Mozambique Energy Situation

Republic of Mozambique
Flag of Mozambique			Location of Mozambique
Capital			Maputo (25° 57′ 0″ S, 32° 35′ 0″ E)
Official Languages(s)			Portuguese
Government			Presidential Republic
President			Armando Guebuza
Total Area (km²)			801,590
Population			23,400,000 (2010 estimate)
Rural Population			14,400,000 (2010 estimate)
GDP (Nominal)			US $9.580 billion (2010 estimate)
GDP Per Capita			US $410 (2010 estimate)
Currency			Mozambican metical (Mtn) (MZN)
Time Zone			CAT (UTC+2)
Calling Code			+258
Electricity Generation			TWh/year (year)
Access to Electricity			%
Wind energy (installed capacity)			MW (year)
Solar Energy (installed capacity)			MW (year)

Overview

Mozambique is one of the poorest countries of the world with about 54% of the population living below the national poverty line. Forest resources satisfy more than 85% of total domestic energy requirements and more than 95 % of energy supply in rural areas. Mozambique has considerable but under exploited energy resources, including natural gas, coal, hydro, oil, solar, biomass and wind.
The energy sector is key to the country's economy already today, since energy exports make up a large share of total foreign exchange earnings. Moreover, the availability of cheap electricity is one of the main reasons for the significant foreign direct investment in energy-intensive industries in Mozambique. Energy exports (hydropower, coal, gas and possibly oil) and projects to cover the growing domestic electricity demand will play an increasingly important role in the years to come. The liberalisation of the power sector initiated in 1997 allowed for third parties from the private sector to enter the power generation, transmission and distribution markets without impressive results so far (2012).

Access to electricity is among the lowest in the world, especially in rural areas where only 1% of the population is supplied.The national grid including off grid facilities is claimed to reach some 30 % of the country today in terms of numbers of people with potential access to the grid (not connected). Many district capitals depend on expensive and often unreliable power generation with diesel generators. Outside these towns, the situation is even worse. The overwhelming majority of rural households, most rural schools, health centres and administrative posts are without access to electricity. Lack of mechanical power is a bottleneck for the rural subsistance agricultural production, as grain producers have to walk long distances to the nearest milling facility. Rural areas lack electricity for lighting, radio and communication in households and for refrigeration in small commerce. Nevertheless, many rural household spend a considerable share of their income for modern energy in the form of kerosene or batteries (€ 4–5 per month). Lack of access to electricity restricts the local population’s opportunities for income-generating activities.

Potentials

Mozambique has considerable energy resources with an estimated hydropower potential of 12,000 MW and also gas reserves (estimated at reaching 700 billion cubic metres) and vast coal reserves (estimated to reach 140 million TJ) with the potential of generating approx. 500 MW and 5,000 MW respectively.

Renewable Energy Potential

Resource	Availability
Wind	Along the cost Niassa (Average wind speed 6 m/s)
Solar	4.5-7 kWh/m2/day
Hydro	12 GW (1 GW in small installations up to 10 MW)
Biomass	100's of MW (Big bagasse potential)

Demand and Supply

Peak electricity demand was 530 MW in 2010 (without Mozal) with an energy consumption of approximately 3,032 GWh. The increase in power consumption has been significant during recent years with average annual increases in the order of 6 to 8 % over the last 10 years. These figures reflect supply to domestic, commercial and industrial consumers in the national power network supplied by Electricidade de Moçambique (EdM) the national power company. Approx. 136 MW (61 MW from hydro and 75 MW from diesel and gas) are supplied by EdM's own generation, mainly by ageing plants requiring refurbishment. The remaining demand is supplied through a purchase agreement with Cahora Bassa, a hydropower plant at the Zambezi River with an installed capacity of 2,075 MW. The number of consumers has grown with more than 10% annually since the year 2000 and was about 850,000 in 2010 (2,240 Medium & High Voltage clients). At present still only 16% of the population has access to electricity. Power demand forecasts indicate that with an average projected growth rate of 6% p.a. Mozambique will reach a maximum demand of 1,350 MW by 2030 and a projected consumption of 8,300 GWh. From 2009 until 2013, it is foreseen that demand reach 560 MW by 2013. For meeting the country‘s electricity needs in a timely manner, it is imperative given that the Cahora Bassa‘s reserve for domestic market requirements of 400 MW is almost exhausted. Therefore it is important that the HEP sites Mavuzi, Chicamba, Corumana are rehabilitated and that the technical and economical feasb. HEP sites Tsate, Mueneze, Alto Malema, Massingir and Mavuzi II and III are errected and the retrofit of the MTC Maputo Gas Turbine. These investments would sum to approx. 415 MW ICap and approx. 300 MW additional firm power. Several large scale IPPs, mainly for export purposes, are planned (totalling ca. 3 to 5 GW).

