Keywords

11.1 Introduction

In December 2023, amidst the fanfare of the annual climate change summit or Conference of Parties in Dubai (COP28), President Filipe Nyusi launched Mozambique’s Energy Transition Strategy for 2023–2030. He summarised his declarations in a tweet saying:

Compatriotas,

Enfrentamos duas realidades que constituem dilema face às nossas ambições de desenvolvimento económico: como um país em desenvolvimento, os níveis de acesso à energia estão abaixo de 53 por cento, mas somos hospedeiros de grandes reservas de gás natural.

Para contornar esta situação, acabamos de lançar, em evento paralelo à COP28, a Estratégia Nacional de Transição Energética, assumindo desta forma o nosso papel fundamental na transição energética no suprimento das necessidades energéticas da África Austral, o que vai contribuir para a descarbonização regional.

Esta iniciativa não apenas coloca Moçambique na vanguarda da inovação climática, como também o posiciona como um destino de investimento atractivo sustentável.Footnote 1

Nyusi’s declaration highlights the country’s priorities for the energy transition: exploiting the large deposits of natural gas found in the Rovuma Basin in 2012 (whose reserves are estimated at 286 × 109 m3) and attracting international investment. The political declaration aligns with recent interventions by the African Union, which in June 2022 called for African countries to use their “abundant energy resources, including renewable and non-renewable energy, to address energy demand” (African Union, 2022). Yet, Mozambique’s Transition Strategy will direct an investment of USD 80 billion to renewable energy to reduce the country’s dependence on fossil fuels. The Strategy adds to a series of reforms in the energy sector, including a new regulatory framework for off-grid developments, that demonstrates an expansion of the role of renewable energy in the future of the country.

The dynamic changes in energy policy witnessed in Mozambique in recent years follow the Government’s ambitious commitment to achieving universal energy access by 2030. Since 2001 the electrification rate has increased from 5% to an estimated 51.3% at the end of 2023 (EDM, 2022). Despite these gains, a lot remains to be done to achieve universal access, particularly for Mozambique’s rural communities, which comprise about 67% of the population (INE, 2019p. 38). Less than 6% of rural dwellers have access to electricity compared to 57% of urban dwellers (INE, 2022). To attain the 2030 target, a combination of national grid expansion and off-grid electrification through mini-grids and solar home systems is planned (Government of Mozambique, 2018). Off-grid expansion is crucial for reaching rural communities, which are widely distributed across the country, often in low densities, making it financially and logistically difficult to instal, supply, and maintain electricity infrastructure.

To help increase Mozambique’s energy access, regulatory reforms have been made to enable the private sector to supplement the energy provided by the state utility company (Electricidade de Moçambique, EDM). The first reforms in 2012 and 2013 approved regulations to enable Independent Power Producers (IPPs) of large (Decree 16/2012) and small (Decree 69/2013) projects to produce and supply energy to the utility company grid system. The second, in 2021, was to regulate energy access in off-grid areas for public and private entities through mini-grids up to 10 MW and energy services (Decree 93/2021). The regulatory framework for off-grid energy access was further developed during 2021/22 by the National Regulatory Authority (ARENE) in partnership with BRILHO, an FCDO/Sida-funded programme.

A transition, however, does not end with the approval of regulations. What is the impact of these policy changes on the energy systems in Mozambique, particularly regarding the government’s objective of achieving universal energy access by 2030?

The development of the off-grid regulation during the lifetime of the CESET project provides an opportunity to understand how this regulation is impacting Mozambique’s off-grid energy landscape in broad terms, specifically on community energy uptake. How the regulation will be implemented and what projects and actions will follow from the regulation is crucial to understanding the extent to which the off-grid energy regulation will indeed facilitate a transition and, in particular, support the development of community energy. An analysis of the existing policy landscape is combined with a study of key stakeholders working in the country’s off-grid energy sector in terms of the opportunities, gaps, and challenges they perceive regarding implementation.

