Analysing Feed-in Tariff Policy to Accelerate Renewable Energy Deployment and Electricity Access in Malawi

Abstract

Decarbonisation of the energy sector and promotion of renewable energy sources is a central goal of Malawi Government as outlined in the country’s Renewable Energy Strategy essentially aimed at increasing the installed capacity of renewable energy technologies and the distributed generation of renewable electricity to accelerate electricity access within the nation boarder. In order to exploit the renewable energy, the government adopted the Feed-In Tariff (FIT) policy, the most versatile and widely implemented scheme globally accounting for a greater share of renewable power propagation than any other renewable energy policy support scheme. FIT is the highest-flying market-based economic instrument promoting renewable energy deployment and being implemented in over 110 countries worldwide. The purpose of this thesis was to analyse the poor performance of Malawi FIT and redesign the policy to attract investors. Since its inception in 2012, the FIT has neither increased renewable electricity generation capacity nor attracted any Independent Power Producers to connected to the grid or generating and selling power to a particular community as distributed generation. The research assessed FIT policy design and remuneration model in Malawi, scheme implementation and challenges faced and funding for the policy. The research explored innovative design to limit the total policy cost. Among the notable research findings and policy design include remuneration model entailing fixed price with full or partial inflation adjustment, levelized cost-based tariff established on conservative basis, shallow approach interconnection costs and inflation tariff adjustment approach. Some of the policy implementation challenges are lack of technical expertise, lack of policy funding, low end-user tariff being charged as ratepayer, grid capacity and low tariff levels. FIT policy funding is critical as it has a bearing on the investors security and several ways to fund the Malawi FIT policy were explored namely fuel levy, electricity levy, ratepayer, maximising electronic fiscal device tax collection to ensure policy longevity and sustainability. The study also involved modelling FIT rates for KIA solar farm under six scenarios and policy options using RETScreen Expert. To turn the KIA project to profitability, the FIT has to be $ 0.51 kWh and investors will earn a 10 % internal rate of return on equity A well-designed FIT will transform the country’s energy system in profound and tangible way. An effective FIT scheme will foster more rapid renewable energy deployment, increase overall electricity generation, boost economic development and increase electricity access in the country while avoiding the greenhouse gas emissions.