IPPs target to generate 1100 MW

04 Dec, 2023 - 00:12 0 Views
IPPs target to generate 1100 MW

eBusiness Weekly

Business Writer

PILOT projects to set the tone for the roll out of a standardised implementation agreement to accelerate the generation of 1 100MW at a cost of US$1 billion by 27 Independent Power Producers (IPPs) is imminent, an official has said.

Towards the end of last year, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, announced that the projects had been recommended for support under the Government Implementation Agreement (GIA) with a view to prop up reliable and sustained energy supply, a key enabler for sustained economic growth as espoused in the National Development Strategy 1 (NDS 1).

Under NDS 1, the country targets to generate 3 500MW by 2025 as Zimbabwe moves towards an upper middle income economy society by 2030.

The Zimbabwe Energy Regulatory Authority (Zera) has since 2010 licenced over 100 IPPs but most of the projects have failed to take off largely due to funding constraints.

The Government intends to speed up investments by the IPPs with a focus on solar projects.

The GIA has three major components, project development support agreement, power purchase agreement; and Reserve Bank of Zimbabwe (RBZ) Undertaking for foreign currency convertibility and transfer.

In an interview, Zera chief executive officer, Eddington Mazambani, said following the recommendation for support under the GIA, significant progress has been made.

“Sometime last year, in November thereabout Honourable Professor Mthuli Ncube announced that the country is going to have a Government implementation agreement for power projects and that’s being implemented and there have been some progress.

“The projects went through some vetting process and now we have some few projects which have been earmarked for piloting because we have never done this before, so we are piloting we want to then analyse the impact of Government intervention through Government Implementation Agreement.

“At a later stage if it’s very useful, then that could be considered at a larger scale but we do have a few projects which have gone through the vetting process. Unfortunately, at this time I can’t say much because the results are not yet final when they applied they started off at 20 and came down to a number below 10 but there hasn’t been an award yet.

“In that regard, for now I cannot give further details but there was a meeting last week to look at final evaluation of the projects which are on the table and the final results will be made very soon,” he said.

“The evaluation team comprising of Ministries of Finance, Economic Development and Investment Promotion; Energy and Power Development; Environment, Climate and Wildlife Management, Zera and ZETDC (Zimbabwe Electricity Transmission and Distribution Company).”

The power situation caused by frequent breakdowns at Hwange Thermal Power Station, has been exacerbated by the water shortages in Kariba Dam which provides the bulk of the country’s electricity supplies.

Mazambani said so far there are 46 operational IPPs with a total capacity of 222.83MW of which 15 are feeding 54.58 MW into the grid with the balance being for own consumption.

Under the GIA framework, he said together with the Government there are advocating for investors in the energy sector to have projects that have a good return.

“For IPPs we don’t talk of cost reflective tariffs, but tariffs which will give them a good return. Each project has a unique cost structure depending on the technology, capacity, distance the project is from the grid and also the source of the feedstock.

“But what we advocate for as the regulator and also as required by the Government is that a project must be able to have a good return and we don’t just take their (IPPs) figures at face value.

“We also interrogate the numbers to say do these numbers make sense. IPPs need to have a good return and that’s the only way we can attract capital into the power project,” he said.

In a separate interview, Energy and Power Development Minister Edgar Moyo said through the GIA the Government is seeking to give IPPs the necessary guarantees to encourage implementation of the power projects.

“IPPs have not been functional because of the absence of guarantees but now that has been largely addressed and we think they should begin to move in.

“In fact, there is a lot of excitement for private developers who want to come into the energy space. Some of the IPPs want to dedicate their production through private contracts that they have with different companies like mines.

“We also have others who want ZETDC to be the offtaker of their power and given such developments in the energy sector the 3 500MW target the country requires under the National Development Strategy 1 (NDS 1) will be met and we are likely to exceed that.

“The 3 500MW target that we set is a realistic benchmark which we think is achievable, but the prospect and capacity are very high,” he said.

 

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