The following section (Sect. 11.2) provides a brief overview of the theoretical basis of the study, based on implementation theory, and informs the methods, presented in Sect. 11.3. The empirical results are presented in two sections: Sect. 11.4, which presents the policy analysis, and Sect. 11.5, which presents the perspectives of policymakers captured in qualitative research. Section 7 discusses the findings of these two sections, concluding that while setting a positive regulatory environment, there are still challenges in the implementation of off-grid energy projects.

11.2 From Policy to Implementation

After a complex process of adoption of the off-grid regulation, the question is what it means in practice. The literature on public policy and administration often assumes that there is a divide between a process of policymaking involving bureaucrats and a process of implementation, in which different ‘active’ actors adopt and work on the policy. Implementation is considered a late stage in the process, a residual process to achieve the policy goals (Hupe & Hill, 2016).

A common approach is to think of ‘policy’ as the core that generates a series of actions during implementation. The policy is thus defined as prescriptive, while implementation consists of applying those prescriptions. Implementation actions thus may involve the further development of policy objectives, the adoption of instruments that provide precise detail about how to make the policy effective, as well as the specification of political-administrative arrangements to organise institutional actions, and any procedural rules (Knoepfel et al., 2007). However, the relationship between policy and implementation is not straightforward. There is a burgeoning literature that explores the complexities of this relationship, particularly questioning the separation of co-jointed processes of policy formation and policy implementation. This kind of thinking may easily lead to a conceptualisation of implementation as ‘the rest’, the kind of actions that follow a complex strategic process of policy making (Hupe & Hill, 2016). In this chapter, the off-grid regulation is approached as part of an ongoing process of change, shifting towards the greater opening in the energy policy of Mozambique and influenced by liberalisation trends that have dominated infrastructure thinking since the 1990s.

This approach intends to overcome stylised conceptualisations that assume the strict separation between policy and implementation and, in doing so, overlook the struggles and compromises involved not only in policy formulation but also in its interpretation. For example, empirical experiences of delivering policy to achieve transitions to sustainability show that implementation raises specific challenges, often determining the success of a policy, for example, in the integration of new technologies within existing infrastructure systems (Aguiléra & Boutueil, 2019). Implementation is closely related to the strengthening of networks and alliances and thus, who is represented in the implementation process will determine the extent to which its outcomes are just and fair. The incorporation of communities in the co-production of implementation processes is increasingly a demand for sustainable development (Diep et al., 2022).

So far, the literature examining the development of off-grid policy, especially in African countries, has tended to pay more attention to the development of regulatory frameworks alone without fully appreciating the complexities of implementation (e.g., Bhattacharyya, 2013; Ole, 2020). We have identified five crucial elements that facilitate the advancement of off-grid policy towards implementation: clarifying institutional roles, enrolling different actors including the private sector, attracting resources and finance, addressing material constraints such as supply chains and facilitating the involvement of the community.

11.3 Methodology

The focus of the research was to consider the institutional context of policy development and how it will affect the implementation of off-grid regulation in Mozambique. Following the discussion above, the first step was to situate the off-grid regulation within the wider landscape of energy policy in Mozambique. This involved a systematic review of existing legislation exploring how off-grid, and more particularly community energy, is supported or restrained by the policy landscape. This review also enables mapping the actors active in the energy landscape, helping explore what different roles actors play.

The second part of the study consisted of eight in-depth key informant qualitative interviews with energy operators, bilateral and multi-lateral donors, and organisations working in Mozambique’s off-grid energy sector. This is a small sample, but it represents a relatively small group of stakeholders who are actively involved in embedding the current off-grid regulation in the energy sector. Interviews were conducted in August and September 2022, using a semi-structured interview guide with questions on the content of the regulation, the process that led to the development of the regulation, key challenges and how implementation of the regulation could be monitored going forward.

The interviews were transcribed and anonymized, and the data was analysed using Nvivo software. Additional feedback and comments were sought from key stakeholders to ground truth and validate the draft findings before they were finalised. A first round of analysis focused on understanding the consequences of the regulation during its implementation, including opportunities for off-grid energy expansion, the emerging challenges for off-grid development, and the possibilities to develop community energy as a special case of bottom-up project development. The policy recommendations emerging from this analysis were compiled in a CESET Briefing (Shenga & Howe, 2022). Further analysis examining the role of off-grid energy in the current energy landscape of Mozambique, the changing roles of actors, and the resources available for off-grid energy development informed the discussion.

