Return to flip book view
2022Annual UpdateYear in review
GET FiT Zambia | Annual Update 20221Table of ContentsMessage from the Ministry of Energy 2Acknowledgements from PS 3About GET FiT Zambia 5GET FiT Zambia – Reections of the Year in Review 10Solar PV and Small Hydropower Tender Status 12A Potential “Microgeneration” Window 17Technical Assistance 19Addressing Programme Challenges 21Other GET FiT Initiatives 23Outlook 26
The Zambian Energy sector continues to be vulner-able to adverse e ects of climate change due to its overdependence of hydro power. This vulnerability has often resulted in load shedding which impacts negatively on the economy.In order to mitigate against this, the Government through the Eighth National Development Plan (8NDP) has committed to increasing the share of alternative and renewable energy in the country’s power generation mix. The Government through the Energy policy of 2019 has also committed to creat-ing an enabling environment for private sector par-ticipation as a way of accelerating the diversi cation agenda. The GET FiT programme has contributed signi cant-ly towards unlocking private sector participation and fast-tracking the delivery of renewable energy pro-jects such as Solar PV and Small – Hydro. The GET FiT programme has also demonstrated the positive potential for a competitive procurement process to signi cantly drive down renewable energy electricity tari s thus contributing towards achieving the sus-tainable Development Goal of "Ensuring access to a ordable, reliable, sustainable and modern energy for all.” It therefore continues to be Government’s desire to see the successful implementation of the GET FiT programme.In 2022, The GET FiT projects faced some hurdles that delayed nancial close of the Solar PV Projects and progress on the Hydro Projects. Some of these hurdles emanated from an unfavorable macro-eco-nomic environment and delayed publication and im-plementation of key energy policy documents that were meant to impact signi cantly on viability of the energy sector. Nevertheless, the Government worked round the clock to overcome some of these hurdles and the Government further remains committed to unlock-ing the few remaining hurdles. Notable among the signi cant progress made by Government in 2022 include: the publication of the Electricity cost of ser-vice study, the publication of the Government White Paper on the Cost of service study, the revision of ZESCO Limited’s connection fees, the nalization of the rules on the Multi-year Tari framework and completion of Phase 1 of the electricity open access regulatory framework. I wish to express gratitude to the German Govern-ment for their unwavering support towards Zambia’s energy sector even in times of delayed progress. I further wish to thank all cooperating partners, nan-ciers, developers and key stakeholders in the ener-gy sector for their support. Lastly, I wish to make a call to these energy sector players to continue collaborating with Government and among themselves to ensure successful imple-mentation of the GETFIT Zambia project. Eng. Honorable Peter Chibwe Kapala, MP Minister of EnergyMessage from the Ministry of Energy2Message from the Ministry of Energy
The Ministry of Energy (MoE) wishes to express deep appreciation to our partners who support the devel-opment of the Global Energy Transfer Feed in Tari (GET FiT) Zambia Programme. This programme is designed to ensure that Zambia promotes private sector participation and diversi es its energy mix through the implementation of low-cost renewable energy projects. Sincere gratitude goes to the German Government and the German Development Bank (KfW) who are our implementing partners. KfW have provided -nancial support in form of Technical Assistance, Vi-ability Gap Funding (VGF) and the Grid Facility. We also thank the British Government, through the Department for Business, Energy, and Industrial Strategy (BEIS) who have partnered with KfW to provide Technical Assistance towards the feasibili-ty study for a potential 5 MW Solar Microgeneration Programme. Further and on behalf of the Ministry of Energy, I wish to express my particular special words of thanks to the following line Ministries, Government agencies, departments, and institutions for their support: Ministry of Finance and National Planning, Min-istry of Justice, Ministry of Green Economy and Environment and Ministry of Water Develop-ment and Sanitation; ZESCO Limited, Rural Electri cation Authori-ty (REA), Zambia Environmental Management Agency (ZEMA), Water Resource Management Agency (WARMA), Energy Regulation Board (ERB), Citizens Economic Empowerment Com-mission (CEEC), and National Heritage Conser-vation Commission (NHCC); and Department of Energy, Department of Planning and Information, Procurement and Supplies Unit and O ce for Promoting Private Power In-vestment (OPPPI)- Ministry of Energy.The programme’s ultimate success will depend on all stakeholders’ commitment and invaluable con-tributions. We look forward to your continued support as we work towards successfully implementing all initia-tives under the GET FiT Zambia programme. Eng. Himba Cheelo Permanent Secretary – Technical Services Ministry of Energy Acknowledgements from PSGET FiT Zambia | Annual Update 20223
Contributing toa climate-friendlydevelopment pathand sustainablegrowth in ZambiaImpact Statement
GET FiT Zambia | Annual Update 20225GET FiT Zambia is the implementation programme for the Government of Zambia’s REFiT Strategy, which aims to facilitate private sector investment in small and medium-scale Renewable Energy Independent Power Projects (IPPs) in Zambia.About GET FiT ZambiaGET FiT Zambia is nanced by KfW, the German Development Bank, on behalf of the German Gov-ernment. The Zambian Ministry of Energy (MoE) is the Project Executing Agency (PEA) responsible for the programme. The GET FiT Secretariat (led by the Programme Implementation Consultant, Multicon-sult Norge AS) was appointed in 2018 to work with the Department of Energy (DoE) to implement the programme.GET FiT Zambia is the second roll-out of the GET FiT concept after a successful pilot in Uganda, where it achieved approximately 160 MW of in-stalled renewable energy capacity via 17 projects. GET FiT Uganda established a track record for pri-vate sector participation.. GET FiT Zambia has been designed based on various lessons learned and on-the-ground experience in Uganda – while consider-ing the country-specic circumstances and barriers to private sector involvement. GET FiT Zambia is implemented by the Ministry of Energy (Department of Energy), in collaboration with KfW, the German Development BankThe objectives of GET FiT Zambia are: Procurement of up to 205 MW of re-newable energy capacity, as GET FiT Zambia has become the ocial imple-mentation programme for the Zambian Renewable Energy Feed-in-Tari (REFiT) strategy. Contribution to diversify Zambia's power mix (both in terms of technology and ge-ography) while ensuring cost-eective, environmentally, and socially sustainable projects to maximise value for Zambian end users. Introduction of standardised legal documentation for Independent Power Producers (IPPs) and framework that will enable successful integration of the procured renewable energy into the national grid. Promotion of competition and private sector participation in the Zambian power sector.
