders. The RfP 4. Risk Allocation and Risk Mitigation
Through consultations and obtaining of After the procurement process, the document is prepared based on the bid Measures; and
the necessary approvals, Government developer will be required to undertake a document which outlines the details 5. Dispute Resolution.
institutions (IDC, ZESCO, REA, etc.) may feasibility study for the power project as of the project including technical
develop power projects with financing by highlighted in section 4.2.2.2. specifications. The shortlisted bidders
the Government, other project financing
25 26
36 37
The IA is an umbrella document that Water Resources Management Act vii. Operational Licenses connection agreements. The Connection
opens negotiations and interactions with of 2011. Any developer intending to engage in the Agreement to be entered into between the
other government agencies for approvals, generation, transmission, distribution, and Transmission Network Service Provider
permits, rights, licenses, waivers, and iv. NHCC Clearance retail of electricity must apply to the ERB for (TNSP) or Distribution Service Provider
incentives. The execution of an IA is Some power projects will require a licence. The developer will be required and the developer, will grant the developer
preceded by negotiation by the Developer clearance from the National Heritage to submit proof that an environmental the right to connect the power generation
with a Government team comprising of Conservation Commission (NHCC). This is impact assessment has been approved, project to the Zambian grid for the purpose
stakeholder ministries and agencies. to ensure that projects are executed with business registration completed and proof of evacuating the power to be generated.
minimal impacts on listed heritage sites. of the financial viability of the project as The draft connection agreements
The life of the project is monitored Where a project is expected to impact a evidenced by a business plan, power are subject to approval by the ERB
by the Ministry of Energy in line with heritage site, a Concession Agreement is purchase agreement, tariff model, and before implementation.
the guidelines provided in the entered into between the developer and connection agreements with an off-taker.
Implementation Agreement. the NHCC. 4.2.1.10 Financial Closure
4.2.1.9 Power Purchase and Once the feasibility study, IA, PPA and
4.2.1.8 Other Rights, Permits, The NHCC Concession will grant the Connection Agreements permits are obtained, the developer is
Clearances, Licenses, and Approvals developer a lease for a specified period i.Power Purchase Agreement (PPA) expected to achieve financial closure
Some of the Rights, Permits, Licenses, on the development of the project on Project developers usually enter into within a specified period failure to which
and Approvals applicable in the energy a Heritage site in accordance with the Power Purchase Agreements (PPAs) with the IA is terminated.
sector are: National Heritage and Conservation energy off-takers prior to the development
Commission Act of 1994. of the project. The PPAs are contractual 4.2.1.11 Project Construction
i. Land Lease agreements that principally specify the The developer is required to apply for and
The Title Deed for Land to be obtained v. ZDA Investment License amount of power and the tariff to be paid obtain a construction permit from the ERB
from the MLNR will grant the developer The IPPA to be entered between ZDA and by the off-taker. On-grid IPPs sign PPAs before construction begins. The developer
a lease to the project site for a specified the developer will grant the developer with utilities for supply to the grid. Under must also be in possession of a decision
period as provided for in the Lands Act. protection on their investment and the new Electricity Act an IPP may enter letter which is valid for three years from
the Registration Certificate (formerly a PPA with any other entity such as bulk ZEMA following preparation of an EIA.
ii. Environmental Permit Investment Licence) will grant incentives user or distribution company and use a
Environmental Permits are granted on the investment if it is in a priority area in transmission network owned by another The developer is expected to implement
by ZEMA following the approval of accordance with the Zambia Development entity to wheel the power through a the project in line with the IA signed with
the Environmental and Social Impact Act. Energy is a priority area and as such wheeling agreement. government. The Government through
Assessments (ESIA) or Environment will get incentives. the MoE will among others undertake
Project Brief (EPB) undertaken by the Draft PPAs and the financial models on project inspections and monitoring and
developer. The ESIA or EPB is undertaken vi. ERB Construction License which they are based must be submitted to evaluation to ensure the project meets the
at the cost and risk of the Developer. The enactment of the Energy Regulation the ERB for approval prior to the execution set milestones and project schedules.