Biomass coming from an estimated 30.6 million hectares of forest lands for wood fuel and charcoal represents about 80% of the total energy consumed by the households. This value is even bigger in remote rural areas. Every year it is estimated that 16,000,000 m3 of forestry resources are burnt to meet rural energy requirements.

The present consumption of oil products is in the order of 600 million litres per year, transport being the lead user followed by agriculture. The turbulence in international oil markets since 2004 resulting in abrupt fluctuations of oil prices have become a source of social unrest. The reduction of the Mozambican energy bill, especially for imports of liquid fossil fuels, which in 2006 amounted to 14% of national imports, deserves special attention. Today both liquid pe-troleum gas (LPG) and kerosene have only a small impact in terms of the national energy ba-lance. LPG is mainly used in the urban centres of Maputo, Matola, Beira and Nampula. How-ever due to bottlenecks in supplies the national consumption does not exceed 14,000 tons.

Mozambique´s considerable energy resources enable the country to meet its internal demand and still export energy to Southern and East African countries. The availability of energy resources including hydro, natural gas and coal, plus the geographical positioning of the country – acting both as route to the countries inland well served by harbours, railway and pipeline systems, and as an interface between the Southern African Development Community (SADC) and the Eastern African Community (EAC) gives Mozambique a privileged, strategic position and role in the regional energy sector.

However despite the countries significant electric power potential there should be no rapid shift expected from biomass to electricity use because Mozambique is a vast country with the majority of the population living in rural communities dispersed throughout the provinces. Energy solutions must take into consideration this reality and adapt to it by combining an intensification of electrification in those areas served by the national electricity grid and the adoption of modern technological solutions and energy services in particular for remote areas, using sustainable biomass, solar and hydropower resources.

Noteworthy Trends

Despite its large renewable energy resources, the country energy sector focus is on large hydro projects in the Zambezi Basin (i.e. Mphanda Nkuwa) to produce power for export to South Africa and for industry. Mozambique relies heavily on the export of commercial electricity to South Africa from the Cahora Bassa dam on the Zambezi River to generate foreign exchange income.

The two immediate projects are the 850 MW (nominal) expansion of the Cahora Bassa dam and the controversial Mphanda Nkuwa dam (2500 MW). See table below.

Project Name Type of Project	Size	Comments
CB North Bank Hydropower expansion	850 to 1300 additional MW	Detailed feasibility study is underway
Mphanda Nkuwa Hydropower	2500 MW	Env. + Soc. Impact Study underway
Massingir Hydropower	40 MW	EDM managed
Lurio Hydropower	120 MW
Majawa Hydropower	25 MW
Malema Hydropower	60 MW
Moatize Coal fired power plant	1500 MW	IES is the developer
Temane Combined Cycle natural gas fired power plant	300-400 MW	On the SASOL gaspipeline. 2010

As a result of March 2009 Government policy, the biofuels sector is receiving hundreds of millions of dollars in investment (sugar – ethanol, jatropha --- biodiesel).However, production has yet to commence and there is considerable controversy about transparency and food vs. energy.

Market Situation

The market situation for photovoltaic (PV) and hydro power technologies and services is still in a very incipient stage. In the case of micro and pico hydro there are no readily available products available in the country which makes prices prohibitive for communities and individual households. However there is a good potential for local manufacture of water wheels and pico turbines, although the market is still very limited and therefore local services tend to be rather expensive.

