Power policy

Around 11% of Malawi’s electricity generation came from renewables in 2020. The country’s National Energy Policy document published in 2018 sets out the ambition for this proportion to increase to 16% by 2025, 23% by 2030, and 28.9% by 2035.

Although power purchase agreements (PPAs) have been signed for solar, wind and small hydro, Malawi does not have energy auctions in the strict sense. State-owned single buyer Power Market Limited plans to float a tender for a mix of renewable energy technologies by the end of 2022.

The frequency of power disruptions means many industrial consumers and some individuals have onsite power generation for self-supply. While such facilities have traditionally run on diesel, high costs have led some companies to shift to rooftop solar and the excess electricity they produce can be exported to the grid. A feed-in tariff scheme has been in place since 2012 and is based on capacity or a combination of capacity and energy charges. Energy producers are paid for the net amount of energy sent out.

To encourage clean energy development, import tariffs have been removed for all renewables equipment. However, the quality of imports, especially for solar technology, is often low or non-functional. This has led to frustration and distrust among potential adopters of solar power. In 2019, many products related to solar generation and energy efficiency measures saw their value-added tax rate reduced to zero.

Grid expansion seems to be the government's main policy objective. Malawi is one of the least electrified countries in the world, with an overall electrification rate of around 15%. It is even lower in rural areas at just 6%. The country's rural electrification fund aims to extend the existing grid rather than building off-grid, but has struggled to increase electricity access significantly. The Ministry of Energy has launched the Free Electricity Connection Policy, which will subsidize rural electrification.

Power prices and costs

Power producers are allowed to structure their own tariffs subject to approval by the single buyer, Power Market Limited. Power tariffs have steadily increased in recent years so that the national utility, Electricity Supply Corporation of Malawi (ESCOM), can raise revenue and improve electricity access.

Power market

The country’s generation market opened up to participation from independent power producers (IPPs) in 2016. This followed the unbundling of state-owned ESCOM into two separate entities: the Electricity Generation Company (EGENCO) for generation and ESCOM for transmissions and distribution.

IPP deals are increasing but still represent a miniscule percentage of overall capacity. According to the Malawi Energy Regulatory Authority (MERA), 13 licenses were handed out from 2021-22 for generation projects. Still, with no IPP assets yet operational, EGENCO remains the owner of all generation, transmission and distribution assets.

Resource potential for solar and mini-grid solutions is high in Malawi. Though ESCOM has no plans to build solar assets of its own, it has awarded solar PPAs to a number of foreign developers.

EGENCO has around 442 megawatts of installed generation capacity, of which almost 90% is hydro and the remainder diesel power plants. In order to meet fast-growing demand for energy, it is aiming to increase its capacity to 522MW by 2024, 1,257MW by 2029 and 1,631MW by 2034.

Doing business and barriers

Almost all investment in clean energy in Malawi comes from foreign entities, with international development banks being a popular source of capital, and renewable developers operating in the country are all foreign subsidiaries as well. Overall investment does not seem to be growing, which could be due to high inflation and volatile exchange rates shaking investor confidence.

Malawi's almost complete reliance on hydropower from the Shire River is a concentrated risk. If water levels remain low, the country will need a new fleet of generation assets to supply electricity. There are no local manufacturers of equipment for solar, wind, or hydro, so everything is imported. Electricity theft is also an issue that will weigh on developers' financial considerations.

Current fuel prices entail many more levies than the common Malawian can pay, which is bad news because the country is increasingly reliant on diesel generation for emergency power.

EV market

The government has yet to implement any substantive policy support in this sector, and the electric vehicle market remains at an early stage.

EV policy

The government has yet to implement any substantive policy support in this sector.

Buildings market

The government has yet to implement any substantive policy support in this sector, and the low-carbon heat market remains at an early stage.

Buildings policy

There are no specific laws.