11.4 The Development of Off-Grid Policy in Mozambique

Electrification is central to the delivery of the SDG7 in Mozambique. The emphasis has gone into extending the central grid to rural and remote areas traditionally excluded from having energy access. Despite appreciable growth in the rural electrification process, according to forecasts, Mozambique's current rate of electrification would only achieve global access in 2065. According to the World Bank, at the current rate, “Mozambique will connect 6.2 million users, reaching 63–65 per cent of its population by 2030, through grid connections” (World Bank Group, 2024), which is positive but far from the optimistic government commitment of reaching universal electrification by 2030. The World Bank recommends diversifying the range of on-grid and off-grid responses to bridge this gap, particularly considering that the increasing risk of drought in the country is likely to compromise its electricity system dependent on hydropower.

The government leads electrification efforts. The Ministry of Mineral Resources and Energy (MIREME) is the main energy planning entity in Mozambique, which has attributed competencies to the exploitation of energy resources and the expansion of energy infrastructure (MIREME, 2021). However, MIREME operates in coordination with the Ministry of Economy and Finance (MEF), which allocates funds for infrastructure expansion, and with Electricidade de Moçambique, E.P. (EDM) the public enterprise that manages the grid and implements electrification projects. While EDM implements on-grid projects, the Fundo de Energia (Energy Fund, FUNAE) is the agency responsible for the implementation of off-grid energy projects such as Solar Home Systems and mini-grids. FUNAE was created for the promotion of renewables in 1997, but it was restructured in 2020 (Decree 101/2020, of 12 November) to facilitate its role in the financing and implementation of off-grid energy projects. The project of electrification has a strong territorial component, with EDM being perceived as the main entity implementing projects in urban, high-density areas and FUNAE being responsible for rural, remote, and low-density areas. This separation means that the potential for off-grid projects in higher-density areas in Mozambique remains unexplored.

The main legal instrument to facilitate electrification is the Energy Law adopted in 2022 (Law No. 12/2022) which in contrast with the previous Electricity Law of 1997, pays special attention to facilitating the adoption and integration of renewables. The 2022 Electricity Law complements the Power Infrastructures Master Plan 2018–2043 aims to facilitate the development of new renewables for their integration into the national grid, fostering some important solar projects such as the Mocuba Solar Plant (30 MW of installed capacity). Regarding increasing off-grid capacity, in 2022, FUNAE had 97 functional solar plants across the country (ALER/AMER, 2022). Throughout 2023, three more mini-grids came into operation in the southern part of the country, totalling 100 (FUNAE, 2023). and adding 9.4 MW of installed capacity (see also additional data at ALER/AMER, 2023). Despite this progress, solar and wind energy still make a limited contribution to the government's electrification efforts. Much of this progress depends on the support (financial and technical of international cooperation partners, such as the European Union and UNIDO or bilateral agreements).

However, since the 1990s, several policy strategies around energy have been directed towards attracting private companies to the energy sector. The Electricity Law of 1997 first introduced Power Purchase Agreements (PPAs) to facilitate greater participation of private companies, particularly for electricity generation. Over decades, the role of the private sector has diversified, and increasingly it is being perceived as playing a key role in the development of renewables. For example, the Power Infrastructures Master Plan 2018–2043 envisages to the grid adding 125 MWof solar generation capacity, developed through Public Private Partnerships. In 2020, the government partnered with the European Union to develop a Renewable Energy Auctions Programme to facilitate a competitive and transparent procurement process for renewable energy and to reassure IPPs of the procedures for the development of new infrastructures, providing a more secure investment landscape. The Autoridade Reguladora de Energia (Energy Regulation Authority, ARENE) is the authority that oversees competition between public and private operators. ARENE was established in 2017 (Law n. 11/2017) as an independent, autonomous body, which conferred it a greater degree of legitimacy than its predecessor, the governmental body Conselho Nacional de Electricidade (National Electricity Council, CNELEC).