About GET FiT Zambia6Programme Structure The programme is motivated by acknowledging the wide range of positive, sustainable e ects that the development of renewable energy projects can have for economic and social development and the strong potential for such projects in Zambia. At the heart of the programme is the realisation of 205 MW low-cost renewable energy capacity, procured from private sector entities through a competitive pro-curement process: 100 MW Solar PV 100 MW Small Hydropower Potential 5 MW Microgen Additionally, GET FiT Zambia aims to boost institu-tional capacity and improve the investment frame-work for private sector participation in the Zambian power sector. A key feature is to introduce a trans-parent renewable energy tender process, advocate for a more streamlined licensing and permitting pro-cesses, and strengthen power grid operations to procure and integrate even more renewable energy in the future. The realisation of up to 205 MW is through the pro-curement of power from private sector IPPs in align-ment with Zambia’s Public Procurement Act and based on international competitive bidding. Under the procurement framework, the IPPs are respon-sible for their own site selection, feasibility studies, and nancing (including debt and equity). The current 31 million Euro grant funding under the GET FiT Zambia programme is thus not aimed to-wards providing debt nancing to individual pro-jects. Instead, it is aimed at assisting the Ministry of Energy with developing a sustainable procurement framework, boosting institutional capacity and, im-portantly, improving the investment framework for private sector participation in the Zambian power sector. The GET FiT Zambia programme was tai-lored to address the challenges stakeholders re-garded as barriers to achieving these objectives. It is envisaged that by addressing these challenges, a good foundation and framework can be laid that will facilitate future low-cost procurement of energy from private sector entities in Zambia:Grant DonorThe German Government through KfW REFiT 205 MW Allocation Competitive Procurement ProcessSolar PV 100 MWSmall Hydropower100 MWImplementing Entity Department of Energy GET FiT SecretariatFinancing Agreement Signed with Ministry of Finance and National Planning Separate Agreement Signed with Ministry of Energy
7GET FiT Zambia | Annual Update 2022GET FiT Zambia toolkit for addressing barriers in the power sectorGET FIT TOOLSBARRIER DESCRIPTIONMECHANISM FOR ADDRESSING THE BARRIERS ࢚ Design & implement a reliable, competitive tender process and work with Ministry of Energy (MoE) to ensure it can be replicated for future rounds. ࢚ Design standardised project agreements, incl. Power Purchase Agreement (PPA), Grid Connection Agreement (GCA) and Implementation Agreement (IA). ࢚ Identify bottlenecks & advise on streamlined licensing & permitting process. PROCUREMEN T & TRANSACTIONS ࢚ Identify appropriate risk mitigation tools that will enable small to medium size investors to access nance and achieve bankability. ࢚ Collaborate with Africa Trade Insurance (ATI).DEBT & RISK MITIGATION FACILIT Y ࢚ GET FiT oers tari-based support in the form of Viability Gap Funding (VGF) for a limited portfolio of Renewable Energy projects. ࢚ VGF facilitates project viability by providing a capital grant to private sector entities willing to take the risks of invest-ing into an evolving renewable energy market in Zambia. ࢚ Requirement for VGF expected to reduce, with increasing investment, economies of scale & improved investment framework conditions. VIABILITY GAP FUNDING ࢚ Includes advisory support. ࢚ Provide capital grants, to the awarded SHP developers, for the construction for the grid construction & selected network reinforcements to enable the integration of SHP and other future renewable energy technologies. The grid assets will remain the ownership of ZESCO. GRID FACILIT Y ࢚ Capacity building programme for key sector stakeholders as part of the Technical Assistance (TA) facility ࢚ TA support earmarked for supporting the Small Hydro-power portfolio. TECHNICAL ASSISTANCEReliable Procurement Framework & Improved Investor ConditionsRisk Mitigation Tools to ensure access to funding & achieve bankabilityHigh Cost of Capital availabilityGrid availabilityCapacity Constraints & Skills Gap
8About GET FiT ZambiaGET FiT Programme Stakeholder and Partners: The following entities have been identied as the key stakeholders and partners in fulling the GET FiT objectives. The Department of Energy, within the Ministry of Energy, is responsible for developing and imple-menting policies, programmes and projects on renewable energy, energy eciency, electricity and power development to facilitate socio-eco-nomic development. The functions of the depart-ment include: – Facilitating the development and review of policies and legislation on energy to provide an appropriate framework for the eective man-agement and implementation of programmes. – Facilitating the construction, rehabilitation, and maintenance of energy infrastructure to ensure the security of supply. – Promoting the development and utilisation of climate-resilient and renewable energy tech-nologies. – Promoting the development and utilisation of climate-resilient and renewable energy tech-nologies. – Maintaining a database on energy resources, production, distribution, consumption, and pricing. – Formulating and reviewing energy strategy and action plans to facilitate resources mobi-lisation and attaining set objectives. – Providing technical guidance and support to stakeholder institutions on matters relating to ecient management and conservation of energyUnder the DoE are several units that assist the Ministry in achieving its objectives, including the Oce for the Promotion of Private Power Invest-ment (OPPPI). OPPPI – The Government established the Oce for Promoting Private Power Investment (OPPPI) to promote private sector participation in devel-oping and implementing power projects. – The OPPPI coordinated the implementation of signicant private sector power projects such as the 300 MW Maamba Coal Fired Power Plant, 120 MW Itezhi-Tezhi Hydroelectric Power plant, 750 MW Kafue Gorge Lower Hydroe-lectric Power Project and the Zambia-Tanza-nia-Kenya Power Interconnector Project. The OPPPI is currently coordinating feasibility stud-ies for a combined capacity of