Developments in Malawi’s Energy Sector: Malawi and Mozambique sign Power Interconnection Agreement

Malawian and Mozambiquan Presidents shake hands over new power interconnection agreement (Courtesy of Joyce Banda’s Facebook Page)

This week, Mozambique’s president Armando Emilio Guebuza travelled to Lilongwe to sign a power interconnection agreement with the Government of Malawi. This energy deal has been discussed for a few years but was dismissed by the former late president Bingu wa Mutharika on the grounds that it would be too costly for the tax payer.

Joyce Banda, the President of Malawi, announced the signing of the agreement through her Facebook page,

You will be pleased to hear that I, President Dr Joyce Banda and my counterpart, Mr Armando Guebuza, had bilateral talks here in Malawi on behalf of the two countries which has led us to the signing of an agreement for the Malawi- Mozambique power interconnection project.

The determination of my administration is to resolve power supply issues in Malawi therefore this agreement is indeed a big step towards having uninterrupted power supply in MalawI when it is materialised.

We also signed a Memorandum of understanding for cooperation in public security, immigration, environment and the promotion of Youth and Sports between the two countries, Malawi and Mozambique.

I will personally ensure that we mobilise resources to be deployed as soon as possible to make sure that the people of Malawi benefit from the bilateral talks I had with the President of Mozambique.

The agreement was amended in January 2013. The two countries, both members of the SADC Southern African Power Pool, agreed to import and export electricity to each other. Previously, Malawi had agreed to only import electricity from but not export to Mozambique.

The country has been facing acute power shortages over the last few years with capacity far lower than the demand. Over Easter, Malawians experienced even more load shedding as the Electricity Supply Corporation of Malawi (ESCOM) conducted maintenance work at three power stations. During the 5 days, electricity coverage was more than halved.

One study conducted in 2012 suggested that Malawi loses USD 4,215 million per year due to power outages. This is evidently a challenge for mining operations in the country. The Nation newspaper reported last year that Paladin Kayelekera uses about 1.5 million litres of diesel every month to power generators for the uranium mine in Karonga. The company wants to connect to the national grid by September 2013.

Energy is consequently one of the key areas highlighted int the nation’s Economic Recovery Plan that was launched half a year ago by Joyce Banda’s administration to bring about a quick turn around of the nation’s economy. Commentators on Malawi’s business environment identify the shortfalls and inconsistent energy supply as a barrier to doing business in the country.

Currently, Malawi generates about 200MW while the demand is 300MW, however, the unmet electricity need does not account for the majority of Malawians who are not yet connected to the electricity grid. In Malawi, only 9 percent of households have electricity, most rely of firewood for cooking and heating needs. The proportion is higher among households in urban areas (35 percent) than in rural areas (4 percent).

The agreement between Malawi and Mozambique may be one step to meet the unmet electricity need. Furthermore, according to the Principal Secretary of the Ministry of Energy, the government is also working on solutions to ensure that the country is able to generate sufficient electricity for the domestic as well as the export markets.

Four companies are investing in the energy sector in Malawi and they are likely to produce a combined 1,235MW of electricity:

• The Chinese Company China Gezhouba Group Company to set up a coal-fired power plant to run at 1,000MW. The first phase will see the power station supply 300MW with coal sourced from Moatize, Mozambique.
• Intra Energy Company signed a Memorandum of Understanding (MoU) with the government last month to set up a 120MW coal-fired power station in Chipoka in Salima. The mining coal will source coal from Malawi through its joint venture Malcoal with Consolidated Mines.
  
• Sukam Power Company has also signed an MoU with the government for a 40MW power generation and irrigation scheme through the construction of a dam at Bongozi on Bua River. The feasibility study report and the Environmental Impact Assessment have been submitted but not yet approved by the government.
• Aspire Power Company is currently running feasibility studies along six sites on the Dwangwa River with the how to set up a 75MW hydroelectric power station. The company has applied for a licence with the Malawi Energy Regulatory Authority (MERA) and it now waits for approvals of the feed-in tariff in order to enter into a power purchase agreement with ESCOM.

In addition, the government is also working on projects with the support of development partners. Two hydropower stations, both to produce 32MW, are reported to start operating later this year, and last month, the African Development Bank approved a grant of USD 3.04 million to finance a feasibility study at the Kholombidzo hydroelectric power plant for the future development of a power generation project. The Malawian government will contribute 7% of the total study cost of USD 3.27 million.