Act No.12 of 2019 has introduced a Permit or signing of the agreement between the
iii. Water Permit for the construction of an energy facility, parties. The ERB however, is not a party 4.2.1.12 Project Commissioning
Some power projects require substantial installation or common carrier prior to to the PPA. The constructed power infrastructure
amounts of water for construction and the issuance of an operating licence . will then be inspected and tested by the
during operations. The Water Permit to This Permit assures the developer that if ii. Connection Agreement ERB to verify technical conformity. Upon
be obtained from WARMA will grant the the facility is built in accordance with the The new regulatory regime under the finalisation and successful testing, the
developer the right to abstract water design specifications and in compliance Energy Regulation Act and Electricity ERB will issue a Generation, Transmission
resources from the river or lake/dam with national technical standards, the ERB Acts now provides for an open access and/or Distribution License to the
for purposes of power generation in the would issue the substantive licence for framework. IPPs can enter into connection developer. These licenses are also called
cases of hydropower and thermal power generation, distribution or transmission, agreements with transmission providers Operational Licenses.
projects development in line with the as the case may be. to evacuate power to off-takers through
29
Verify with EE Act
27 28
38 39
4.2.1.13 Project Operations 4.2.2.2 Feasibility Study Rights 1. The feasibility study rights are granted 1. Undertake the feasibility study on the
i. Project Operations during IA Period i. Grant of Feasibility Study Rights for a period of two (2) years and may project site area within the agreed
During its operation, the infrastructure Any person who intends to undertake be extended for a further one (1) year timelines and schedule.
will be inspected and monitored by the a feasibility study for the development on demonstrating that the study could 2. Provide quarterly progress reports
Ministry of Energy to ensure the project of a new electricity project in Zambia is not be completed within two years; including the costs incurred in the
is operated according to the provisions of expected to apply for an authorisation to 2. The developer undertakes the study at feasibility study activities. The progress
the Implementation Agreement. the Minister responsible for Energy in a its own cost and risk; report format shall include but not
prescribed form. 3. The developer submits quarterly limited to:
ii. Project Operations Post IA Period progress reports; • Period of reporting;
Upon the expiry of the IA, provisions in the The key details to be provided in the 4. The developer shall not transfer or sale • Activities undertaken during the
IA are invoked in which case if the project application include: the feasibility study rights to another reporting period;
is a Build, Own and Operate (BOO), such person or entity without approval of • Risks and challenges encountered;
a project continues to operate under the 1. Name and legal status of project the Ministry; and • Mitigation measures for risks
normal IPP framework in the energy sector proposer; 5. If the feasibility study is approved, and challenges;
and where the project was developed as a 2. Location of the project site, indicating the developer will negotiate an • Indication of progress against work
Build, Own, Operate and Transfer (BOOT), the name of the proposed project site, Implementation Agreement with MoE plan; and
such a project will be handed over to district; province and geographical and a Power Purchase Agreement • Activities to be undertaken in the
Government in line with the IA. coordinates of the project site; (PPA) with any willing off-taker. next quarter.
3. Project type i.e., generation/ 3. Acquire necessary permits and
4.2.2 Private Sector Initiated transmission/distribution; Failure to abide by the above conditions licences for undertaking the feasibility
(Unsolicited process) 4. Technology type (e.g., hydro, solar, will result in the revocation of the feasibility study; and
4.2.2.1 Site identification wind, biomass, bagasse, geothermal); study rights. 4. Comply with all existing laws of the
Private developers may undertake their 5. Technical and Financial capacity to Republic of Zambia.
own reconnaissance and identification undertake the feasibility study; ii. Obligations of the Ministry during
of potential project sites for power 6. Expected project installed capacity; Feasibility study 4.2.2.3 Review and Approval of the
generation in partnership with other and The following are the obligations of the Bankable Feasibility Study
private entities without the involvement of 7. Benefits of the project to the country. MoE to the developer at feasibility study After the completion of the Feasibility
government. The private developer will be stage: Study, the project developer will submit
required to identify a viable power project Upon the submission of the application, the Feasibility Study report to the MoE for
for development and submit a detailed the Ministry will then engage relevant 1. Provide necessary support and advice review and approval.
