Power policy

Madagascar does not have a legislated clean energy target, although it is aiming for 85% of power generation to come from renewables by 2030, consisting of 75% hydro, 5% solar and 5% wind. The country’s current electricity generation mix comprises 26 megawatts (MW) from biomass, 790MW from small hydro plants, 1,039MW from oil and diesel sources, 30MW from natural gas and 15MW from solar PV.

The government is looking to install around 100MW of new renewables over the period 2015-2030. In 2018, a 20MW solar project was commissioned by state-owned utility Jirama and the government held a tender for 25MW of solar with storage supported by the World Bank's Scaling Solar program. These are the most tangible signs of progress towards the country’s renewables target. While the government can hold tenders for energy projects under the 2017 Electricity Code, no new auctions have been held since the solar PV tender in 2018.

The country is trying to encourage private sector investment in renewables capacity. It has eliminated import tariffs and VAT on solar PV, and capital investment in equipment (with the exception of buildings) can also be depreciated at an accelerated rate of 30% of the net value.

The government wants to prioritize energy access for all. At present, Madagascar’s electrification rate is about 69% in urban areas and just 9% in rural areas. The National Strategy of Electrification (NSE) is currently under development as a continuation of the National Energy Policy (“Nouvelle Politique de l’Energie”, NPE) introduced in 2015. The 2015-2030 NPE is extremely ambitious and aims for 70% of the population to have access to electricity and modern lighting by 2030. It considers a pathway in which 70% of electrification will be through grid extension, 20% through mini-grids and 10% will be served via individual off-grid solutions. As announced in March 2019, Madagascar is also working with the World Bank to bring electricity access to a minimum of 1.7 million people by the end of 2023.

Power prices and costs

There are no time-based tariffs in Madagascar. Tariffs and their structuring applied in electrification projects must be reviewed by the regulator and take into account the income of the population they will serve. In most cases, this means that development funding or government support is required to fill the gap between the cost of systems and what can be recovered from users.

The direct retail of electricity to industrial and commercial users can be priced bilaterally. The government also subsidizes electricity through the subsidy of fuel.

Power market

Independent power producers (IPPs) in Madagascar can sell their electricity to state utility Jirama, which is the sole offtaker for the main grid. However, in the private market, IPPs represent just 6.5% of electricity production in Madagascar, and the remainder is accounted for by private suppliers in rural areas.

The country’s power sector has been opened up to IPPs for over a decade and there is a clear intention to attract more private and international investment. Independent producer CrossBoundary Energy is set to build a renewable energy plant in 2022 – comprising 8MW of solar, 12MW of wind and 8.25MW of battery storage – and has signed a 20-year corporate PPA with Rio Tinto to power its QMM ilmenite mine.

The retail of electricity can also be done by independent companies through direct sales or within rural electrification concessions, however, experience in this segment remains limited.

Doing business and barriers

Navigating administrative processes and land acquisition can be difficult and lengthy in Madagascar. Moreover, access to financing is generally complicated. The quality of the grid can also cause issues for larger projects, which is why most PV developers are encouraged to not only include storage in their projects, but also to finance their own connection to the grid. While the Rural Electrification Development Agency (ADER) and the Board of Electricity Regulation (ORE) monitor and enforce clear rules on grid interconnections, there is currently no publicly available data on grid extensions to help developers plan for the medium to long-term

Owing to difficulties in collecting tariff payments, companies in Madagascar’s utility sector – including public ones – are heavily indebted. Jirama, which is the sole off-taker on the main grid, is under considerable financial stress and generators have been paid in treasury bonds. The budget gap covered by the government to support social retail tariffs and high fuel import bills doubled from 2009 to 2014, reaching $150 million despite lower energy commodity prices at the time. The growth of renewables in the mix should improve the financial health of Jirama.

The main obstacle to retailing off-grid electrification products continues to be the low income of the target population. There are also administrative barriers. According to the 2017 Electricity Code, distributors of PV equipment under 10 kilowatts (kW) must fill out a simplified declaration form on behalf of their customers and submit it to the Authority for Power Regulation (ARE). For PV installations between 10-150kW, they must fill out a proper declaration form and submit an environmental impact assessment.

There are no concrete plans to overhaul the electricity industry in the foreseeable future.

EV market

The government has yet to implement any substantive policy support in this sector and the electric vehicle (EV) market remains at an early stage.

EV policy

The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage.

Buildings market

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.

Buildings policy

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.