|Energy as a Tool for Sustainable Development for African, Caribbean and Pacific Countries (EC - UNDP, 1999, 89 p.)|
|CHAPTER 2: THE SUB-SAHARAN AFRICA REGION|
EMERGING VISIONS FOR ENERGY AND DEVELOPMENT
Critical changes are taking place in Zimbabwes energy sector. Foremost among these is the planned privatisation or commercialisation of parastatal bodies within the sector and the granting of access to independent power producers. It is thought that these new paradigms will bring autonomous efficiency to the management of the sector, thereby improving supply security and price stability.
The utility, the Zimbabwe Electricity Supply Authority (ZESA), has embraced demand-side management, including integrated resource planning, as demonstrated by its decision both to switch from controlled electricity pricing to a long-run marginal cost formula and to drop subsidies. ZESA is also experimenting with the use of solar PV devices to supply remote locations. The approach it will eventually adopt is not yet fully formulated, but the present experimental phase shows significant change in the strategy of the authorities, particularly with regard to rural electrification.
A strategy of diversification of technology is also inherent in the attempt to introduce solar PV generation to rural households. Through the GEF PV solar pilot project, over 9,000 units have been introduced, and thousands more have been installed outside the project. A strong supply base for PV devices is already in place. Assessments of other technologies, such as dendrothermal plants to generate power from forestry waste, have been conducted. Micro-hydro options have been studied and a few plants are already operating. Proposals for harnessing coal-bed methane for power generation are being examined by the Department of Energy.
These new options are expected to both decentralise the sub-sector and improve access, particularly for rural populations. This is critical to the governments overall policy of decentralising economic activities through rural growth points and service centres. Of the 500 or more of these centres in the country, 84% of those classified as district centres are electrified compared with only 19% of those classified as rural. Many of these present good opportunities for stand-alone electricity generating stations using small-scale hydro technology and coal-bed methane.
It is expected that wider access to electricity will mitigate local environmental problems, particularly fuelwood depletion and deforestation. In fact Zimbabwes project on solar PV dissemination, funded by GEF through the UNDP, sought to respond to both local and global environmental demands. While global environmental benefits are not the drivers of energy sector thinking, a number of joint benefits have been identified in the various climate change mitigation studies conducted in the country.
The long-term vision for market-driven development in the energy sector is embraced in three key new initiatives: the first is the commercialisation of energy parastatals; the second is support for small business development in energy supply to small-scale energy users; and the third is a widely discussed search for market development mechanisms to enable small energy users (such as households) to purchase and use modern fuels. The market development approach, although ill-defined as yet, appears to be key to ensuring access to modern fuels by rural populations.
CHALLENGES AND OPPORTUNITIES FOR SUSTAINABLE ENERGY
There are three major challenges facing the Zimbabwean energy sector. The first and most critical is to ensure that conventional fuels are effectively diffused among rural communities to relieve pressure on declining forest resources. The second is to finance investment in the sector, with a particular emphasis on combining traditional large-scale infrastructure and small-scale alternatives. It is clear that traditional approaches alone cannot solve the problem and also that the new approaches may constitute a high risk for individual investors, where the financial base is weak to begin with.
A further challenge is the basic problem of pricing fuels, particularly electricity. This has been a dilemma right across the Southern African region where pricing has been sensitive to social needs. While it is accepted that consumers must pay the full cost of energy to send the right efficiency signals and to adopt a sustainable investment path, there are concerns about the implications that this strategy will have on fragile industries and disadvantaged social groups.
The challenge of mobilising investment depends on two activities. The first is to locate investment for traditional large-scale installations. Here, the introduction of independant power producers (IPPs) is expected to relieve investment shortfalls and to widen participation, a desired social effect. The second is to mobilise investment for small-scale installations and to ensure that an amicable relationship exists between the new operators and traditional suppliers.
Already two key challenges have been identified by the SADC/UNDP FINESSE project. The first is that IPPs and small-scale operators need market guarantees in order to survive. For electrical IPPs this means power purchase agreements and for renewable energy operators it means a social commitment to parallel activities of market development. The latter would be an uphill task without the commitment of global or international partners in Africa. The former also faces difficulties, in that parastatals undergoing commercialisation will not accept an obligation to support new competitors unless it makes financial sense for them to do so.
