Policy and Regulatory Framework for Mini/Nano Grids in Mozambique

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Introduction

Along with grid-densification and access to solar home systems (SHS), one of the most important measures to achieve country-wide electrification in Mozambique by 2030 is through the development of mini-grids. The mini-grid market for private sector is still small in Mozambique. Regulatory restrictions limit the participation of the private sector to develop mini-grid projects. Unlike the market for Solar Home Systems (SHS) and Improved Cookstoves (ICS), which are targeted at individual users, namely a household or institution, mini-grids provide access to electricity to a larger number of end-users simultaneously. Read more...

This article provides an overview of the policy and regulatory framework for nano/mini-grids in Mozambique and is targeted at private sector, donor organisations, NGOs, Government bodies and other stakeholders who are interested in getting a deeper understanding of the nano/mini-grid market in Mozambique.

For an overview of the stakeholders involved in the market, click here.

For an overview of the market size and potential growth, click here.

Policy Framework

The following regulations provide the framework for the services rendered by nano/mini-grids.

  • In July 2022, the new and revised Electricity Law 12/22 was passed to revoke the old Electricity Law from 1997. The purpose of this law is to define the general organization of the electric power sector and the legal regime electric power supply activities. In terms of mini-grids, it specifies the updated criteria to obtain a mini-grid concession[1]. The new revision of the Electricity Law will treat mini-grids as specific activities with a simplified licensing process[2] as opposed to previous regulations, where the tendering process for mini-grids were the same as for big utility projects (Decree 48/2007)[3].
  • Decree n. ° 93/2021. In September 2021, the Government of Mozambique approved a new Regulation for Energy Access in Off-grid Areas, which was officially published on December 10th 2021. This regulation establishes the principles and norms for energy access in off-grid areas using mini-grids and other energy services[4].

Additional action in the energy policy is the ongoing revision of the energy strategy 2009-2014.

Other supporting laws, decrees, and reforms related to the construction and operation of mini-grids are shown below.

  • Decree n. 8/2000, of 20 April 2000 - Regulations on the Powers and Procedures for the Award of concessions, and the import and export of energy. This decree sets the regulations for the installation of power stations granted by the Council of Ministers.
  • Resolution 62/2009 approves the Development Policy on New and Renewable Energies and outlines the government’s plans for the energy sector.
  • Decree no 58/2014 establishes a structure for REFIT in Mozambique and is yet to be implemented
  • Law no 15/2011 establishes the Decree 75/2007 on special economic zones offices establishing the guidelines for the contracting, implementing and monitoring process of public-private partnerships (PPP), large-scale projects and business concessions[5].
  • Decree Nr. 184/2014 includes the technical standards for mini-grids connecting to the national grid[6].

Regulatory Framework

Tariffs and Subsidies

The new Mozambican Regulation for Energy Access in Off-Grid Areas from 2021 specifies the guidelines for tariff calculations. It states the tariffs must be calculated on the bases of accepted costs and allowed revenues, including the ability to pay of consumers and existing incentives for economic efficiency. The tariff structure will be fixed for each consumer category. Tariffs will be revised and authorised by the Energy Regulation Authority (ARENE).

In 2014, Decree 58/2014 was passed allowing mini-grids to sell excess generated electricity to EDM through the Renewable Energy Feed-in Tariff (REFIT)[7]. The mini-grids can be developed by individuals or cooperatives i.e. either public or privately owned model. To ensure grid interconnection after the grid expansion, the sites must be located not further than 10km from the national grid. Projects outside the 10 km radius are not eligible for REFIT; however these prices could be used as a guideline to calculate services in remote sites. The prices for the REFIT depend on the energy source (biomass, wind, hydro, and solar) and the generation capacity. Although the Mozambican REFIT is not yet operational in 2022, it represents an important energy and climate change policy instrument[8].

The approved tariff structure of REFIT is as follows:

Max. capacity Biomass Tariff (MZN/kWh) Wind Tariff (MZN/kWh) Small Hydro Tariff (MZN/kWh) Solar PV Tariff (MZN/kWh)
10 KW Not applicable 8.00 4.81 13.02
0.5 MW 5.74 Not applicable Not applicable Not applicable
1 MW 5.36 5.61 3.44 10.73
5 MW 4.43 4.65 2.70 8.40
10 MW 4.06 4.12 2.29 7.91


For a complete list of tariffs and specifications in the Decree 58/2014 click here.

In 2015, the Mozambican Government received a grant from the Sustainable Energy Fund for Africa (SEFA) for the project “Promotion of renewable energy in Mozambique – Enabling Environment.” One of the project’s objective is to create and enable a regulatory framework for mini-grids, including guidelines for grid connection for mini-grids, standardised PPAs for mini-grid, guidelines for investors and technical regulations for mini-grids[9][10]. This new regulatory framework is reflected in the new Regulation for Energy Access in Off-Grid Areas[2].

Another part of the project aims to explore a tariff proposal for mini-grids that do not qualify for the REFIT pricing due to being located further than 10km from the national grid. The first initiative for this purpose was the electrification of the Titimane village. Additional projects are yet to be announced.

Concessions

As stated in Decree n. °93/2021, the concessions for mini-grids will be allocated through a tender process under the terms of the present public procurement legislation, and the concession contract will be valid for up to 30 years[11].