over 2000 MW, with some projects currently at the Power Pur-chase Agreement (PPA) negotiations stage. Energy Regulation Board – The Energy Regulation Board (ERB) is mandated to ensure eective en-ergy sector regulation. The ERB does this through issuing licenses to undertakings, monitoring the eciency and performance of undertakings; re-ceiving and investigating complaints; approving of location and construction of energy infrastruc-ture; price adjustments of energy services and products; and developing standard codes, guide-lines, and other regulatory interventions. ZESCO – ZESCO Limited is a power utility owned by the Government of the Republic of Zambia that supplies electricity and energy solu-tions within Zambia and the Sub-Saharan region. The company is the dominant participant in the electricity market in Zambia. ZESCO Limited is a vertically integrated power utility with operations cut across the electricity value chain, generation, transmission, distribution, and supply. The Cor-poration owns and operates several hydropower stations with a combined power-generating ca-pacity of more than 3,000 MW. ZEMA – Zambia Environmental Management Agen-cy (ZEMA) is an independent environmental regu-lator and coordinating agency. ZEMA is mandated to do all such things as are necessary to ensure the sustainable management of natural resources and protection of the environment, prevention and con-trol of pollution. ZEMA was established through an Act of Parliament, the Environmental Management Act (EMA) No. 12 of 2011. The EMA provides for the continued focus on Environmental Manage-ment, including new and emerging issues such as climate change, pollution from Persistent Organic Pollutants, and electronic waste.Programme Benets GET FiT Zambia programme objectives align with the Government of Zambia’s development priorities and implementation strategies, as set out in the Eighth
GET FiT Zambia | Annual Update 20229 National Development Plan (8NDP). Amongst the stated objectives is the promotion of green growth to safeguard the environment and natural resources. This is especially important as power from renewable energy sources in Zambia, other than large hydro-power, is still low, with electricity generation from solar PV only accounting for 3 percent of the total installed generation capacity, and hydropower accounting for over eighty percent. This has made the Zambian ener-gy sector vulnerable to the impacts of climate change as droughts experienced over recent year have led to lower power production from hydropower, resulting in signicant power shortages. Therefore, the diver-sication of the energy mix becomes critical to en-sure a sustainable power supply to meet other stated country priorities, such as annual real gross domes-tic product (GDP) growth of 4.5 percent by 2026 and increased economic growth from agricultural, manu-facturing, tourism, and mining sectors.The GET FiT Zambia programme, by its design, plays a unique role as a catalyst and enabler to en-sure progress towards achieving the country's pri-orities. Below are some of the specic benets the programme portfolio brings: 120 MW of Solar PV projects will enable diversi-cation of generation sources by adding 120 MWac of climate-friendly Solar PV to the grid, increasing the generation capacity from renewables. This ful-ls the medium to the long-term aim of the REFiT Strategy, ensuring that renewables contribute to a diversied energy mix to create increased en-ergy security. The 120 MWac of Solar PV projects are relatively advanced, and only needs to secure nance and commence due diligence before im-plementation starts thereby allowing the projects to be implemented in a relatively short timeline. 50 MW to 100 MW of Small Hydropower Plants (SHPs), are being targeted in the north and north-western part of the country where rainfall is the highest. The Grid Facility under the pro-gramme further aims to strengthen critical network infrastructure to enable both the integration of the SHPs and to accommodate the integration of fu-ture renewable energy in the northern part of the country. The deployment of the viability gap fund-ing (VGF) is further aimed at ensuring the project viability while ensuring SHP taris remain aorda-ble to the ZESCO and its electricity consumers. The GET FiT Zambia projects also allow for the increase of generation output which the coun-try needs to prevent further electricity decits. In addition, the investment of diverse technolo-gies in the sector increases investment genera-tion from private sector entities. By diversifying the energy mix with Solar PV and decentralised SHPs, the programme will play an essential role in satisfying current power needs and improving the reliability of power supply in the future. Project implementation is carried out through a transparent, competitive procurement process with the involvement of the programme stake-holders, particularly the DoE and OPPPI, who are a central part of the programme implementation team. This further aligns with the 8 NDP objec-tive of ensuring a good governance environment. The comparatively lower price achieved through a competitive process will allow ZESCO, as the o-taker, to sell low-cost power purchased to its consumers in Zambia. The high cost of capital and inadequate regulatory frameworks for renewable energy have been said to contribute to a low rate of private sector invest-ment in renewable energy due to uncertainties around funding. The GET FiT programme aims to improve the institutional framework conditions, build capacity and hand over the standardised project agreements for future implementation by the MoE as part of the ownership strategy. The continuation of the procurement of Solar PV and SHPs will support and enable future power development, particularly the implementation of the Integrated Resource Plan, currently under development and set to be completed in 2023. – This supports the country’s need for consist-ent long-term planning and project imple-mentation as the country also embarks on activities to increase manufacturing, mining, etc., to move towards economic transfor-mation. With the implementation of the pro-jects being carried out over several years, capacity building and job creation will be an added benet from implementing the GET FiT projects, thereby positively contributing to human and social development.