Two recent studies in the region have demonstrated that long-term regional electricity trade must be profitable and must guarantee security of supply in the power sector if it is to succeed. This will require quick, effective, negotiating capacity and political stability, which cannot be guaranteed at this point in time. Hence there is a considerable amount of caution, even in the SADC region, where cooperation in the power sector is significant.
There are many opportunities to improve energy efficiency in Africa, but preliminary assessments (GTZ/ADB studies in Zambia and Zimbabwe) have shown that there is a lack of energy services support. The challenge here is to finance energy services companies and build up the necessary level of competence. Two creative approaches are being tried in Zimbabwe. The first is part of the FINESSE project, administered by the SADC Energy Technical Assistance Unit (TAU) and the Public Private Partnership project, where public utilities and private industry are seeking to invest jointly in an ESCO. The second is a much larger GEF initiative which is being discussed with UNDP to introduce variations on this first approach. What these initiatives demonstrate most clearly is the urgency of completing a wide range of enabling programmes in order to mitigate the risks associated with investment in this sector.
In order to establish alternatives such as energy efficiency mechanisms and the use of renewable energy technologies, an atmosphere of energy-use optimisation must prevail. The region is better prepared now than ever before to develop this necessary condition. There is a role here for NGOs and research bodies to develop and popularise approaches such as Integrated Resource Planning which are already under discussion in the SADC.
Opportunities for "leapfrogging" need to be developed and presented for business investment. Making the transition from theory to investment is not easy, even in apparently obvious cases. The research community must take a lead role in preparing financing institutions, individual investors and, critically, policy-makers, to accept and implement these options.
POLICIES TO PROMOTE SUSTAINABLE ENERGY
Overall, strategy in the Zimbabwean energy sector is changing course, focusing more on market demand and commercialisation. It is not a straightforward task, formulating and enforcing policies to reinforce this goal. For example, it is not practical to expect the electricity parastatal to commercialise while at the same time making it responsible for the social and infrastructural development associated with rural electrification. Expanding renewable energy use, which has been embraced by the government, carries its own policy dilemmas. The first is the very controversial issue which stems from the pressure on governments to reduce import taxes on renewable energy devices. There are calls for the same amount of pressure to be applied to suppliers to push them into carrying out further technical and economic research to reduce production costs. Most governments regard these taxes as revenue to be used to redistribute wealth and finance critical development projects. Sweeping macroeconomic policies cannot address this problem. The second dilemma is that there is little capacity within government to ensure that tax concessions are passed on to the consumer. A decision has to be made regarding whether to focus on developing markets or to reduce duties and taxes to achieve affordability.
Despite these policy issues Zimbabwe has made significant progress in promoting sustainable energy. There is now a Solar Energy Industry Association, and awareness among rural households about solar energy technology is quite high. Financing mechanisms for the purchase of renewable energy technologies are in place in the form of a low-cost revolving fund. A major policy failure, however, has been the lack of support for the development of businesses which supply these devices: the newly stimulated market will collapse unless there is a sustainable supply base. Support for business has been the focus of the SADC FINESSE project. The development of markets and of the capacity of businesses to function within them are the most critical institutional capacity building gaps in the country.
Standards have been developed within the context of the GEF UNDP project, and these are available for wider application. These standards were developed in response to the high failure rate of the devices already installed and the lack of backup support, which left consumers stranded and began to destroy the reputation, and therefore the market, of renewable energy technologies. The new standards and codes of conduct appear to be working well in Zimbabwe so far.
POTENTIAL ROLES FOR DEVELOPMENT ASSISTANCE
The traditional role of development assistance focused on carrying out studies and providing demonstration units as gifts to communities. These units usually failed because they had no service support structures. A new role for development cooperation was identified in the course of the SADC FINESSE and the Public Private Partnership projects underway in Zimbabwe: the provision of support for parallel activities to remove market barriers, bring down costs, and otherwise cushion the risks for the investor.
