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International

African fishing village near Senga Bay - Malawi

Lessons from Malawi: Five Steps for Planning Sustainable Energy Investments

Whole-system energy investment planning shows how countries like Malawi can reach Sustainable Energy for All goals at a lower cost, using abundant renewable resources. RMI’s work in Malawi applies a few core principles to demonstrate US$500 million in savings as the country increases electricity generation and connects households to achieve universal energy access.

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Development needs energy. In countries like Malawi, where only 12 percent of the population is connected to the electric grid and reliable power is one of the greatest barriers to business, this is shown in sharp relief. Improving the country’s infrastructure to provide affordable, reliable energy for all is at the core of national development goals.

There is a misconception that renewables are an expensive alternative, and least-developed countries will need cheap fossil fuels to kick-start their own growth, in the same way as they were used by wealthy countries. Today, solar is the cheapest source of electricity available in many places, and battery costs continue to plummet, meaning renewables offer the most compelling pathway for national energy investments. 2019 also saw the greatest decline in coal-fired electricity generation in history. This was led by the United States and a major drop in India, where the low utilization of coal-fired plants is making them ever more costly to operate.

Against this backdrop, there is an opportunity for least-developed countries to fast-track their energy transitions, as laid out by UN Under-Secretary General Fekitamoeloa Katoa ‘Utoikamanu and RMI Managing Director Richenda Van Leeuwen.

Figure 1. Validation of the Malawi Sustainable Energy Investment Study

 

RMI’s recent work with Malawi’s Department of Energy Affairs and UN-OHRLLS has shown how a least-cost energy development pathway for the country saves US$500 million compared to business as usual, using a fully renewable scenario and de-risking the sector to attract investment.

Learning from Malawi

In November 2019, Malawi launched the Sustainable Energy Investment Study alongside the updated National Energy Policy. This plan was based on extensive modelling, analysis, and stakeholder consultation across the energy sector, drawing on previous work in Malawi. A few core principles emerged from this process. These can be distilled to the following five steps, that may be applicable to many other countries in similar situations.

Figure 2: Meeting Malawi’s energy needs will mean rapidly accelerating progress on electrification and clean generation

1. Build the right projects, in the right order

Lead with a national vision for the energy sector, based on least-cost optimization; try to avoid creating confusion and sending mixed signals with conflicting plans and policies. Supply and demand need to be balanced, so the plans must be flexible enough to respond to the real need for power, without locking utilities into long-term contracts for power they can’t sell. Applying these principles will help to save 25 percent of the projected cost of Malawi’s electricity generation infrastructure through to 2030.

2. Balance distributed and centralized energy resources

Energy efficiency will have a greater impact than we may think. In many cases, it can easily save 10–15 percent of projected demand, especially if it is considered at an early stage. Also, on- and off-grid resources will work together in ways we might not expect; Energy planning and regulations should allow space for different models to develop. People will want to move up the “energy ladder”, improving the services available to them over time.

3. Drive cost reductions in both hardware and finance

Capital costs for renewable energy are dropping fast, and competitive bidding in a dynamic environment informed by international benchmarks should help capture these savings. In parallel, a de-risking process will help reduce the cost of finance.

4. Apply subsidies carefully, where they are most needed

Climate finance is increasingly available for developing countries (although support may be needed to access the funds). These funds should be used to further de-risk and blend with private finance where appropriate, to scale up investment. Governments always give some sort of subsidy to the power sector, even where tariffs are cost-reflective. For example, this may be in the form of guarantees for investors. This support should be made explicit and recognized. Public and grant funding will need to flow to the hard-to-reach populations and support areas like cooking solutions; Not everything can be left to the market.

5. Plan for a cooking energy transition

Health issues and deforestation make an energy transition in cooking urgent. Improved cooking stoves are an immediate first step in Malawi, but the long-term plan must be more ambitious. This transition may seem expensive, but in the long term it is far cheaper than the alternatives, which in Malawi’s case include environmental remediation, topsoil loss, siltation of hydroelectric reservoirs and more. Cooking must be considered alongside the broader energy sector, and more funding is urgently needed. Sustainable Energy for All estimates only 1 percent of the required finance for 2030 goals is being made available today.

Figure 3: There is a US$3 billion investment need across Malawi’s energy sector through 2030, including cooking and forestry

For these five things to happen, governments need to lead. In Malawi’s case, the Department of Energy Affairs is looking to drive a clear agenda that development partners, investors, developers, and other partners can sign up to. If stakeholders can work together, there is an opportunity for huge savings in the transition to a sustainable energy future.

Download the full Sustainable Energy Investment Study from the Malawi Department of Energy Affairs website.

Having helped chart a common vision, RMI will continue to be involved and provide ongoing support as these recommendations are implemented in Malawi. Beyond this, we will continue to work with UN-OHRLLS and other partners to share the learning and look at opportunities for other least-developed countries to build sustainable energy pathways.