Now is the Time to Reimagine Policy and Regulations for Zambia’s Energy Sector

Nkusuwila Nachalwe-Mbao , LLM (Energy and Environmental Law - Distinction) Birmingham (UK), LLB(UNZA), ACG, P.G Dip. L.D, MCIArb (UK), ASCZ, Lusaka, Friday, 12 July 2024 — There’s a groundswell of inevitability gathering pace in Zambia’s energy sector. The nation, its leadership, regulators and stakeholders in the energy space need to look in the mirror and admit that we are behind the curve in diversifying Zambia’s energy mix. ?The critical diversification should have begun decades ago. Practising law and consulting for over two decades in energy and environmental law, I've had a front-row seat to the evolution of Zambia's energy sector, including the unprecedented energy crisis that Zambia grapples with today. As an Energy Law Expert, I share my thoughts on the urgent need for regulatory reform and diversification in our energy systems.

Zambia is in a “Situation Critical” regarding energy sufficiency, evidenced by the recurring power shortages that have plagued us in recent months and years. These are not mere inconveniences but symptoms of a deeper structural problem in our energy sector. As Managing Partner of Nkusuwila Nachalwe Advocates, a Firm I founded in 2012, I have had the privilege of advising numerous clients on energy-related matters. It has become increasingly apparent that our current approach is unsustainable. The time is ripe for a comprehensive legislative and policy overhaul in our energy sector that will agitate and usher in a change in practices towards sustainable energy.

The Current Regulatory Framework

Zambia's energy sector is governed by a regulatory framework that, while comprehensive on paper, is struggling to address current challenges. The Policy and Legislative framework comprises the Energy Policy 2019 and four principal Acts of Parliament, namely, the Electricity Act No. 11 of 2019, the Energy Regulation Act No. 12 of 2019, the Petroleum Act, CAP 435 of the Laws of Zambia and the Rural Electrification Act of 2023. These, taken together, form the backbone of our energy regulatory ecosystem. However, recent events have exposed the limitations of this framework.

Zambia’s heavy dependence on hydroelectric power, accounting for about 85% of our electricity generation, has left the country vulnerable to the whims of nature. The recurring droughts affecting the Kariba Dam are a stark reminder of the risks associated with this overreliance. We have all experienced firsthand, and numerous studies by scholars and research organisations show the power deficit's adverse impact on households and businesses, with some areas experiencing extended load-shedding of up to 24 hours. This is not just an inconvenience but a significant impediment to the country’s economic development and social progress and illuminates the shortcomings in its capacity to generate and supply energy sustainably. Power shortage demonstrates that a country has not attained energy autonomy and self-sufficiency.?

The Crucial Role of Independent Regulation

As a Legislative Draftsperson and Energy Law expert, I appreciate the vital role that independent regulation plays in a well-functioning energy sector. While the Energy Regulation Board (ERB) has made huge strides in regulating the energy industry, there remains room for improvement in independence, capacity and energy efficiency development.

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An empowered and autonomous Regulator is essential for fostering fairness, transparency, and efficiency in the energy sector. It enhances regulatory certainty, crucial for attracting the foreign direct investment (FDI) Zambia desperately needs. From my interactions with prospective investors, consultants, industry players and the wider stakeholders, I have gleaned the common concerns regarding regulatory unpredictability. A strengthened Regulator like the ERB could merit the confidence of stakeholders, allay legitimate fears and open the floodgates for investment in renewable energy projects which would invariably diversify Zambia’s energy mix.

Moreover, an independent ERB can ensure objectivity in tariff and standard setting, balancing the interests of consumers with those of power generators particularly now with the policy shift towards net metering. My experience in legal advisory on some solar projects has shown how crucial the balance is in tariff negotiations. The intricacies and complexity of balancing fair returns for investors with affordable electricity for consumers highlights the dire need for a robust and independent Regulator capable of striking this balance effectively.

