Abstract
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.
Highlights
Feed-In Tariff (FIT) is a financial policy scheme or mechanism paid to renewable energy generators that makes provision for generated electricity to be fed into the national grid at a regulated price
FIT Policy fixes the wholesale price for the purchase of electricity generated from the renewable source, normally paying generators a premium rate over the retail electricity price for each unit of electricity fed into the grid [3]
In Europe alone, FIT policy accounted for 93% of all onshore wind capacity and entirely 100% of solar photovoltaics installed by the end of 2010 [6]
Summary
Feed-In Tariff (FIT) is a financial policy scheme or mechanism paid to renewable energy generators that makes provision for generated electricity to be fed into the national grid at a regulated price. It encourages investment in renewable energy (RE) projects by providing a guarantee to long-term availability and access to electricity market to Independent Power Producers (IPP) to sell their generated power into the grid [1, 2]. The solar farm investment cost was USD 8.3 million including overhead costs and generate a maximum of 830 kW [17, 18] This is the first ever and only power generation facility with a connection to the Electricity Supply Commission of Malawi (ESCOM) grid. FIT has increased solar installed capacity in EU region [25] such that FIT accounted for entirely 100% of solar photovoltaics installed by the end of 2010 [6]
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