Jul 06, 2012
Malawi adjusts power pricing thinking in bid to attract private developersBack
Escom|Hydropower|Supply Corporation|US’s Millennium Challenge Corporation|China|Malawi|Mozambique|USD|Electricity|Electricity Sector|Electricity Tariffs|Energy|Power Producers|Shire River|Ben Botolo|Bingu|Joyce Banda|Ken Lipenga
© Reuse this
Finance Minister Ken Lipenga said when he presented the country’s 2012 Budget to Parliament last month that the measures included gradually removing subsidies on electricity supplied by Escom to ensure the tariffs were at full cost-recovery levels.
“There has been limited private-sector investment in the power sector in Malawi because electricity tariffs have been set too low. The adjustment of electricity tariffs to full cost-recovery levels will create incentives for private-sector investment in power generation and distribution.”
Lipenga added: “Because energy is the lifeblood of industry, immediate reforms are needed to create a conducive environment for scaling up capacity. In pursuit of this goal, we have increased electricity tariffs by 63.52% so that revenues in the sector are closer to cover- ing the costs of production. This measure is a move towards a more market-determined tariff structure in the electricity sector.
“It is our intention to have a pricing structure that reflects the long-run average cost of producing electricity in order to allow the private sector to invest in further generation capacity.”
Lipenga said the upward adjustment of the country’s electricity tariffs would also assist Escom in raising funds to meet the cost of importing electricity from Mozambique under the planned World Bank-financed Mozam-bique–Malawi power interconnector project.
Malawi, which generates 98% of its electricity from hydropower plants on the Shire river, has an installed generation capacity of less than 300 MW, while demand is around 400 MW and is projected to increase to 700 MW by 2020.
Meanwhile, the Malawi government says it is optimistic about its negotiations with the US’s Millennium Challenge Corporation (MCC), from which it is seeking $350-million for the power sector. The deal was suspended over concerns about poor governance and lack of respect for the rule of law during the previous administration of the late President Bingu wa Mutharika.
Lipenga said, thanks to positive reforms initiated by the administration of the country’s new President, Joyce Banda, MCC had reopened its country office in Malawi and there were high hopes that the US federal agency would resuscitate the grant.
Proceeds from the MCC grant would be used mainly to rehabilitate Malawi’s power plants, which frequently break down, contributing enormously to the country’s electricity woes.
In a related development, the Malawi government says its Kapichira 2 hydroelectric power station will come on stream in August 2013.
The station will add 64 MW to Malawi’s power grid.
Ministry of Energy and Mines principal secretary Ben Botolo says: “We expect to have the machines at the site between August and December this year. The contractor has already worked on the designs and the specifications have been taken to China.”
In other efforts to increase power production capacity, Malawi is implementing the $70-million World Bank-financed Malawi Energy Sector Support Project, which involves a number of surveys to identify and develop potential for electricity generation on a number of rivers in the country, and is also pursuing a project to quantify its coal resources for electricity generation.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines
Other News This Week News
Updated 8 minutes ago South African stocks were led lower by top tier mining stocks on Tuesday as global gold prices slumped by more than two percent on US dollar strength. AngloGold Ashanti was the biggest loser in the blue chips index, tumbling 3.78% at R184.25, its biggest percentage...
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
This Week's Magazine
South African antenna designer and producer Poynting and provider of professional products, system integration and implementation and commissioning services for the broadcast and telecommunications markets in South Africa, African Union Communications (Aucom),...
Industrial automation giant Festo has been displaying some of the its ongoing research projects and latest automation developments and products at the Hannover industrial fair from April 7 to 11, as part of its Integrated Automation – The Next Steps theme. The...
South African retail companies are responding to the way in which e-commerce is changing their engagement model with customers by improving customer engagement channels and order fulfilment intelligence, says industrial and retail software company JDA Europe, Middle...
In support of the South African government’s mandate to create more jobs and promote sustainable development, multilevel marketing company Amway’ business model aims to assist government in easing the startup of business and encourage an entrepreneurial mindset...
The global energy outlook is that energy demand will double by 2050 and the world’s population will grow to nine-billion, creating a need for increased energy supply with reduced carbon dioxide (CO2) emissions.