The Mphanda Nkuwa Dam project will have a profound effect on the Mozambican energy sector, despite much of the generated electricity being sent for export.

Mozambique has recorded an average annual growth rate of 14% in electricity consumption over the past decade. In the country's five-year plan for 2015–19, the expansion of the energy sector has been described as one of the greatest economic challenges, especially in light of the growing industrial requirements of the nation. By the mid-2000s, proposals for the construction of several hydroelectric dams had already been put on the table. Currently, five power stations are planned, with priority given to the Mphanda Nkuwa Dam on the Zambezi river, approximately 60km downstream from the existing Cahora Bassa Dam near the city of Tete.

The building of the dam is not without controversy, with several environmental organizations, including the UN World Commission on Dams, warning of the potential environmental and socio-economic damage its construction could wreak. The way the dam operates, using peak moments of water power, will mean large daily fluctuations in river flow, which could possibly damage the existing irrigation system and aquaculture, as well as severely impact on fishing industry. The Ministry of Energy has countered all of these claims stating there will be “no identifiable impact on the Zambezi delta and fisheries in the Indian Ocean."

The ministry sees the Mphanda Nkuwa Dam as a priority project, part of a larger plan that includes the construction of four other dams in the country. In total, the combined projects should create an output of approximately 3,600MW, of which the Mphana Nkuwa Dam will account for 1,500MW.

The total costs of the project have doubled since 2009, and are now estimated at $4.2 billion. Investments are mostly coming from the China-owned Exim Bank, which is known for similar large-scale infrastructural investments on the African continent, in collaboration with the Brazilian construction company Camargo Correia, the Mozambican investment company Energia Capital, and EDM, the publicly-owned electricity company of Mozambique.

Once the dam is completed, about 75% of the generated power will be sold to Eskom, the South African power company, which already has an agreement in place that will be valid until 2029. This agreement outlines an annual purchase of 1,100MW, with 15% going to Zimbabwe. The remaining 10% will be used for domestic consumption, as the country itself lacks the required transmission infrastructure to distribute electricity across rural areas, and will not expand the network for some time due to the high cost of doing so. It is this latter point that has attracted most criticism, as many rural areas in Mozambique need electricity. Moreover, it is suggested that poorer southern regions will eventually have to buy back energy from South African suppliers who operate close to the border.

The current capacity of Mozambique's total electricity production is approximately 2,300MW, meaning that an additional 1,500MW will have a massive impact on the domestic energy sector, and make the Mphanda Nkuwa Dam into the largest production facility in the country. The 'Powering Africa' report on Mozambique states that Mozambique has a total of 6,000MW of renewable energy potential. The construction of the dam would unlock a full quarter of this.

The administration of President Filipe Nyusi has committed itself to making expansion of the electricity sector a priority, and the construction of the Mphanda Nkuwa Dam will be of pivotal importance in this regard. Since the largest share of the production capacity will be exported, the actual impact on the domestic penetration of electricity remains small, though the liquidity these electricity exports bring could potentially benefit the financing of the expansion of the transmission grid, allowing for the electrification of rural areas in the future.