Malawi’s electricity generation mix consists predominantly of large hydro power plants, mainly on the Shire River that flows from Lake Malawi. With an electrification rate of at most 9% and increasing power demand, the country is struggling to reform its power market and incentivise the build-out of new capacity.
Malawi’s Ministry of Natural Resources, Energy and Environment oversees its electricity sector along with the Malawi Energy Regularity Authority (MERA). The Electricity Supply Corporation of Malawi (ESCOM) is a vertically integrated government utility and responsible for all generation, transmission, distribution and retail within the country.
In September 2012, MERA finalised a feed-in tariff, but to date it has not been made available to developers. Clean energy project developers and manufacturers can qualify for general tax incentives that were set up to support foreign investment. A biofuels blending mandate has been in place since the 1980s.
Large hydro power plants make up 282MW of the 372MW of installed capacity. Small hydro contributes 68MW, with the remainder composed of biomass, diesel and a single 0.83MW PV plant. The two biomass plants are captive and owned by a sugar cane producer, while the PV plant – financed through a grant from Japan – is used to power Lilongwe’s airport. A micro-grid run by Mulanje Electricity Generation Association (MEGA) in Mulanje district with 56kW of hydro capacity is the only example of a functioning off-grid system.
The government is conducting feasibility studies for new large hydro power plants with a total capacity of 310MW. To attract foreign investment in the power sector, the country has started opening up the electricity market with a standardised power purchase agreement to allow independent power producers to operate. It is early days, however: only two IPPs are developing projects. HE Power has licenses for a 41MW hydro project and is only lacking an equity investor. IntraEnergy, from Australia, has signed a memorandum of understanding with the government for a 120MW coal-fired power plant in Pamodzi.
The existing Rural Electrification Programme under the energy ministry uses revenues from a 1% electricity tax for a fund to extend the main grid to trade centres. Malawi has few public schemes to help develop off-grid solutions despite having an energy access target of 30% by 2020. These include the UNDP funded Decentralised Energy management program and Sustainable Energy Management program. There are a number of entrepreneurs selling solar lanterns, installing small-scale home systems and offering finance for their uptake. They are helped by an exemption from import duties for solar panels and lanterns.
The government has acknowledged the need for sectoral reform and an external consultant is developing options for unbundling the power market as part of a new energy policy package. President Mutharika announced in February plans to create two separate companies, responsible for generation on the one hand and transmission and distribution on the other.
Score Summary
Malawi scored 1.01 in Climatescope 2015, placing it 33rd on the list of countries overall, up one place on 2014. Its best performance was on Greenhouse Gas Management Activities Parameter IV.
The country was ranked 22nd on Enabling Framework Parameter I, which was a slight improvement on 2014. This largely reflected the country’s relatively robust framework for distributed energy and the presence of energy access policies.
On Clean Energy Investment and Climate Financing Parameter II, the country was placed near the bottom of the list in 53rd place, reflecting the absence of investment in the sector.
Malawi was ranked 28th on Low-Carbon Business & Clean Energy Value Chains Parameter III, with a number of service providers present related to the distributed energy sectors.
On Parameter IV, the country climbed 10 places to 18th thanks to a better performance on the Clean Development Mechanism risk indicator.