A report by the Lusophone Association for Renewables (ALER) and Mozambique’s Association for Renewables (AMER) highlights the important role that Independent Power Producers (IPPs) can play in developing the landscape of off-grid energy in Mozambique (ALER/AMER, 2022). Here is where the off-grid energy regulation provides an important framework to fill what ALER and AMER call ‘a legal void’ in defining what off-grid areas are and what the procedures are to obtain an off-grid concession. The new off-grid regulation may facilitate the active participation of the private sector in the development of mini-grids (currently dominated by FUNAE).

Optimistic assessments of community action on energy do not translate easily into context in which government-driven public interests wrestle with the potential development and economic opportunities of the energy sector Bomberg and McEwen (2012). In Mozambique, both public and private providers faced the regulatory requirement to demonstrate social benefit from any infrastructure or economic development project. Engaging communities is often thought to facilitate decentralised supplies and the adoption of heterogeneous renewable generation technologies (Wirth, 2014). However, there are broader questions of technology justice and resource sovereignty that remain unaddressed in technological approaches to community energy. Often, inadequate legal frameworks, lack of access to technology, and lack of resources combine to prevent communities from instituting, managing, and owning energy projects (Ambole et al., 2021). Mozambique is not an exception. Policies for the institutional diversification of the energy sector have put greater emphasis on infrastructure development and increasing investment than on ensuring social development, despite increasing realisation that a transition to sustainable energy depends on facilitating a fundamental cultural and social change. In fact, the discourse on transition appears to have fostered a backward movement away from the participatory approaches that feature in previous policies. For example, the 2009 New and Renewable Energy Development Policy (No. 62/2009) stated its intent to “Promote broad participation of the community, companies, civil society, in the process of developing new and renewable energies to guarantee the equitable prioritization”. In contrast, the 2018 Electricity Infrastructure Integrated Master Plan 2018–2043 (MMRE, 2018) makes no reference to community participation or to community energy. The off-grid regulation emphasises community engagement as a condition for the development of mini-grids but does not specifically state community energy as a workable strategy for development. In between the public and the private sector, communities and civil society organisations get squeezed out. So far, there is limited evidence of community engagement in the 100 mini-grid projects led by FUNAE, let alone facilitating their leadership in the development of solar projects.

11.5 Policymakers’ Perspectives on the New Off-Grid Policy Regulation

Against this context, policymakers’ perspectives offer a contrasting outlook of optimism and scepticism about the possibility of delivering a renewable, off-grid future. Scepticism increases in relation to community energy, which some actors do not see as a workable alternative. The analysis explored first the positive aspects of the off-grid policy, then the perceived implementation challenges, and finally, explored community energy perceptions in the context of the new policy.

11.5.1 Positive Aspects of the New Policy

All key informants emphasised the positive significance of having an off-grid regulation approved and in place. The regulation is unanimously seen as a key milestone for the development of the energy sector in Mozambique and particularly for achieving universal energy access in rural and hard-to-reach communities.

While there was acknowledgement that the regulation may not meet everyone’s requirements, there was widespread agreement that simply having a regulation in place, even if not perfect, is preferential to having nothing at all. This is because the ‘rules of the game’ of the operating environment are now known and publicly available. This has increased the private sector and investor confidence in the off-grid sector previously monopolised by FUNAE.

The interviewees stressed that the increased confidence in the business operating environment presents several opportunities. Firstly, there is an expectation that the off-grid market will develop by becoming more competitive, with the entrance of new companies and private investors, particularly in relation to mini-grids. Up to now it has been very challenging for mini-grid operators to advance in the sector given the grey areas that existed around licencing, compensation arrangements and the national electrification expansion strategy, for example. Secondly, linked with the expected off-grid market development is the anticipation of accelerated financing. This is expected from both private sources and development assistance providing much-needed startup capital or investment guarantees. However, as some respondents noted, it is a challenging business environment at the moment. Local energy operators are having to cope with multiple shocks from COVID-19, the Russia-Ukraine conflict, cyclones and a heated conflict in the north of the country. Moreover, local operators may not have the capacity to take advantage of the financing available. For example, they may not meet the eligibility requirements to access the funding or have the skills to apply for or absorb the investment.

