The encyclopedia · Strategy & Leadership · Strategic decision · 2015–2016
Zambia's standardized solar auction delivered Africa's lowest power price
The World Bank's Scaling Solar package — templates, financing and guarantees in one — cut Zambia's first solar auction to ten months and 6.02¢/kWh.
Industrial Development Corporation of Zambia
the move
Drought in 2015-16 shrank Zambia's hydropower output and forced power cuts, while the state utility struggled to pay for new generation. The government turned to the World Bank Group's new Scaling Solar programme.
Scaling Solar packages everything a developer needs — advisory services, template documents, financing term sheets, World Bank guarantees and MIGA political-risk insurance — into one process, with bidders ranked only on the tariff they offer.
Zambia's first round took about ten months from launch to results: 48 developers requested qualification, 11 pre-qualified, and in June 2016 Neoen/First Solar won about 45 MW at 6.02 US cents per kWh, with Enel Green Power winning 28 MW at 7.84 cents — both under 25-year PPAs.
The 6.02-cent price was the lowest for solar in sub-Saharan Africa and among the lowest anywhere at the time — delivered in a market that had never hosted a utility-scale solar IPP.
why it works
- Template contracts removed months of PPA negotiation and legal risk.
- World Bank guarantees and MIGA insurance replaced the sovereign-risk premium.
- One ranking criterion — tariff — made the auction transparent and competitive.
- A 25-year fixed price gave lenders the certainty to fund the projects.
what transfers
When a market is untested, kill the risk premium by standardising the process: pre-agreed contracts, guarantees and one ranking criterion attract global bidders and turn risk into price competition.
what came after
The two plants eased the drought-driven power shortage, Scaling Solar was rolled out to Senegal, Madagascar and Ethiopia, and Zambia planned further rounds under the programme.
references
- Zambia to be home to Africa's cheapest solar
- West Lunga Scaling Solar Energy Project — Project Appraisal Document
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