Power policy

Mozambique’s National Electrification Strategy encompasses its plan to prioritize investment in the development of lower-cost power infrastructure and draws up a strategy to connect new consumers with distribution networks. Early steps were toward developing clean energy and financial support for projects. While longer-term priorities include large hydroelectric power projects, such as the 1,500-megawatt (MW) Mphanda Nkuwa dam, nearer-term efforts are focused on fossil-fuel facilities and two solar projects, one of which was commissioned in July 2019.

Scatec's 40MW Mocuba PV plant is the country’s first utility-scale solar project. A second, Neoen's 40-megawatt Metoro PV Plant, is still under development.

Under Mozambique’s New and Renewable Energy Development Strategy for 2011-2025, the country plans to install 100MW of on-grid onshore wind capacity, up to 10,000 onshore wind turbines for off-grid generation, and approximately 125MW of small hydro.

The Ministry of Energy published a long-term development strategy, called the Integrated Electricity Infrastructure Master Plan, in 2018. It envisions new power generation projects totaling 530MW of solar and 150MW of wind, in addition to 4,300MW of hydro, 1,350MW of coal and 8,500MW of natural gas.

Power prices and costs

Following a five-year freeze from 2010-15, retail power prices have risen considerably in recent years. Commercial tariffs increased 49% and residential bills more than doubled across 2016-2021 as state utility Electricidade de Mocambique (EDM) attempts to make up for longstanding revenue shortfalls. In 2021, the regulator kept tariffs for both industrial and residential bands flat. Social tariffs, which apply to low-income users, have remained stable.

Power market

Mozambique’s power market is structured around EDM, a state-owned and vertically integrated utility responsible for the transmission, distribution and sale of electricity. All power consumers in Mozambique must buy electricity from EDM, which oversees 20% of the country’s generating capacity and purchases power from independent power producers and the 2.1-gigawatt Cahora Bassa hydropower plant.

Cahora Bassa is majority state-owned and 90% of its generation is exported, mostly to South Africa. The plant’s vast size means hydroelectric generation dominates Mozambique’s power sector, representing 74% of the capacity mix in 2021.

Like most countries in Sub-Saharan Africa, Mozambique does not have a wholesale power market, but it belongs to the Southern Africa Power Pool ¬– an electricity power pool that spans 12 countries in the region – which is gradually increasing liquidity.

A new draft electricity law is expected to overhaul Mozambique’s power sector, streamlining the legal framework and clarifying licensing for generation, transmission and distribution. A new regulator, Arene, was established in 2017 but is not yet fully operational and will require support to become a strong and independent regulatory body.

Doing business and barriers

Mozambique has historically relied on its large-hydro resources, and the broader power fleet is in need of investment as the country seeks to expand generation capacity to meet rising demand and an ambitious electrification target. Power demand continues to grow quickly, with peak consumption having increased 34% since 2010.

Mozambique’s electrification rate remains low, reaching just 40% in 2021, and progress in extending access to the wider population has been slow. The government is aiming to achieve universal access to electricity by 2030, of which 70% is targeted through grid-connected systems and the remaining 30% off-grid.

The country’s rural electrification agency, Funae, has developed mini-grid and pico-solar pilot programs in partnership with German aid agency GIZ, and signed an agreement with Ignite Power in 2019 to install individual solar energy systems in 300,000 homes in remote areas.

Project development in Mozambique, whether conventional or in mini-grids, remains hamstrung by a lack of regulation. The development of a power plant requires a concession from the government, while the lack of standardization for power purchase agreements (PPA) can result in prolonged negotiations with EDM, which is heavily indebted and undergoing major structural and operational changes. Internal politics at the state electricity company remain a potential challenge to project development.

For on-grid projects, developers can negotiate prices that enable the project to be profitable, but PPAs are negotiated on a case-by-case basis and there is no standardized duration for either on- or off-grid projects.

Developers also face a difficult investment environment in Mozambique. A lack of standardization and clarity around licensing and concessions, the absence of a strong and independent regulator, as well as the challenging position of vertically integrated utility EDM compound a lack of incentives for renewables.

The development of vast offshore gas discoveries does threaten to divert government resources and attention away from renewables. Mozambique’s domestic natural gas sector has grown rapidly since 2015.

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

Mozambique has successfully experimented with energy efficiency programs in the past and the government has prepared a new plan to improve energy efficiency through the implementation of energy standards for industrial and commercial lighting.

Buildings policy

There are no specific laws.