Energy operators, donors and implementing partners also speak of their increased confidence in the government and its commitment to facilitate a conducive operating environment for the off-grid sector. One further opportunity identified is that having the off-grid regulation approved and in place could facilitate financial incentives such as tax breaks, subsidies, and tariff support to make the financial returns on investment more attractive for potential off-grid energy suppliers. In August 2022, Mozambique’s President Nyusi announced a stimulus package for the acceleration of the economy (Pacote de Aceleração Económica, PAE) to respond to the country’s growth needs. In addition to reducing the VAT rate from 17 to 16%, one of the measures announced—a VAT exemption on imports of electrical items—was specifically targeted at promoting investment in renewable energy and expanding energy access in rural areas. As of February 2023, specific details related to this announcement, such as exactly what electrical items are covered by the exemption, are still to be disclosed. The fiscal authority (Autoridade Tributária de Moçambique, AT) and the Ministry of Economy and Finance (Ministro da Economia e Finanças, MEF) have received from MIREME and from a representation of national off-grid energy operators a detailed proposal on the interpretation of PAE for the off-grid sector, and a list of materials and equipment for which custom tariffs and vat exemptions would be applicable on imports.

The government is seen as taking a proactive approach to developing legal and regulatory reforms. This extends beyond developing and approving the off-grid decree but also in the revisions to the electricity law and, most notably, institutional development through the creation of ARENE as an independent authority. There was widespread praise for the consultation process that led to the development of the off-grid regulation, both by those who participated in it as well as those who observed the process indirectly. Both ARENE and MIREME are seen as having played a positive role in developing a supportive policy environment as both organisations have engaged in constructive discussions with stakeholders working in the sector. Most interviewees were encouraged by this in the context of ARENE being an emerging institution that is still learning and building its capacity and whose remit covers the full spectrum of the energy sector, of which off-grid is only a small component. Expectations are, therefore, high among those interviewed for this conducive relationship to continue. It has also led to hopes for additional institutional reforms, specifically those that could pave the way to clarify the roles and responsibilities of EDM and FUNAE in how they work together with the private sector for off-grid sector development.

11.5.2 Perceived Implementation Challenges

Despite the overall optimism and opportunities conveyed regarding the off-grid regulation, respondents expressed reservations regarding its implementation. At the time of the interviews, a suite of accessory regulations (27 instruments in total) needed to be finalised and/or approved and published by the government, covering a wide range of topics such as concessions and technical and safety standards. Against this backdrop, one of the main challenges expressed is that the regulation has not yet been tested in practice, and there are several areas of ambiguity outlined below, which it is hoped will be clarified by the approval of the accessory regulatory instruments.

The off-grid regulation does not make any reference to the role of key public institutions involved in and responsible for the energy sector. Specifically, the lack of reference to the roles and interaction between EDM, which in cooperation with MIREME is responsible for the national electrification strategy, and FUNAE, which is responsible for energy access projects in rural and off-grid areas, was seen as a challenge for many respondents. The opaque nature of the planning and decision-making at the central level on the national electrification plans can interrupt investment in off-grid projects. This is because there is no clarity as to what happens when off-grid and on-grid energy projects interact or if grid expansion takes place in an area allocated to off-grid energy projects.

Another major challenge foreseen by respondents relates to financing and tax incentives. There was widespread anticipation that the decree would provide information about the fiscal arrangements for off-grid investments, such as taxation, customs duties, tariffs, subsidies, and compensation arrangements in the event the national grid extends into off-grid concession areas. However, the decree does not provide information on these issues. A concerted effort led by AMER brought a package of incentives for approval by the government, but the final approved incentives were only a fraction of those proposed.

Mozambique represents a difficult business operating environment for off-grid energy projects, and it is critical that operators and investors know the financial viability of their projects before they can commence operations (see also Chapter 5). This was emphasised most strongly by mini-grid developers. This is due to the time and sunk costs of conducting feasibility studies, developing a workable business model within the existing tariff regime and the exposure of capex costs. Similarly, a respondent who operates a solar home system (SHS) business, explained that 45% of operating costs are related to customs duties and tax to import the SHS equipment. These costs must be passed directly onto the consumer in the prices charged. Yet, the target consumers of SHSs in off-grid, rural areas are typically people with little or no regular income or ability to pay for goods and services. A reduction or exemption of import duties, for example, would make these systems much more affordable and would increase their uptake.