The Need for Policy Review

In my assessment, the National Energy Policy of 2019, while a step in the right direction, is overdue for an extensive review. The Policy needs to be more ambitious and proactive in its approach to renewable energy uptake if the diversification of the energy mix is to be realised, particularly in light of the current energy deficit and the global push towards cleaner energy sources.

I envision a Policy that sets more aggressive targets for renewable energy adoption. For example, we could aim for 30% of our energy mix to be generated from non-hydro renewables by 2030. The policy should also outline specific incentives for private sector investment in renewables. Inquiries from clients and prospective investors show an eagerness to invest in renewable energy such as solar and wind projects if the right incentives were in place.

Furthermore, our Policy should address the need for decentralised energy solutions. Like many others, travelling across Zambia, I have seen vast rural areas unconnected to the national grid. These regions could benefit enormously from off-grid and mini-grid solutions powered by renewable energy. Our policy should set clear targets for rural electrification through these means and outline strategies for their implementation. This by no means takes away from the strategies and projects being implemented by the Rural Electrification Authority (REA), whose statutory mandate is to contribute electricity to the development of social and economic activities in rural areas.

Diversifying Our Energy Mix

One of the energy sector's most pressing needs is diversifying our energy mix. Our overreliance on hydropower has left us vulnerable to climate-induced shortages.

Looking back, I believe we should have started diversifying our energy sources three decades ago when the impacts of climate change were first predicted. Recently, the Vice President, admitted at the UN Water Conference on “International Decade of Action: Water for Sustainable Development” 2018-2028, in Dushanbe, Tajikistan, that Zambia lost its place as the country with 75% of freshwater resources in Southern Africa owing to Climate Change. Thus, continued reliance on hydroelectric power would be folly for Zambia given the droughts experienced in recent history.

Climate change and its adverse effects, like drought, pose a serious risk to hydroelectric power generation. Unlike risks posed by Black Swan events such as the COVID-19 Pandemic, which are random, hard to predict, and impossible to plan for, Climate Change is known its effects are predictable. Against the background of this knowledge, failing to plan and vigorously develop alternative energy sources would be tragic for the country.

By the same token, at domestic and small—and medium-scale business levels, we should all plan long-term and invest in alternative energy sources if our businesses have to be sustained. Total reliance on hydroelectric power currently supplied by Zesco Limited may be detrimental as it has been demonstrated that it may not always be available when we need it, owing to competing needs for an insufficient commodity.

Solar energy presents a particularly promising opportunity for Zambia. With the abundant sunshine all year, we are well-positioned to harness solar power on both large and small scales. I have advised clients on rooftop solar installations and large-scale solar farms, and I'm convinced that solar could play a significant role in our country’s energy future with the right policies in place.

Wind energy is another potential avenue for diversification. While the wind resources may not be as abundant as our solar potential, there are areas in the Eastern and Southern Provinces where wind farms could be viable. Feasibility studies for such projects that I have been privileged to review show potential worth pursuing.

Biomass energy, derived from our agricultural waste and forestry residues, could also play a role in our energy mix especially regarding domestic clean cooking energy. This could not only provide a renewable source of energy, but also create new economic opportunities in rural areas. Successful models of this kind of energy abounds in other countries, and I am persuaded we could adapt these to our Zambian context coupled with a mindset change.

With myths surrounding nuclear energy outright, we could hastily dismiss it as an alternative source to be included in Zambia’s energy mix. Nuclear energy divides opinions the world over. However, it is one of the safest and cleanest energy sources with a zero-carbon footprint compared to other energy sources such as coal.

Small Modular Reactors (SMRs) could provide a stable, carbon-free source of electricity for big energy-intensive industries such as Large-scale mining. However, this requires careful consideration of safety measures, handling and management of waste during decommissioning, including managing public perceptions. As someone who has studied nuclear energy law, I understand this option's potential benefits and significant challenges. Be that as it may, mining operations encounter nuclear materials such as uranium which occurs naturally in Zambia. It begs the question of how that is treated, handled or stored to avoid contamination.

While this source may not be a priority today, studies should be commissioned on the safety and viability of nuclear energy as a source of energy for Zambia.

