Zambia signs power deal with Mozambique

From the newsletter

Through its power utility ZESCO, Zambia has signed an Inter-Utility Memorandum of Understanding (IUMOU) with Electricidade De Mozambique (EDM) to establish the Mozambique-Zambia Interconnector (MOZA). This marks Zambia's third cross-border interconnection agreement since January 2025.

• Insufficient generation capacity has led to the implementation of a minimum of 12 hours of daily load shedding in the country. This measure was initiated last year due to the worst drought experienced, which severely impacted hydropower generation.

• The country hasn't kept up with the electricity demand, which has been growing by about 150 MW to 200 MW annually. It is banking on solar power and cross-border electricity trading to supplement its grid.

More details

• The agreement to establish the electricity interconnector between Mozambique and Zambia was confirmed at the 2025 Zambia International Mining and Energy Conference (ZIMEC). During the conference, Zambia's utility company, ZESCO, also announced the country's aim to add 1,000 MW of solar electricity to the grid by the end of 2025.

• This additional capacity is crucial as Zambia currently faces an electricity deficit of approximately 1,600 MW. Only about 53% of the population has access to electricity, and demand is increasing due to new connections as well as growth in the mining and industrial sectors. Balancing this rising demand with the need to expand electricity access is becoming a significant challenge for the country.

• Zambia aims to achieve universal electricity access by 2030, a goal that appears ambitious given the current situation. To reach this target, the country recognises the necessity of private sector involvement, as outlined in their national energy compacts.

• In January of this year, Zambia secured $292 million in funding from the World Bank for the Zambia-Tanzania electricity interconnector project. Earlier this month, the government issued a tender for the construction of this interconnector. Zambia is also pursuing an electricity interconnector with Botswana, although funding for this project has not yet been secured.

• As a member of the Southern African Power Pool (SAPP), South Africa's electricity challenges have also affected the countries it exports to as it reduced its exports to address local demand. This in addition to droughts affected Zambia. Expanding the interconnector to several countries will guarantee alternatives in case of challenges by one country or technology.

• International electricity trading is becoming increasingly common in Africa, as countries seek markets for surplus electricity and others look to import to cover deficits. The East African Power Pool (EAPP) market is scheduled to become operational in the first half of this year. However, some countries in the region, such as Kenya, Ethiopia, and Tanzania, are already engaged in cross-border electricity trading. There are even plans to expand and connect the East African Power Pool with the SAPP. This would open up the market for Zambia to tap into the EAPP.

• Developments in generation capacity are also underway. Since January, there have been a total of three projects in the pipeline. Two have secured financing, while one is still in the announcement stage with no funding. These projects represent a total of 117 MW from solar power and 100 MWh in battery energy storage systems.

Our take

• International electricity trading is becoming an attractive option for countries seeking affordable and reliable electricity. With the growth of renewable energy generation capacity, countries will increasingly need dependable power sources to meet their baseload requirements. This can be effectively achieved through a trading market where countries with surplus electricity can sell their excess.

• However, this approach isn't without its challenges. Establishing consistent regulations regarding the origin of traded energy can be complex. There's a risk that countries might inject electricity generated from fossil fuels into the grid, making it difficult to ensure that the traded power is genuinely renewable. Stronger regulations are needed to guarantee the green credentials of traded electricity.

• Zambia's strategy of pursuing both local generation and external sourcing appears to be a well-balanced approach. This allows countries to specialise in generating electricity from resources they have in abundance and then supplement their grid through imports. Imports shouldn't be seen as a single solution. The recent reduction in electricity exports by South Africa serves as a clear example of why relying solely on external sources can be problematic.