Another challenge foreseen, although not solely related to the off-grid decree, is whether there are sufficient government resources (financing and human capital) and alignment to implement the decree and the wider, ambitious universal energy access target. Respondents acknowledged that while the off-grid energy sector has gained momentum there remain skills and capacity gaps to implement and manage the new developments. The energy transition plan expects to create the conditions for a USD80 billion investment, but the reliance on international development partners is still high.

Other challenges are institutional. ARENE is seen as being stretched to respond at the pace of the off-grid sector due to it being a new institution that is not yet operating at full staffing capacity. Other public institutions are seen to have related parts to play, such as MIREME, EDM, FUNAE, and others, such as the National Institute for Standardization and Quality (Instituto Nacional de Normalização e Qualidade, INNOQ) which has responsibility for enforcing quality standards for off-grid energy equipment. It was felt too early at this stage to know whether these institutions have clarity in terms of their roles in relation to the off-grid decree and have the capacity to deliver and coordinate their work during its implementation. Energy operators, donors and implementing organisations expressed concern that if the government is too slow to act because of resource constraints, financial and technological opportunities could be missed. The dynamic nature of the renewable energy sector could make current policies and practices quickly outdated.

In fact, some operators already identified some missed opportunities from a technology point of view, particularly in delivering small—and micro-scale systems such as SHSs. Since the off-grid regulation was designed specifically to accelerate the development of mini-grids in the country, other types of off-grid technology risked becoming marginal, regardless of their potential. While the regulation classifies systems into three mini-grid categories, smaller-scale systems are still subject to relatively large amounts of reporting requirements, which has financial and operational implications for the operators. The failure of the regulation to embrace a wider range of technology options, particularly those aimed at the low end of the market, was felt by some providers as a missed opportunity.

Finally, an indirect challenge emerged during the discussions related to overseas development assistance. While not specifically linked to the regulation itself, this challenge relates to the off-grid energy sector in general and was referenced in at least three interviews. Respondents spoke about the lack of coordination among donor organisations that are providing development assistance to support the off-grid energy sector. There is a vibrant community of donors working in the sector providing essential financing and technical support. However, there was a degree of frustration about the perceived homogeneity of donor programmes and the extent to which the off-grid regulation actually challenges such models. Interviewees called for a more strategic, coordinated approach where donors supported a wider range of actions to target ‘blockages’ in the sector rather than just providing catalytic grants and results-based financing.

11.5.3 Potential for Community Energy Uptake

Interviewees were asked specifically to evaluate the off-grid regulation in relation to its potential to promote community energy. One respondent emphasised that the first and foremost guiding principle, stated in Article 2 of the decree, is that all projects that involve activities to supply access to energy in areas outside of the national grid are “in the public interest and of a social nature”. In their view, having this definition at the outset of the regulation provides a clear signal that the intention of the regulation, at its core, is to provide social (and economic) benefits to rural communities.

Several respondents expressed cautious optimism, that there is an underlying assumption that this regulation will facilitate energy access in rural areas through community energy projects. However, it was noted that this has not yet been tested in practice.

At the same time, there was consensus that community energy is not well highlighted in the regulation, and it is not clear how communities can or will be involved or participate in off-grid projects. One interviewee, for example, noted community energy is not salient in the context of the ‘market-based’ approach that seems to be dominating the off-grid energy sector. In their opinion, this is often top-down from the supply side with limited community participation, or where there is community participation, this is often focused on awareness raising rather than on community needs.

