Exploring the economic prospects of wind energy in Zambia

Abstract

Zambia has recently faced prolonged load shedding due to reduced hydroelectricity generation caused by unfavourable rainfall patterns. To tackle this issue and satisfy increasing energy demands, the government aims to explore alternative energy sources like wind energy. However, the uncertainty surrounding the economic feasibility of implementing wind power projects in Zambia poses a significant challenge. This study evaluates the economic feasibility of eight proposed wind farm sites using net present value (NPV), simple payback period (SPP), internal rate of return (IRR), and levelized cost of electricity (LCOE). By examining energy yield analysis (EYA), wind speed, and financial indicators, the study identifies the most economically viable wind farm site(s). The results reveal that the Lusaka wind farm is the most economical, with an energy yield analysis of 386 GWh, wind speed of 8 m/s, NPV of USD 316 million, SPP of 2.9 years, IRR of 82%, and LCOE of 0.182 USD/kWh. An economic sensitivity analysis, varying the average electricity tariff, also points to Lusaka as the most financially viable site. Consequently, policymakers are advised to develop cost-reflective feed-in tariff (FiT) schemes and power purchase agreements to establish electricity tariffs that encourage investment from independent power producers in Zambia.