10GET FiT Zambia – Reections of the Year in ReviewAlthough nancing of the GET FiT projects is not con-cluded, 2022 brought signicant progress regarding macroeconomic developments, which is a crucial factor in reopening Zambia as an investment desti-nation for international lenders in renewable energy. Specically, the International Monetary Fund (IMF) debt relief package was signed on 31 August 2022 , and progress was made toward a debt restructuring deal for Zambia, which is now envisioned to be con-cluded during the second half of 2023. The successful bidders of the Solar PV tender have demonstrated continued commitment to the pro-gramme and continued development of their pro-jects through renewing their bid bonds. In addition, the pre-qualied SHP developers have reconrmed their interest through dialogue with the Secretariat. Meanwhile, the Secretariat maintains a strong focus on Technical Assistance (TA) activities to ensure that the programme contributes toward the objec-tive of strengthening the institutional framework for renewable energy investments. TA activities include supporting the government in the development of an Open Access Market (see picture from workshop below), and a planned project to assist OPPPI in es-tablishment of a GIS based platform to use in the Feasibility Study Right (FSR) process and ease the communication of FSR sites with the public. GET FiT Zambia – Reections of the Year in Review2022 represented continued challenges for the GET FiT programme to ensure concrete progress towards implementation of the six (6) awarded Solar PV projects. Nonetheless, the continued commitment of the successful bidders, and positive developments in the macro- economic environment brought optimism as the year came to an end.
GET FiT Zambia | Annual Update 202211Toward the end of 2022, the country sadly entered into an energy crisis. The REFiT strategy (imple-mented by the GET FiT Zambia programme), aiming at facilitating private sector investment in small- and medium-scaled renewable energy IPPs in Zambia, was developed as a response to the previous en-ergy crisis in the country (2015/2016 rainy season). The climate crisis impacting the water availability in the country and lead the country to suer signicant power shortages proves that diversifying the ener-gy generation mix has never been more urgent than now. This makes programs like GET FiT ever more relevant in Zambia's struggle to handle this crisis. The GET FiT Secretariat, therefore, emphasises the need for joint action to unlock funding and enable investments into renewable energy generation pro-jects and contribute towards the diversication of the production portfolio, to make the country bet-ter prepared for changing climatic conditions in the future.
12Solar PV and Small Hydropower Tender StatusA public Solar PV tender was announced in 2018, and six (6) Solar PV projects were awarded to three (3) successful bidders in April 2019. MoE granted project development rights in 2019. However, mac-roeconomic and ZESCO's nancial sustainability challenges led to the project nanciers suspending their funding activities in the Zambia energy sector. Meanwhile, developers remain committed to im-plementing projects and have agreed to extend bid validity, while GET FiT Secretariat and KfW remain engaged in onboarding potential lenders. The Secretariat also explored alternative otake solutions with investors and nanciers. However, merchant risk, the energy tari structure, and at the time, there were no credit-worthy o-takers with a proven track record in Zambia to o-take power from the projects. Furthermore, it was considered not nancially benecial for ZESCO and its consum-ers to purchase power at a margin instead of bene-ting from the low cost achieved through the tender. This was especially important as the programme objectives were to ensure that broader public ben-ets from low-cost power procured through the programme. Therefore, stakeholders have agreed that ZESCO will remain the o-taker for the GET FiT projects, especially as the programme design and deployment of grants aim to ensure a low costs tari outcome that will benet the broader ZESCO customer base. Solar PV and Small Hydropower Tender StatusThe Solar PV and SHP tenders are two of the main components of the GET FiT Zambia programme, making it a high priority to progress the implementation of these activities.Successful Solar PV tender ending in record-breaking award in 2019 At the time, the GET FiT Zambia Solar PV Tender was the largest single Solar PV tender implemented in Sub-Saharan Africa outside of South Africa. It was the rst pub-lic tender in Sub-Saharan Africa to achieve a tari below 4 USDc/kWh.The prices of the power to be provided from these projects were considered so favourable that it was agreed to go beyond the targeted 100 MWac. The awards were thus given to three developers of projects which together would provide 120 MWac of generation capacity to the Zambian grid.Though the Solar PV costs have increased over the recent years due to the global impact of global economic conditions, it is trending downward again. It is therefore foreseeable that these impacts can be contained and aordable low-cost taris to ZESCO, can still be achieved.
13GET FiT Zambia | Annual Update 2022The Small Hydropower (SHP) tender was ear-marked for launching at the end of the rst quarter in 2020. Thirty-three (33) entities were prequalied under the tender in 2019, and twenty (20) were suc-cessful in obtaining feasibility rights from the MoE for the development of their projects. The targeted pro-ject size for the tender ranges from 1 to 20 MW. The tender launch was put on hold, initially as a result of COVID-19, which resulted in restricted movement of people and hence the ability of developers to make progress on their feasibility studies. However, when the lenders informed the Government that they will be suspending funding activities for private sector projects in Zambia’s energy sector, the SHP tender and the Solar PV programme were also put on hold.The pre-qualied developers are showing continued interest in GET FiT Zambia, despite the tender being put on hold until nancing is unlocked. Lenders indi-cated the importance of resolving the following key concerns before they would be able to fund any pri-vate-sector projects in Zambia: Finalization of the Cost-of-Service Study (CoSS) and implementation of cost-reective tari. Provide a roadmap for restoring the sector’s -nancial sustainability, including addressing arrear payments. Securing an IMF debt relief package Concluding the debt restructuring negotiations with the national creditors Signicant progress was made towards address-ing the above requirements. The CoSS was nal-ised, and the Government of Zambia issued a CoSS White Paper setting out its policy position and framework for the migration towards cost-reective taris. The IMF debt relief package was secured in August 2022, and ZESCO also initiated initiatives to address its nancial sustainability. This included nalising its turnaround strategy and 10-year-stra-tegic rolling plan. The Secretariat and KfW have continued engaging various lenders and donors to identify an anchor nancier and increase available grants under the grid facility. The objective of increasing the grid fa-cility grants is to enable the inclusion of selected grid-strengthening initiatives to ensure the integra-tion of the SHP projects and future renewable en-ergy projects that will be implemented beyond GET FiT programme. It is hoped that all these eorts will allow for faster progress to be made towards the small hydropower tender launch once lender re-quirements are met, and the Solar PV projects are on track to achieving nancial close.
