Energy Sector

Mozambique’s electricity market is dominated by hydropower generation capacity, largely utilized for exports to neighbouring South Africa and Zimbabwe via the Southern African Power Pool (SAPP). The urban electricity access rate is estimated at 67%, the rural electricity access is estimated at 27%, with overall electricity access rates standing at 39-40%. Peak electricity demand in the country was estimated at 831 MW in 2014 (15 December 2014), excluding BHP Billiton’s Mozal Aluminum facility, with electricity demand rising over 11% per annum for the period 2009 to 2014.

As per a 2015 World Bank Policy Note, the power sector in Mozambique faces three key challenges: i) providing reliable and efficient electricity supply; ii) expanding generation and transmission capacity to meet current and future demand; and, iii) providing access to electricity to the vast majority of the population.

Peak demand in the country was estimated with 831 MW in 2014. As shown in the table below, total demand in GWh from EdM was 3,780 GWh (net of BHP Billiton demand) where residential and large customers were the largest consumer groups. Demand for electricity has risen by over 11% per annum on average between 2009 and 2014, and is expected to continue to increase rapidly.

Electricity Consumption by Consumer Segment (GWh)

Mozambique targets the provision of grid-connected access to 50% of all households by 2030. This would require EdM to connect 175,300 households per year to the grid. Current EdM plans budget for 100,000 new connections per annum which would result in approximately 38% of all households being connected to the grid by 2030. Off-grid solutions are thus an important element in Mozambique’s electrification future.

Mozambique’s hydroelectric potential is among the highest in Africa, estimated at 19,000 MW. The country is home to one of the largest hydro dams on the continent, the Cahora Bassa Dam, which has an installed capacity of 2,075 MW and produces electricity for Mozambique, South Africa, Zimbabwe, Botswana and the wider Southern African Power Pool (SAPP). Mozambique itself only procures up to 500 MW (300 MW firm, 200 MW non-firm) from the dam, transported mostly via South Africa. With the majority of power used by neighbouring countries, and the Government of Mozambique as the dam’s majority owner (92.5%), the dam is an important source of foreign revenue in the Mozambican economy.

EdM as the national utility holds ownership of various hydro- and thermal energy units as shown in the table below. Some of the units either require refurbishment or are currently not being utilized for varying reasons. Available capacity owned by EdM currently stands at 117 MW.

IPPs recently added two gas fired power plants to the grid – the 100 MW Gigawatt project and the 175 MW Central Termoeletrica de Ressano Garcia (CTRG) power plant jointly owned by Sasol and EdM. A World Bank study (2015) furthermore indicated that, at the time, 65 MW of emergency power was procured from Aggreko.

As a result of the large share of hydropower in the generation capacity mix, electricity generated in 2014 was largely produced from hydropower plants (92%) with only 7% and 1% from gas and diesel power plants, respectively.

Proposed power plants

Based on a World Bank study from 2015, the Government of Mozambique estimates to have expanded generation capacity to 3,138 MW by 2022 and 4,163 MW by 2030. In this scenario, IPPs become the largest group of generators. In the medium- to long-term, the country is expected to exploit ~3,000 MW of additional hydropower capacity. The projects most concretely discussed are the Mphanda Nkuwa 1,500 MW project as well as a 1,245 MW expansion to Cahora Bassa. The country is additionally keen to utilize national fossil fuel resources, i.e. natural gas and coal, for power generation. Although no coal power plant has been constructed to date, approximately 2 GW of coal capacity is planned. Natural gas is intended to provide up to 1,400 MW of power capacity in the medium- to long-term.

The abovementioned capacity expansion projects will define the envisioned future generation mix as one dominated by hydro, coal and gas power plants. A 5.4 GW pipeline of “priority projects” was recently outlined in the Renewable Energy Atlas of Mozambique. Overall, renewables will play a minor role for utility-scale power generation; their utilization is seen as most important for the off-grid sector.

Expected Priority Generation Projects

Source: EdM, Presentation to ESWG, March 2016

The national grid is largely managed by state-owned utility Electricidade de Moçambique (EdM). A small proportion of the lines are owned by Hidroeléctrica de Cahora Bassa (HCB), the operator of the Cahora Bassa hydroelectric plant, and by Mozambique Transmission Company (MOTRACO), which supplies power to the Mozal aluminium smelter owned by BHP Billiton. The smelter is not supplied by EdM; it imports power directly from ESKOM SA.

The transmission system has developed as three separate systems, although the northern and central systems have some interconnection. The transmission system does not cover all areas of the country, while power to Maputo is re-imported from South Africa’s ESKOM, as no direct connection exists from HCB’s plant to Maputo. A single transmission line also delivers power to the north-eastern region, making power supply vulnerable to outages on the line.

