Keeping Malawi Lit Up and ESCOM’s Reforms in a Free-Entry Electricity Market Regime
Updated: Jan 15, 2020
The electricity problem in Malawi has never been an insurmountable challenge. Rather, it has been let free to escalate to its current state. According to us, it is much less the problem of ESCOM than it is about implementing energy policies and plans.
As always, it has been about doing the right thing.
We know that only 9% of Malawi’s people have access to grid electricity, as 2015 statistics obtained from IRENA, the World Bank and the IEA confirm. With electricity demand estimated to grow to 874 Mega Watts (MW) in 2020, the current state of energy supply paints a bleak picture of the country’s ability to rebound and broaden its electricity base. Malawi currently has a hydro power generating capacity of at least 2000 MW, from Manolo on Songwe River to Zoa Falls on Ruo River – almost double the projected demand of the country in 2025 (set at 1193 MW, according to Malawi’s Energy Ministry). That is hydro power alone, among the many energy choices at the country’s disposal, which it is yet to explore. And yet, Malawi’s vehicle for generating and supplying electricity, the Electricity Supply Corporation of Malawi (ESCOM), continues to mal-supply even the minute segment of the population connected.
Accessing electricity in Malawi has almost always paralleled with ESCOM doing Malawians a favour. The enjoyment of ESCOM’s benevolence of dropping a line to tap power from the national grid, the only source of electricity commissioned in the country, is a celebration of the privileged few. The enjoyment of unflinching lights is the extravagance of even fewer Malawians. These are also the households that always have a back-up plan in the event of power failure, thanks to those that have profited in the energy situation from selling inverters and generators. Furthermore, for the lit-up population, such enjoyment splits further between households and industrial entities that must rely on electricity to produce and market for the economy to move.
Some households have never suffered with the rest on the woes emanating from ESCOM’s excellence at keeping power to itself. They have ably and cleverly established small generating plants for themselves. These include large tea estates that obtained licenses to generate and consume electricity within the confines of the farms, deals that were possible during the MCP days. A handful of people have engineered plants that smell of hazardous attempts to electrocute oneself, creative experiments that, with proper handling, could yield some good benefit.
Many excuses for the failure of ESCOM to deliver border around justifiable causes, pointing fingers at climate change and environmental degradation, and the reliance on seasonal and erratic rainfall patterns that must supply the Shire River with enough water to turn the turbines downstream. Others have blamed the irregular and inadequate provision of power on corrupt practices that climb the ladders of the government hierarchies, with less than convincing vetting processes in the awarding and signing of contracts by the sole electricity supplier. ESCOM’s top brass have successively denied involvement in muddled affairs, although it has been common knowledge they have bowed to political interests with refined dedication than to performing the tasks they were hired to do. Through the regimes that have governed the country, ESCOM trucks have hauled more party enthusiasts to political rallies than laminated poles and equipment to where electricity is demanded.
The utility company has also gone through several makeovers in the name of reform to make the giant a little less indolent at connecting our houses and factories, but more so to energize it so it can recoup enough revenues to keep its operational account running at full speed. This embodies a part of the ESCOM conundrum: its balance sheet has never balanced. A new mega reform that promises to split the entity into more efficient generation and distribution companies is anticipated to create two youngsters that can run and respond to the challenges facing not just new consumers, but also the existing clientele that seems to endure being shortchanged on its expectations. Reforms for ESCOM have always made the scene and have been shelved. Yet nothing has ignited a passion for heeding to the counsel over the decades.
ESCOM takes its marching orders from the law-making and the executive governments. A fact that is normally overlooked. This has meant that the errors committed by the arms of government have implications on the laxity characterizing the electricity supplier today. As national planners, they have failed to see the iceberg hit way too many times that no alternative options could be exploited for years. A row between Mr. Bakili Muluzi and the Danish government in the mid-90s lost the country the opportunity to draw Malawi’s first wind map, which was to expose the right sites for planting windmills across the country. More Malawians and the country’s productive economy would have been reached. More schools and hospitals would have been lit up. Perhaps, more importantly, there was a chance to introduce a competitor to ESCOM without having to trick it into efficiency using the current set of restructuring options. With capacity that could supply the entire country, with some change for sale elsewhere, there is enormous room in which we could fit ten ESCOMs that could reach at least 90% of the population. That is the room that new entrants can occupy. It makes sense, however, that the regulatory environment considers a strong efficiency argument as the entry of new firms occurs within the current framework of reforms.
While we believe in free markets and competition, the supply of electricity still requires the light touch of an informed government to manage distortions caused by market failures. This will ensure consistent supply of power to support the country’s development and perhaps make it a net energy exporter. Regulatory reforms need to put tight caps on transmission (which, for good reasons, we think should be left in the hands of government) and distribution. But it will start with a level of ambition of the government (see our recent article about this here) that goes beyond the pleasures of self-rooted interest and short-sighted political gain. It will also need tougher actions on environmental protection to keep the water flowing in our major rivers, and to erase the temptations of expanding coal and biomass in the energy mix. Our message to Mr. Msaka, Malawi’s energy minister, is that there is capacity that transcends Malawi’s energy needs in renewables that eco-unfriendly choices can be done away with.
In a post-monopoly energy market, the awarding of generation licenses should be auctioned to select the most efficient and fit firms. It will also have to regulate pricing that would ensure an appropriate price discrimination regime to allow both the poor and the rich receive light upon the clicking of a switch. Lawmakers must swallow the bitter pill of giving precedence to factories and deep-pocketed clients in the process so that, first, their bill payments keep engines running the economy back to life, and second, to ensure electricity suppliers have predictable cash flows. The principle of the fit helping themselves first to help others is what applies here. It is after power companies have stable incomes, and the right systems of checks and balances are enforceable, that new and smaller consumers can sustainably tap into the grid.
Beyond regulation, government needs to consider the alternative forms of electricity that will add value for the national grid as well as a positive footprint on the environment. Malawi’s energy policy wants to see coal upscaled to 6% of power generation by 2050. This is an environmental disaster that will only bring wide grins to coal miners that are rubbing their hands in anticipation of big bucks to make.
Energy planning should also consider the introduction of quasi mini grids at regional and district levels, where appropriate, to allow for electricity generation, consumption and employment at the most local level. Mini grids would aide to minimize power loss in transmitting electricity hundreds of kilometers long in the backbone North-South and East-West transmission lines. This might circumvent the absolute necessity of installing the “much-needed” 220-230 kilo Volt backbone for which money remains elusive.
The most important strategy of all is to stop calling the Malawi energy Regulatory Authority (MERA) an independent body, and start living the talk.