MonguSolweziNdolaChomaKabweLusakaMansaChipataKasamaChinsaliDemocratic Republic of the CongoAngolaBotswanaZimbabweTanzaniaGARNETON North & SouthDeveloper InnoVent & CECRegion CopperbeltSize 40 MWacGeneration 113 GWh/year 4.80 USc/KWhBULEMU West & EastDeveloper Red Rocket Region KabweSize 40 MWacGeneration 126 GWh/year 3.99 USc/KWhSOLA 1 & 2Developer Globeleq & SOLARegion KafueSize 40 MWacGeneration 120 GWh/year 4.52 USc/KWhZambiaMalawiMap of Zambia showing locations of potential hydropower plants with current Feasibility Study RightsAwarded Solar PV PortfolioMonguSolweziNdolaChomaKabweLusakaChipataDemocratic Republic of the CongoAngolaBotswanaZimbabweTanzania ZambiaMalawi Site with allocated FSR(Larger bubble indicates larger size)ChinsaliKasamaMansaSolar PV and Small Hydropower Tender Status14
GET FiT Zambia | Annual Update 202215Timeline showing the most important milestones which have been completed for the two tenders todate, and the envisioned timeline for 2023 through 2027.201920202021/202220232024-2027Covid 19 impact + nanciers suspend funding. Programme implementation put on hold.Award of Solar PV projects and SHP prequalicationProgress on programme milestonesFocus on TA and options for programme successUnlock fundingFinancial close and project implementation 120 MWac Solar PV granted development rights by MoE 33 entities pre-qualied to apply for FSR and participate in SHP tender Concluded feasibility studies and EPBs. ZEMA environmental authorisation obtained. Secured and conrmed line route & grid connection point with ZESCO. Feasibility study rights granted by MoE to 20 of the pre-qualied entities during 2019 and early 2020. Stakeholder engagement Investigated alternative energy otake and sources of nancing Concluded feasibility study on Microgeneration Engaged other donors to increase grants for the SHP grid facility TA, including support to implement the Open Access regime and short term grid study Demonstrate country progress towards meeting requirements. Concluding debt restructuring is key. Secure funding. Finalise Solar PV due diligence Sign project agreements Explore options to allow SHP tender to commence, Seeking anchor nancier for SHP tender & donors for additional grants Achieve nancial close and notice to proceed, Solar PV portfolio Reach commercial operation, Solar PV portfolio Launch SHP tender and award SHPs with development rights Reach commercial operation, SHP portfolio
16Solar PV and Small Hydropower Tender StatusSector Sustainability Contribution Restore Investor Condence• Allowing ZESCO to make a prot due to energy prices lower than average consumer tari • Enabling diversication by adding 120 MWp climate-friendly solar to the grid• Adding benets to the grid as plants are close to the grid and load centers, thereby reducing system losses. Low taris include grid connection costs • Short execution timeline: projects relatively advanced allowing for shorter implementation timelines• Improving investor condence which enable SHP and other private sector projects in the Zambian on-grid market • Enabling ZESCO to build a payment track record (as the taris for the Solar PV projects are below the ZESCO average selling price) • Unlock nancing, including funds from the Green Climate Fund (GCF) allocated to Zambia • Build a track record with GCF and demonstrate commitment to the climate targets • Enable potential GCF funding for other initiativesUnlocking the initial funding for the Solar PV projects is expected to contribute to the sector in following manner:
17GET FiT Zambia | Annual Update 2022A Potential “Microgeneration” WindowIn 2022, the GET FiT Secretariat continued working on the Microgeneration concept. The REFiT Strategy has an allocation of a 5 MW Microgeneration component, and this has been reserved for private Zambian developers to build their experience and track record.The selection criteria for the GET FiT Zambia Solar PV, and Small Hydropower tender were stringent. Developers were required to include a track record of project development, which excluded many local developers from participating in the tender process. This separate microgeneration procurement window is foreseen to tender 5 MW Solar PV to private Zam-bian developers to build their experience in devel-oping renewable energy projects as well as to build a track record for participation in future procure-ment tenders. This supports the overall objective of GET FiT Zambia which is to "improve the framework conditions for private investments in small-scale re-newable energy".The 5 MW Microgeneration component has the fol-lowing objectives: Unlocking Zambian investments by facilitat-ing signicant (and favouring full) investments by Zambian entities. Creating nancial linkages. Enabling nancing from Zambian institutions in partnership with De-velopment Finance Institutions (DFIs). Building track records. Supporting Zambian companies in building a track record in develop-ing Solar PV projects. Enable Zambian private sector participation in renewable energy projects. Site OverviewFollowing a technical and environmental scree-ning, a suitable site within the Citizen Economic Empowerment Commission's (CEEC) industrial yard at Mongu was selected for the project. Mongu is the capital of the Western Province of Zambia, with a population of about 191,845 (2010 census). The district is predominately rural. 80 percent of the economic activity is related to agriculture, shing, forestry, and hunting. The area has an electricity access rate of six percent. The CEEC industrial yards are meant to enhance Small and Medium Enterprises (SMEs) competitiveness in the large manufacturing sub-sectors and create jobs. Locating the Microgeneration projects at this site will support local value creation, reduce technical losses, and provide much-needed electricity to Western Zambia. Building a Zambian Solar PV CommunityAt the heart of the Microgeneration component is the idea of fostering a Zambian energy industry by enabling local rms to emerge as successful and competitive project developers in the Solar PV space. Microgeneration contributes to GRZ's eorts to di-versify the electricity generation mix as outlined in the Sustainable Development Goal 7 (SDG7) by in-creasing the share of renewable energy in the global energy mix by 2030.