project proposal to the MoE. project stakeholders such as the proposed to the project developer for undertaking
off-taker, authorizing, and licensing and completing the feasibility study; After the approval of the Bankable
Acceptable site location and detailed agencies. The Ministry through the Office 2. Where necessary facilitate for Feasibility Study Report, MoE and the
project proposals submitted will form the for Promoting Private Power Investment interactions between the project project developer will negotiate and
basis for the issuance of feasibility study (OPPPI) undertakes due diligence on the developer and relevant institutions, for sign an Implementation Agreement. The
rights (permission letter/ memorandum of proposed project. The Ministry of Energy the purpose of obtaining information developer will also be expected to obtain
understanding) by the MoE to undertake a reserves the right not to issue feasibility to complete the feasibility study; and the relevant permits, rights and approvals
feasibility study. study rights where there is cause. The 3. Review the quarterly progress reports from other government agencies
following are some of the conditions that and feasibility study reports submitted and institutions.
The developer also must arrange its own govern the feasibility study rights issued by the developer.
off-taker and negotiate a connection to the project developer30: Following the signing of the Implementation
agreement with a system operator or iii. Obligations of the developer during Agreement, the unsolicited process
transmission service provider. feasibility study proceeds in the same way as the solicited
The following are the obligations of the process highlighted in sections 4.2.1.7 to
project developer to the project during the 4.2.1.13 above.
feasibility study period:
30
Part II of the Electricity Act s. 4-21
29 30
40 41
4.2.3 Self-Generation for industrial use However, establishments intending to CHAPTER FIVE
PERMITTING PROCESSES BY
and/or local area distribution install power generation plants of two
4.2.3.1 Capacity greater than 250 kW hundred and fifty kilowatts (250kW) or
Application for feasibility study rights to the
Ministry of Energy must be distinguished
less for self-generation, would generally
require no feasibility study rights and SELECTED GOVERNMENT
from a generation licence from the Energy
Regulation Board.
developers would be free to choose
any site/location subject to fulfilment of
INSTITUTIONS
environmental requirements. However,
Project developers undertaking the the developers are required to inform the 5.1 Ministry of Energy “A person shall not establish or operate
development of an electricity project for MoE on their undertaking to ensure the The Ministry of Energy (MoE) is the overall an enterprise without a licence issued
self-generation, of above 250 kW capacity projects are captured. Further, in cases government Ministry charged with the under this Act.”
will be required to apply for feasibility where such plants are proposed to be responsibility for the development and
study rights as outlined in section located on irrigation canals, the technical management of energy resources in a Subsection (2) makes it an offence
4.2.2 and a licence from the Energy clearance of the concerned Government sustainable manner for the benefit of the to establish or operate an enterprise
Regulation Board. institutions shall be obtained. people of Zambia. The Ministry of Energy without a licence.
plays a policy setting and facilitation role
4.2.3.2 Capacity less than 250 kW A project developer undertaking a in the Zambian energy sector. Further, sections 5(1) and 6(1) of the
Development of power projects with a generation project of below 250kW for its Electricity Act respectively provides
capacity equal or less than 250 kW and own use does not require to apply for a The Ministry of Energy procures as follows:
aimed for distribution to a third party shall licence under the Energy Regulation Act. developers on competitive bidding basis,
be undertaken following the obtaining However, if the generation is meant for issues feasibility study rights and executes “A person shall not generate, transmit,
of feasibility study rights as outlined in supply to a third party or for entrepreneurial Implementation Agreements for power distribute or supply electricity or trade
section 4.2.2.2. activities, the developer must apply for projects as outlined in section 4.2.1.7. in electricity as an intermediary or
a generation licence irrespective of the establish or carry on an activity for or
amount of power generated. 5.2 Energy Regulation Board (ERB) related to the generation, transmission,
The Energy Regulation Board (ERB) is an distribution or supply of electricity,
autonomous statutory body established trading in electricity as an intermediary
under the Energy Regulation Act No. 12 or the operation of a transmission or
of 2019 of the Laws of Zambia. In power distribution system, except as provided
developments, the ERB undertakes the in this Act and the Energy Regulation
following activities: Act, 2019.”