The EdM transmission system comprises three regions:

• The northern region has a 220 kV transmission system covering about 1,000 km from the Songo substation to Nampula and continuing at 110 kV to the town of Nacala. A separate 220 kV system (operated at 110 kV) extends from Tete, linking with the central region at Chibata.
• The central region has a 110 kV system linking the hydroelectric power stations at Chicamba and Mavuzi with the load centres in the Beira-Manica corridor.

The southern region comprises a 110 kV network extending from Maputo to XaiXai, Chokwe and Inhambane, together with a 275 km single-circuit line from Maputo to Komatipoort, where it connects with the system operated by South African utility ESKOM.

Transmission and Distribution Network in Mozambique

Source: ALER 2016

The government intends to further expand the transmission grid until 2025, particularly from the resource-rich north to the capital Maputo in the south, via the creation of a backbone transmission project consisting of one 400 kV HVAC line and one 800 kV or 500 kV HVDC line – effectively creating a grid to service the country’s major consumption zones and connect to the South African market. The line is anticipated to carry electricity generated from the Mphanda Nkuwa and Cahora Bassa extension generation projects as well as provide power to the SAPP, at an estimated cost of USD 2 billion.

The large distances between generation and consumption, dependency on single lines as well as large parts of the country not covered are major challenges for electricity supply and electrification. Grid breakdowns have led to widespread electricity outages, due to a lack of resilience on the system. This fragility has been evidenced by the loss of supply following the floods of January 2015, and by over 59 hours of transmission interruptions in 2013. The average interruption time increased from 30 minutes in 2009 to 68 minutes in 2013. In 2015, floods have damaged the main transmission line connecting the northern part of the country, which led to 4 weeks of outages for some consumers.

In October 2015, EdM reviewed its tariff structure upwards by 26.4% on average. Tariffs in Mozambique are however not sufficiently high to enable EdM to appropriately fund its O&M expenses, not mentioning investments required in transmission, distribution and new grid connections. The company is running a deficit on electricity sales, purchasing at between USD 0.09 and USD 0.10 per kWh, and selling at an average of USD 0.076 per kWh, while being additionally constrained by the devalued Metical.

Electricity Tariffs as of February 2017

EdM connection fees do not recover the full cost of connecting new customers. In 2012, customers on the social tariff paid about 875 MT (USD 30.84 at the 2012 exchange rate) for connections and normal household customers paid about 3,630 MT (USD 127.90 ). The 2015 WB policy note estimates that it costs EdM an additional USD 1,000 for each ordinary connection.

Private sector off-grid electrification initiatives in Mozambique are scarce but emerging, with an identified market potential of approximately 4 million households. The majority of the country’s direct experience with off-grid technologies has been built through the pilot implementation experiences of FUNAE. FUNAE has installed approximately 70 diesel-based mini-grids operated by local communities, and approximately 1,500 solar home systems (SHS) as of end 2015. It also manages the 50 Vilas Solaires project, which installs 4 kW solar plants with battery backup to electrify rural institutions, micro-enterprises, and households in 50 villages. FUNAE has additionally installed several (approximately 60) solar irrigation systems between 2006 and 2016.

There are a handful of off-grid solar product vendors distributing pico-PV solar lighting products (e.g. lanterns) with at least one company piloting Pay As You Go (PAYG) solar home solutions. Three solar PV-based mini-grids have been installed in Niassa Province, financed by the Government of South Korea, with capacities of 400 kW (Mavago), 400 kW (Mecula) and 500 kw (Muembe). The UK’s Department for International Development is currently preparing a market development initiative, BRILHO, to accelerate investments in the country’s off-grid energy access sector. BRILHO has identified five “fast track” private energy access providers, and is expected to attract regional off-grid energy market leaders to the Mozambican market. At least one Portugal-based mini-grids developer has been assessing the feasibility for a broad-based roll out of hybridized PV/Diesel mini-grids with established telecommunications and agricultural sector partners.

The multi-donor supported Energising Development (EnDev) programme, operating in the country since 2005, has prioritized activities in grid densification, improved and clean cookstoves, pico- and micro-hydro (PHP and MHP), and small-scale PV systems. EnDev Mozambique provides training for importers, wholesalers and retailers of solar products and focuses on the establishment of training centres, testing facilities and a research centre, while supporting marketing campaigns. Hydropower activities include the establishment of commercial operator models for MHP and PHP plants and the provision of grants for hydro investments. EnDev provided technical assistance to local developers. The biomass component of EnDev Mozambique supports the implementation of the Mozambique Biomass Energy Strategy (BEST) by supporting marketing, introducing new stove models, and ensuring product quality in the sector. In the first half of 2015, a results-based financing (RBF) schemed aimed at the clean cooking sector was initiated and managed through a call for proposals.