The World Bank stats show about 700 million people in sub-Saharan Africa do not have access to electricity. The African continent, particularly sub-Sahara Africa, faces an acute shortage of electricity supply. Ironically, the continent is one of the richest places in the world as far as solar energy is concerned.
It is, therefore, something to reckon when Zambia, a country in sub-Sahar Africa, can supply solar power to its citizens at a record lowest price of 6 cents/kWh. This comes after the World Bank partnered with stakeholders in the country in the Scaling Solar initiative to auctionsolar power for 100 MW (2×50 MW) at 6 cents/kWh.
Zambia’s solar auction puts Africa on the map of regions auctioning the green energy at affordable prices. Other notable countries in the world auctioning solar power at affordable rates include Mexico, India, Peru, and Dubai. In the instance of Dubai, the country holds the world’s record for the most affordable solar power auction at just 3 cents/kWh.
Zambia’s solar energy auction is a significant milestone achievement than that of Dubai because of the following reasons:
The 6 cents/kWh being charged by Zambia will remain constant for the next 25 years. Making the average price for the auctioning in real terms being as low as 4.7 cents/kWh.
There are no explicit or implicit costs involved in this deal; especially since Zambia does not have a sophisticated and liquid financial market. The World Bank Group help structure the auction based on world’s best practices; taking into consideration the local specifications and guaranteeing a backstop the obligation for the national utility to pay for the power being supplied.
Zambia already has some 2400 MW of hydropower generation, which is relatively a large capacity compared to other countries with the solar auctionprogram. Although the country is being pulled behind by some distressed macro economic factors coupled with a weak institutional capacity to man the energy sector. The guarantee by World Bank Group is critical in addressing the inherent risks that come with these factors.
Zambia can very well act as a case study on in shifting perceptions that low-cost renewable energy is not achievable in developing countries plagued by weak institutional frameworks, high cost of doing business and underdeveloped laws and regulations. As per the Doing Business Report, the country is ranked 97, which does not look as encouraging as the United Arab Emirate (UAE) ranked 31.
Although the legal and financing agreement is yet to be signed, the Zambia solar auction has launched a new clean energy era for the continent of Africa and the rest of the world. As more and more countries work towards establishing well-structured, transparent bidding process to mitigate their risks by securing guarantees and other financial insurance instruments. More can be done in as far as providing solar power cheaply over the years.
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