KfW Development Bank backs Mozambique's GET FiT program to encourage hydropower investment
7 November 2023
Mozambique's determined drive to bridge its electricity deficit while harnessing its substantial hydropower potential and other renewable energy resources has found strong support from the KfW Development Bank.
This initiative, which aims to revolutionize the nation's energy landscape, enjoys the backing of the European Union (EU) and the German government. Mozambique, ranked among the world's ten poorest countries, grapples with a critical energy shortfall, with just 50% of its population enjoying access to electricity. To propel the country towards energy sustainability and universal access, KfW Development Bank has taken the reins in overseeing the GET FiT (Global Energy Transition Feed-in-Tariff) program on behalf of the EU and the Federal Ministry for Economic Cooperation and Development (BMZ).
At the heart of the GET FiT program is a mission to stimulate private sector investments in the expansion of renewable energy infrastructure across Mozambique. The initial phase of the program focuses on promoting private solar projects and the installation of photovoltaic systems, with BMZ having already committed €25 million to kickstart this phase. Simultaneously, the program's second phase is set to support the development of small-scale private hydropower ventures, with funding provided by the EU. "Hydropower has huge potential in Mozambique to generate climate-friendly energy," explained Marco Freitag, KfW portfolio manager. According to extensive studies, the country boasts over 1,400 potential sites for hydropower projects, with a collective capacity exceeding 18,000MW.
Under the GET FiT Mozambique II umbrella, KfW has earmarked approximately €20 million to facilitate the entry of private power producers (IPPs) into Mozambique's burgeoning energy market. IPPs stand to receive tariff subsidies disbursed over several years following the commissioning of their power plants, thanks to a results-based funding approach. The program also extends its support to the integration of hydropower facilities into the national electricity grid while mitigating financing risks for IPPs through a guarantee facility. Furthermore, GET FiT's forward-thinking approach involves the establishment of standardized contracts and approval processes, which, in turn, reduce costs for private investors and expedite project implementation. To ensure transparency and foster competition while maintaining favourable electricity tariffs, project licenses will be awarded through an international public tender.
"The EU investment can mobilise additional private capital of about EUR 60 million," Freitag explained. The programme will focus on the north and the centre of the country, where almost 80% of the population lives and where electricity supply is inadequate and not very reliable. "If reliable energy is provided, this also contributes to economic development," Freitag added, stating that GET FiT exclusively promotes electricity production from renewable energy sources - and thus makes an important contribution to climate protection.
Mozambique already generates 80% of its energy from renewable sources, with hydropower accounting for the lion's share. The program's ultimate ambition is to more than double the installed capacity of hydropower plants, increasing it from the current 2200MW to around 4500MW by 2030.
Hydropower projects under GET FiT are anticipated to have installed capacities ranging from 4 to 15MW. Prior to commencing plant construction, environmental and nature impact assessments are conducted to ensure that the benefits to the population outweigh any potential adverse effects. Collectively, the program seeks to add 25MW of power generation capacity through these projects, potentially supplying electricity to more than 400,000 people annually, depending on the project locations.
