Financial Modelling of Feed-In Tariff for Increasing Solar Photovoltaic Energy Portfolio in Malawi
Journal of Energy and Natural Resources
Volume 9, Issue 1, March 2020, Pages: 14-27
Received: Jan. 9, 2020;
Accepted: Feb. 4, 2020;
Published: Feb. 14, 2020
Views 205 Downloads 63
Isaac Chitedze, Faculty of Science, Technology and Innovations, Department of Energy Systems, Mzuzu University, Mzuzu, Malawi
Nwedeh Chukwuemeka Cosmas, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Ibadan, Nigeria
Cohen Ang’u, Wangari Mathai Institute for Peace and Environmental Studies, University of Nairobi, Nairobi, Kenya
The Feed-In Tariff (FIT) policy has contributed significantly in driving renewable energy investment around the world. Despite the lessons of FIT’s contribution in attracting private investment in renewable energy development around the world, Malawi’s FIT policy of 2012 has not attracted any private investor. This paper examined the financial modelling of feed-in tariff rates, using Kamazu International Airport solar farm in Malawi as a case study. The paper also analysed the major challenges encountered in implementing the FIT policy in Malawi and funding options for the policy. This paper presents policymakers and planners an analysis on why FIT policy in Malawi has not increased renewable electricity generation capacity. The paper outlines a financial modelling of the FIT using RETScreen Expert. The analysis shows that the FIT for solar in Malawi is significantly lower than a minimum rate that would make a solar PV investment financially viable. The Malawi FIT policy stipulate US$0.10 and US$0.20 for non-firm power (without storage) and firm power (with storage) respectively. The results of the financial modelling presented herein show that for a ten years payback period; the minimum FIT required is US$0.34 with an annual escalation rate of 5%. It is also shown that at US$0.22, to achieve a payback period of 10 years; an annual escalation rate of 10% would be required. Given the financial modelling results, the Solar Photovoltaic (PV) FIT in Malawi requires review for enhancement of solar investment in the country.
Nwedeh Chukwuemeka Cosmas,
Financial Modelling of Feed-In Tariff for Increasing Solar Photovoltaic Energy Portfolio in Malawi, Journal of Energy and Natural Resources.
Vol. 9, No. 1,
2020, pp. 14-27.
Couture T. D., Kreycik C., Cory K., Williams E., (2010). A Policymaker’s Guide to Feed-in Tariff Policy Design. Colorado. USA, National Renewable Energy Laboratory.
Mendonça M, Jacobs D, Sovacool B., (2010). Powering the Green Economy: The Feed-in Tariff Handbook. London, Earthscan.
Klein A, (2008). Feed-in Tariff Designs: Options to Support Electricity Generation from Renewable Energy Sources. Germany, VDM Verlag Dr. Müeller, Saarbrücken.
Poruschia L., Ambreyb C., Smartc J. Revisiting feed-in tariffs in Australia: A review. Renewable and Sustainable Energy Reviews 2018; 82: 260-270.
Deutsche Bank, (2010). Get FiT Program: Global Energy Transfer Feed-in Tariffs for Developing Countries. Germany, Deutsche Bank Group https://www.researchgate.net/publication/323666220_GET_FiT_Program_Global_Energy_Transfer_Feed-in_Tariffs_for_developing_countries [accessed on 19 May 2019].
Ragwitz M et al., (2012). Recent developments of feed-in systems in the EU – A research paper for the International Feed-In Cooperation. Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).
Nolden C., (2015). Performance and Impact of the Feed-in Tariff Scheme: Review of Evidence. UK, Department of Energy and Climate Change.
Alizamir S, Véricourt F, Sun P. Efficient Feed-In-Tariff Policies for Renewable Energy Technologies. Operations Research 2016; 64: 52-66.
Zhang R., Ni M., Shen G., Wong J. An analysis on the effectiveness and determinants of the wind power Feed in-Tariff policy at China’s national-level and regional-grid-level. Sustainable Energy Technologies and Assessments 2019; 34: 87-96.
Li-Fang Chou & Liang-Feng Lin, (2012). Renewable Energy Feed-in-Tariff System Design and Experience in Taiwan, Low Carbon Policy and Development in Taiwan. Dr. Liang-Feng Lin (Ed.), ISBN: 978-953-51-0156-7, InTech.
Marques D. C., Fuinhas J. A., Macedo D. P. The impact of feed-in and capacity policies on electricity generation from renewable energy sources in Spain. Utility Policy 2019; 56: 159-168.
Couture T. & Gagnon Y. An analysis of feed-in tariff remuneration models: Implications for renewable energy investment. Energy Policy, 2010; 38: 955-965.
Rickerson W. et al (2008). Exploring Feed-in Tariffs for California. California Energy Commission. Oakland, CA. Sacramento, CA.
Couture T. & Cory K., (2009). State Clean Energy Policies Analysis (SCEPA) Project: An Analysis of Renewable Energy Feed-in Tariffs in the United States. Golden, CO. National Renewable Energy Laboratory Technical Report No. TP-6A2-45551.
Han J., Mol P. J. A., Lu Y., Zhang L. Onshore wind power development in China: Challenges behind a successful story. Energy Policy, 2009; 37: 2941-2951.
Malawi Energy Regulatory Authority, (2012). Malawi feed-in tariff: Renewable energy resource generated electricity in Malawi. Lilongwe, Malawi Energy Regulatory Authority.
Japan International Cooperation Agency, (2013). Kamuzu International Airport to Benefit from the Japanese Government Funded Solar Power Generation Equipment. https://www.jica.go.jp/malawi/english/office/topics/130930.html [accessed on 11 June 2019].