31
Review section for clarity
31 32
42 43
The issuance of a licence includes is augmented by the Energy Licensing The EA provides for declaration of an of ZESCO Limited and its operations such
publication of the proposed licensed Regulations that provides further detailed emergency by the ERB following an as in the case of power off-take from
activities in the Gazette as part of a process requirements to apply for an application by a licensee. The significance Independent Power Producers (IPPs).
compulsory consultation process that operational licence as indicated in of this provision is that the licensee may
must be followed. The application process Figure 5 below: be permitted by the ERB to adjust its tariff 5.4 Ministry of Lands and Natural
for the duration of the emergency without Resources (MLNR)
conducting a public hearing. Access to state land for project
Licence application
Developer/ forms submitted in development is obtained from the Ministry
Application verified in
Applicant pays for triplicate together 3. Technical Compliance of Lands directly through an application to
presence of Applicant
application form with supporting Following completion of construction of the the Commissioner of Lands. As regards
documentation energy infrastructure, the ERB conducts customary land, the developer applies
a commissioning inspection prior to the through the traditional leadership in the
issuance of a substantive licence with area and the local municipality surveys
accompanying licence conditions. This and inspects the land before submitting
Application processed Duly lodged inspection is a verification of compliance the application to the Ministry of Lands for
Applicant invoiced
for licence fee for Technical and application recorded in with national technical standards for the processing of title.
Financial Assessments Public Register electricity sector.
It is important to first confirm that the
Following the issuance of the substantive feasibility study, environmental, and
license, the ERB specifies in the licence site approvals are secured before
conditions the frequency of reporting proceeding to secure title to the land
by the IPP. The ERB also undertakes on which the proposed project will be
Application Gazetted Provisional Licence
(request for public Board approval periodic audit inspections and verification situated. The feasibility and EIA studies
issued after payment
comments) inspections to confirm implementation of may recommend that the project be
audit directives or enforcement notices. relocated to another site than the one
proposed and if land acquisition has been
5.3 Ministry of Finance and National concluded, this might be difficult and
Planning expensive to reverse. This is particularly
Issuance of The MFNP is responsible for formulating true for acquisition of land that is already
standard Licence tax policy for the energy sector in Zambia on title from a private entity. An MOU
as part of the fiscal policy of the country during the feasibility and EIA process
and as has been explained earlier, it is phases might be more appropriate and
responsible for formulating tax policy for after approvals are secured then the land
Figure 5: ERB licensing process
the energy sector in Zambia as part of the acquisition formalities or long-term leases
Templates of the Licenses are available on the ERB website (www.erb.org.zm). fiscal policy of the country. Through the maybe completed.
Ministry of Energy, the MFNP also plays
the role of guarantor of state enterprises
2. Tariff Management adjustment or variation of electricity tariffs
which may include financing requirements
The ERB determines and regulates tariffs charged by an enterprise. In addition to
in the energy sector . It also approves regulating the import and export of power,
Power Purchase Agreements (PPAs) the EA also provides the mechanism for
and the key provisions of Power Supply the ERB to review and approve PPAs for
Agreements (PSAs) prior to final execution both local and export of power.
of these agreements by the parties.
The EA governs the prior approval of The export and import of electricity
Power Purchase Agreements (PPAs) or is approved by the Minister following
supply agreements, setting the mode of consultation with the ERB.
