Why do some efforts to expand access to renewable energy succeed? Why do other efforts fail? An SEI research team travelled to Mozambique to see how renewable energy projects are faring on the ground and to gain insights into questions about the effectiveness of renewable energy finance in spurring wider socioeconomic development in low-income countries.
Mozambique has managed to make great strides in expanding electricity access – despite recurring, extreme weather events; political instability; and the lasting legacy of its civil war and armed insurgency. Large-scale investments in energy (hydro power and natural gas), industry (aluminium) and mining have driven economic growth. Yet, fewer than 7% of people use clean-cooking technologies. Almost 40% of Mozambique residents still lack electricity. And roughly 65% of the Mozambique population lives below the national poverty line.
Renewable energy is often prescribed as a pathway to socioeconomic development, but investments into this sector do not come with a guarantee for beneficial impacts. Crucial questions have yet to be answered about how to improve the odds, and how to identify the development instruments most likely to expand energy access so that it delivers economic growth and contributes to lifting people out of poverty.
SEI and partners are seeking to better understand why some efforts to expand access to modern, affordable and sustainable energy succeed – and why others fail. As part of ongoing work on these issues in the wider region (see here and here), a group of us travelled to Mozambique to see for ourselves how renewable energy projects are faring. Our travels took us across some 3000 kilometres, to rural outposts and urban centres, and through five provinces and the national capital of Maputo. We looked at all manner of projects, from a notebook-sized solar panel proudly held by a man living in a hut in rural Manica Province to the country’s first utility-scale solar photovoltaic plant in the agricultural hub of Mocuba. At each site, we sought out the perspectives of people involved: consumers, communities, businesses, service providers, investors, governments and development partners.
Our aim was to use on-the-ground perspective to piece together a more accurate picture of the impacts of finance for renewable energy on economic development – and to better understand its limits. What we saw and heard helped us grasp insights into critical components that can either set the stage for success or tip promising infrastructure into failure. We found that certain common denominators applied, no matter the business model, the type of development intervention, or the scale of the project. We came away with a better sense of the context-specific challenges that influence the performance and long-term viability of renewable energy initiatives.
Our experiences in Mozambique underscore the importance of basics. We see a need to design interventions with the end user in mind, to boost institutional capacity at all levels of government, to coordinate planning among development partners, and to assign clear responsibilities for maintenance and security. We view these as essential components for measures that can deliver meaningful and durable benefits.
This collection of our photos illustrates our seven takeaways from our trip.
Mozambique has made measurable advances in key respects. These include improving the institutional setup, related policies and regulation, electricity generation both on and off grid, infrastructure for transmission and distribution, and the regional trade of power. Electrification rates continue to rise. Utility-scale renewable plants are operating. Frameworks for off-grid and private participation are in place. The sector is moving forward, albeit unevenly.
Nhamatanda, a farming town that was decimated by Cyclone Idai in 2019, has a new school that is connected to the grid. The national utility has a strong grid-connection drive, and the number of those with access is increasing. The connection works are supported by development partners.
Photo: SEI.
A health centre in Maqueze has a new solar system that charges phones and powers lights and low-energy appliances, such as fans.
Photo: SEI.
Purchasing power is severely limited, for both on-grid and off-grid electricity. Without complementary measures such as social protection (cash transfers, for example) or broader human capital investments to raise incomes, many energy services will remain out of reach or continue to be underutilized. Energy interventions alone cannot directly alleviate poverty. Even if adopted, electricity access at the household level does not automatically lead to higher incomes, improved education or better health. Such positive outcomes happen when energy interventions are coupled with programs to enhance skills or productivity, to improve education opportunities, or to extend health infrastructure. Otherwise, on its own, a little electric light cannot work miracles.
When they can afford it, people purchase solar equipment, even without financial support. The size of this equipment tends to be limited and, as a result, so is the impact. As the owner who purchased this panel for his home near Gondola said, “I would like to use other (electrical) appliances, but the system can’t handle it.”
Photo: SEI.
A villager in Sofala Province shows his home solar system.
Photo: SEI.
A villager in the Gorongosa District with his unsubsidized, solar photovoltaic panel, which he uses to charge his phone.
Photo: SEI
A solar-powered radio in Manica Provice.
Photo: SEI.
