Increasing renewable energy production could play an important role in improving Madagascar's electricity self-sufficiency, writes Harry Clynch

Madagascar is one of the richest countries in Africa in terms of renewable energy potential. Many regions of the island have more than 2800 hours of sunshine annually, one of the highest levels on the continent. The north and south of Madagascar have favorable wind speeds for electricity production, and its hydroelectric potential is estimated at 7800 MW. High levels of sugar and other food production suggest that biofuels could be another rich source of energy for Madagascar and its population

Despite this, Madagascar has traditionally struggled to produce sufficient amounts of electricity. In 2023, the World Bank estimated that only 33.7% of the Malagasy population has access to electricity, compared to a significantly higher average of 48.4% in sub-Saharan Africa. Nearly 20 million people are believed to lack access to electricity, placing Madagascar thirteenth among countries with the largest non-electrified populations in the world.

This scarcity has forced Madagascar to continue importing large amounts of fossil fuels from abroad. Although around 80% of Madagascar's energy comes from biomass, the rest largely comes from fossil fuels like gasoline and coal. In 2022, Madagascar imported over $600 million in refined oil, mainly from Oman and the United Arab Emirates.

In addition to the environmental implications, this has left the Malagasy economy exposed to high raw material prices, as seen after Russia's invasion of Ukraine, which pushed crude oil prices above $130 per barrel. High fuel prices were partly responsible for a heightened inflation environment in Madagascar, with an average price increase of 9.9% last year

Given all this, it is not surprising that President Andry Rajoelina and the Malagasy government have identified renewable energy as the answer to several of the major challenges facing the country. Increasing renewable energy production could, at least in theory, play an important role in improving Madagascar's electricity penetration and making the country energy self-sufficient, which in turn would generate additional economic benefits.

Ugo Razafindratandra, head of corporate relations at the Economic Development Board of Madagascar (EDBM), notes that Madagascar's climate makes renewable energy an obvious solution for a country that needs more energy production. "We believe that renewable energies are key to having a positive impact in terms of sustainable development," he says. "All the resources are free. We have high levels of annual sunshine. We are an island, so we have plenty of water for water-based energy solutions. We have good wind speeds in several regions of Madagascar."

For this reason, the government has already set ambitious goals in this sector under the Madagascar Rural Electrification Program, which aims to harness the potential of renewable energies to provide electricity to 70% of the rural population by 2030. Razafindratandra adds that the authorities also see renewable energies as a way to drive industrialization and improve the Malagasy economy.

"Energy is a priority sector, as one of the pillars of the government's program is the industrialization and economic transformation of the country," he points out. "In the long term, we want to establish free zones to attract foreign direct investment (FDI), but that will require a lot of energy, and renewables are key to achieving this."

Global organizations and Madagascar's international partners seem to have embraced this vision and have provided significant assistance to help the country develop its renewable energy sector. For example, in November 2020, Power Africa, a U.S. government initiative, granted $1.2 million to mini-grid developers in Madagascar to provide sustainable energy solutions to rural communities, individuals, and businesses.

In February of this year, the European Union also announced a new initiative called "RePower" to bring renewable energy to 20,000 off-grid consumers in Africa by 2027. The EU is providing about $10.7 million in funding to enhance renewable energy penetration in rural communities in Madagascar, Niger, Senegal, and Ghana.

Private sector participation
While these humanitarian initiatives play an important role in boosting Madagascar's renewable energy sector, private sector participation is critical. Although the state electricity company JIRAMA provides electricity to some parts of the country, most of Madagascar's energy comes from private companies.

In the past, the private sector has been reluctant to increase its production capacities in Madagascar. Low population density in many areas, along with high levels of poverty, have made it commercially unviable for the private sector to provide services in large areas of Madagascar. However, the Malagasy government has recognized this and, with the help of international organizations, is offering public sector financing and other incentives that make Madagascar's renewable energy sector increasingly attractive to the private sector.

In April of last year, the World Bank approved a $400 million credit for the Digital and Energy Connectivity for Inclusion in Madagascar (DECIM) project, which aims to double energy access in Madagascar to 67%. The DECIM project will subsidize the provision of energy-related infrastructure to ensure that private companies can provide electricity in areas that would otherwise be commercially unviable.

DECIM also seeks to close the "affordability gap" by ensuring that communities have enough financial resources to cover their electricity needs. By addressing both supply and demand issues, the Malagasy government hopes to pave the way for increased private sector investment in the country's renewable energy sector and, consequently, greater access to electricity across the island.

Hydroelectricity and solar lead the way

Perhaps the most prominent example of this enhanced cooperation between the public and private sectors is the Sahofika Hydroelectric Power Station, which is currently under construction but is set to commence operations later this year. The project is a public-private partnership (PPP) between the Malagasy government and a consortium of international energy companies. The government has contributed €30 million to the project, and the African Development Bank, the Arab Bank for Economic Development in Africa, and the EU are also poised to financially support the project.

When the power station is completed and comes online this year, it will supply power to around eight million people in Madagascar, a testament to the social and economic change that cooperation between Madagascar's public and private sectors can bring.

Other private sector energy companies have also expanded their presence in Madagascar as the market becomes more attractive and commercially viable. In February, the pan-African company AXIAN reached a deal to acquire solar power assets in Madagascar. These assets include the Ambatolampy solar power plant as well as four hybrid power plants, which will collectively enhance electricity access for around 600,000 people in Madagascar

Article source: african.business