Climate-friendly power generation: KfW programme creates incentives for private sector involvement in Mozambican energy sector
News from 2019-09-04 / KfW Development Bank
On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) KfW today signed a EUR 25 million grant with the Mozambican Ministry of Economics and Finance for the GET FiT (Global Energy Transfer Feed-in-Tariff) programme in Mozambique. The aim is to facilitate the market entry of private investors wishing to engage in electricity generation from renewable energies. The GET FiT programme will promote investments in photovoltaic systems including battery storage of up to 32 megawatts in total. It provides for various instruments for this purpose: On the one hand, the financial gap to the existing feed-in tariff will be closed by cost-covering top-up payments to the investor. Furthermore, the costs for connecting the solar systems to the electricity grid will be covered and the electricity purchase risk of the private electricity providers will be reduced by a guarantee facility. The program also creates standardized contracts and approval processes that reduce costs and accelerate procedures. In order to create transparency and achieve favourable electricity tariffs, the individual solar projects are put out to international and public tender.
"We are convinced that even in one of the poorest countries in the world, including Mozambique, private investment in power generation and favourable electricity tariffs are possible through public international tenders and competition and under conditions that are attractive to the market. This is also good for the end customer, who has to pay the electricity bill," said Prof. Dr. Joachim Nagel, Member of the Board of Managing Directors of KfW Group.
The project supports the government of Mozambique in its efforts to supply the entire population with electricity by 2030. At present, only just under one third of the population has access to the electricity grid. The GET FiT programme concentrates on the north and the centre of the country, where 77% of the population live and the electricity supply is particularly inadequate and unreliable - one of the main obstacles to economic development. KfW is already financing successful GET FiT programmes in Uganda and Zambia.
Mozambique has large oil, gas and coal reserves, but also an untapped hydropower potential of 18,000 megawatts and good conditions for electricity from solar, wind and biomass. The GET FiT programme exclusively promotes electricity generation from renewable energies. It thus contributes to a higher share of renewable energies in Mozambique's energy mix and to climate-friendly development.
While solar systems are widespread in Africa, the storage component is still an innovation that is on the advance. The battery storage capacity makes it possible to make the electricity available in line with demand, even if the solar radiation is already low in the evening hours from 5 p.m., but the demand for energy is highest.