Open Access and Net Metering: A Game Changer

The recent Government pronouncements regarding Open Access and Net Metering are heartening. These policies, which I believe will be realised through the enactments of regulations under the Electricity Act and have the potential to transform our energy landscape.

Open Access would allow Independent Power Producers (IPPs) to use the national grid to transmit and distribute electricity, breaking the monopoly currently held by Zesco Limited. This could increase competition, potentially driving down prices and improving service quality. In my line of work, I have advised clients eager to enter the market under such a system, and with the proposed legislative reforms, there is a high likelihood of agitating and unleashing an unprecedented wave of innovation in Zambia’s energy sector.

Net Metering, on the other hand, would allow individuals and businesses to generate their own electricity and feed excess power back into the grid. These policies and legislative reforms have transformative potential and Zambia is not a pioneer. Tunisia was the first low-income African country to implement net metering focusing on solar PV systems at the residential level. Zambia has embarked on this trajectory and I am persuaded that the right conditions are in place to make it a success. Imagine a small business owner in Lusaka installing solar panels, using the generated electricity during the day, and feeding any excess back into the grid. At night, when their solar panels aren't producing, they could draw power from the grid. The net effect could be a reduced electricity bill and a more stable power supply for the business.

Challenges and Opportunities

While the path forward for our energy sector is clear, it is not without challenges. The transition to a more diverse energy mix will require significant investment in infrastructure. Integrating large amounts of variable renewable energy into our grid will require upgrades to our transmission and distribution systems, as well as investments in energy storage solutions.

Financing these investments will be a daunting endeavour. In my line of work, I have participated in innovative financing mechanisms, such as green bonds or climate finance from international institutions, that could help fund our energy transition. I believe these options are worth pursuing.

Another challenge lies in building capacity and human capital needed to manage and maintain new alternative energy technologies which will invariably means investments in education and training programs. I am an advocate for partnerships and collaborations between higher learning and tertiary institutions and energy companies to address this need.

Despite these challenges, the opportunities presented by energy sector legislative reform are immense. A more diverse and robust energy sector could drive economic growth, create jobs, and improve the quality of life for all Zambians. It is an established fact, evident now during the energy crisis, that reliable electricity supply boosts productivity in commercial endeavours while the loadshedding impedes productivity at all levels of economic activity.?

Moreover, by positioning ourselves as a leader in renewable energy, Zambia could attract international investment and potentially become an energy exporter to our neighbours in the Southern African Power Pool. I have had discussions with regional partners and stakeholders who are interested in and keenly watching the developments in Zambia’s energy sector. .

Reflecting upon the 2022 Zambia-DRC Cooperation Agreements, which aim to foster electric vehicle batteries and champion just energy transition because of the 80% of the critical minerals required naturally occur in these two countries. I was privileged to author an Unsolicited Commentary, which was published in the Environmental Law and Management Journal by the Law Text Publishing Limited of the United Kingdom and the Times of Zambia.?

Reflecting on my years of experience in the energy sector and the trends leading to legislative reforms, I am more convinced than ever that Zambia has turned a corner in its energy development. The current crisis, while challenging, presents an opportunity for transformative change. An extensive review and strengthening of its regulatory framework to incentivise investments are imminent. Diversification of the energy mix must transition from rhetoric to action with much urgency; we must embrace new technologies and business models to build a more resilient, sustainable, and prosperous future that will make Zambia energy self-sufficient.

The road ahead will require bold leadership, innovative thinking, and a commitment to long-term planning. But with the right policies and regulations, we can turn our energy challenges into opportunities, setting an example for other African nations facing similar issues.

I often remind my clients and colleagues that "the best time to diversify Zambia’s energy mix was thirty years ago, but the next best time is now." The same applies to the domestic energy mix; we should plan and invest in solar energy for appliances and lighting and clean cooking energy sources, gas or other environmentally friendly options available for our cooking energy needs. It's time for us to seize this moment and chart a new course for Zambia's energy sector. Our future economic emancipation depends on it.