31
Review section for clarity
33 34
44 45
The process for land acquisition is as shown in Figure 6 below. The EIA Regulations provides guidance as When satisfied that the project has
to the format and content of an EPB and provided adequate mitigation measures,
an EIS document . ZEMA issues a Decision Letter valid
Project Developer Land is surveyed by Commissioner of for three (3) years . Figure 8 illustrates a
submits application survey Department or Lands considers
for title to land through approved land application and issues
summary of the EIA process.
Commissioner of surveyor and survey title to the land for
Lands via a letter diagram prepared. project development
Developer submits draft EIA
document to ZEMA
5.5 Ministry of Mines and Minerals and approvals for the extraction of mineral
Development (MMMD) resources for energy production is as
Developer conducts Scoping
The requirements for MMMD for licenses shown in the Flow chart in Figure 7 below: Meeting in locality of
proposed project (Public
consultative meetings)
35 36
46 47
5.7 Water Resources Management 21 of 2011. Permanent water rights are The application process is outlined in Figure 10 below :
Authority (WARMA) to be obtained following the signing
Following the granting of feasibility of the Implementation Agreement with
study rights by the Ministry of Energy, the Ministry of Energy. The WARMA act
Developer applies to NHCC
the developer is expected to apply for outlines the application process for water for Permit during feasibility
temporal water rights for purpose of rights for hydro generation as indicated in study period
feasibility study in accordance with the Figure 9 below.
Water Resources Management Act No.
5.8 National Heritage Conservation operations that may impact upon national
Commission (NHCC) heritage sites. A developer of a power
The National Heritage Conservation plant in a heritage site must obtain
Commission Act, Chapter 173 of the permission to undertake a feasibility study
laws of Zambia gives guidance on how and developments at a heritage site. Source, Zambia Environmental Management Agency (ZEMA).33S.4(k)
42
to deal with activities such as engineering SRefer to preamble of the NHCC Act on the issue of all waterfalls being heritage sites.
43
37 38
48 49
5.9 Zambia Public Procurement Promotion and Protection Agreement The solicited proposal process is shown in Figure 11 below.
Authority (ZPPA) (IPPA). The IPPA grants the developer
The procurement of power projects in protection and incentives on their
Zambia is undertaken in accordance investment in accordance with the Zambia Contracting Authority (CA)
drafts solicitation
with the Public Procurement Act in Development Act. documents and submits to
which a tender process is initiated by the the PPPD for approval.
procuring agency. 5.11 Public-Private Partnership
Department Conceptualisation of the
project and submission to
Due to the intrinsic nature of power The PPP process is provided for by the PPPD by Contracting
developments, the Public Procurement PPP Act 14 of 2009 and Amendment Authority (CA). Call for RfQ/EoI and
Act makes provision for the Ministry to Act No. 9 of 2018. Approvals for all PPP evaluation of bids by
Contracting Authority (CA)
entertain initiatives led by the private projects are granted by the PPP Council
sector using an unsolicited process. of Ministers who are the apex Committee
The Contracting Authority
established to approve all PPP projects. Contracting Authority (CA)
(CA) enters into
drafts ToRs and submit to
However, even under the unsolicited The PPP approval processes can either the PPPD for approval negotiations with the
best bidder
model, adherence to the procurement be solicited or unsolicited: Due diligence undertaken
by the Contracting
Act is required. This demands that the Authority (CA) and PPPD.
procuring agency provides justifications i. Solicited proposals
Advertisement for
for procuring using an uncompetitive Solicited Project proposals are initiated by Consultancy for feasibility Final concession
model. Typical justifications include the contracting authority which includes study and evaluation of agreement submitted to
bids by Contracting Attorney General
patented technology, intellectual property Government ministries, parastatal or state- Authority (CA). Issuance of RfP and
rights, private led initiatives with significant owned enterprise, local authorities, and evaluation of bids by
Contracting Authority (CA).
benefits to the country etc. agencies. In this case, the Government
institution should submit the project
Submission of approved
5.10 Zambia Development proposal in line with the Section 21 – 26 Submission of feasibility concession agreement to
Agency (ZDA) of the Amended PPP Act No. 9 of 2018 to study report to the PPPD
for approval
PPPD for PPP Council
approval to award
The developer also applies for and is the PPP Department to structure a project Submission of evaluation
report to Technical
issued with an Investment Licence (IL) on a PPP basis. Committee by the PPPD.