The challenge of financial incentives, raised in the previous section, was also noted as critical in enabling the uptake of community energy projects. Unless import duties and taxes are addressed to reduce tariffs, community energy projects, especially those targeting the most vulnerable, will be very difficult to pursue. According to those interviewed, the sustainability and financial viability of many off-grid energy operators are on a knife edge as they try to recover from the economic shocks of the COVID-19 pandemic and rising inflation. In turn, their ability to absorb any further shocks from the market is limited, and they need a stable operating environment to survive. This was emphasised in relation to the micro-scale energy operators whose main clients are those most affected by energy poverty. The rising costs of living due to inflation mean that not only is the ability of people to pay for energy services even further reduced, but the energy operators (without any financial incentives) have to pass their rising costs onto the consumer since their financial returns on investment are already stretched to the limits. To adapt to these circumstances, some energy operators reported they are trying to focus more on productive use systems so that instead of just providing energy access, they can also help their customers generate income through activities that might include irrigation, refrigeration, or milling, as a potential win–win solution for both parties.

Reflecting on the wider implications, the likely consequence noted by all respondents is that energy operators will prioritise those communities where there is a higher ability to pay. Those communities that have potential economic development or anchor clients that can provide stable revenues will be targeted first over more marginalised communities and will be left behind to benefit last. Among interviewees, there was little sense of facilitating greater autonomy, and generally, community energy was reduced to ‘benefits to communities’ rather than ‘led by communities.’

11.6 Discussion and Policy Recommendations

Several highlights emerge from the perspectives of energy operators, donors, and implementing organisations working in Mozambique’s off-grid sector regarding the opportunities and challenges presented by the new off-grid regulation. Table 11.1 summarises the insights from the analysis above.

Table 11.1 Implementation dimensions
Full size table

Reading the insights above, considering the discussion on implementation, the new off-grid regulation must be understood as a building block in a broader process of policy development that also involves action on the ground. Respondents emphasise that an existing regulation is better than a perfected future one because it provides the opportunity to test its principles in practice. While the extensive consultation had also helped to enlist the support of diverse stakeholders, all of them show legislative change as a milestone rather than an endpoint. At the time of the interviews, much hope was put in intermediary policy instruments, such as the additional 27 accessory instruments that complete the off-grid framework to provide prescriptions for action, but even as the details of those instruments become known in early 2023, uncertainty remains in a dynamic process in which the interaction between policy and technology is constantly shifting.

One priority for the energy sector is the provision of appropriate financial incentives for growth in the off-grid sector. Energy suppliers are operating under difficult economic circumstances and in a country context where all equipment for off-grid energy systems must be imported because there is no local production capacity. Appropriate tax breaks and other financial incentives are crucial for the off-grid energy sector in general and for community energy in particular. In the context of communities with very low incomes, the success of community energy depends on having low tariffs. However, having little empirical evidence of the delivery of community energy in Mozambique, cost limitations seem insurmountable without government support.

The regulatory reforms have created momentum and raised expectations in off-grid sector development. Some of those relate to the perception that more clarity is needed in the energy sector. The regulation has a performative role in creating the context of implementation, facilitating institutional development, and creating the conditions for actors to take action on the ground. Ongoing consultation further facilitates implementation. However, there are unrealistic expectations about the extent to which regulation alone can bridge the gap of capacity and skills faced by all the organisations involved in the regulation, from ARENE to every small operator.

However, the development of regulation creates capacity, by situating organisations in the institutional landscape. For example, the definition of FUNAE and EDM’s remit and the arrangements should be off-grid and on-grid projects meet the explicit expectation placed on ARENE in fulfilling its mandate to regulate the sector and help orient other actors within the sector. The off-grid sector is still nascent and the absorptive capacity of energy operators, whether they are private businesses, associations, or community groups, requires time to develop.

As Table 11.1 shows, the off-grid regulation both supports and constrains community energy. The off-grid regulation does not have a strong emphasis on community energy. Article 3 of the regulation specifies that it applies to “collective entities of private and public realm”, which does not address community energy explicitly. In practice, community energy may be already happening. Implementing partners such as UNIDO, in partnership with FUNAE, have been training community associations on how to apply for off-grid community energy funds disbursed by BCI Commercial Bank (UNIDO, 2022). However, despite these experiences, it will require time to monitor the number and type of community energy systems that may be established under the new regulation before an assessment can be made regarding the regulation’s impact in this area.