Identify and directly address results risks, stemming from poor practices in power system planning and expansion within partner countries, which can undermine the impact of infrastructure investments targeted by the compact. As documented in the Infrastructure Development Project (IDP) evaluation, a pattern of accelerating growth in new customer connections emerged early during compact implementation, leading to rapid increases in demand for electricity in excess of available supply. This imbalance ultimately created a major impediment to achieving the project’s main objective: improving the availability and reliability of power for Malawian consumers. While Malawi had a very low rate of electrification prior to the start of the compact, the infrastructure packages selected during program design expressly prioritized upgrades to transmission throughput capacity, while also bolstering generation and distribution capacity of the national grid. While these investments would enable expanded electricity access over the long term, the compact design reflected an emphasis on improving both reliability and evacuation of power under the assumption of more gradual demand growth, while still preparing the electric grid for more generation supply in the future (This included the construction of transmission links able to connect Malawi to the Southern Africa Power Pool. In addition, MCC funded an Integrated Resource Plan for Malawi’s power sector and engaged with the Government of Malawi on generation planning as part of due diligence). From a system planning perspective, these were critical preconditions to widescale campaigns to expand access to electricity from the grid. Overall, IDP investments were designed to allow businesses to benefit from more consistent power service, thereby reducing reliance on more costly energy sources.
Despite the soundness of these design decisions, the MCC Country Team observed an increasing trend of rapid growth in connections, which began in the first year of the compact. Over the compact term, this trend culminated in a 75 percent increase over the number of connections at baseline in 2013. As a result, despite the successful completion of all planned infrastructure works, the evaluation found that generation supply cuts or “load shedding” remained pervasive for most customers throughout Malawi, with limited changes observed over conditions prior to the commissioning of IDP-funded assets. Ultimately, this limited the ability for households and enterprises to fully benefit from the infrastructure upgrades supported by the compact. Given this outcome, MCC recognizes the need to identify risks related to inadequate practices in system expansion planning within its partner countries, and to develop more explicit strategies for mitigating such challenges. It is also important to understand that similar initiatives aimed at ambitiously expanding on-grid electricity access are likely to be tied to political imperatives prevalent within the broader context of the country’s power sector; these may often exist prior to MCC’s involvement in the power sector, but could equally be induced by MCC’s engagement and the perceived opportunities created by large infrastructure investments. The dynamics of system planning and sector governance challenges can therefore complicate MCC’s strategy for engagement: even where direct support for expanded connections is excluded from compact funding, MCC would not be in a position to explicitly dissuade partner governments or sector institutions from undertaking access campaigns of their own, particularly in countries with low rates of electricity access such as Malawi. Moreover, there may be other donor-funded initiatives that do provide direct support for such efforts, even if these may be premature from a system planning perspective. In light of these issues, there may be no clear or immediate strategy or solution for confronting the risk of rapid demand growth when such growth rates are not matched by increases in generation supply.
For future compacts involving power infrastructure investments, MCC should use the compact development period to explore the country-specific risks and challenges regarding current practices for system planning and expansion. Potential mitigation strategies should be developed according to the unique political economy context underlying these processes, and may include some combination of early engagement with the country government on planning and execution of sector plans, and carefully examining the activities of other donors active in the country’s power sector (It is important to note that the suggestions offered here were implemented during development of the IDP, and such activities have long constituted core elements of due diligence planning at MCC. The learning being expressed seeks to reinforce the role of these practices in identifying results risks while emphasizing the importance of making them salient in the program logic, and facilitating risk monitoring and development of tailored mitigation strategies). In developing the program logic for the investment, assumptions about growth in connections and electricity demand should be made explicit, and country teams should closely monitor these assumptions, which can provide early indications of the program logic not aligning with on-the-ground reality and trends that can emerge after implementation begins.