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.
Year
2020
Abstract