Disrupting the Status Quo: Rethinking Mauritius’ Energy Sector

Opinion

Madness, they say, is doing the same thing over and over again and expecting different results. This is why our energy sector now needs disruption

By Sandiren Reddi

At a press conference on 8th May 2025, the Minister of Energy and Public Utilities delivered a candid assessment of our electricity sector: ageing infrastructure (both public and private), imminent capacity shortfall, and a system that has been dangerously stretched over the last few months.

The stop-gap solution: the procurement of a powership to deliver 90-110 MW of generation capacity, located in the Port area. It will operate under a short-term power purchase agreement (PPA) up to 2030, with deployment expected in 8-10 months.

Crucially, this grants the Minister and Government room and time to manoeuvre.

The imperative now is to go beyond the status quo and disrupt the existing model – ‘rupture’ – and set the foundation for a modern and future proof energy sector characterized by efficiency, innovation, transparency, and resilience.

Time to move from the CEB as we know it?

A key takeaway from the press conference is the continued emphasis on the critical role played (and to be played) by the Central Electricity Board (CEB) in ensuring energy security and the wider economy. In the absence of further details, this means maintaining the CEB within its current organizational and market set-up.

But this no longer works. CEB’s huge deficit of Rs 7.5bn is not only the result of mismanagement but intrinsically linked to the current model and market structure for the CEB.

The Single Buyer Model, in its current form where the CEB is simultaneously the producer, grid operator, buyer and seller of electricity (and dare I include quasi-regulator as well), no longer works because it entrenches opacity and inefficiencies.

It is an outdated model based on centralized generation, monopolistic procurement, limited competition and contestability, and overlapping or blurred institutional boundaries.

Furthermore, it fosters monopolistic tendencies on the buy-side and consolidates oligopolistic behaviours on the sell-side, with IPPs entrenched in robust contractual positions with potential of cost pass-through to the CEB.

And it is a model which penalizes the end-user/consumer by creating a structure where the public directly or indirectly (whether through tariffs or subsidies) funds inefficiencies from fuel procurement, dispatch, equipment renewals and skewed contracting positions.

For a government intent on responsible fiscal management as well as modernizing the country, particularly with digitization and AI, maintaining the current model is not only uneconomical but would be antithesis to the Government’s objectives.

Institutional Ambiguity and Regulatory Marginalisation

Secondly, the current model, despite legislative reforms in 2004 with the Utility Regulatory Authority (URA) Act and 2005 with the Electricity Act, still faces governance, institutional and regulatory ambiguity and overlaps.

As an example, the Minister and the CEB remain the central actors driving forward key issues surrounding energy security, PPA renewals with IPPs, and considering new alternatives producers (powerships).

The sectorial regulator, the URA, on the other hand, is conspicuously absent despite a regulatory framework that clearly delineates its role and responsibilities. This creates a fundamental governance and conflict issue where the policy maker and the licensee/operator (CEB) act as quasi-regulator.

This is an institutional and governance weakness that needs to be addressed as a strong, independent regulator protects, among others, from ad-hoc and reactive decision-making rather than long term strategic planning.

To that end, the Government must empower the URA, not only through the existing statutory framework, but also in practice through sufficient capacity building, including technical expertise, budgetary independence and enforcement authority.

A new market structure

Rethinking the Single Buyer Model also means re-assessing the market structure itself. In a context where electricity reforms need to synergise with digital transformation – especially with the huge energy requirements that come with AI – the market structure must transition to one that fosters innovation, introduce competitive pressures, promotes cost-efficient pricing and ultimately leads to consumer welfare and economic growth. For instance:

• Would opening up the grid under an open access/third party access regime work?
• Does keeping the CEB in its vertically integrated structure where production, transmission and distribution are still concentrated under one corporate entity still make sense?
• Is it time to consider capacity auctions and competitive bidding (to ensure transparency and least-cost procurement)?
• Isn’t it time to align decentralization with pricing reform to incentivize adoption of renewables?

This is not about abandoning a national strategic asset or public ownership but about extracting maximum economic and operational benefit through structural reforms.

Above all, these proposals require regulatory clarity, clear separation of functions, and alignment with international best practices.

Even in emergency, the right governance matters

While the powership is clearly an emergency intervention, it is still crucial for its procurement to follow due process and licensing process as set out in the regulatory framework.

In addition, the Government must be transparent on the key terms of its power purchase agreement notably fuel cost pass-throughs, emissions limits, exit clauses and tariff structure.

In setting this precedent, Government has sufficient grounds to make sure that the renewals of existing purchase power agreements are not done on legacy terms which would further entrench the cost of inefficiencies and opacity in such contracts (e.g. cost pass-through for renewing ageing equipment).

At an industry level, the Government should ensure that efficiency standards are built in all contractual and licensing arrangements.

Conclusion: a turning point in our energy strategy

Madness, they say, is doing the same thing over and over again and expecting different results. This is why our energy sector now needs disruption.

Disruption does not mean destabilization but instead means a strategic reorientation which can yield significant benefits if done correctly.

But whether it was our economic diversification, the emergence of the EPZ or bold reforms in education, we have been historically very good and successful at bold transitions and breaking the status-quo.

This strategy must prioritize efficiency, robustness, resilience and sustainability and this is the moment. In the summer of 2030, we do not want to be discussing how increased demand stressed the grid and we were on the brink of a blackout.

Mauritius Times ePaper Friday 16 May 2025