The political economy of energy mix in hydropower dependent developing nations – a case study of Zambia

Zambia is one of at least 32 developing countries with a combined population of 1.4 billion people that are more than 25% dependent on hydropower for their grid electricity generation and which have experienced El Niño droughts. El Niño-induced droughts, projected to increase in frequency as average global temperatures rise, mark this reliance as climate vulnerability. Droughts in 2015, 2016, and 2019 rendered low hydropower reservoir levels in Zambia, constraining electricity generation capacity and resulting in unprecedented power outages. Notwithstanding these frailties, the national power utility ZESCO has subordinated the need to achieve system sustainability and diversify its energy supply assets to the path dependent pursuits of subsidising existing consumers and building more hydropower generation assets. The path dependent approach was locked-in by earlier macro-level investment decisions, over which the World Bank had significant influence. Like 17 other countries, Zambia received World Bank investments for hydropower in the 1950s-70s to support mining or industrialisation. Path dependence ultimately undermined the Zambian government and ZESCO’s attempts to enhance Zambians’ welfare. Through analysis of primary collected data, this research shows that the consequences of ZESCO’s path dependence, which resulted in power outages, have had an adverse impact on the driver of Zambia’s future industrialisation – its manufacturing sector. The research shows that ZESCO’s “least regret” path going forward in terms of baseload power, climate impact, human health and financial lifecycle costs involves charging cost-recovery tariffs and diversifying its portfolio of generation assets. As global average temperatures and the frequency of El Niño events are rising, these findings have implications for the formulation of a low carbon energy policy for a fifth of the world’s population living in hydropower dependent countries affected by increasing incidence of drought