Solar power makes it possible for a general store and bar in Ndoro village in the Caia District to use a freezer and play music. Even when the use of power is not necessarily defined as “productive”, electricity can lead to improvements in quality of life in ways that people value and consider worthwhile pursuing. Such cases are also limited by affordability challenges.
Photo: SEI.
When incomes are a little higher, as is the case for these relatively well-off farmers, new technologies are adopted. Near Guerel, this small-scale biodigester converts animal waste to biogas, which is then used for cooking. However, such biodigesters are expensive to buy and require skills to use effectively.
Photo: SEI.
Most energy-access projects we saw are publicly supported. They depend on development partners providing either full funding or heavy backing. Such backing comes through project-preparation grants, loans, guarantees or subsidies. Another frequently used form of support is results-based funding. This is an arrangement that gives providers top-up payments when they achieve designated milestones, such as connecting a certain number of households. Private-sector provision of electricity services generally focuses on productive-use applications, such as irrigation, milling or cold storage. Nevertheless, private-sector electricity services also rely heavily on support from development finance institutions. This is the case no matter the size of the project – for both large-scale infrastructure and small, decentralized operations. The risks for commercial actors remain significant. Such risks can include whether potential customers can afford the service; financial weaknesses of the relevant utility; regulatory uncertainties; and political and macroeconomic conditions, such as inflation and the availability of hard currency.
Even relatively large private-sector entities depend largely on grants or results-based funding. This is the case, for example, for Kenya-based BURN Manufacturing, which has an office in Matola. BURN Manufacturing produces clean-cooking products.
Photo: SEI.
This farm in the Goldola District in Manica Province added a second solar photovoltaic irrigation system. The equipment is sold, installed and maintained by a private operator. The system relies on results-based-funding payments from development finance institutions. This arrangement makes the system more affordable for users, and makes it possible for the operator to earn an operational profit.
Photo: SEI.
Better outcomes share the following characteristics: They demonstrate a realistic understanding of customers’ needs, preferences, and ability and willingness to pay. They base cost and revenue assumptions on local realities. They use entities with “skin in the game” to provide services over the longer term. These entities depend on customer adoption and satisfaction. By contrast, interventions with sub-par impacts tend to be designed “in the lab”, far removed from customer needs. They adopt a “one-off” approach. They are slow to adjust and to incorporate new knowledge.
Specific conditions are required to use this "clean-cooking" stove in a resettlement camp for internally displaced people in Metuchira, Sofala Province. The stove must be used indoors with certain kinds of ventilation. Often, these conditions are not met, and they fail to take people's preferences into account. The impact in terms of “cleaner” cooking is minimal.
Photo: SEI.
This is a solar-powered water pump in Sofala Province. On our trip, people frequently emphasized that water is their main need – not electricity. Understanding customers’ needs can enable better bundling of services. For example, combining a water pump with a solar system to power it may increase take-up and impact.
Photo: SEI.
This farm in the Godola District in Manica Province has a solar photovoltaic irrigation system. The owner said she is satisfied with the solar pump, which helped her expand cultivated land, diversify crops, increase yields, and reduce reliance on manual labour and diesel pumps. As the farmer said, “I would like to have another system to further expand the farm.” The payments are collected during times when crops are sold (and cash is available). This makes it easier for farmers to make their payments, and it makes the collection of payments more reliable for providers. The design of the intervention appears to have been centred on customer needs, and willingness and ability to pay.
Photo: SEI.
At many sites, we found equipment that had been damaged, tampered with, or abandoned. Electricity services were unreliable or poorly maintained. Responsibility for operations and maintenance seemed unclear. In some cases, the electricity service was only available during a few (unpredictable) hours of the day, relying fully on sunshine, for example. This makes its use cumbersome at best or unprofitable. One cannot reasonably expect economic benefits to surface from equipment that does not work properly or reliably.
A hairdresser's shop in Maqueze in Gaza Province now has electrical power, but capacity for others who want to be connected is limited.
Photo: SEI.
A bar in Maqueze has cold storage thanks to connections to a minigrid connection.
Photo: SEI.
A minigrid in Changanine, Gaza Province, supplies households and small businesses with electricity using a prepaid mobile-money payment system. In practice, service reliability has been poor, the result of equipment failures and limited maintenance. When the minigrid came online, one customer invested in a mill that she can no longer use. “I hope the utility grid will come here soon,” she said. “The minigrid helps, but it’s not quite what we wanted.”
Photo: SEI.
