Subsidy Swap: Reducing fossil fuel subsidies through energy efficiency and renewable energy in Zambia

In Zambia’s electricity sector, demand has risen faster than supply.

In response to rising demand, several new power plants have been commissioned, including the 300 MW Maamba coal power plant and the 120 MW Itezhi Tezhi hydropower plant in 2016. Subsidies, particularly in the form of under-recovery of electricity sector revenues caused by below-cost pricing, have led to electricity sector deficits and threatened the financial sustainability of the sector.

Price increases in the electricity sector in 2017 of 75 per cent have reduced electricity sector subsidies, but costs remain higher than revenues. This report explores how subsidy reform could help to reduce the cost of subsidies and promote a transition to energy efficiency and clean energy. The report focuses on the mining sector, which is responsible for more than half of all electricity consumption, and the potential of solar PV.