This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 2/22/2017

Overview

With an electrification rate of only around 10%, Malawi has one of the most severely constrained power sectors in sub-Saharan Africa.  Total system capacity stands at just 351 MW, nearly 20% of which was added only in 2013 with the commissioning of the 64 MW Kapichira II hydropower project.  This represents the first new generation supply in over 13 years.  Peak demand presently exceeds supply by almost 100 MW, and demand forecasts by the Government of Malawi’s Department of Energy indicate that this gap will grow significantly between now and 2030.  The existing power system has its source of supply from three hydro power stations on the Shire River and a 4.5 MW mini-hydro on the Wovwe River.  There is also a MVA solar photovoltaic plant at Kamuzu International Airport run by the Airport authority.  The existing operating capacity of ESCOM (351.7MW) carries a system operating reserve of 10MW.  While the vast majority of Malawi’s power is hydro-based, efforts are underway to diversify generation sources, including with support of the U.S. Millennium Challenge Corporation.

Sub-Sector Best Prospects

With generation capacity currently lagging behind demand for electricity, electricity generation is a high priority.  In April 2011, the Millennium Challenge Corporation signed a Compact Agreement with the Government of Malawi, which entered into force in September 2013.  The Compact focuses on power infrastructure, power sector reform, and environmental and natural resource management aimed at securing hydropower generation on the Shire River.

U.S. companies can explore independent electricity generation opportunities through power purchase agreements and other possible outsourcing opportunities with ESCOM, the national power utility.

Opportunities

Between now and 2020, the Malawi Government plans to add over 100 MW of power.  Despite these efforts, a power shortfall remains projected for 2020.  As Malawi lacks the capital to fully meet this gap on its own, it is considering new generation projects using available ESCOM resources and proposals from independent power producers, further grant funding, soft loans, and bilateral borrowing.

ESCOM is currently implementing the following power supply projects: 

  • 10MW diesel peaking plant in Lilongwe expected on line by 2016 and funded by ESCOM. 
  • 6MW diesel peaking plant in Mzuzu currently under procurement and funded by ESCOM.  It is expected on line by 2017. 
  • 23MW Tedzani IV under procurement and funded by JICA.  This is expected to be on line by 2018. 
  • 300MW Kammwamba Coal Fired plant being championed by Government of Malawi.  Plans are to bring 10% of output on line by 2019 and 90% by 2020 with the final 100% by 2021. 
  • An additional 12 MW at the Nkula A hydropower plant as part of the MCC-funded rehabilitation of this site.

Projects under Feasibility and/or Design Stage: 

Government is undertaking several feasibility and design studies of power sources which could be implemented in the short term (2016 – 2020).  A brief summary of the projects: 

  • Songwe River Basin Hydro Electric Project Phase I 

This is a joint project by the governments of Malawi and Tanzania.  The African Development Bank funded the feasibility and design studies.  The final Design Report was expected end of 2015.  Funding and other administrative issues are expected to be finalized in 2016.  This project will be commissioned in 2022 with 90MW reserved for each country. 

  • Mpatamanga Hydro Electric Project 

Funded by the World Bank, the feasibility study is expected to be completed in 2016.  Mpatamanga is expected to generate up to 350MW.  It will have a large reservoir expected to benefit investments downstream like Kapichira Power station, the future Hamilton Falls Hydro Electric Project, and also the Lower Shire Irrigation Project. Current estimates are that the power station will be on line by 2021.  Power is expected to be evacuated through the new Phembeya Substation. 

  • Kholombidzo Hydro Electric Project 

The feasibility and design studies are being funded by the African Development Bank.  It is a run of river design, which will generate about 100MW, and may potentially include some storage.  Kholombidzo is very close to the new Phombeya Substation through which power is expected to be evacuated.  The feasibility report is expected to be delivered in 2016. 

  • Lower Fufu Hydro Electric Project 

The World Bank is funding the feasibility study and detailed design of this project.  The project will be on South Rukuru River with North Rumphi and Lower Fufu River transfer.  The location is independent of the other power stations and also Phombeya Substation.  For system stability, its location would greatly enhance security of the power system and also reduce losses.  However system optimization would require the above feasibility studies due sometime in 2016.  The scope of works for Lower Fufu involve extensive tunneling and may cause delay in the completion of the project. 

