11 February 2013 – Reliable energy supply is critical to supporting the growing Mozambican economy. Most of the country lacks adequate electricity infrastructure to meet the escalating demand. Electricity infrastructure suffers from under investment, which has led to power outages and load shedding on a regular basis.

Analysis from Frost & Sullivan finds that the demand for electricity in Mozambique will grow by 14 per cent annually and that regional demand within the South African Power Pool (SAPP) will increase by nearly 1,500 MW annually over 2012 to 2020.

“More than 5,000 MW of additional generation capacity will come online by 2020,” notes Frost & Sullivan’s energy andenvironmental business unit leader, Cornelis van der Waal. “The two biggest generation projects, MphandaNkuwa and the CahoraBassa North Bank Expansion (in the Tete province) are estimated to come online in 2019 and 2020, respectively.”

Currently, however, the lack of a direct transmission line connecting the CahoraBassa power station in the North with the capital, Maputo, in the South, means that electricity first has to be exported to South Africa, and then imported at an increased cost.

“The lack of adequate transmission and distribution (T&D) infrastructure in Mozambique is one of the biggest restraints in the electricity industry,” van der Waal says. “A widely dispersed population often makes building T&D infrastructure financially unviable. Off-grid electrification represents a solution to overcoming this restraint.”

Off-grid electrification allows isolated communities to get connected to electricity. Currently only 18 per cent of Mozambique’s population has access to the national electricity grid, with an additional 12 per cent having access to electricity through off-grid electrification.

Another key challenge relates to low electricity tariffs. As a result of low electricity tariffs, utilities are unable to generate enough revenue to invest in maintaining and upgrading electricity infrastructure. This also makes the power generation market an unviable proposition for independent power producers (IPPs).

“The Government of Mozambique is currently revising the electricity tariff structure; if the electricity tariffs are cost-reflective, the market will attract IPPs to finance and build additional electricity infrastructure,” van der Waal says. “Even though electricity sector reform has not been completed, IPPs can still approach the Ministry of Energy with proposals to finance and construct electricity infrastructure.”