A New Era in Energy: Understanding Zambia’s Open Access Regulations
ZESCO Limited (ZESCO), the national utility, has long dominated Zambia’s electricity sector. However, introducing the open access regulatory framework marks a transformative shift, allowing large electricity consumers to purchase power directly from other producers, not just ZESCO. This development aims to foster competition, enhance efficiency, and attract investment into the sector.
The Zambian National Energy Policy and the Energy Act of 2019 provide the legal basis for establishing an open access regime to make the power sector more responsive to the country’s energy needs. In line with this, on 19 July 2024, the Electricity (Open Access) Regulations of 2024 (the “Regulations”) were issued to outline the procedures and requirements for implementing open access in the energy market.
Open Access Framework
The new framework allows third-party access to Zambia’s transmission and distribution infrastructure, enabling power trading without ZESCO as the sole off-taker. Central to this framework is a transmission and distribution pricing model that facilitates power wheeling, allowing electricity to flow from producers to large-scale consumers through the national grid.
The Regulations specifically cater to large industrial and commercial electricity users, while Independent Power Producers (IPPs) and other suppliers must register with the Energy Regulation Board (ERB) to offer services within the open access system.
Categories of Open Access
Open access to the transmission and distribution systems is divided into three categories:
- Long-term open access
- Medium-term open access
- Short-term open access
Criteria for Participation
Under the Regulations, participants wishing to engage in open access must hold a license from the ERB and can be issued licenses as either electricity suppliers, system users, or consumers. This ensures that only qualified participants can trade electricity within the open-access framework.
Application Process
Entities seeking access to transmission or distribution systems must apply to the relevant transmission or distribution network service provider (“Service Provider”) using the form specified in the Regulations. Additional supporting documents will also be required as part of the application.
Allotment and Priority
When allocating open access, the Service Provider must prioritize applications based on the type of access (long-term, medium-term, or short-term), while adhering to a “first-come, first-served” principle. This ensures fairness and transparency in granting access to the grid.
Transmission and Distribution Charges
The Service Provider is required to levy transmission and distribution charges for open access, with the pricing structure approved by the ERB. This framework ensures consistency and regulatory oversight in determining the costs of using the grid.
Role of the Energy Regulation Board
The ERB will play a critical role in Zambia’s open access regime, which includes:
- Developing and enforcing the open access framework, rules, codes, and guidelines.
- Approving trading guidelines set by the system operator.
- Reviewing participation agreements.
- Setting the pricing methodology for transmission and distribution system usage fees.
Role of the Energy Regulation Board
The ERB will play a critical role in Zambia’s open access regime, which includes:
- Developing and enforcing the open access framework, rules, codes, and guidelines.
- Approving trading guidelines set by the system operator.
- Reviewing participation agreements.
- Setting the pricing methodology for transmission and distribution system usage fees.
Significance of Open Access Implementation
Meeting Demand – The introduction of open access aligns the energy sector with Zambia’s growing energy demands, addressing issues like power shortages and improving reliability.
Wheeling Charges – By establishing a clear pricing methodology for power wheeling, the framework brings transparency to transmission and distribution costs, enabling better financial planning for participants and fostering competitive pricing, ultimately benefiting consumers.
Consumer Choice – Large electricity consumers now have the freedom to purchase power directly from producers, enhancing competition and offering more options in the marketplace.
Final Thoughts
The implementation of open access in Zambia’s electricity sector represents a significant step toward a more competitive and efficient energy market. By allowing direct purchases from power producers, the framework not only increases consumer choice but also drives down costs through enhanced competition. This initiative is expected to attract substantial investment, spark innovation, and improve energy reliability across the country.
As Zambia continues to address challenges such as energy shortages and infrastructure constraints, the open access framework offers a flexible and responsive solution to the nation’s diverse energy needs. Empowering large consumers and independent power producers can stimulate economic growth, generate jobs, and pave the way for a more sustainable and resilient energy future.