18A Potential “Microgeneration” WindowMicrogen contributes to: Building a solar PV tender track record for Zam-bian developers A more diversied generation mix and lower technical distribution losses. Socio-economic development in Mongu districtOther Benets More generation capacity in Western Zambia will improve grid reliability and benet local industry. Power plants will create local employment in the construction and operational phases. This job creation aligns with Economic Transformation and Job Creation, one of the main focus strate-gic development areas stipulated in the 8NDP. Making Microgeneration a RealityWhile small-scale investments/plant sizes are re-quired to achieve the development eects of mi-crogeneration, they also increase the nancial cost of electricity from power plants. Making the Mi-crogeneration bankable and nancially viable for the developers while keeping taris aordable requires grant-funded VGF. Considering the state of the sec-tor and utility, the VGF will be required for this pro-ject, and it will need to be structured to ensure it provides a liquidity buer for lenders.The following supporting activities will also require grant funding: Grid connection Technical Assistance – Integration of knowledge transfer activitiesThe realisation of the Microgeneration project re-quires grant funding which the secretariat and Min-istry have worked on obtaining but have not had much success.Conclusion The Microgen concept is an innovative and ket-tle-ready development project with great potential. However, making it a reality will require grant fund-ing for VGF and other necessary investments. The GET FiT Secretariat and the Ministry are focusing on identifying a willing donor who can provide the required grant funding.
GET FiT Zambia | Annual Update 202219Technical AssistanceGET FiT Zambia is not only a vehicle to procure and develop energy projects in Zambia, but also aims for lasting impact in the sector through experience and capacity building. The close involvement of relevant government institutions in implementing the programme and providing TA to strengthen the investment framework, GET FiT shall contribute to the continued development of renewable energies after the programme implementation period.The TA components of the GET FiT toolbox aim to boost institutional capacity and enable a transpar-ent regulatory framework for private sector partici-pation in developing the country's renewable energy resources. The TA Facility consists of integrated ca-pacity building through the program's implementa-tion and dedicated TA projects. So far, GET FiT has contributed in establishing a renewable IPP frame-work, developing a Short-Term Grid Development plan (STGD), and market design and regulations to enable the open access regime in the sector. In close collaboration with the MoE and other main stakeholders, GET FiT actively identies opportuni-ties and synergies with other activities in Zambia to contribute to improved framework and investment conditions. A description of the work conducted and planned under the Open Access Market, the Short-term Grid Development Plan and GIS implementation can be found on the next page. TA activities provided through GET FiT ZambiaTECHNICAL ASSISTANCEGrid studies for integration of renewables (completed)Integrated Capacity Building by Programme Implementation Consultant (ongoing)Legal advisory related to the GET FiT Solar PV Portfolio (ongoing)Open access market rules and regulations and transmission and distribution pricing methodology (ongoing)GIS Implementation (planned)
20Technical AssistanceOpen Access Market In 2019, the Government of Zambia launched the new National Energy Policy (2019). The new Ener-gy policy facilitated the enactment of the Electricity Act No.11 of 2019 and the Energy Regulation Acts No.12 of 2019. The new Acts have made provision for Open Access to transmission and distribution networks to facilitate power trading between gener-ating companies and end-users. However, there are currently no regulations to gov-ern the open access regime. Before nalising the regulations, a process has been undertaken to en-sure that the open access regime operates fairly and transparently. An appropriate market structure and design, together with rules that would govern the market, is required. The ERB is, therefore, tasked with developing the market structure and associated open access rules and regulations and creating a transmission and distribution pricing methodology. Through the GET FiT TA Facility, technical assistance is provided to the ERB to support the development of the open access market. GIS ImplementationAs part of the TA Facility, GET FiT and OPPPI aim to improve the application, approval, and monitoring process of renewable energy project developments. OPPPI has a central role in this process. The aim is to establish a GIS-based platform containing the most up-to-date information about renewable ener-gy projects in the pipeline. This will also facilitate the management of FSRs. In addition to the value the GIS platform represents for internal portfolio management, it can also be an ecient tool for im-proved access to information for market actors. The project is planned to be implemented in 2023.
GET FiT Zambia | Annual Update 202221Addressing Programme ChallengesAt the time of the 100 MW Solar PV launch in April 2018 (and closed in November 2018), the power sec-tor reform to address ZESCO's nancial sustainabili-ty had been underway. The CoSS was launched with an expected completion date of 2019. On the back of this, the MoE announced the award of six (6) pro-jects representing a total of 120 MW in April 2019 to the Successful bidders. The target date for nancial close and construction start was Q4_2019/Q1_2020, respectively. The successful bidders undertook sev-eral activities to ensure they met these timelines. Unfortunately, the macroeconomic outlook con-tinued to deteriorate during 2019 and 2020. This, together with continued challenges of nancial sus-tainability in the sector, including lack of progress in the reform eorts, ZESCO's non-payment to IPPs and increased arrears, led to lenders suspending their funding activities in Zambia. By the end of 2020, the situation worsened when the GRZ de-faulted on its international debt obligations.Prospective lenders informed that they could recon-sider their position on condition that the GRZ ad-dresses the key concerns (listed in the table below). The GRZ committed to addressing these concerns and, considering the positive impact the success-ful implementation of the 120 MW Solar PV pro-jects would have on the country; an agreement was reached between KfW and the MoE to extend the programme timelines. The successful bidders have also continued to show interest. They have continu-ously been willing to extend their bid bonds and va-lidity in the hope that lenders, especially DFIs, would eventually be willing to fund projects in Zambia. Despite the initial slow progress in addressing the en-ergy sector sustainability concerns and the country's macroeconomic challenges, signicant progress has been made since 2021. The feedback does not in-tend to convey that all lender's requirements have been resolved. Instead, it demonstrates that eorts are being made to address the concerns raised and that signicant progress has been made. However, for IPP projects to secure funding, nalisation of the debt restructuring still remails a key hurdle.The table below provides a brief overview of the key lender concerns and accomplishments.REQUIREMENT1. IMF Debt Relief 2. Debt Restructuring 3. CoSS White Paper 4. Implement Cost Reective Tari5. Sector Reform / Financial Sustainability 6. Transparency, including the releasing of Financial StatementsCompleted Delayed On track but not yet completed
