Power policy

Historically, Botswana has lacked the legal framework and incentives to develop its renewable energy industry, with the National Energy Policy having remained in draft form since October 2009. An ambitious tender for 100MW of solar PV capacity announced in 2017 was canceled in May 2019. The tender was reissued and redefined in late-2019 as two 50MW IPP projects. Procurement has been initiated on 12 grid-connected, solar- and diesel-powered mini-grids with total capacity of up to 35MW. Two contracts for solar PV and mini-grids have been awarded through tenders and PPAs have been agreed, with contracts in place with developers. Import and tax incentives apply to a wide range of manufacturing goods and there are no specific provisions for the renewables industry.

Only one grid-scale renewable energy project has been commissioned in Botswana to date – which is the 1.3MW solar PV project located close to Phakalane. It was financed through a $12.5 million grant from the Japanese government. That is the only utility-scale renewable project to be financed in the last five years, making the current share of foreign investment 100%. Botswana is open to foreign investment, but many project developers are unable to prepare the project proposals that meet the criteria necessary to attract international finance, according to the World Bank.

Power prices and costs

For decades, electricity in Botswana has been heavily subsidized, but this is slowly changing with tariffs having increased in recent years. Private consumers have paid low power prices, which has led to the Botswana Power Corporation (BPC) dispatching power at a loss. In an effort to create more cost-reflective tariffs, BPC has gradually increased tariffs and steadily reduced the subsidy from 2.4 billion Botswana pula ($220 million) to 1.4 billion Botswana pula and reduced it further to 800 million Botswana pula in 2019. Electricity tariffs have risen consistently over the last decade at an average of 10% annually.

Power market

Coal dominates Botswana’s power sector, accounting for 82% of the current installed capacity. By contrast, solar PV accounts for just 0.1%, although this is expected to change with the procurement process underway for the independent development of two 50MW solar PV projects. Both projects have secured financing and are expected to be commissioned in 2022. There are also auctions for 12 grid-connected, solar- and diesel-powered mini grids with total capacity up to 35MW, two of which have been awarded and PPAs have been signed. Both solar PV and mini-grid tenders have contracts in place with developers.

Botswana has gradually weaned itself off dependency on imports from the SAAP, and it now imports only 23% of distributed power nationally. There is only one operational 1.3MW solar plant in the country, and renewables do not benefit from purchase obligation as BPC buys all the power available regardless of sector.

Currently, the Botswana Power Corporation is the sole provider of generation, transmission, distribution and retail services. However, BPC is looking to transform itself into a transmission and distribution utility and to move away from being a fully integrated utility. Independent power producers (IPP) have been allowed to enter the market since 2007 but have only began to expand into the generation market in the last three years, with the signing of two PPAs for the Morupule B Coal plant and a 1MW solar plant in 2017.

Doing business and barriers

Botswana boasts an impressive electrification rate of 70%. Botswana's power demand has plateaued in recent years, sitting at 610MW for the last three years. Demand has peaked due to a slowdown in mining as a result of the commodity price slump, whereby the largest state mine in the country filed for liquidation in 2016 and halted all operations. BPC has an aging power plant fleet with the oldest plant commissioned in the late 1980s. Refurbishment of the Morupule A coal plant has experienced numerous delays, while Morupule B has been prone to breakdowns.

Botswana, much like other sub-Saharan countries, has introduced import duty exemptions for equipment and machinery including solar panels and inverters. The Manufacturing Investment Incentive is a broad policy to bolster the manufacturing sector. The incentives make no special provision for the renewables industry but do present an opportunity to develop a manufacturing industry, provided that the local market becomes more stable. Offtaker risk poses a potential hurdle to this market, as the BPC has historically run at a loss. More recently, the BPC has managed to reduce its losses. Unlike its neighbors, Botswana has little currency risk with the pula strengthening against the dollar.

EV market

The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage. The government subsidizes fuel prices through the National Petroleum Fund, which may hinder EV adoption.

EV policy

The government has yet to implement any substantial policy support in the sector and the EV market remains at an early stage.

Buildings market

Botswana's National Development Plan 11 (NDP 11) states that the energy efficiency program will be implemented through energy performance contracts or any identified fit-for-purpose models to achieve financial sustainability for national energy efficiency initiatives. Through energy audits, government buildings will be retrofitted with an ultimate objective to achieve a 20% energy saving during NDP 11. The Government estimates that the extension of the retrofitting program to all government buildings would yield a 20% saving in electricity consumption, which will translate into a cost saving of P80 million per year, using the 2014 tariff of 1.34 Botswana Pula per kWh.

Buildings policy

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.