Mini-grid Energy Regulations in Mozambique

After the publications of the 5 Off-grid Energy Regulation in Mozambique named: Tariff Regulation for Mini-grids; Regulation on the interconnection of min-grids; Technical and security standards Regulation; quality of service and commercial relations Regulation; Regulation of the attribution of concessions for mini-grids and model of the concession contract, energypedia and AMER conducted a webinar on June 29, 2023 on the topic Empowering Energy Access in Mozambique: Revealing the Moz Hub and navigating off-grid energy regulations; with Djamila Osman as the Speaker, having an impressive background in Field of Law, more than 20 years of experience, and currently working as Executive Administrator at Epsilon.

In this article you can find a summary of the questions and the answers from Ms Osman.

Having a deep participation in the updating of the Regulation, what changed?

At the end of the year 2020, AMER organized a webinar on Mini-grids, and this webinar was important because in a certain way were defined, what were the main barriers or mini-grid development in Mozambique. One of the identified barriers was the lack of a specific rule for mini-grids, nowadays this isn't the case, there's a specific rule for mini-grids, second, was the time and complexity of attribution of the concession for mini-grids development, but with the new Regulation of the attribution of concessions for mini-grids and model of the concession contract approved, the process became more earlier; and related to this, beyond this Bureaucracy and complexity, we are talking about years for the attribution of the concession not weeks or months, equivalent time for 400 MW not for a Mini-grids which is too much complex, expensive and isn't feasible. Nowadays it is possible to have a mini-grid concession for various sites, and I remember in this context the Mini-grid Promoter from Engie Energy Access. She talked about why they decided not to install a mini-grid in Mozambique, and one of the reasons was it is not possible to negotiate a concession of 3 years, plus 3 years and more, and that there would have to be a concession for multiple sites and this is now possible. Another problem was in the definition of tariffs, as there were no specific rules for the mini-grids, there were no specific rules for the definition of tariffs associated with that mini-grid, there were general rules, so nowadays I'm not sure if this is completely outdated, but it is clearer now. One of the fatal questions for the mini-grid is when the national grid arrives, what to do? There is a regulation that has been approved with a whole process on how to proceed and with the standard contract for grid interconnection. I would say it is what has changed, for those who want to operate a mini-grid in Mozambique. Finally, there is an aspect very important which evolve the clients in terms of the quality and the amount of energy according to certain pattern established already depending on their need. Generally, it is what has changed related to mini-grids regulations in the energy sector in Mozambique so far.

AMER Associated have been questioning what is the new role for ARENE and FUNAE?

There is the perception and so far the experience that there are still some open competitions in which FUNAE appears almost as the granting entity, and as the entity that regulates the competition. Remember that until now there was a model in which FUNAE itself was normally the promoter of the mini-grid. It is FUNAE that launches the tender for a third party to build the mini-grid, in the EPSISTA model, and this network is then either operated by FUNAE or there will be another tender for operation. Here we are talking about a different situation, and I understand this confusion, but we are talking about a different entity. In other words, there is a model in which the private individual is the promoter of the mini-grid, let us say that he is the "owner of the mini-grid", and in this case we have two models, tendering or private initiative, but we are talking mainly about tendering, and ARENE is the entity that carries out the tender, that processes the tender, that is through an electronic platform, which is much more simplified, and requests the attribution process from MIREME, and then at the end communicates the positive or negative decision regarding the tender. So I would say here that it is clear, through the regime that was approved now, that there are three relevant entities, and this is very important because this separation of powers in any sector is fundamental. You cannot have an entity that is promoter, regulator and grantor, it does not work. So, at this moment, what do we have? We have ARENE, which is the regulatory entity in the energy sector, and therefore it is ARENE that manages the tendering process, the exchange of information, it is ARENE that manages the tendering process and the exchange of information, and it is she who manages the interconnection process, manages the whole process of setting the tariffs, then we have MIREME, which oversees the Ministry of Energy, and MIREME is the granting entity, who approves the concession, and lastly FUNAE, which is the entity responsible for the activities of implementing off-grid electrification.

What are the criteria in the definition of the sites for the establishment of a mini-grid, since there are places with technical and climatic characteristics for mini-hydro, why the focus on solar energies?

