Malawi could start to address her perennial electricity blackouts if she turned to trade with other countries in Southern Africa with excess power generation capacity. Mozambique and the Democratic Republic of Congo (DRC) probably represent the best chances of electricity trade as they have more electricity output than their economies require.
Environmental degradation, combined with onslaught of climate change, is the major cause of electricity problems in Malawi. As these could take years to reverse, electricity trade agreements offer a viable medium-to-long term solution to securing sustainable supply.
In the next three to five years, power trading agreements between countries with excess power generation capacity and those battling supply shortages such as Malawi will be a dominant theme in the electricity markets of south-central Africa.
Mozambique, which currently has the potential to produce more electricity than its economy requires at present, is likely to dominate the supply-side of this trading market with Namibia, Zambia and Botswana expected to be the main purchasers in the region, after South Africa.
The biggest challenge to these arrangements will be reliable and stable transmission networks to facilitate the seamless transfer of electricity between sellers and purchasers.
These networks require significant co-operation between neighbouring countries. So, the role of the Southern African Power Pool (Sapp) in ensuring cross-border planning, investment and trading between member States remains critical.
Power will increasingly become one of the most tradable commodities across the region in the coming years given the electricity shortage we are seeing across Southern Africa. Almost every aspect of a modern economy relies on electricity to function so the countries that emerge as the ones with excess supply will have significant negotiating power, so to speak.
Mozambique, which plans to double its generating capacity to five Gigawatts (GW) by 2025, is one of the few countries in Africa that currently possesses an over-supply of electricity thanks to the hydro power available from the Cahora Bassa dam, which has an installed capacity of 2 075 Megawatts (MW) of power per year or around 73 percent of the country’s installed generation capacity.
Mozambique has the potential to expand the existing capacity of the Cahorra Bassa hydro facility by approximately 60 percent provided it can attract the necessary investment.
The biggest challenge Mozambique faces in taking advantage of this opportunity and many other power projects, is that it has weak transmission infrastructure, which is a key requirement for exporting adequate levels of electricity to other countries in the region. However, it has phenomenal potential for electricity production, ranging from coal, gas and hydro powered generation.
Mozambique has recently commissioned Sasol’s CTRG 175MW gas fired project. While small by international comparison, the value of such projects should not be underestimated in a regional context.
The 118MW gas-fired plant built in Mozambique by Gigawatt, a company that was awarded a gas power generation concession by the country’s government to supply electricity to the capital city of Maputo, will add significantly to the nation’s grid.
The author is an executive vice-president in the Power and Infrastructure Finance Division of Standard Bank Group, South Africa.