Much the same applies to energy efficiency mechanisms. Here risk-cushioning is essential, as is building the capacity of industries to identify exploitable options and to convert them into profitable businesses. These measures will be critical to the success of energy efficiency and conservation as a clean development option.
In conclusion, the main role for international partners in making the Zimbabwean energy sector more sustainable is to cushion the effects of the transition from central management of the sector to a more open business environment with visible participation by local investors, while maintaining social responsibility.
THE ENERGY SECTOR
The energy sector is administered by the Department of Energy, within the Ministry of Transport and Energy. Other major actors in the sector are the National Oil Company of Zimbabwe (NOCZIM), responsible for the bulk importation of refined petroleum products; the Zimbabwe Electricity Supply Authority, responsible for the generation, transmission, and distribution of electricity as well as investment decisions in the sector; and the Wankie Colliery Company, the sole supplier of coal in the country. Wankie Colliery is a private company operating a mine of 6 million tonnes per year capacity in the north-western corner of the country.
The private sector is also involved in the distribution of liquid fuels and in the electricity sector. Independent power producers are now permitted and two major power sector investments are under negotiation, one involving 200 MW of coal-based generation and the other natural gas. Smaller investments have been made in micro-hydro. Electricity capacity currently stands at 1,295 MW of thermal (coal) power and 666 MW of hydropower. Power transmission relies on 3,595 km of high voltage networks and 56,115 km of distribution lines. Total (commercial) energy consumption is 136 PJ, or 3.25 Mtoe.
Zimbabwe - The National Context
Zimbabwe is a relatively small country with a population of 11 million and a land area of 391,000 km2, 29% of which is under cultivation and over 50% classified as forested. The climate is temperate: rainfall varies from 400 mm a year in the low-lying areas and 900 mm over the central watershed to 1500 mm in the countrys Eastern Districts. Although Zimbabwe is a multi-party state, there is no strong opposition capable of effectively challenging the ruling party ZANU PF, which has governed the country since 1980. Elections are run at all levels of government, however, including central government and municipal authorities, and any interested party or person can stand for election. Per capita GDP in 1995 was US$580 (in 1987 US$). The national currency, the Zimbabwe Dollar, is valued at Z$17.9 to the US$, but has lost value significantly since mid-1997 when it stood at about Z$10 to the US$. Manufacturing contributes about 25% of GDP, making it the most significant economic sector. The total productive sector makes up 44% of GDP. The manufacturing sector, which comprises over 6,000 different products and employs about 17% of the workforce, is strained due to the weakening currency, increasing labour costs, and high interest rates, which range from 27% to 40% per year depending on the nature of investment.
The agricultural sector exerts considerable influence over the Zimbabwean economy but has been severely affected by droughts in recent years. It is imperative that irrigation programmes be introduced urgently, a measure which will carry important implications in the areas of energy supplies and pricing.
Infrastructure remains an area of focus for the countrys development programmes. Road density is low (14,150 km of paved roads and 76,928 km of unpaved roads). Rural electrification is also low with only 20% of households connected to the national grid and over 90% of rural households dependent on fuelwood for 96% of their energy needs.
Biomass resources are under pressure on two fronts: high demand in both rural and urban communities, and low biomass growth rates, depressed by drought. Between 70,000 and 100,000 hectares of forest are cleared annually for agricultural purposes, this being the major cause of deforestation. About 6 million tonnes of wood are harvested annually for household energy purposes, with significant additional consumption by small-scale rural industries such as beer-brewing, brick-making, and tobacco-curing. Although biomass use may look sustainable at the national level, there are large pockets where deforestation and shortage of timber for all applications has passed critical levels, thereby threatening fuel supplies for poor rural households.
Fuelwood is the main source of energy among rural house-holds. In urban households fuelwood consumption varies depending on access to electricity and electrical appliances for lighting and cooking. Households without electricity consume around 5 kg of fuelwood daily, and those on a load-limited electricity supply, which cannot support electrical stoves, consume around 1 kg each day.