This is a very difficult question, because when we talk about RE, we talk exaggeratedly about solar energy, but perhaps because it is an energy of easier implementation, because the studies are more available, because the cost is more affordable, but interestingly, in the rules that have been approved, there are some specific rules very few, but there are already some specific issues for the mini-hydro,  I'm not sure, I don't want to lie, but I think also for wind energy. This is a criticism that exists not only in off-grid zones, but also within the national grid. The rules of attribution themselves are very much in contemplate solar energy alone, and do not contemplate the specificities of wind and hydro energy. For example in the system of concession allocations for mini-grids, if I have a period of 18 months, which may be more, if it is explained, but 18 months to collect the data of the winds or rivers in 18 months would not be enough, and so yes, there is still that problem, but I believe that nowadays there is a little more openness towards other energy sources and also because nowadays the door is being opened to a private, promoter of a mini-grid, it is simpler to incorporate other sources of energy, whereas the FUNAE model,  remembering that FUNAE bet a lot on solar energy is more complicated, but it is a great question.

What are the requirements to have funding to bolster a renewable energy company?

I'm going to answer not as a Lawyer, but as someone who is seeking funds for our activities in the energy sector, we are on the same road of looking for financial help. There's a variety of fund programs, AMER can help, relating to inform, what are the program, but now, each program its specificities, Somes include grants for reinforcement on capacity management, others reinforcement for pilot projects, RBF, to help a little the expenses because in the rural areas is too much difficult, relatively operational costs, materials acquisition costs, and there's some institutions who gives credits such as CIMA, where the requirements are extremely tight and, therefore it's required to approve a date of good conduct rules, audit the accounts, is required to fulfill with many requisites and I can say that our company (Epsilon Energia Solar) was eligible to the CIMA, but for several months, we struggled to meet all the requirements, and then there's some institutions such as EletriFi form Europe Union, in which has as goal be part of the share form Mozambican companies, once again who fulfill the requirements. However, relatively to requirements they vary so much, form one program to another program, and the best way to understand if you are eligible is to see the programs themselves and see what those are you can fulfill or not, remembering that they are very rigorous and to fulfill a such program until be eligible for a fund takes too much time as well the main activity takes.

Based on your analysis, since the regulations were recently passed, do you believe that access to energy has become easier and simpler?

Yes, without a doubt, in terms of what has been approved in the regulations there is no doubt, now it remains to be seen in practice, in the implementation of the same as it will be. For example, ARENE that processes the processes, has an electronic form that will facilitate the monitoring of the online process, the well-defined deadlines, the MIREME that makes the concession with a concession document of 3 pages with one and another clause for negotiations, but very simple for a document of kind, and with a period of 90 days for ARENE to respond to the whole process, if it is applied as well as the regulations were designed, is very simple. It should be noted that a concession is different from a license, and grants a certain autonomy, and security to the investor during a certain period of time, with well-defined rules that protect the investor.

You are leading a working group between AMER and ALER, could you please let us know what it is about, what is intended to be done with the work that is being led by you?

Tomorrow (28.06.2023) we will have the first session with the members of ALER and AMER, and in this working group we will present in a little more detail the regulation, the essential aspects, and collect the concerns of the members. Because from a legal point of view I can support, but participation is very important, of the members, and above all in very practical matters. The person reads the Act, and everything seems to make a lot of sense and be compatible, but then in practical terms things are not applicable, or there are issues that the legislator the working group that make the regulation did not think about, because it is impossible to think about all situations, I think one of the richest aspects of AMER and ALER is the fact that they have members with various backgrounds, various experiences, some of which have already developed these types of projects in other countries, so they have a very rich experience, and here in Mozambique we will also promote this debate tomorrow, between noon and 1:30, and then I will promote a debate with some members who actually have a very practical experience, to gather what their main concerns are,  and the main issues and then, and then I'm going to talk to some of the relevant authorities, in this case the role of ARENE, it is very fundamental because it is the regulatory body, it is the entity that will do this process of processing, it has the role not only in the processing of concessions, which is a fundamental point, it has the role in the definition of tariffs, which is another fundamental point, the role related to the terms of interconnection, these are the three points that we will discuss,   to have this practical experience, also on the side of ARENE, and to clarify some issues that are sometimes not so visible in the regulations and then finally the objective of this whole effort is to prepare the roadmap of the mini-networks, therefore, to know what to do to start a mini-network, with which I should go, I start my process, what I have to deliver, how this is processed,  how is it to have an environmental license, to have the DUAT, how long will it last until construction begins, it is to give an overview to the members, which is one of the roles of AMER, to promote more of these projects for better energy diversification and access to energy, and at the end of the year, a seminar will be organized between ALER and AMER, where I will make a more clear presentation to disseminate all this work.

Are there specific documents for a company to work in the energy area as a distributor?

There is a whole registration service with ARENE, and a regulation was recently approved that explains about all the documents that must be registered, of energy service providers with ARENE.