In its first phase, ENDEV MOZAMBIQUE has started pioneer activities in the local manufacture of water wheels for upgrading traditional maize mills and the manufacture of pico turbines with most promising results. Therefore it is envisaged to upscale micro/pico hydro power activities sustainably on a local level with an appropriate and cost effective approach for technical capacity building, technology transfer and market development. The market for PV is divided into steadily growing local market spots and mainly capital based PV providers working with directly imported equipment for government projects funded by donors. The local market is efficient and reliable but informal, with low quality products of Chinese origin coming mainly from RSA. Market actors are lacking technical knowledge. In parallel to the dissemination of products from the local market ENDEV MOZAMBIQUE has started designing an energy efficient compact small solar home system (SSHS) with a local enterprise. In the case of PV for household lighting, technical capacity building, technology transfer and market development is envisaged within a Public Private Partnership (PPP) measure with German enterprises and higher quality products.

In addition to the overarching need for developing the countries extensive energy resources (hydro, coal, gas and biomass) for both domestic and regional consumption the main challenges in the power sector in Mozambique are:

• Ensuring that affordable electricity supply is available to meet the rapidly growing domestic demand. In the near term, this will involve the continued extension of the grid with a focus on loss reduction and intensification of the grid,
• Reaching the vast areas of the country beyond the national grid managed by EdM. The GoM is committed to supporting decentralized electrification of social infrastructure (rural schools, clinics and administrative offices) and to increase access to modern energy services to villages and rural enterprises through PV systems, micro/pico-hydro schemes, modern biomass energy, and other Renewable Energy Technologies (RETs),
• Ensuring that power shortages do not become a constraint on economic growth. Several GoM proposed generation and transmission ―mega-projects‖ will address sufficiency and security of supply for the medium to long-term,
• Institutional strengthening and capacity development of the main sector public institutions (MoE, EdM, FUNAE and CNELEC) but also of the private sector composed of NGOs, MFIs, and local enterprises working with RETs, in order to improve their respective performance, governance and effectiveness.
  

Cumulative capacity, by technology:

1. Wind: NONE
   
2. Solar PV: NO GRID CONNECT. SMALL OFF GRID MARKET.
3. CSP: NONE
4. Solar thermal:Very small household and tourism market
5. Geothermal: NONE.
6. Bioenergy (heat and/or power):5-10 MW in 5 sugar refineries (Self consumed)
7. Hydropower: 2,075 MW Cahora Bassa dam dominates the energy sector.This is owned by Hidroelectrica de Cahora Bassa (HCB), whose assets are 85% owned by the Mozambique government.
   160 MW, mostly of hydropower, is managed by Electricidade de Mozambique (EDM)
8. Biofuels production data – for both ethanol and biodiesel.
   A National Policy and Strategy for Biofuels was approved in February 2009 which focuses on ethanol from sugarcane and sorghum and coconut and jatropha for biodeisel. < www.biofuelsdigest.com/blog2/2009/03/27/mozambique-establishes-national-biofuels-policy> .
   This policy has led to hundreds of millions of dollars in investment plans in ethanol and biodiesel in Mozambique. An October 2007 ethanol plant in Mozambique received US$510 million in support from the UK. However, the actual on-the-ground activity is unclear and production has yet to commence.Biofuels are not readily available in the country and export details are also not available.
   
9. Marine energy (specify technology) NONE

Policy Framework, Laws and Regulations

Within PARPA (PRSP), the programme for reduction and alleviation of absolute poverty, the GoM has been granting high priority to efforts to increase access to electricity for the population. Within the PARPA II the GoM has affirmed the critical role of the energy sector in reducing poverty. Adequate and equitable access to energy resources and services such as the provision of energy services to households, rural schools, administrative offices, and hospitals in rural areas is defined as a key driver of growth and poverty alleviation. The energy-related goals set in the PARPA are being operationalised by GoM through a number of strategies, investments and studies that have been prepared or are under way. The PARPA II (§507ff) outlines a programme for the energy sector, which entails: Electrification, Liquid Fuels, Renewable Energy, and Intersectoral Collaboration.

The Energy Policy approved March 3rd 1998 by the Council of Ministers under Resolution 5/98 established with the following objectives among others relevant for ENDEV MOZAMBIQUE.:

§ Guarantee reliable supply of energy, at lowest possible cost, in order to meet present demand and future levels based on economic development trajectories,

§ Increase the energy options available for household consumption,

§ Secure better efficiency in energy utilization,

§ Promote the development of environmentally friendly conversion technologies, namely hydro, solar, wind and biomass,

§ Promote competitive, dynamic and more efficient entrepreneurs.

