The cost of power outages to Zambia’s manufacturing sector

Policy brief Energy

  • The researchers surveyed 146 large manufacturing firms in Zambia’s industrial hubs in 2018 to assess the impacts of power outages on Zambia’s manufacturing sector, and firms’ coping mechanisms.
  • Following the outages of 2015 and 2016, manufacturing’s share of energy delivered by Zambian energy utility ZESCO dropped and had not recovered by 2017.
  • The researchers find that:
    • Backup generation was associated with a reduction in production delays which was associated with reduced loss in clients;
    • Export-oriented firms are willing to pay more for reliable energy. Other firms are unwilling because of their distrust in ZESCO delivering;
    • That since the largest firms pay the highest marginal costs during outages for backup generation, it makes sense for ZESCO to charge them more if it helps ZESCO deliver more reliable service.
  • Parliament has a role to play in allowing the Energy Regulation Board to set cost-recovery tariffs for the mining sector.