22Addressing Programme ChallengesIn December of 2022, the Minister of Energy anIn December 2022, the MoE announced that load management measures would be implemented to rationalise the water in the Kariba Dam to avoid a complete shutdown of electricity generation activi-ties at the Kariba Complex. Though intended for six (6) hours per day, the load management was up to twelve (12) hours. The load management measures have been a feature of Zambia's electricity sector since 2015, as it continues to remain vulnerable to climate change due to cyclical drought. Pro-grammes such as GET FiT Zambia were introduced to help diversify the energy mix by implementing not only Solar PV projects but also SHPs in the northern part of the country, which still has good rainfall. The role of the 120 MW Solar PV projects in address-ing the Zambian power decit has also been recog-nised in the MoE’s Energy Suciency and Surplus Plan. In addition to contributing to government's emergency initiatives, the GET FiT programme would also oer the following benets: Sector Sustainability Contribution Enabling diversication by adding 120 MW climate-friendly Solar PV to the grid. Adding benets to the grid as plants are close to the grid and load centres, thereby reducing sys-tem losses. Low taris include grid connection costs. Short execution timeline: projects are relative-ly advanced, allowing for short implementation timelines once nancing is secured and nancial close achieved Allowing ZESCO to bank energy from its hydro-power and sell this into the Southern African Power Pool (SAPP) market during peak periods. This is likely to have a positive impact on its -nancial sustainability. Restore Investor Condence Improving investor condence in the Zambian on-grid market. Enabling ZESCO to build a payment track record (as these taris are below their selling price). Unlock nancing, including funds from the Green Climate Fund (GCF) allocated to Zambia. Build a track record with GCF and demonstrate commitment to the climate targets. Enable potential GCF funding for other initiatives. Conclusion Despite all the challenges, the program's resilience is embedded in the fact that the grant funding has been extended by the German government, through KfW, to the GRZ to ensure that low-cost electricity can be provided to the people of Zambia. Therefore, the deployment of funds, whether for developing a competitive procurement process, improving inves-tor framework conditions to promote private sector investment or part of the VGF, is done with this ob-jective in mind. The GET FiT Programme Partners (which includes the GRZ through the MoE, German Government, KfW, ZESCO and the GET FiT Secretariat) have therefore been willing to consider options to ad-dress the short to medium-term risks and bankabil-ity concerns to ensure the implementation of much needed renewable energy power in Zambia.
GET FiT Zambia | Annual Update 202223GET FiT Uganda was the rst roll-out of the GET FiT programme. It is designed to leverage private investments into renewable energy generation pro-jects in Uganda. The programme has facilitated a portfolio of 17 small-scale renewable energy pro-jects promoted by private developers with a total installed capacity of 158 MW and a planned yield of 765 GWh of clean energy production per year. GET FiT Uganda has been developed by the Government of Uganda and the Electricity Regulatory Authority (ERA) in close cooperation with the KfW Develop-ment Bank. GET FiT is being supported by the Gov-ernments of Norway, the United Kingdom, Germany, and the European Union (EU).With the last three power plants reaching commer-cial operation in 2021, GET FiT Uganda has proven its unique ability to attract private sector invest-ments. The programme has leveraged over USD 455 million in private investments. Furthermore, with a high level of construction activities, job creation from the portfolio is substantial – amounting to over 13,500 jobs (full-time equivalent). The main focus during the last years of implementation of the GET FiT Uganda programme is grid upgrades which will reduce the amount of deemed energy from the GET FiT projects. The sector improvement throughout the programme implementation period is being rec-ognised internationally, and ERA has been ranked "number 1" in the Africa Electricity Regulatory Index for ve consecutive years1.For more information on GET FiT Uganda, please visit the website www.gett-uganda.org.Other GET FiT InitiativesGET FiT Uganda GET FiT Zambia | Annual Update 2020 Hydropower Bagasse Solar PVKakira CHPSiti I SHPSiti II SHPWaki SHPNkusi SHPSindila SHPNdugutu SHPRwimi SHPNyamwamba SHPNyamagasani I + II SHPsKyambura SHPKikagati SHPMuvumbe SHPLubilia SHPTororo Solar PVSoroti Solar PVRWANDATANZANIAKENYADEMOCRATICREPUBLICOF THE CONGOSOUTH SUDANUgandaLAKE VICTORIALAKE ALBERTLAKE EDWARD1 https://africa-energy-portal.org/reports/electricity-regulatory-index-eri-africa-2021-editionGET FiT Uganda project portfolio
24Other GET FiT InitiativesMozambique is generously endowed with renewa-ble energy resources – with the largest hydropower potential in Southern Africa and favourable condi-tions for electricity production from Solar PV, wind and biomass. Meanwhile, the country's population still su ers from low electricity access rates. As of 2020, Mozambique's installed capacity consists of approximately 79 percent hydropower, 20 percent natural gas and diesel and 1 percent Solar PV, to-talling 2,850 MW. The state-owned utility, EDM, operates about 1 GW of this. Several large energy development projects are in the pipeline. The gov-ernment and EDM recognise the need to engage the private sector and alleviate the challenges in the sector, and IPPs are already an important contribu-tor to Mozambican power supply. The Mozambican power system is characterised by long distances between the large generation centres and the most important load centres, with long and overloaded power lines result in poor power supply. The un-der-capacity of energy infrastructure and weak se-curity of supply is an impediment to the investments required for Mozambique to become a regional powerhouse and achieve its ambitions of universal access to a ordable and sustainable energy for its population. Building on experience