MCC energy compact limps on targets

Despite completing the infrastructure works on time and budget, the Millennium Challenge Corporation’ (MCC) $350.7 million (about  K257 billion) energy compact fell short of achieving its objectives to improve the availability, reliability, and quality of the power supply.

In its March 2021 evaluation brief titled Improving Power Quality and Reliability in Malawi published on Friday, MCC observed that while the national grid was modernised, challenges with reliable power supply continue.

Among others, MCC points out that power was transmitted more efficiently to high-consumption areas and that transmission system losses declined, but power supply cuts remained pervasive, largely due to insufficient generation capacity amid rapid growth in demand with persistent distribution  losses, suggesting grid capacity constraints remained a challenge.

Reads the evaluation brief in part: “By compact closeout, transmission losses were nearly halved from the pre-compact level of 10.5 percent, but distribution losses showed almost no change and remained at 12 percent.

“Total system losses declined from 22 to 17.3 percent at closing, but because many of these improvements preceded the completion of the infrastructure development project [IDP] construction activities, the compact’s role in this result is unclear.”

Addressing load shedding was not a project objective; however, persistent load shedding undermined the achievement of the broader compact objective of improving the availability and reliability of the power supply.

MCC figures show that between January 2017 and December 2019, there were only 43 days without load shedding, and unplanned outages increased slightly in both frequency and duration, rather than decreasing as expected.

Consequently, firms reported that on average, the number of outages per year rose from 120 at baseline to 192 at endline, forcing over 80 percent of firms to shut down at least some of their operations during outages.

At the same time, connection time and costs have not been reduced because end users wait, on average, 7.5 months to get a new connection.

“In order to achieve project objectives and sustain results in the future, it is essential for key government institutions involved in Malawi’s power sector to coordinate efforts in addressing the generation supply gap, ensure continued maintenance of compact-funded infrastructure, and support financial sustainability of the power sector through cost-reflective tariffs.”

The compact (2013-2018) aimed to address electricity supply challenges through the $255.4 million IDP, which invested in the national electricity grid’s generation, transmission, and distribution infrastructure to increase grid capacity and stability.

The compact was designed to scale up income levels and reduce poverty by revamping Malawi’s power sector and improving the availability, reliability and quality of the power supply energy grant by the US Government to Malawi.

Energy expert and former Electricity Supply Corporation of Malawi (Escom) chief executive officer Kandi Padambo observated that while the grid was modernised,  power supply cuts remained pervasive largely due to insufficient generation capacity and rapid growth in demand.

He said: “The real positive impact on our economy will be spurred  when we have more than  matched our generation capacity with our ever increasing demand.

“The rapid growth in demand for electricity is a boon in the power sector. The generation deficiency is a constraining challenge to be resolved.”

Malawi has one of the lowest electricity access rates at 11 percent compared to 42 percent in low-income countries and 48 percent in sub-Saharan Africa, according to World Bank data.

There is also a glaring inequality among the rich and poor when it comes to access to electricity as the poorest 20 percent of Malawians have one percent electrification rate while the richest 20 percent have 31 percent electrification rate.

Minister of Energy Newton Kambala told Business News that he is meeting his team on the same and will revert later.

However, speaking earlier, he observed that government alone cannot bring about the much needed improvements in the provision of power to the industry and the population; hence, a policy shift was, therefore, made to liberalise the sector and allow the participation of private sector.

“This was done through the unbundling of Escom. In order to attract private investors in generation, government carved out generation function from the old Escom and established Egenco,” he said.

Malawi Energy Regulatory Authority (Mera) figures show that out of 10 independent power producers (IPPs) that were approved to generate and sell power to Escom, only two are operating while another IPP, JCM Matswani Solar Corp Limited (Golomoti), which is expected to produce 60 MW solar power had shown progress.

Meanwhile, the new prospective compact will focus on challenges to do with access to land and low investments in agriculture and high market transaction costs.