Power policy

Mozambique established a National Electrification Strategy to encompass a plan for prioritizing investments for the development of lower-cost of power-system infrastructure and draws up a national plan for connecting new consumers with distribution networks. Early steps were toward developing clean energy and donor support. A lack of regulatory clarity and follow-through and competing priorities continue to restrain development. While longer-term priorities include large hydroelectric power projects such as the 1,500-megawatt Mphanda Nkuwa dam, nearer-term efforts are focused on fossil facilities and two solar projects, one of which was commissioned in July 2019. Scatec's 40 megawatt Mocuba PV Plant is Mozambique's first utility-scale solar project. A second, Neoen's 40-megawatt Metoro PV Plant, are still under development. Mozambique created a renewable energy feed-in tariff in 2014, intended to apply to PV, wind, biomass and small hydro projects from 10 kilowatts to 10 megawatts. However, the scheme has not come into force.

Power prices and costs

Despite a five-year freeze in 2010-15, retail power prices have risen considerably in recent years. Commercial tariffs climbed more than eightfold, and residential bills more than doubled as state utility Electricidade de Moçambique (EDM) attempts to make up for longstanding revenue shortfalls. In 2020, the regulator reduced the tariffs for both the industrial and residential bands by approximately 10%. Social tariffs, which apply to low-income users, have remained stable. Like most countries in Sub-Saharan Africa, Mozambique does not have a wholesale power market, but it belongs to the Southern Africa Power Pool, which is gradually increasing liquidity.

Mozambique has historically relied on its large-hydro resources, with the broader power fleet seeing little investment in recent years. More recently, investment has been directed to developing the domestic natural gas sector, which has grown rapidly since 2015. In terms of clean technology, the last decade saw Mozambique receive limited investment in biofuels and small but growing inflows into solar. However, 2019 was the best year in a decade for Mozambique in terms of attracting clean energy asset finance. It received $176 million, of which $120 million was directed to wind projects and the remaining $56 million to solar. The 2019 investment level was equal to 69% of the total attracted since 2010. The country’s rural electrification agency, Funae, has developed mini-grid and pico-solar pilot programs in partnership with German aid agency GIZ and recently signed an agreement with Ignite Power to install individual solar energy systems in 300,000 homes in remote areas of the country. These will reach 1.8 million people over the next three years, and help the country achieve its objective of universal energy access by 2030, established via the Energy for All project (Projecto de Energia para Todos).

Power market

Mozambique’s power market is structured around Electricidade de Moçambique (EDM), a state-owned and vertically integrated utility responsible for the transmission, distribution and sale of electricity. All power consumers in Mozambique must buy electricity from EDM, which oversees 20% of the country’s generating capacity and purchases power from IPPs and the 2.1-gigawatt Cahora Bassa Hydro (HCB) facility. The latter is majority owned by the Mozambican state (92.5%). Some 90% of the plant’s generation is exported, mostly to South Africa. Cahora Bassa’s vast size means that hydroelectric generation dominates Mozambique’s power sector, representing 70% of the capacity mix in 2019. A new draft electricity law is expected to overhaul the sector, streamlining the legal framework and clarifying licensing for generation, transmission and distribution. A new regulator, Arene, was stood up in 2017 but is not yet fully operational and will require support to become a strong and independent regulatory body.

Doing business and barriers

Mozambique's power fleet is in need of investment as the country seeks to expand generation capacity to meet growing load and ambitious electrification targets. The Ministry of Energy has published a long-term development plan, the Integrated Electricity Infrastructure Master Plan, which encompasses the southern system and central and northern systems for 2018-2028, and the integrated system through 2029-2043. The Plan envisions new power generation projects totaling 530 megawatts of solar and 150 megawatts of wind, in addition to 4,300 megawatts of hydro, 1,350 megawatts of coal and 8,500 megawatts of gas. Mozambique’s electrification rate remains very low at just 30% in 2020, and progress in extending access to the wider population has been slow. Power demand continues to grow quickly, with peak consumption nearly doubling since 2010. For on-grid projects, developers can negotiate prices that enable the project to be profitable, but PPAs are negotiated on a case-by-case basis and there is no standardized duration for either on- or off-grid projects.

Developers face a difficult investment environment in Mozambique, with the country placing 138th in the World Bank’s ease-of-doing-business index in 2019. A lack of standardization and clarity around licensing and concessions, the absence of a strong and independent regulator, as well as the challenging position of vertically integrated utility EDM compound a lack of incentives for renewables. Furthermore, development of vast offshore gas discoveries threatens to divert governmental resources and attention. Project development in Mozambique, whether conventional or in mini-grids, remains hamstrung by a lack of regulation. Development of a power plant requires a concession from the government, while the lack of PPA standardization can result in prolonged negotiations with EDM, which is heavily indebted and undergoing major structural and operational changes. Internal politics at the state electricity company remain a potential challenge to project development.

EV market

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

EV policy

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

Buildings market

The government has yet to implement any substantive policy support in this sector.

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.