‘Zambia solar energy price lowest’

SargsyanBy STEPHANIE KUNDA –

ZAMBIA has set a new price record for utility-scale solar-generated energy in Africa with the support of the World Bank Groups (WBG) Scaling Solar Initiative.
Zambia’s solar auction result followed a series of headline-making auctions in India, Mexico, Peru, and Dubai.
Scaling Solar is a World Bank Group solution that makes it easier for governments to quickly procure and develop large-scale solar projects with private financing.
The World Bank’s global head for clean energy, Gevorg Sargsyan posted on the bank’s blog that the auction for 100 Mega Watts (MW) has resulted in a price as low as six cents/kWh.
This was good news for the country, which, much like the rest of Sub-Saharan Africa faces acute electricity shortages.
Nearly 700 million people in sub-Saharan Africa did not have access to electricity.
In Dubai’s case, the price was as low as three cents/kWh, the lowest price ever offered for solar power.
Solar auctions were effectively a competitive bidding process to build power plants and supply a specific quantity of electricity at a pre-agreed price over a specified period of time.
Mr Sargsyan said there were a few reasons why Zambia’s outcome is more significant than Dubai’s.
The first, being that Zambia’s six cents/kWh price was fixed, and would not increase for 25 years.
This made the average price in real terms an even more astonishing 4.7 cents/kWh.
Second, there were not any implicit or explicit subsidies involved in the deal, neither Zambia had a sophisticated and liquid financial market.
“The WBG simply helped structure the auction based on the best global practices – taking into account local specifications and providing a guarantee to backstop the obligations of the national utility to pay for the electricity being supplied,” Mr Sargsyan said.
Third, Zambia had about 2,400 MW of mostly hydro-based generation, compared to much larger systems in other countries with successful auctions.
“It also has a distressed macroeconomic situation, coupled with weak institutional capacity in the energy sector. The bank’s guarantee is critical to address the risks associated with these factors,” he added.
Most importantly, Mr Sargsyan said these results had a dramatic shift of perceptions, that lower costs for renewable energy were unattainable in poor countries with weak institutions, underdeveloped laws and regulations, and high costs for conducting business.
According to the Doing Business Report, Zambia was ranked 97th, compared to the United Arab Emirates, which was ranked 31st.
While all the legal and financial agreements still needed to be signed, the auction had launched a new era for clean energy in Africa and the rest of the world.
“As long as countries put in place a well-structured, transparent bidding process, mitigating country risks using guarantees and other financial insurance instruments, we can expect to see even lower prices in the months and years to come,” he said.

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