In July 2018, a workshop was delivered in Lilongwe, Malawi with the intention of fostering collaboration between a wide range of stakeholders in the country’s energy access industry, specifically within the mini-grids and pico-solar products sectors. 23 presentations were given to 54 attendees which included practitioners, researchers, civil servants and industry partners who shared information on the subjects of market constraints, lessons learnt and opportunities for the future. The workshop was funded by the Scottish Government and the UK Department of International Development (DFID), and facilitated by the University of Strathclyde, Practical Action, Community Energy Malawi (CEM) and the Business Innovation Facility (BIF).
Discussions produced three key lessons for the topics of mini-grids and pico-solar products:
- Key lessons on mini-grids
- A non-subsidised business model has yet to be found
- Restrictive and outdated policies are hindering market growth
- More coordination is needed between stakeholders, private and public
- Key lessons on pico-solar products
- Poor quality products make people lose trust in solar
- A more enabling environment for businesses is needed
- A better understanding of energy access can provide a strong foundation for the future
These lessons are described in more detail at the end of this post with full details of the topics and discussions from each of the workshops available in the report below:
The workshop finished by promoting a concluding discussion which summarises the progress which was made:
Key message:
Malawi’s energy ecosystem is unique, and as such, bespoke and robust business models are needed ensure project sustainability and improve energy access.
Demand:
The energy sector will progress faster with better understanding of energy demand. This requires market research, data acquisition and dissemination to help understand the energy needs of rural communities.
Business models:
Hybrid business models combining community and private elements are will be most effective for Malawi, as such elements will maximise system sustainability.
Key requirements for sustainability:
– Communities need to understand energy systems and usage costs
– Roles and responsibilities of stakeholders must be clearly defined
– Need sustainable and cost reflective tariffs which cover maintenance costs
– Investment in training and capacity building are key to operational efficiency
– Simple, transparent regulatory and legal frameworks aid business planning
Development:
Malawi needs to develop a demand driven energy access action plan which unlocks the buying power of individuals. Products must conform to standards which requires well-coordinated efforts by companies, consumers, policy makers and authorities.
Key Lessons on Mini-grids
A non-subsidised business model has yet to be found
The mini-grid sector is missing an active private sector as the enabling environment is not currently conducive for participation in development and application of the technology. Lack of financing mechanisms are currently a key barrier to mini-grid deployment, with high interest rates. Donors focus on capital costs and up-front funding, while it is recognised that costs are spread throughout the project lifetime. Especially with solar mini-grids, battery replacement costs are a key challenge.
Restrictive and outdated policies are hindering market growth
A clear and robust rural electrification master plan is essential to reduce the risk of the national grid encroaching on potential mini-grid sites. MERA is developing a tariff setting tool, but without it there is a risk that tariffs will be unsustainable and not cost reflective. Current licensing costs and processes for mini-grids are high and long respectively. Proposed changes by MERA are needed as soon as possible to streamline new installations.
More coordination is needed between stakeholders, private and public
More coordination is needed between non-governmental players, especially in the private sector. Organisations like REIAMA and CONREMA can support sharing knowledge and best practice but require commitment to support from private sector actors. It is necessary to consider plans which allow for reduced fee or free membership for small and medium sized enterprises.
Key Lessons on Pico-solar Products
Poor quality products make people lose trust in solar
The bodies responsible for checking the conditions of the pico-solar products are not doing a good job because there are a lot of fake products on the market which hinder the sale of the original ones. Government bodies need to be more proactive in producing standards regulations and then enforcing them which could come in the form of MERA certifying reputable importers. Increasing consumer awareness of quality products and other identifiers such as warranties could also help improve overall product quality across the sector.
A more enabling environment for businesses is needed
Through reducing or removing import duties and VAT on renewable technologies, the cost to businesses and consumers will reduce. This will make entrepreneurs and investors more likely to see the solar PV industry as a viable business proposition which can be further enhanced by providing support to banks and other financial institutions to allow reductions in loan interest rates. With local banks providing financial support, the shortfalls of national and international donor funding can be avoided as the all stakeholders have a vested interest in the long-term sustainability of the business and sector as a whole.
A better understanding of energy access can provide a strong foundation for the future
There is still only patchy knowledge of the energy access situation in Malawi as a whole, while the data which does exist fails to sub-categorise the type of energy access. With a better knowledge of the scale of the problem and the characteristics of communities, feasibility studies can be conducted which will not only improve the chances of projects succeeding, but also provide assurances for financial institutions when offering loans. Such a task requires the cooperation of industry players at all levels, starting with workshops like this one which has demonstrated the will of actors across the solar PV sector towards growing the market in Malawi.
Strathclyde Energy for Development 