The fiscal incentives extended by newly drafted Renewable Energy Policy is likely to attract Individual Power Producers (IPPs) in the renewable energy sector of Zimbabwe.
The new policy issued by the Ministry of Energy and Power Development announced tax exemptions, reduced license fee and offered robust financing measures to encourage IPPs’ participation in renewable energy sector.
The government’s announcement came in such dire situation when the entire country is battling against severe power deficit. At present, the supply of electricity in Zimbabwe is at around 1,000 MW which is less than half of its peak power requirement—2,200 MW.
The IPP’s investment in renewable energy sector is expected to address country’s domestic demand for electricity in near future. According to the policy, IPP in renewable sector of energy is estimated to contribute more than 16% of total power production by 2025. The investment estimates to generate 1 GW electricity from renewable energy sources such as hydro, solar, wind, etc. in next 13 years.
To meet the projected target, the policy is facilitating IPPs participating in renewable energy sector so that country can overcome its unprecedented power crisis. The ageing power plants with limited maintenance and holding the license by IPPs due to lack of capital are two key reasons behind extreme power shortage in Zimbabwe.
Earlier, almost 80% licensed IPPs remained idle. This is because of the complex market mechanism due to which financiers do not have confidence on IPPs regarding repayment of the loan. As a result, they (IPPs) were unable to raise capital at reasonable interest rate.
But newly drafted Renewable Energy Policy recommended to form separate fund called Green Energy Fund of Zimbabwe to finance the project. IPPs investing in renewable sources of energy are aided by the fund if they meet the criteria cited by the government. And due to this, both—new IPPs planning to obtain license and old one with license—are attracted to invest in the renewable energy sector in Zimbabwe.
At present, around 30 licensed IPPs in Zimbabwe are planning to install new power plants out of which 15 are solar plants and remaining comprise of small hydro and biomass. They (solar plants) are intending to generate over 730MW in near future of which 300MW will be produced by the end of 2018.
Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at email@example.com
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