Financing Zambia's Net-Zero Power Sector Pathway

Zambia’s transition toward a net-zero electricity sector requires significant investment in renewable energy generation, grid expansion, and enabling infrastructure. This study assesses the investment requirements and financing challenges associated with the energy transition using scenario-based analysis. The findings indicate that investment needs will increase substantially between 2025 and 2050, driven primarily by solar PV, wind, hydropower, small hydro, geothermal, and transmission infrastructure development. Under the baseline scenario, a persistent financing gap of approximately USD 56 billion emerges due to high upfront capital requirements, elevated financing costs, foreign exchange exposure, limited access to affordable long-term capital, and existing revenue constraints. Scenario analysis demonstrates that the financing gap can be substantially reduced through a combination of improved macroeconomic conditions, increased access to concessional finance, and revenue-support mechanisms, including renewable energy PPAs, capacity payments, and fiscal incentives.

The results show that while macroeconomic improvements enhance investment conditions, financing structure reforms and revenue-support measures provide the greatest contribution toward closing the financing gap. Under the combined intervention scenario, the financing gap is fully eliminated by 2050, reaching approximately USD -1.1 billion, indicating that available financing capacity exceeds projected investment requirements. This outcome highlights the effectiveness of combining affordable capital, reduced investment risks, and stronger project revenue certainty to create conditions that can attract private investment and accelerate renewable energy deployment.