by the Zambia Development Agency
(ZDA). The IL serves as an Investment Submission of feasibility
study report to PPP Approved concession
Technical Committee and agreement signed by the
PPP Council for Approval Minister of Finance
39 40
50 51
ii. Unsolicited Proposals must obtain authority from the PPP The process of incorporating a company is shown in Figure 13 below:
Unsolicited proposals are initiated by the Department to proceed with an unsolicited
private sector. In this case, the private party project and consequent implementation
must submit a proposal to the contracting once approved.”
authority and PPP Department, but Developer completes
should be in line with the provisions of The unsolicited PPP process is shown in and submits
section 42 of the PPP Act No. 14 of 2009. workflow of Figure 12 below: Clearance & Developer Company
approval of proposed prepares supporting Incorporation Form 3
Therefore, the Government institution company name. documents to PACRA.
PACRA Registers
company
Final concession
agreement submitted
Unsolicited CA advertise to Attorney General
Project for competing PPD submits to
proposal proposal and PPP Technical Figure 13: Process of incorporating a Company
submitted by evaluation Committee
private party (sec 42(11)
Application for Name Clearance Form 1 be opened. The application process for a
Submission of
approved
may be accessed on TPIN is done online on the ZRA website, or
concession https://www.pacra.org.zm/applications/ a paper application can be made through
PPPD receives
agreement to
PPPD for PPP
pacra/html/attachments/2019form1.docx one of many ZRA customer care centres
PPP council
Relevant evaluation &
Due Diligence approves
Council approval Application for Incorporation Form 3 may throughout the country.
Government
to award be accessed on
Agency (CA) reports for
& copy review https://www.pacra.org.zm/applications/ The TPIN Application Form 1 may be
to PPPD
pacra/html/attachments/2019form3.docx downloaded from the ZRA Website at
www.zra.org.zm (https://portal.zra.org.
5.13 Zambia Revenue Authority (ZRA) – zm/index)
PPPD Taxpayers Identification Number (TPIN)
reviews a Government Approved
CA evaluates pre-evaluation agency (CA) for concession The TPIN is a unique ten-digit computer 5.14 Department of National Parks and
the proposal
within 14 days
and draft negotiations agreement generated taxpayer identification number Wildlife
advertisement and bidding signed by the
(sec 42 (2) of and approves Minister of that allows the ZRA to track all tax issues The process for the development of power
PPP Act),
submit a
Finance rated to that taxpayer. The banking sector projects to be undertaken in the national
pre-evaluation requires a TPIN before a bank account can parks is as shown in Figure 14 below.
and draft
advertisement
to PPPD
41 42
52 53
5.15 IPP, ZESCO Limited, Transmission specifying the type of generation technology, Further to a grid integration study, covers the technical and economic
System Operator (TSO), and any other type of power, plant capacity, financial developers that wish to connect their considerations that may arise as a result
off-taker model, and power plant availability/reliability networks to the national grid are supposed of the interconnection. The procedure for
PPAs may be entered into between IPPs specifications. to enter into a Connection Agreement negotiating a connection agreement is
and any off-taker or ZESCO for the supply with the TSO. The Connection Agreement shown in Figure 17 below:
of power to or through the grid. An IPP If the proposed project is deemed suitable
usually initiates the discussion with ZESCO for ZESCO’s needs, then ZESCO would enter
through the submission of a letter with the in further discussions and negotiations with
accompanying documentation such as the proposed project developer. The flow Developer and
feasibility study report, Implementation chart for the PPA process between ZESCO TSO enter into
Agreement signed with the Ministry of and IPPs is shown in Figure 15 below: negotiations on the
Energy and the project technical details, cost and timelines for
Developer submits
any transmission line
Grid Integration
to evacuate power to
Study Report to TSO
Developer enters into an the connection point,
Implementation Agreement Developer writes to ZESCO
Developer undertakes
and prepares Feasibility with the government, public proposing development of building or up-grade
Study Report entity or signs an agreement
with a private entity.
a power plant and entering
a PPA.
of a substation and
metering equipment.