  • Cogeneration (Renewable) 

The proposal is to use bagasse from sugarcane mills at Dwangwa and Nchalo to generate power for the grid.  The study is being funded by the World Bank and expected to be finalized in 2016.  The project has a quick implementation period.  At Dwangwa, 5MW can be injected into the grid in one year and this can be followed by 20MW at Dwangwa and 35MW at Nchalo by 2018.  It is proposed that its developments should be done by an IPP or PPP.  

  • Geothermal 

The government is recruiting a consultant to scan and identify potential sites for geothermal.  While geothermals are a very attractive source of power, it is prudent to be conservative about the likelihood of a find at this phase. The project is part of a World Bank funded package. 

  • Interconnection Projects:

    • Mozambique – Malawi Interconnection 

The first phase of interconnection between Malawi and Mozambique at 400kV would connect Tete in Mozambique and Phombeya in Malawi.  The initial design for this line was to construct a line with a transmission capacity of 280MW during drought conditions.  The feasibility and design studies are being updated and the line is expected to be commissioned in 2018.  EDM (a Mozambique Power Supply Company) has committed to provide 50MW as part of the agreement.  World Bank is funding this project. 
The second phase of interconnection with Mozambique will involve the construction of a 400kV line from Phombeya in Malawi to Nampula (Nacala) Province.  This will enable Malawi to import and transmit power from the energy rich Tete Province (both hydro and coal power stations) to Nampula Province.  This interconnection offers a great relief in power deficit through power imports and also sets open a door for exports to the regional market in times of excess power as well as an opportunity for railway electrification from Phombeya substation.

  • Malawi – Tanzania Interconnection 

A Southern African Power Pool (SAPP) Regional Generation and Transmission Expansion Plan Study by Nexant and funded by the World Bank in 2009 recommended that “the planned projects to interconnect ESCOM and TANESCO be given high priority and accelerated to the extent possible”.  The World Bank is currently funding a feasibility study to interconnect Malawi and Tanzania with a 400kV line from Nkhoma in Malawi via Songwe to Tanzania.  This project will also interconnect the SAPP with the Eastern African Power Pool.

  • Zambia – Malawi Interconnection 

An MoU was signed between the Governments of Malawi and Zambia to facilitate project implementation.  This line will be at 330kV connecting Chipata in Zambia to Nkhoma in Malawi.  

  • Other Renewable Power Options 

Apart from mini-hydro power and cogeneration potential plants, other renewable power generation options also exist in Malawi.  These include concentrated solar power (CSP), solar photovoltaic (PV), and wind.  Most of these options can be developed for either grid connection or off-grid use.  With support from the World Bank and also the University of Strathclyde, the GoM is looking at potential sites for these renewables.  A thorough study however has to be undertaken to validate the development and application of these renewable energy sources in the Country.  It is also worth noting that the current ESCOM grid can only absorb a limited amount of power from variable renewable sources such as wind, solar PV, and CSP.  Some preliminary assessments have indicated that the grid can only take up to 40-85 MWs of such variable power sources on the existing network.  

  • Independent power producers

Independent power producers, together with the government, are considering at least four projects that, combined, could provide up to an additional 220 MW of power.

  • Proposed 40-100MW solar energy project by U.S. company Atlas Energies 
  • Proposed 40 MW hydropower project on the Bua River at Mbongozi with local firm HE Power 
  • Proposed 30 MW solar energy project with Canadian firm JCM Capital
  • Proposed 50 MW solar energy project with Tanzania company Grow Mine Africa 

These independent power producer projects may also represent potential opportunities for debt and/or equity investors.  More information is available from the Department of Energy.

  • Additional near-term opportunities

With existing or soon-to-be-completed feasibility studies, there are real opportunities for near-term investment for public-private partnerships and/or for independent power producers.

  • Longer-term opportunities

Two additional hydropower projects and a handful of solar, geothermal, and biomass projects provide other potential opportunities.  These projects are at various stages of development and consideration by the government and could eventually become prime for public-private partnership.  Generation projects are expected to benefit from possible trading and export opportunities when cross-border transmission projects are in place with Mozambique, Tanzania and Zambia.

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Malawi Energy Trade Development and Promotion