In March 2009 the Policy for Renewables was defined with the following objectives among others with relevance for ENDEV MOZAMBIQUE:

§ Increase the access to modern energy services of high quality and accessible prices,

§ Reduce poverty and contribute to the Millennium Development Goals,

§ Contribute to the generation of local and national income and employment.

The revised Energy Strategy aims to align Mozambique with best international practices for efficient energy utilization, raising awareness amongst its citizens about good environmental practices, diversifying the energy supply matrix, giving particular emphasis to new and renewable sources of energy and to the opportunities contained within the Clean Development Mechanisms, under the Kyoto Protocol. It should ensure energy availability to sustainably meet the requirements of national socio-economic development by undertaking the necessary actions to increase access to diversified energy sources in a sustainable way, contributing to the welfare of the population and the country‘s socio-economic development. The strategy recognizes accelerating electrification efforts, giving priority to rural areas, through the expansion and intensification of the national grid, the utilization of Renewables, the optimization of low cost solutions, and the introduction of measures which will ensure productive and efficient use of electricity (as low consumption/high efficiency light bulbs). The GoM aims to support regional integration and reflects in its national legal framework the best practices in environmental protection. Mozambique has its own Oil Law and Electricity Law. A Regulation defines the licensing of electricity installations, another Regulation establishes the competencies and procedures regarding concessioning of production, transmission, distribution and marketing of electricity, as well as its importation and exportation. Other regulations establish the norms for the national grid, the instructions for CNELEC and its regulatory functions, and the Technical Unit for Implementation of Hydroelectric Projects (UTIP). Based on the new Energy Sector Strategy with its specific subsectors of Electrical Energy and New and Renewable Energies, as well as the Energy Strategic Plan 2009 – 2013, the GoM has prepared a comprehensive 5-year plan for energy development and access. ENDEV MOZAMBIQUE is fully aligned and consistent with this plan, with PARPA and with the new sector strategy. ENDEV MOZAMBIQUE will specifically support: (i) grid densification by scaling-up electricity connections in peri-urban areas; (ii) promote market development for renewable energy technologies for household lighting and social infrastructure; and (iii) technology transfer and capacity building for the main implementing partners mainly, but not exclusively of the private sector.

ENDEV MOZAMBIQUE will specifically support:

1. grid densification by scaling-up electricity connections in peri-urban areas;

2. promote market development for renewable energy technologies for household lighting and social infrastructure

3. technology transfer and capacity building for the main implementing partners mainly, but not exclusively of the private sector.

Institutional Set-up in the Energy Sector

The public sector is represented by:

§ The Ministry of Energy (MoE) is responsible for national energy planning and policy formulation and for overseeing the operation and development of the energy sector. The MoE is composed of three main thematic areas (Power Sector, Renewables and Liquid Fuels) and a central services management group. The MoE is represented in the provinces through the Provincial Directorates of Mineral Resources and Energy (DIPREME).

§ Electricidade de Moçambique (EdM), is a vertically-integrated, government-owned electric utility responsible for generation, transmission and distribution of electricity in the national grid. EdM buys most of its power supply (apr. 400 MW) from Hidroelectrica de Cahora Bassa (HCB), owner and operator of the Cahora Bassa hydro power plant on the Zambezi (2,075 MW). The GoM owns 82 percent of HCB which operates as an Independent Power Producer (IPP) The bulk of the electricity generated at HCB is exported to South Africa, with a small amount to Zimbabwe. EdM sells any excess electricity on the Southern Africa Short Term Energy Market. The Mozambique transmission grid is currently interconnected with South Africa, Zimbabwe and Swaziland.

§ The Fundo Nacional de Energia (FUNAE) was established in 1997 as a public institution to promote rural electrification and rural access to modern energy services, in a sustainable manner, and as a contributor to economic and social development in the country. Since its establishment FUNAE has implemented numerous projects using renewable energy technologies to electrify schools, clinics and communities.

§ The Conselho Nacional de Electricidade (CNELEC) was re-established as an independent advisory regulatory body for the electricity sector in early 2008 with support from the World Bank Energy Reform and Access Project (ERAP). CNELEC was instructed to give its highest priority to an evaluation of EDM‘s performance under its Performance Contract with the GoM. This Performance Contract covers the years 2007 to 2009 and sets out the goals and indicators to be met annually by EDM and GoM. CNELEC was also instructed to conduct a review of the current methodology used by EDM in setting tariffs. In performing the review of EDM‘s performance, the directive instructed CNELEC to conduct its review in an open and transparent manner with public hearings in several locations throughout the country.

