Zimbabwe’s solar energy framework nearing completion, Finance Minister Mthuli Ncube said, which will be clear on currency hedging so as to allow more investors to tap into the sector.
Hedging is a financial strategy that allows investors to reduce the downside of other tradable securities which includes stocks, bonds, commodities currencies, options and futures. While hedging does not totally eliminate the risk of losing money on investment, but experts say, it lessens that risk.
Renewable energy is steadily growing in Africa and some countries have already made significant progress in generating electricity as they move towards green energy projects.
However, there is a need to strengthen policy commitment. Policy and regulatory stability, transparency and predictability are fundamental to attracting investments and driving cost reduction. And there is a need to support innovation, not only in technologies, but also in policy, business models and market design.
Ncube told a Zimbabwe Economic Society webinar that the government is going to support the investors in the solar energy space while at the same time closing the energy gap.
“We are just about to conclude our framework for the solar energy sector which includes various areas of the hedging regime so that those who lend us money are able to receive their payments and proceeds,” he said.
He said currency hedging should be clear on what it means for them before they invest.
“So, we are busy fixing that framework which will allow more people to come into the sector.”
The southern African nation relies on a carbon intensive model to generate grid electricity for both the industrial and household sectors but it intends to tap electricity from non-fossil fuels as part of efforts to meet its carbon emissions reduction targets by 2030 and also diversify its energy mix.
Zimbabwe’s installed electricity generating capacity is about 2 210 MW, of which 1 050 MW is from the Kariba South hydro power station and the balance is derived from several coal-fired power stations, the largest of which is Hwange, with installed capacity of 920 MW. In recent years, Zimbabwe’s actual generating capacity has been lower than the installed capacity due to low water levels at Kariba and lack of maintenance at the power stations.
Zimbabwe has scored the worst ranking of all the 18 African countries in a global league table of Energy Transition 2021 after slipping eight places to 115.
Significant new investment is now critically needed to accelerate the growth of renewable energy in Africa so as to ensure sufficient, affordable, reliable energy for all citizens and drive inclusive, just and sustainable energy transitions.
Most importantly, experts say, governments need to collaborate more with the private sector to invest in sustainable energy that has proved to be both effective and profitable – Harare