Zimbabwe: Ipps urged to strike power deals with exporters
INDEPENDENT power producers (IPPs) have been urged to enter into power purchase agreements with local exporters as such contracts are more cost effective, an official said.
Currently, electric utility Zesa Holdings remains the main purchaser of power generated by IPPs, but concerns over poor tariffs have partly slowed project implementation due to viability concerns.
Most IPPs generate electricity for their own use and offload the excess to the national grid.
“As we work to resolve the issues of a standard power purchase agreement, which deal with some technical issues, off-take agreements and a government implementation agreement, we encourage IPPs , especially those involved in renewable energy, to enter into off-take agreements with exporters,” Energy and Power Development Secretary Eng Gloria Magomba said last week.
The government has already engaged the African Legal Support Facility (ALSF) and international consultants to come up with an agreement to implement renewable energy projects in a bid to attract investment in the sector.
Implementing agreements define the terms under which governments provide incentives and assistance to potential projects awarded to investors. The government agreement will address issues related to political risks, default risks and general government support, such as the provision of land to renewable energy developers.
The ALSF is an international organization hosted by the African Development Bank in Abidjan, Côte d’Ivoire. It was created in December 2008 by the African Development Bank at the request of African countries and became operational in 2010.
Since 2003, African finance ministers have been calling for the establishment of an institution that would provide legal assistance to African states, particularly heavily indebted poor countries (HIPCs), to meet the challenge of disputes with creditors and the negotiation of commercial contracts. complex. .
The ALSF was therefore established to provide legal and technical capacity to African countries. The mandate of the ALSF focuses on providing practical and “on the ground” support when negotiating contractual arrangements between governments and investors.
The ALSF empowers governments with the knowledge and resources to ensure balanced, fair and equitable outcomes to improve good governance and environmental and social management.
Eng Magombo said that while there is growing interest in the renewable energy sector, particularly solar power, concerns have been raised about currency convertibility risks, viability gaps and potential losses that investors may suffer due to sub-economic tariffs.
Entering into a private power purchase agreement with exporters will help IPPs neutralize currency risks, energy experts have said.
Zimbabwe, which seeks to increase its renewable energy capacity to 1,100 MW or 16.5% of total electricity supply by 2025 and to 2,100 MW or 26.5% of total by 2030 in line with climate goals, needs huge capital inflows to achieve the target.