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Progress and Opportunity for Renewables in Malawi

22 January 2020

On 28 November, without a great deal of fanfare, the Government of Malawi endorsed a new energy policy and renewables strategy. One reason for the muted celebrations was that the documents have effectively been published for the last couple of years and are in wide circulation. Since I had been part of the team to draft the renewables strategy while working for the government of Malawi in 2016, and with the high-profile Africa-UK Investment Summit taking place this week in London, it felt like a good time to reflect on the country’s progress in renewables since I left Lilongwe almost three years ago.

Utility Reforms and Signs of Progress

Since 2017, installed capacity on Malawi’s grid network has increased by around 10MW following the development of large-scale diesel generators – complete with eye-watering power costs. So far not so much progress. However, reforms to the state-owned utility ESCOM in 2016 split the group into two entities, a supply business and a generation business. This allowed private sector developers to compete to sell power to the state-owned supplier for the first time. A resulting auction process for remaining capacity on the grid led to the first ever private sector-led power purchase agreements (PPAs) being signed by the Government of Malawi.

The most advanced development is a 60-megawatt solar array at Salima, already in construction, led by local developers Matswani in partnership with JCM Capital from Canada and InfraCo Africa – a development finance group which has support from the UK Government, among others.

Alongside the utility reforms, the US Government’s Millennium Challenge Corporation has worked on upgrading parts of Malawi’s aging grid network resulting in additional capacity on the grid. Coupled with the PPA signings, this has piqued the interest of a number of international players looking to kick-start projects in Malawi.

The Minister of Natural Resources Energy and Mining Bintony Kutsaira said during the launch of the new energy policy that the power sector needs a total of $2.5 billion to achieve set targets to more than triple the country’s power generation to 1,200-megawatts.

At ITPEnergised we are utilising our strong local network alongside our market-leading technical and environmental expertise to be ready to assist developers looking to enter the market in Malawi.

The Off-Grid Challenge

 

Despite the signs of progress, the grid network still only reaches around 10% of Malawi’s 18 million citizens. Off-grid solutions are urgently required for the vast majority, particularly those in rural areas where planned network extensions will not reach.

Government reforms for energy access include a levy on fuel to contribute towards rural electrification. Some of this funding, alongside support from the international community, is spent on developing new pilot mini-grid developments. Pioneering developments like the hydro scheme at Mount Mulanje may only serve a few hundred people but they are vitally important in understanding the steps to be overcome to make the roll-out of mini-grids a reality.

For those who aren’t lucky enough to benefit from a pilot mini-grid scheme, there is still the option of household-scale solar panels and batteries to meet basic energy needs. ITPEnergised recently reported on a number of British organisations making progress in Sub-Saharan Africa in the off-grid sector, and Malawi’s strong ties to the UK could see these businesses and charities increasing their activity in the country.

Disappointingly, many prominent off-grid companies are not yet operating in Malawi. This is possibly due to affordability issues, with Malawi’s income per head behind some of its neighbours, with relatively more wealthy countries like Kenya and Tanzania pioneering the use of mobile money alongside the spread of solar products to help citizens purchase and use power off-grid. Although the sector is not yet flourishing in Malawi, it has the potential to move quickly across borders, meaning advancements in other parts of East Africa should bring increased hope for Malawi.

Grid Integration and Cooperation

As the price of renewable power continues to reach record lows across Africa (the International Renewable Energy Agency notes the average solar electricity cost of $0.085/kWh produced by projects commissioned last year is set to fall to $0.048 next year), Malawi is looking outwardly to increase grid integration with neighbours to take advantage of exporting and importing power.

The World Bank and other donors are supporting the development of a $130m interconnector with Mozambique which will initially see excess power from hydro transmitted into Malawi, along with the prospect of being able to export power to the wider region. Although the technical solution has been found, the agreement between Malawi and Mozambique is yet to be formalised, a situation all too common with other cross-border energy trading agreements throughout Africa.

With appetite for investment in renewables across Africa at an all-time high, Governments and the international community now have to back the industry and work to ensure other political obstacles are overcome. The recent launch of the new and ambitious policy for energy and renewables from Malawi’s leadership is a small but encouraging step.

For more information and advice about environmental and technical support to help develop renewable energy projects in Africa, please don’t hesitate to get in touch.