Mozambique gets $43.6 million for power line

From the newsletter

The African Development Bank has approved $43.6 million in financing for electricity transmission line infrastructure in Mozambique. The project will be carried out by the national power utility company in partnership with a private sector team led by independent power producer Globeleq. It will evacuate power from the country's first grid-connected wind farm.

• The AfDB has reportedly faced funding cuts from its major donor, the US. This situation could impact its plans for the next financial year if an alternative funder is not found. However, for now, it remains on course to meet its targets.

• This project will not only supply power to Mozambique but also connect to the Southern African Power Pool market. It follows a growing trend of countries building infrastructure with regional interconnection in mind.

More details

• The funding includes $33.2 million from the African Development Fund and $10.4 million from its Climate Action Window, with additional contributions from the Government of Mozambique. This investment will transmit 332 gigawatt-hours of clean wind energy from the 120 MW Namaacha Wind Farm to homes and businesses in Mozambique and Southern Africa.

• This isn't Mozambique's first venture into interconnecting its power grid with neighbouring countries. It has, for instance, signed a deal with Zambia for electricity exports. The increasing energy challenges and the growing need for countries to achieve universal electrification have made grid interconnection vital. Countries with surplus generation can sell their excess power in regional markets.

• Mozambique is connected to the Southern African Power Pool (SAPP), which includes countries with electricity deficits like South Africa and Zambia. Furthermore, the SAPP market is connected to the East African Power Pool, where similar challenges exist, with Kenya facing even more severe issues than its neighbours. Kenya has relied on Ethiopia to meet its peak demand and is even negotiating for an additional 50-100 MW on top of the current 200 MW it imports.

• Opening up regional markets for interconnection and the liberalisation of electricity markets will allow for greater private sector participation and boost generation capacity. This could potentially accelerate electrification efforts and the adoption of renewables. Heavy energy consumers, such as mining companies, could source cheap and clean power from a competitive market.

• The AfDB has been a key supporter of interconnecting African grids through funding. It has provided $104 million for the Ethiopia-South Sudan project, $154 million for Uganda-South Sudan, and supported the already completed Kenya-Ethiopia transmission line. The bank, however, faces a risk with the exit of some of its major funders.

• The AfDB is now left with the option of pursuing structural reforms that would allow its main fund, the African Development Fund (ADF), access to international capital markets. This plan could enable the ADF to raise an additional $27 billion in funding, which would aid in supporting its mission of connecting 300 million Africans by 2030.

Our take

• The future of Africa's power market lies in interconnected grids. With the growing adoption of intermittent renewables, countries will increasingly need baseload power. This can be better achieved when grids are intergrated.

• It is now a wake-up call for countries with reliable renewables, such as hydropower, to fully explore their potential. The Democratic Republic of Congo, for instance, could generate enough power from hydro to supply several countries.

• However, as Africa's major project funder, the AfDB, grapples with funding challenges, private equity funds should increase their involvement. Several funds have been established, but this needs to scale up to meet the growing demand.