TSO reviews
, proposed
power plant s specifications
and possible point of
Figure 17: Flow Chart for Connection Agreement
connection to the grid. TSO
Developer submits ascertains whether Developer prepares
technical connection will be at Grid Integration
specifications of the distribution or transmission study as part of the
power plant voltages, distance to the feasibility study.
connection point, if there is
existing substation and if
there is need to upgrade
substation.
44
S.30(1) of EA
Figure 16: Flow Chart for Grid Impact Study
43 44
54 55
CHAPTER SIX Figure 18 indicates the process for obtaining ERB approval to adjust tariffs.
BUSINESS ARRANGEMENTS
Applicant prepares &
submits tariff
6.1 Tariffs The Energy Regulation Board shall, application to ERB
One key aspect of investment by IPPs in determining a tariff or variation of a
is the issue of electricity tariffs. The tariff, consider the following principles:
bankability of a project and its economic (a) a tariff shall be fair, reasonable, and
viability largely depends on the anticipated reflects the cost of efficient business
cash flow that the project can generate operation; ERB notifies the public
during its lifetime. The project cash flow (b) a tariff shall ensure quality of service, (affected consumers) within
14 days of receipt of tariff
is a component of the PPA signed with predictability of tariff adjustment and adjustment application
the off-taker. PPAs between off-takers reasonable rate of return on capital
and IPPs are subjected to regulatory investment;
approval by the ERB prior to final signing (c) a tariff shall encourage competition,
by the parties. economical use of the source of the
electricity, good performance, and ERB reviews tariff
No objections or
application taking into
The more significant issue concerning optimum investment; ERB conducts public consideration any public
submissions received; tariff
hearing after 30 days takes effect on the 30th
PPAs is the level of tariffs that the utility (d) a tariff shall reward efficiency in comments & justifications
days after public notice.
can charge and consequently its cash performance; and by applicant
flow. Based on the 2006 Cost of Service (e) a tariff shall reflect enforceable
Study (CoS) commissioned by the ERB, standards for the quality and cost of the
electricity tariffs were determined to be supply of electricity to retail consumers
low. From that time several non-legislative and non-retail consumers.
efforts were made to migrate the tariffs ERB reviews tariff application
taking into consideration any
towards cost reflectivity. This had limited The legal regime also allows IPPs to sign public comments &
success, but in 2019, with the enactment power supply agreements directly with justifications by applicant
of the Electricity Act No. 11 of 2019, bulk purchases and the national grid
cost reflectivity of tariff is now law. The can be used to wheel power to those
provisions in the Act make it mandatory consumers. This allows an IPP to spread
for the ERB to ensure that cost of power its cash flow risk between supplying Figure 18: Tariff Adjustment Process
in PPAs between off-takers and IPPs to the utility and other bulk clients such
are cost reflective. Section 30 (1) of the as distribution companies and other
Electricity Act sets out the following five bulk consumers. 2. Tariff Management adjustment or variation of electricity tariffs
Tariff Principles: The ERB determines and regulates tariffs charged by an enterprise. In addition to
in the energy sector . It also approves regulating the import and export of power,
Power Purchase Agreements (PPAs) the EA also provides the mechanism for
and the key provisions of Power Supply the ERB to review and approve PPAs for
Agreements (PSAs) prior to final execution both local and export of power.
of these agreements by the parties.
The EA governs the prior approval of The export and import of electricity
Power Purchase Agreements (PPAs) or is approved by the Minister following
supply agreements, setting and mode of consultation with the ERB.
45 46
56 57
7.2 Projects under implementation
CHAPTER SEVEN Table 2 below shows some of the power projects currently under implementation.