A tailor and other enterprises in Changanine in Gaza Province expanded once they were able to receive electrical power from a minigrid connection. However, unreliable electricity supply led this tailor and some other businesses to scale back or suspend activities. Several businesses are waiting for new or expanded connections. Others are considering reverting to manual production.
Photo: SEI.
A shop in Changanine in Gaza Province began selling cold drinks once it gained access to electricity. Shops in the area reported income increases after they were able to access electricity. However, capital costs for equipment have not yet been recovered.
Photo: SEI.
When maintenance obligations are not clear, infrastructure is often abandoned and dismantled. Only remanants are left of this solar lamp in the Gorongosa District.
Photo: SEI.
In this home in Manica Province, a solar system is still functioning after six years. When the equipment is of good quality, properly installed, and maintained either through a service contract or by the owners themselves, solar home systems can offer reliable power for light and phone charging in the household.
Photo: SEI.
There are high hopes that the private sector (domestic and foreign) will take over both the finance and the service provision of development-linked economic activities and, thus, fill in the gaps left by fiscally constrained governments. Nevertheless, the provision of finance or electricity services exclusively from private enterprises is rare in a country still fighting widespread poverty. Development finance institutions and development partners need to carefully assess sectors and interventions to ascertain what approaches are likely to succeed. Where are private-sector-driven and market approaches likely to be most promising? By contrast, where are grant-based, traditional development interventions likely to be more effective? The role of the private sector is much clearer in high-value, export-driven sectors such as mining, where Mozambique is an emerging regional leader. The suite of development tools required to support these sectors is different (and largely already in place) from those that are likely to be valuable in other sectors.
Epsilon Energia Solar has an electric tuk-tuk assembly warehouse in Matola. The company reports that it is successfully selling vehicles in urban areas and solar-irrigation pumps in rural regions. The company relies on support from development finance institutions, results-based funding approaches and flexible repayment schedules.
Photo: SEI.
While Epsilon Energia Solar is moving forward with its tuk-tuk and irrigation sales, it is gradually retreating from the solar home-system market. It has found that customers cannot afford even its highly subsidized offer for solar lamps. If not coupled with productive uses, these systems are not likely to succeed. People cannot afford the payments that are required for these systems to be viable.
Photo: SEI.
Progress is most promising when development partners learn from past experiences and can align incentives and partners’ expectations with the realities on the ground. Progress starts out fast from a low base, but then it tapers off. Continuing progress requires a willingness to persevere, change tack when needed, and tolerate uncertainty and failure. Not all progress can be measured on the bottom line. Some interventions, such as capacity building, may take years to yield results. Nevertheless, these interventions are crucial.
The public-private partnership that made the 40MW Mocuba Solar Power Station project possible involved years of planning and out-of-the-box thinking – including tailor-made financial guarantees. In 2019, the plant became the first utility-scale solar project in Mozambique. Since then, the demonstration effect of the project has helped give rise to many more projects now in development.
Photo: SEI.
Technicians from the national utility, Electricidade de Moçambique (EDM), attended a training course in Maputo. Knowledge transfer and cooperation take time to bear fruit. It is difficult to assess their value. Such training must overcome cultural barriers and funding constraints. At the same time, training is critical to the sustainability and local ownership of energy interventions, and to the progress of the system. In this case, the training addressed the difficulties inherent in managing the grid when renewable electricity generation is high and consumption is low. The training was conducted by a team from Denmark, which has experience in operating power systems that heavily rely on wind sources and can offer insights into dealing with imbalances between electricity generation and use times.
Photo: SEI.
SEI researchers from the Finance for Sustainable Development program who travelled to Mozambique contributed photographs and content to create this feature story. The members of this group, shown below from left to right, are Maximilian Bruder, Daniel Duma, Fiona Lambe, Annika Hilgert and Miquel Muñoz Cabré. Julia Weppler provided support.
Photo: SEI
One-SEI program / Our mission is to help accelerate the allocation of capital to sustainable economic activities.
Past event / SEI will contribute to the sessions on climate delivery, adaptation finance and climate communications during Climate Weeks 2026 in Yeosu, Korea.
Project / This project provided Norad with a synthesis of existing evidence on the effectiveness of development cooperation in the energy sector.
Past event / This workshop provides the technical and financial expertise needed to turn ambitious goals into practical implementation for Nigeria's private sector.
