Comparison of electricity tariffs across Africa

Access to electricity is only 20 percent in Zambia, less than half of what is found among the relevant African peer groups. Power access lags behind in both urban and rural areas, but the gap for rural electrification is particularly large — more than 3 percent in Zambia versus 30 percent in the peer groups. Not only is access low, but it has also been stagnant over time. Only 0.5 percent of the Zambian population is newly electrified each year, compared with 2 percent in the peer groups. While power is relatively abundant in Zambia, much of that power is going to the mining sector, leaving relatively little for domestic consumption. Low power tariffs undermine the sustainability of the power sector. At $0.03 – $0.04 per kWh, Zambia has some of the lowest power tariffs in Africa (figure 8). Looking across the developing world, Zambia’s power tariffs fall below the typical price range of $0.05 –$0.10 per kWh. While Zambia’s power production costs are low, tariffs are lower. Both historic and long-run marginal costs are close to the mark of $0.08 per kWh (figure 9). Tariffs are capturing only about 40 percent of historic costs, and the power sector today is living on the investments of the past without making provision for the future. South Africa’s recent power shortages demonstrate the dangers of putting off change for too long. Underpricing of power creates hidden costs that are as large as the overall level of revenues (figure 10). Given the relatively low costs of power in absolute terms, it should be feasible for Zambian consumers to pay full- cost recovery tariffs. A stronger cash flow for the ZESCO would help to finance the needed expansions in generation capacity to keep pace with growing demand and to accelerate the pace of electrification. Zambia’s long -term power supply options could be affected by the evolution of regional power trade in the framework of the Southern African Power Pool (SAPP). Zambia already imports a relatively small amount of power from neighboring DRC. Plans to further develop the Inga hydropower site in the DRC could lead to a large expansion in low-cost hydropower for the DRC, available for export to countries such as Zambia. While Zambia has attractive hydropower resources of its own, the long-run marginal cost of hydropower generation in the DRC, at around $0.014 per kWh, is about half the equivalent cost in Zambia. In the medium term, therefore, Zambia will face a strategic choice between developing more domestic hydropower resources versus strengthening its cross-border interconnectors with the DRC. Adopting a regional approach could save Zambia $160 million a year in power-supply costs in the long term.

Link:https://www.researchgate.net/figure/228304217_fig5_Figure-8-Comparison-of-electricity-tariffs-across-Africa