GE and China Machinery Engineering Corporation (CMEC) are to become joint 60% equity owners of a proposed new plant in Mozambique at a time when companies and markets around the world are turning away from investing in new coal plants.
Ncondezi Energy is planning a 300MW coal-fired power plant in the northern province of Tete, which could be scaled up to 1,800MW in the future. Coal would be supplied from an adjacent mine.
Simon Nicholas, energy finance analyst with IEEFA says the company, whose office is registered in the British Virgin Islands tax haven, signed a Joint Development Agreement in July 2019 with struggling thermal power equipment supplier GE and coal power engineer CMEC to become equity owners.
“While it is true that Mozambique will need more power as its economy develops, the country is at risk of locking itself into expensive, inflexible and obsolete coal power,” says Nicholas.
“Such a move is increasingly out-of-step with the rest of Africa where the opportunity for a major coal power build-out has passed.”
In September 2019, African Development Bank (AfDB) president Akinwumi Adesina stated, “Coal is the past, renewable energy is the future. For us at the African Development Bank, we are getting out of coal.”
Among the coal power proposals, the AfDB will now not fund is another African coal power project in which GE is involved – the controversial Lamu coal power proposal in Kenya. A 2019 IEEFA report found the Lamu proposal would lock Kenya into 25 years of expensive electricity.
As well as exporting hydro-power to South Africa, Mozambique also imports coal-fired power from South African state-owned power utility Eskom, with Mozambique being Eskom’s largest international customer.
But the tide is changing, with Southern African nations increasingly turning to renewable energy to escape an over-reliance on hydro and Eskom, including in Mozambique.
The nation’s first 40MW utility-scale solar project went online in 2019 and 60MW of additional solar installations are being developed. Further, another 80MW is being planned for the Niassa and Nampula provinces.
Ncondezi Energy states the proposed coal plant will balance the intermittency of renewable energy in Mozambique.
“The inflexible nature of 24/7 “baseload” coal power technology means it is ill-equipped to deliver on that claim,” says Nicholas.
Today, Japanese and Korean engineering and finance is less available for coal-fired power plants, with Marubeni Corporation and KEPCO recently pulling out of the financing of new plants in Botswana and South Africa.
“China is increasingly the last resort for coal power proponents globally,” says Nicholas.
“Chinese state-owned enterprises are providing the subsidised financing that most private global financiers steer clear of.
“There are concerns that this Chinese largesse risks catching African nations in a “debt trap”.
“Further, GE has continued to bet heavily on fossil fuels globally and continued to misread the energy transition.
“Mozambique needs to invest in technologies of the future, not those of the last century,” says Nicholas.