GENERATION POTENTIAL AND POWER NO. PROJECT DEVELOPER PROJECT CAPACITY STATUS
PROJECTS UNDER IMPLEMENTATION NAME TECHNOLOGY (MW)
1. Kafue Gorge ZESCO Limited Hydro 750 Construction
7.1 Generation Potential to municipal solid waste, sewerage Lower
7.1.1 Hydropower wastewater, agricultural crop residues, 2. Ngonye Falls Western Power Hydro 180 IA Signed
Zambia has a hydropower potential livestock manure or waste, wood chips Hydroelectric Company
in excess of 6,000 MW out of which or biomass, and industrial waste. This
about 2,354 MW has been developed. potential has been noted and several 3. Lufubu Lufubu Power Hydro 163 IA Signed
Hydropower dominates the electricity private developers have expressed Hydroelectric Company Limited
supply industry with up-to 83%. interest to undertake feasibility studies for 4. Kabompo Copperbelt Hydro 40 IA Signed
Waste-to-Energy projects in Zambia. Hydroelectric Energy
7.1.2 Coal to Power Corporation
The proven reserves of coal in Zambia are 7.1.5 Wind power 5. Chavuma Sinohydro Hydro 30 IA Signed
estimated to be over 30 million tonnes, The Ministry of Energy through a World Hydroelectric
mainly consumed by electricity, mining, Bank funded Renewable Energy Wind Project
and commercial industries. The generation Mapping for Zambia Project published
capacity from coal accounts for 10% of the a 24-Month Site Resource Report that 6. Afri Energy Afri Energy Biomass/Waste 36 IA Signed
total installed capacity. More exploration collected wind data from 8 different sites Biomass Ventures Limited to energy
work is required to ascertain the quality and in the country. The report gives an average Projects
extent of the coal deposits for electricity wind speed ranging from 6.9 – 8m/s. This 7. Bulemu East Building Energy & Solar 40 Financial
generation. Production of electricity from available wind resource data indicates & West (GET Pele Energy Mobilisation
coal is considered unclean and this poses that there are sufficient wind speeds at FiT) underway
a challenge for mobilisation of project specific locations to support electricity 8. Aurora Solar 1 Globeleq & Aurora Solar 40 Financial
financing. However, this resource has the generation. Currently, there is no power & 2 (GET FiT) Power Solutions Mobilisation
potential to provide base-load power and generation from wind energy. underway
improve security of supply.
7.1.6 Geothermal Power 9. Garneton InnoVent & CEC Solar 40 Financial
7.1.3 Solar Power There are more than eighty (80) hot springs North & South Mobilisation
Zambia has an average solar irradiation spread out in different parts of the country (GET FiT) underway
of 5.5 kWh/m²/day with approximately which indicate potential for Geothermal 10. Mulembo Mulembo & Lelya Hydro 106 Detailed
3,000 sunshine hours annually providing for both power generation. & Lelya Hydro Electric Feasibility Study
good potential for photovoltaic and solar Hydroelectric Power Limited underway
thermal applications (including electricity 7.1.7 Uranium Projects
generation, solar home systems, solar Zambia has deposits of Uranium.
However, the utilization of Uranium in 11. Mutinondo Mutinondo Hydro 110 Detailed
water pumping, solar water heating, etc.).
nuclear technology in Zambia has been and Luchenene Power Feasibility Study
Solar power generation accounts for 3%
limited to research, education, industrial Luchenene Company Limited underway
of the total installed generation capacity
and medical applications to achieve Hydroelectric
Projects
7.1.4 Waste to Energy the desired impact for socio-economic
Zambia has potential to utilize waste to development. There is no electricity 12. Access wind Access Wind One Wind 130 Detailed
produce energy, electricity, and other generation from Uranium resource. project Zambia Limited Feasibility Study
by-products. The forms of waste to be completed
targeted may include but not limited
13 Kalahari Kalahari Geothermal 15-20 Detailed
Feasibility Study
completed
47 48
58 59
MINISTRY OF ENERGY
Ministry of Energy
https://www.moe.gov.zm