Solar power in Mozambique: Opportunities abound

18 September 2020 | Mozambique has significant and largely unexploited solar potential that offers many possibilities for grid-connected and rural electrification projects. To support projects and businesses in the sector, GET.invest offers access-t0-finance advisory through the Finance Catalyst. In Mozambique’s Real Estate Magazine Renewable Energy Special, GET.invest Finance Catalyst advisor Marcus Rother, a renewable energy expert who has been supporting Mozambican companies in the IPP, minigrid and solar home systems segments, was invited to speak about challenges and opportunities in the renewable energy sector, with a particular focus on solar power.

The contents of this article are considered to be the personal opinion of the advisor and do not necessarily reflect the views of GET.invest’s donors.

MRE: What do you see as the main challenges in Mozambique with regard to on-grid power?

MR: On-grid solar holds the promise of ever cheaper electricity thanks to tremendous cost reductions and improved access to finance, which has led to new record-breaking low tariffs presented by bidders. However, despite this unique value proposal of on-grid solar only a handful of plants over 5MW have been realised in sub-Saharan Africa. Programmes present in Mozambique like PROLER, by the French Agence Française de Développement, and GET FiT, of the German bank KfW, try to ease access to finance by taking on part of the off-taker risk through guarantees, insurance products or reserve accounts. Another challenge is the complexity of integrating public financing support tools into the financial model of a private enterprise. While highly paid finance professionals are readily available in large corporate deals, access to such much-needed services is often out of reach for smaller entrepreneurs. Having a range of experienced industry experts as well as a specialised financial modelling team within our facility, the GET.invest Finance Catalyst certainly fills a gap here.

MRE: And what about the off-grid market?

MR: In the absence of ambitious grid expansion programmes, off-grid solutions remain essential to bring electricity to the many unelectrified communities. While Mozambique has been one of the first to instate FUNAE as a public institution for rural electrification, much work remains to be done in terms of clear rules under which the private sector can engage in the national energy market. The implementation of the New Electricity Law would provide much needed legal security for entrepreneurs and investors by regulating future sales licenses and tariffs, mini-grid inclusions into the transmission network, auto-consumption and net-metering. The slow progress on the mini-grid market has however provided opportunity for more flexible models of solar home systems on a PAYG basis to serve needs of remote customers. This sector has seen great progress over the past years thanks to technological advances in areas like mobile-money, low-consumption devices, and cloud-backed data processing. In many cases it has evolved from being just a cheap consolation for lack of “real electricity access” to an impactful modern energy service for consumptive and productive applications alike. So far, there are already some companies operating in Mozambique, but I can see room for several more in a large underserved market like Mozambique.

 

  • Photo: © GIZ / CAROLIN WEINKOPF

MRE: What potential do you see for rooftop solar systems in Mozambique?

MR: Self-consumption with or without grid-feedback to medium and large commercial and industrial customers is maybe the single most exciting opportunity in Mozambique. Rooftop systems have been around in Europe for decades and there are good technical solutions for any kind of structure. This solution is particularly interesting where consumption peaks at the time of maximum solar generation as is the case with cooling systems, e.g. for food supply storage, malls, office buildings, etc. In addition, it is in most cases also a relatively straightforward business-to-business undertaking. We have a lot of experience on this in our team.

MRE: How can the GET.invest Finance Catalyst support propositions in Mozambique?

MR: Mozambique is an important country for GET.invest. We believe that the combined experience of our team of advisors can help energy projects and companies in Mozambique to become successful. Our target KPI is to have a company being accepted for financing and we keep daily contact with relevant banks, development finance institutions, funds, corporate foundations and private investors who are out looking to invest either equity or debt into promising projects. In 2019 and with additional support from the European Union and Germany, we have launched a dedicated branch of our programme in Mozambique, we have a team in the country, and we have many experts and partners lined up. The programme has since supported various events to connect investors and investees, organised in close collaboration with associations such as the mozambican (AMER) and the lusophone (ALER), through our local office in Maputo. We are already supporting six companies in Mozambique, and we are open to support many more!

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This article is an excerpt of an interview with GET.invest Finance Catalyst advisor Marcus Rother in Mozambique’s Real Estate Magazine, whose August 2020 issue specialised on Renewable Energy. To read the full interview, click here.