from Uganda and Zambia, the third roll-out of the GET FiT con-cept in Mozambique will support unlocking private investments in renewable energy projects by reduc-ing risks, improving attractiveness of the investment environment, increasing institutional capacity, and building a track record of successfully implemented projects.GET FiT Mozambique is nanced by the German Financial Cooperation and the EU through KfW De-velopment Bank and implemented by the Ministry of Mineral Resources and Energy (MIREME) as Project Executing Agency with the support of Multiconsult Norge AS as Programme Implementation Consult-ant. The Government of Mozambique and KfW signed the Special Agreement for the programme under the German-Mozambican economic cooper-ation in 2019, and its implementation kicked o in May 2022. At the core of the programme is the procurement of generation capacity by IPPs. The rst round will be a competitive international reverse auction for pri-vately promoted Solar PV projects with battery en-ergy storage systems (BESS) at pre-selected sites, ranging from 4 to 15 MW. The total capacity awarded will be around 25-30 MW, depending on the select-ed sites and the price outcomes of the competitive procurement process. The tender will be conducted under the aegis of the energy regulator ARENE, with EDM as o -taker. The introduction of BESS as part of the tender is a new innovation for the GET FiT programme.In December 2022, the EU announced their partici-pation in the programme with 20 million Euros. This additional programme funding will support the sec-ond procurement round, which will target SHPs. GET FiT Mozambique
GET FiT Zambia | Annual Update 202225As in Zambia and Uganda, the programme's tool-box includes several instruments to support the de-velopment of the energy sector in Mozambique.The German government is also supporting ‘Green People's Energy for Africa’. This programme in-cludes a window for private sector-led mini-grid development in Mozambique, which is foreseen to be implemented under the same implementation framework as GET FiT, and with FUNAE as a key stakeholder. The Green People's Energy for Africa is expected to kick o in the rst half of 2023. With around EUR 23.5 million funding, the programme targets supplying at least 7,000 businesses and households in remote rural regions, many of which will receive electricity for the rst time.For further information about GET FiT Mozambique, please visit https://www.get t-moz.org. Technical Assistance FacilityGridFacilityViability Gap FacilityRisk Mitigation FacilityTop-up for cost-reflective tariffs to make IPP projects with new renewable energy technologies viable.Grid Studies and Technical Assistance to ensure effective and timely connection of new IPPs to the grid.Mitigating political & commercial risks, e.g. offtaker risk.Support and capacity building for planning and implementation of competitive procurement of renewable energy to enable an efficient and transparent investment framework based on standardized procedures and documentation.GET FiT Mozambique Toolbox
26OutlookOutlookThe positive prospects from the end of 2021 have further materialised during 2022, leaving the Secretariat positive that the nancial close for the Solar PV portfolio potentially can be reached towards the end of 2023 or start of 2024.With the GRZ’s energy sector, macro-economic reforms and the IMF debt relief package well un-derway, investor and lender condence in the Zam-bia power sector is hoped to be restored. Potential lenders to GET FiT projects have communicated the intention to return to the Zambian energy sector as soon as denitive progress has been made on the debt restructuring negotiations. Against this back-drop, there are prospects for fruitful lender discus-sions between the successful Solar PV bidders and selected DFIs in the second half of 2023. The Sec-retariat will continue its engagement with all relevant stakeholders to ensure the continued relevance of the GET FiT Portfolio and implementation of the Government’s REFiT programme. Key activities for GET FiT in 2023 will include: Continued dialogue with the key governmental stakeholders to the programme Continued engagement with nancers to poten-tially enable progress toward nancial close for the Solar PV projects. Conclude the due diligence process of the GET FiT Solar PV projects by 2023/early 2024 and explore opportunities to fast-track the projects once funding can be secured. Continue to engage donors for additional grants and identify an anchor nancier for the GET FiT SHP tender Procurement of a consultant to assist OPPPI in the development of a GIS-based platform to make the FSR process more ecient and transparent Continued engagement to ensure progress in the Open Access TA projectA successful outcome of GET FiT Zambia has the potential of making Zambia more resilient to tackling the impact of climate change. With a geographically spread portfolio across the country and represent-ing dierent generation technologies (Solar PV and Small Hydropower), the projects can contribute to reducing the negative impact of external shocks, such as the droughts experienced at the end of 2022. Thus, the clear ambition for GET FiT in 2023 is to come one step closer to the programme outcome target of Improved framework conditions for private investments in on-grid renewable energies up to 20 MW.
GET FiT ZambiaAnnual Update 2022This report and all its contentsincluding gures and graphs are produced by Multiconsult.multiconsult.noCredits:Page 4: AJ_Watt/Getty ImagesPage 11, 16: Alexander FilipovOther photos: MulticonsultGET FiT Secretariatc/o Multiconsult Norge ASEnergy Regulation Board –Main BuildingGround Floor – Room 101Danny Pule RoadLusaka, Zambiainfo@gett-zambia.orgMulticonsult Norway– HeadquarterNedre Skøyen vei 20276 OsloNorway+47 21 58 50 00energi@multiconsult.noKfWMarco Freitag, Principal ProjectManagerKfW BankengruppeLAd4 – Infrastructure SouthernAfricaPalmengartenstr. 5-960325 FrankfurtGermanyThe People at Work forGET FiT ZambiaThe programme is mainly carried forward by the GET FiT Zambia Secretariat in Lusaka and the Zambian governmental institutions Department of Energy (DoE) and Oce for Promoting Private Power Investment (OPPPI). The picture to the left shows representatives from the GET FiT Secreta-riat and the DoE. From left to right, back to front Agnelli Kafuwe (DoE), Dailesi Njobvu (GET FiT Secretariat), Judith Raphael (GET FiT Secretariat), Brian Siakweenda (DoE), Isaac Soko (DoE) and Allan Chivunda (DoE). Other representatives who are not in the picture include David Wamulume (DoE), Shuko Zyambo (OPPPI), Misheck Mubuyaeta (OPPPI) and David Phiri (OPPPI).KfW, in close cooperation with the Zambian Ministry of Energy, is responsible for the implementation of GET FiT Zambia, supported by Multiconsult as Programme Implementation Consultant:Marco FreitagKfWPrincipal Project ManagerMari Soe Brelin FuruMulticonsultProject ManagerArnold Simwaba Department of EnergyDirectorJudith RaphaelMulticonsultResident Director