The private sector is represented by various licensed private enterprises which participate in the grid extension and household connection works of EdM and private enterprises for the provision and installation of PV products, often situated exclusively in the capital Maputo. A microfinance sector with banks and NGOs is active throughout the country but often exclusively restricted to the province and/or district capitals. The NGO sector is characterized by relatively weak institutional profiles and technical specialisation, as well as weak implementation structures and technical competences.

Major Donor Activities

The World Bank is one of the main donors in the energy sector in Mozambique. Since July 2007, it has served as co-chair with the GoM on the ―Energy Sector Working Group‖ that was established within the framework of the Paris Declaration. The Bank is in preparation of the second phase of the Energy Reform and Access Project (ERAP), which will now be called Energy Development and Access Programme (EDAP). The proposed project will help establish the necessary operational framework for increasing electricity access to un-electrified areas nationally in a sustainable and programmatic manner, aiming at mainstreaming a sector-wide approach (SWAp) by establishing a comprehensive donor partnership framework for coordinated and sustained financing of investment and capacity strengthening aligned with national priorities and procedures (WB, ADB, ADF, OFID, BADEA, IsDB, Kuweit Fund) With Norway, the World Bank is also co-financing the Mozambique- Malawi Transmission Interconnection Project (cancelled medio 2010) and the Mozambique Regional Transmission Backbone Project. Sweden is engaged together with co-financing of Norway and Denmark in rural electrification (grid extension and household connections) in Sofala, Manica, Tete and Niassa Provinces. Norway is financing rural electrification in Cabo Delgado and grid extension in Gurue - Cuamba – Lichinga and Namacurra – Pebane. Technical assistance (TA) and capacity development for EdM in mega project development for power generation, as well as for the MoE are delivered by Norway and Sweden. Sweden also is embarking on the rehabilitation of the hydro power stations in Mavuzi and Chicamba. The European Commission (EC) is financing rural electrification in Cabo Delgado, Tete and Sofala with EdM, PV electrification in rural areas with FUNAE and capacity building in energy planning and management for the MoE. DFID is giving TA on Biofuels to the National Directorate of Renewable Energy of the MoE.

Belgium has signed a contract with FUNAE in September 2010.The program will focus on off-grid energy systems, based on renewable energy resources (hydraulic, solar and wind), in remote rural areas where no grid connection is foreseen within the next five years. The program will finance, on grant basis, electrification systems for community infrastructures such as administrative buildings, schools, health centres, water pumping devices and public lighting. In addition, renewable energy installations for private use (household, shops or small enterprises) will be stimulated by subsidies (investment funds) and soft loans through micro-finance systems. In order to increase the sustainability of the renewable energy installations, the program will also provide a computerized asset management system and technical assistance focused on capacity building through training initiatives, research and development. Three long-term international experts (two with technical (PV, Solar) and one with a socio-economical profile) have joined and cooperate with the FUNAE staff during the implementation of the project.
The total budget of the program has been established at 18.000.000 EUR, composed of a 15.000.000 EUR contribution of the Belgian Government and an additional contribution of the Mozambican Government estimated at 120.000.000 MTN (equivalent to 3.000.000 EUR) for payment of all taxes and duties, personnel, staff and office space provided by FUNAE. Also the Netherlands government has joined the Belgian BTC/FUNAE activity in 2011, with an additional amount of some 9,000,000 EUR. Considering the large area of the country and the dispersed population in the rural areas, a geographical concentration and/or clustering of the activities will be essential for the follow-up and the cost-effectiveness of the activities. As the provinces of Manica, Tete, Zambezia and Nyassa have a high potential for small hydropower, the possibility of concentrating activities in these four provinces will be investigated.

ENDEV MOZAMBIQUE coordinates its activities with the EDAP and Belgian Programs in close cooperation with FUNAE and government structures both central and in the province, as there will be several common intervention areas such as grid densification, PV electrification of social infrastructure and market development of PV systems for households. The ENDEV MOZAMBIQUE activities are in line with the capacity development needs of the implementing partners of the private sector, NGOs, communities and local entrepreneurs, which will receive business development services and will be trained on the job during the implementation of the activities in the PV and hydro power components.

Further Information

References