In July 2022, Law 12/22 was passed to revoke the old Electricity Law from 1997. The new law specifies the updated criteria to obtain a mini-grid concession, including the following points:

1. “The establishment of mini-grids, involving the production of electricity with installed power equal to or less than 10MW, requires a concession, under the terms of this Law".

2. “Mini-grids are exempt from concession fees, without prejudice to the payment of other taxes or fees due under the terms of the law".

3. “The mechanisms for connection to the National Electricity Grid and for compensation resulting from the expansion of the National Electricity Grid to the location where the mini-grid is installed are defined by regulation”[12].

Power Purchase Agreements (PPA)

Mozambique’s National Electrification Strategy establishes the operational model of the mini-grids under a PPA. Independent Power Producers (IPPs) investment in mini-grids will be made through public-private partnerships (PPP) between IPPs and EDM; IPPs will be in charge of the investments, construction, and O&M, while EDM will be in charge of service connections and the distribution networks through public investments. FUNAE’s role in these agreements is as the supervisor of implementation activities and the designer of the distribution network infrastructure. The tariff for the mini-grid electricity under these PPAs will be charged to the beneficiaries as it is to regular EDM consumers[13].

As proposed in the SEFA Appraisal Report for the “Promotion of renewable energy in Mozambique – Enabling Environment” project[14], EDM has yet to issue long-term standard PPAs to increase private sector partnerships and undertake financial risks[15].

The private investments into the electricity sector is governed by the Public Private Partnership Law (2011).

Further Information

References

  1. ↑ ‘Lei-12_2022-Lei-de-Electricidade.Pdf’. Accessed 2 August 2022. https://www.lerenovaveis.org/contents/lerpublication/lei-12_2022-lei-de-electricidade.pdf
  2. ↑ 2.0 2.1 AMER Mini-Grids Sessão A. Accessed 12 August 2021. https://www.youtube.com/watch?v=rrLYseQua7Y.
  3. ↑ Business Environment Constraints in Mozambique’s Renewable Energy Sector: Solar PV Systems and Improved Cook Stoves’, n.d., 59.
  4. ↑ Decreto-NÂo-93-2021-de-10-de-Dezembro-de-2021-Aprova-o-Regulamento-de-Acesso-Ã-Energia-Nas-Zonas-Fora-Da-Rede.Pdf’. Accessed 19 January 2022. https://amer.org.mz/wp-content/uploads/2021/12/Decreto-nA%CC%82o-93-2021-de-10-de-Dezembro-de-2021-Aprova-o-Regulamento-de-Acesso-A%CC%83-Energia-nas-Zonas-Fora-da-Rede.pdf.
  5. ↑ Law No. 15/2011 Establishing the Guidelines for the Contracting, Implementing and Monitoring Process of Public-Private Partnerships, Large-Scale Projects and Business Concessions.’, accessed 8 September 2021, https://www.ecolex.org/details/legislation/law-no-152011-establishing-the-guidelines-for-the-contracting-implementing-and-monitoring-process-of-public-private-partnerships-large-scale-projects-and-business-concessions-lex-faoc165015/.
  6. ↑ Mozambique – GET.Invest’, accessed 31 May 2021, https://www.get-invest.eu/market-information/mozambique/.
  7. ↑ Decreto n.o 58/2014’, accessed 6 August 2021, http://extwprlegs1.fao.org/docs/pdf/moz185558.pdf.
  8. ↑ Emília Inês Come Zebra et al., ‘Assessing the Greenhouse Gas Impact of a Renewable Energy Feed-in Tariff Policy in Mozambique: Towards NDC Ambition and Recommendations to Effectively Measure, Report, and Verify Its Implementation’, Sustainability 13, no. 10 (January 2021): 5376, https://doi.org/10.3390/su13105376.
  9. ↑ African Development Bank, ‘Mozambique - Promotion of Renewable Energy in Mozambique - Enabling Environment - SEFA Appraisal Report’, Text, African Development Bank - Building today, a better Africa tomorrow (African Development Bank Group, 22 December 2020), https://www.afdb.org/en/documents/mozambique-promotion-renewable-energy-mozambique-enabling-environment-sefa-appraisal-report.
  10. ↑ DevelopmentAid’, DevelopmentAid, accessed 6 September 2021, https://www.developmentaid.org/.
  11. ↑ Decreto-NÂo-93-2021-de-10-de-Dezembro-de-2021-Aprova-o-Regulamento-de-Acesso-Ã-Energia-Nas-Zonas-Fora-Da-Rede.Pdf’.
  12. ↑ Lei-12_2022-Lei-de-Electricidade.Pdf’, accessed 2 August 2022, https://www.lerenovaveis.org/contents/lerpublication/lei-12_2022-lei-de-electricidade.pdf.
  13. ↑ ‘Mozambique Energy for All ProEnergia Project.Pdf’, accessed 14 June 2021, https://documents1.worldbank.org/curated/pt/594061554084119829/pdf/Mozambique-Energy-for-All-ProEnergia-Project.pdf.
  14. ↑ Bank, ‘Mozambique - Promotion of Renewable Energy in Mozambique - Enabling Environment - SEFA Appraisal Report’.
  15. ↑ ‘IRENA - Renewables Readiness Assessment: Mozambique’, accessed 10 August 2021, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2013/IRENA-Mozambique-RRA.pdf.
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