Background

Although grid electricity tariffs in Mozambique are currently set by the Ministry of Finance, there is no regulation on tariff-setting for off-grid electricity generated from renewable energy sources.
For the success of FUNAE (the Portuguese acronym for Mozambique National Fund for Rural Electrification) it is critical to have a tariff setting tool based on a detailed and accurate analysis of all the financial, economic, social and environmental aspects that directly influence the cost of providing electricity generated from renewable energy sources in off grid locations.
Currently, such a tool does not exist, which compromises the capacity of FUNAE to charge adequately for its power generation projects.

Purpose

To develop an off-grid RE tariff-setting tool for FUNAE that is suited to small-hydro, solar, wind and biomass (the most appropriate RE technologies for Mozambique), which is based on a detailed and accurate analysis of all the financial, economic, social and environmental aspects.

Main Activities

• Develop a balanced, accurate and easy to use tariff setting tool which takes in consideration the Mozambican rural reality, to be used in the provision of energy services in remote locations, far removed from the national grid, where there is clear demand for energy services
• Systematically consider other sources of revenue from new RE generation projects, such as CDM revenue
• Train FUNAE staff in conducting surveys in rural locations to determine end-user willingness and capacity to pay for electricity from renewable sources
• Build institutional capacity so that the tariff setting tool to be used by FUNAE efficiently and independently

Expected Impact

• Sustainability of FUNAE's operations by charging adequate tariffs for off-grid electricity generated from renewable sources
• Increase in rural electrification rates and a scaling up of off-grid rural electrification projects in Mozambique thanks to FUNAE's improved regulatory capacity in tariff-setting
• Use of the new tariff setting tool by other stakeholders in the electricity sector in Mozambique (such as the EDM the national utility, the Ministry of Energy or the national regulator CNELEC)