Minister of Energy Newton Kambala has given independent power producers (IPPs) two months to start work on their projects or risk having their contracts terminated.
Speaking when he toured Mulanje Hydro Limited and Cedar Energy Limited projects in Mulanje on Thursday, the minister observed that some of the IPPs have shown no progress three years after signing power purchase agreements with Electricity Supply Corporation of Malawi (Escom).
He said: “We have seven IPPs who haven’t shown any progress. In the next two months, we will review the PPAs and look at how we can bring serious investors.
“Unfortunately, Aggreko [one of the IPPs] is very expensive for the economy, but we cannot afford to lose them. Either we have expensive power or we have power challenges for now.”
Information from Malawi Energy Regulatory Authority (Mera) show that out of 10 IPPs that were approved to generate and sell power to Escom, only two are operating while another one JCM Matswani Solar Corp Limited (Golomoti), expected to produce 60 megawatts (MW) solar power, has shown progress.
The ones operating include Aggreko, with a generation capacity of 78MW from diesel generators in Blantyre (35 MW), Lilongwe (20 MW) and Kasungu (23 MW) and Mulanje Hydro with an installed capacity of 8.2MW.
The others include HE Power (Mbongozi Hydro) for 41 MW, Phanes Energy Renewables Nkhotakota Ltd for 21MW Solar power, Quantel Renewable Energy Ltd (Bwengu) for 50MW Solar power, Droege Mzimba Wind Farm Ltd for 50MW Wind power, Droege Monkey Bay Solar Farm Limited for 20MW floating solar power.
Kambala, however, said it was unlikely that government will renew the Aggreko deal in which the IPP is leasing 84 generators. The contract expires on January 21 2021.
A copy of an Emergency Power Tarrif Impact Analysis done in November showed that generation cost of a unit of energy using diesel-powered generators was K195 per kilowatt hour (kWh) while Escom was selling electricity to consumers at K84.40 kWh, making a loss of about K110.60.
Meanwhile, Mulanje Hydro, which has a 20-year power purchase agreement with Escom and its project was commissioned in September 2019, is producing one megawatts of its 8.2MW capacity due to low water levels in Ruo River.
Mulanje Hydro Limited managing director Ian M’Kersie said in an interview on Thursday that the generation depends on river flow and was optimistic on getting back to full capacity when the rains are back.
He said the firm is planning to build another seven megawatts hydro-electric power station in the area as soon as stakeholder, regulatory and other requirements have been met.
Kambala has since urged the IPP to find ways to keep up with their production capacity.
Mera figures show that electricity penetration is at around 11.5 percent.