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Overview of the Zimbabwean Electricity Industry
Frost & Sullivan, Dec 2010, Pages: 77
Numerous developments are expected within the Zimbabwean electricity from 2012 onwards due to the electricity demand and supply situation in the country. Zimbabwe is exiting a 10 year period of economic decline and hyper-inflation and the government of Zimbabwe acknowledges that economic growth needs to be supported by the availability of electricity to sectors such as mining and manufacturing that are expected to drive economic growth. The ministries of Energy and Power Development, and Economic Planning and Investment Promotion are engaging investors who can possibly develop electricity industry projects in partnership with the state utility ZESA or in their private capacities
Research Overview
This Frost & Sullivan research service titled Overview of the Zimbabwean Electricity Industry provides electricity installed capacity and electricity demand forecasts, an analysis of the key industry participants and a comprehensive examination of the development of key projects in the industry.
Market Overview
Zimbabwean Electricity Industry to Benefit from Revival of Overall Economy
Growth in the Zimbabwean electricity industry will be driven by the resurgence of the country’s economy. Economic growth will boost electricity demand - electricity demand for 2010 exceeded available electricity capacity by an estimated 1,266 MW. Promisingly, a solid project pipeline to increase available electricity capacity exists in the country. Zimbabwe is anticipating significant economic growth from 2010 to 2015, after going through a 10-year period of economic contraction and hyperinflation. Demand for electricity is expected to increase as the economy grows and spur investment in the power sector. “The future of the electricity industry is heavily dependent on the outcome of future elections, economic growth and the adoption of policy that promotes local and international private sector investment,” cautions the analyst of this research. “There are several electricity industry projects in the pipeline that have not secured funding, and the development of these projects could improve the electricity demand and supply situation within the country.”
Availability of electricity feedstock, mining resources and an efficient labour force are positive factors that could help fuel the development of the Zimbabwean electricity industry. For instance, the country has coal reserves that will approximately last the next 200 years at a production output of 5,000 tons per annum. These coal reserves can be used as feedstock for coal coal-fired thermal power stations. “The Zambezi river, which runs along the Zimbabwe-Zambia border, has hydro potential of 5400 MW, of which only 750 MW is currently being utilised,” adds the analyst. “Furthermore, Zimbabwe has copper and ferro-chrome deposits, which can be used in pylon and cable manufacture and maintenance.”
Solid Project Pipeline, Coupled with Move toward Cost-reflective Tariffs, Bode Well for Future
Acknowledgement of the need for and the move towards cost-reflective tariffs will also support market growth. The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) currently charges an average tariff of 7.5 c/kWh which is 25 percent less than an estimated cost recovery tariff of 10 c/kWh. In order to operate viably and minimise the seeking of short-term debt to cover operating expenses, Zimbabwe Electricity Supply Authority (ZESA) holdings needs to charge cost-reflective tariffs. The Government of Zimbabwe also acknowledges that in order for IPPs to operate viably within the industry, tariff levels and power purchase agreements should be set at levels that enable the recovery of costs. “In the short term, tariffs are not expected to increase,” states the analyst. “However, in the medium to long term, as the billing and revenue collection improves, ZESA expects to charge economically viable tariffs.”
The poor state of existing electricity industry infrastructure presents a major challenge to sustained market expansion. The bulk of Zimbabwe’s electricity industry infrastructure is outdated or dilapidated due to theft, vandalism and neglect. The country’s two major sources of electricity, Hwange Thermal Power station 1and 2, and Kariba hydro-electric power station were commissioned in 1972 and 1959, respectively. They are in need of technology upgrades to maximise efficiency. “Accordingly, there is an increasingly significant market for original equipment manufacturers (OEMs) given the number of maintenance and repair projects that are in the pipeline,” remarks the analyst. “Generation projects that are likely to lead to a considerable increase in installed capacity are the Gokwe North Power Project, and expansion to Kariba and Hwange power stations.” Transmission capacity expansions for the rural electrification projects are also anticipated in the long term. Independent power producers (IPPs) are expected to participate more in the long term due to projected regulation and licensing reforms.
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Generation
- Transmission
- Distribution
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