The Embassy of Japan in Malawi, (2013). Grant Aid Program for Environment and Climate Change Solar Electricity Generation System Handover Ceremony at Kamuzu International Airport. https://www.mw.emb-japan.go.jp/Handover%20ceremony%20of%20Solar%20Electricity%20Generation%20System%20at%20Kamuzu%20International%20Airport.html [accessed on 11 June 2019].
REN21, (2017). Renewables 2017 Global Status Report. Paris: REN21 Secretariat, http://www.ren21.net/gsr-2017/. [accessed on 18 July 2019].
Ministry of Energy, (2010). Feed-in-tariffs policy for wind, biomass, small-hydro, geothermal, biogas and solar generated electricity. http://kerea.org/wp-content/uploads/2012/12/Feed-in-Tariff-Policy-2010.pdf [accessed on 20 June 2019].
COMESA, (2017). Feed-In-Tariffs Guidelines. http://www.comesa.int/wpcontent/uploads/2017/12/FIT-Guidelines.pdf [accessed on 27 June 2019].
IRENA, (2015). Africa 2030: Roadmap for a Renewable Energy Future. Abu Dhabi, IRENA.
Renschhausen M. Evaluation of feed-in tariff-schemes in African countries. Journal of Energy in Southern Africa, 2013; 24: 56-66.
World Future Council, (2013). Powering Africa through Feed-in Tariffs: Advancing renewable energy to meet the continent's electricity needs. A study for the the Heinrich Böll Stiftung and Friends of the Earth England, Wales & Northern Ireland. Renewable Energy Ventures (K) Ltd. and Meister Consultants Group Inc., Nairobi, Kenya.
Jenner, S., Groba, F., & Indvik, J. Assessing the strength and effectiveness of renewable electricity feed-in tariffs in the European Union countries. Energy Policy 2013; 52: 385-401.
Rowlands I. The development of renewable electricity policy in the province of Ontario: the influence of ideas and timing. Review of Policy Research, 2007; 24: 185–207.
Moner-Girona et al. Adaptation of Feed-in Tariff for remote mini-grids: Tanzania as an illustrative case. Renewable and Sustainable Energy Reviews 2016; 53: 306–318.
Reserve Bank of Malawi, (2018). Report and Accounts for the year ending 2010-2018. Lilongwe, Malawi. RBM.
Hidayatno A., Dhamayanti R., Destyanto A. R. Model conceptualization for policy analysis in renewable energy development in Indonesia by using system dynamics. International Journal of Smart Grid and Clean Energy, 2019; 8: 54-58.
USAID, (2018). Malawi Power Africa Fact Sheet. https://www.usaid.gov/sites/default/files/documents/1860/MalawiPACFSDEC20175.508.pdf and https://www.usaid.gov/powerafrica/malawi [accessed on 2 July 2019].
METI. (2016). Management and Engineering Technologies International, Malawi Grid Capacity Study. 364279/PWR/PTD/1/A June 2016 Final Report.
REN21, (2018). Renewables 2018 Global Status Report. Paris: REN21 Secretariat. http://www.ren21.net/wp-content/uploads/2018/06/17-8652_GSR2018_FullReport_web_-1.pdf [accessed on 18 July 2019].
REN21, (2019). Renewables 2019 Global Status Report. Paris: REN21 Secretariat, https://www.ren21.net/wp-content/uploads/2019/05/gsr_2019_full_report_en.pdf [accessed on 11 November 2019].
REN21, (2012). Renewables 2012 Global Status Report. Paris: REN21 Secretariat: http://www.ren21.net/Portals/0/documents/activities/gsr/GSR2012_low%20res_FINAL.pdf [accessed on 18 July 2019].
Phiri Grace, (2016, November 10). MCCCI, Government Tussle over Fuel Levies. The Nation Newspaper. https://mwnation.com/mccci-government-tussle-over-fuel-levies-2/ [accessed on 25 July 2019].
MG. (2017). Malawi Government, Annual Economic Report 2017. Ministry of Finance, Economic Planning, and Development. Department of Economic Planning and Development. Lilongwe.
Jimu Christopher, (2017, May 11). Businesses to benefit from K30bn Marep 8. The Nation News Paper. https://mwnation.com/businesses-to-benefit-from-k30bn-marep-8/ [accessed on 25 July 2019].
MG. (2016). Malawi Government, Annual Economic Report 2016. Ministry of Finance, Economic Planning, and Development. Lilongwe, Department of Economic Planning and Development.
Mwale Joseph, (2019, August 21). Fuel Crisis Looms. The Nation Newspaper. https://mwnation.com/fuel-crisis-looms/ [accessed on 22 August 2019].
MG (2019). Annual Economic Report 2019. Ministry of Finance, Economic Planning and Development, Department of Economic Planning and Development. Lilongwe, Malawi.
ESCOM (2018). Abridged Version of the Base Tariff Application for the Functions of Transmission, Distribution, System Market Operator and the Single Buyer including Bulk Customer and End User Tariffs for the Period 2018/2019 To 2021/2022. https://www.meramalawi.mw/index.php/resource-center/press-release/send/18-press-release/80-abridged-version-of-the-escom-base-tariff-application [accessed on 30 June 2019].
ESCOM (2018). Base Tariff Application for the Functions of Transmission, Distribution, System Market Operator and the Single Buyer Including Bulk Customer and End User Tariffs for the Period 2018/2019 to 2021/2022. Available on https://www.meramalawi.mw/index.php/resource-center/press-release/send/18-press-release/82-escom-base-tariff-application-main-submission [accessed on 30 June 2019].