Madagascar Energy Situation

Overview   Republic of Madagascar     Capital Antananarivo (18° 55′ 0″ S, 47° 31′ 0″ E) Official language(s) Malagasy, French Government Caretaker Government President of the High Transitional Authority Andry Rajoelina Prime Minister Albert Camille Vital Total area 587,041 km2 Population 20,653,556 (2009 estimate) GDP (nominal) $8.382 billion (2010 estimate) GDP Per capita $393 Currency Malagasy ariary (MGA) Time zone EAT (UTC+3) Calling code +261

Situation analysis and framework conditions Madagascar’s energy balance shows that about 80% of its overall energy consumption is based on biomass (mainly firewood 68%, charcoal 10% and other biomass 2%), 17% on petrol (transport), 2% on electricity (hydropower and diesel power plants) and 1% on coal. Until today the petroleum products are all imported. Even though Madagascar has oil in place the oilfields are not being exploited yet. The energy consumption per head is around 0,2 tons oil equivalent, which is one of the lowest in the world. Access to electricity remains low with about 20% of the total population having access to this form of modern energy. In the rural areas, only about 5% have access to electricity. The installed capacity of electricity production in Madagascar accounts accordingly for some 650 MW only (production in 2008 = 486 GWh). The currently utilised capacity is even lower due to the poor efficiency following the lack of rehabilitation of some of the large hydro power plants. Six big hydro power plants (the biggest with an installed capacity of two times 30MW) provide the largest portion of the electricity production. Hydropower in general provides approximately 68% of the country’s electricity, the rest is produced by close to 100 diesel power plants. There is only a very limited national electricity grid between the capital Antananarivo and the city of Antsirabé with an overall length of approx. 180 km. The rest of the electrified cities and villages rely on isolated small and mini grids; Energy situation especially in rural areas Energy demand and supply in the householdsector For households all over the country, but especially in rural areas firewood and charcoal for heating and cooking, and kerosene and candles for lighting are the most important energy sources. Rural households spend on average 70€ per month, whereof about 11% or 8€ for lighting and batteries (radios, torches) and 5% or 3.5€ for cooking. Only about 5% of the rural population currently have access to electricity, which shows a large discrepancy compared to the urban areas where more than 60% of the households have access to electricity. The per capita consumption of electricity is at a low level per capita. Rural electricity supply More than 80% of the population (total of 20 Mio people) live in rural areas which signifies an untypically low level of urbanisation in the African context. The increase of urbanisation is equally low. Only 5% of this rural population have access to electricity. Those, who have access, get their energy mainly from diesel power plants in isolated small or mini grids. The power plants work usually only work for a few hours in the evening and prices per kWh are high (about 55 €cents/kWh). While there were initially exclusively these diesel-run electrification schemes, the sector has since 2007 shifted towards renewable energy projects with by now about 9 small hydropower-plants, 5 wind power plants and 1 biomass plant running village electrification schemes (In addition there are a few older plants and a few plants implemented by NGOs on the basis of renewable energies). Solar power is up to now only used for the electrification of some social infrastructure (including public lighting) and for single households mainly in the form of pico-solar-systems. Institutional set up and actors in the energy sector Public institutions Ministère de l’Energie (ME): responsible for the national energy policy and coordination of the activities in the energy sector. The Direction de l’Electricite et des Energies Renouvelables (DEER) implements the policy in the electricity and renewable energy domain. Agence pour le Développement de l’Electrification Rurale (ADER): established in 2004, responsible for ensuring the implementation of the rural electrification policies and the administration of related instruments, for promoting the provision of private-sector-services and providing technical advice to the private operators and for supervising the realization and financing of rural electrification projects. Office pour la Regulation de l’Electrification (ORE): established in 2004, responsible for the application of the norms, the quality of services, the principles of competition and the definition of the tariffs. Electricity companies JIRAMA (Jiro sy Rano Malagasy – Malgache Power and Water): earlier monopolist, now a limited liability company fully state owned, responsible for provision of electricity (production, transport, and distribution) and water services in the urban areas of the whole country, activities concerning rural electrification have been ceded to the Rural Electrification Agency (ADER) Private operators: see 1.2.3 Non governmental service providers for rural areas in the field of energy Private operators: With the reform of the energy sector, implemented between 1998-2004; it was decided to promote the private sector participation in the sector of rural electrification. Until today, some 20 operators – mainly small and medium-sized companies - have realized approx. 80 projects in the rural areas. Most of the private operators are associated in the Association des Opérateurs Professionnels en Electrification de Madagascar (AOPEM). This private sector is relatively dynamic but faces some problems as regards experiences with renewable electrification schemes and getting access to financing for the projects (a part from ADER) because of their small sizes and deficits in book keeping and setting-up of business plans. Policy framework Poverty reduction strategy In 2006, Madagascar launched the Madagascar Action Plan 2007-2011 (MAP). The MAP includes eight commitments: (1) responsible governance; (2) connected infrastructure; (3) educational transformation; (4) rural development and a green revolution; (5) health, family planning, and the fight against HIV/AIDS; (6) high growth economy; (7) cherish the environment; and (8) national solidarity. For each commitment, the government identified key challenges, goals and strategies, priority projects and activities, and key monitoring indicators. Rural electrification with renewable energies is in line with the objectives of the MAP (see development of the infrastructure and the rural areas, protection of the environment), but the main targets of energy policy had already been defined during the energy reform process. However, since the start of the political crisis in early 2009, the implementation of the MAP is unsure. Energy policy Energy sector reform On the basis of a World Bank initiative dating back to 1995, several donors have accompanied the government of Madagascar to unbundle and ultimately privatise the activities of the national electricity utility JIRAMA and at the same time reform the energy sector. With the adoption of the new law n° 98-032 on energy in 1999 and following decrees the sector had been formally liberalised. The objectives of the energy sector reform are the following: Development of independent power producers (IPP) Promotion of competition and private-public-partnerships Restructuring of the national power utility JIRAMA Providing 10% of the rural population with reliable and sustainable electricity supply until 2012 Increasing the share of renewable energies (without traditional biomass) to at least 3% of the total energy consumption by 2012 Even though the reform process has partly failed as regards the restructuring of JIRAMA, there are now about 20 private operators active in rural electrification.   National Electricity Fund (FNE Fond National de l’Electricité) Together with the establishment of the Rural Electrification Agency in 2004, Madagascar has introduced a consumer tax of 1.25% on electricity bills for consumptions being higher than 20kWh per month. The funds are provided to the Rural Electrification Agency to co-sponsor rural electrification projects. The agency offers a maximum of 70 % of investment costs to private operators who contribute the remainder and receive the concession to exploit the plant for 10-20 years. Even though a national electricity fund is in place, its impact is restricted as the funds available are very limited and its actual structure does not allow for financial contributions by other stakeholders like international donors, finance institutions or private investors. Therefore a restructuration of the FNE is being analyzed.   Feed-in Tariffs for renewable energies The significance of the possibility to feed-in electricity to existing grids is rather limited due to the small size of the national grid. Nonetheless, where such projects have been developed, the national power utility JIRAMA has proven to be reluctant to offer favourable feed-in tariffs. Only 2 operators of small hydro power plants have managed to conclude individual feed-in contracts with JIRAMA on the basis of a 10 years’ tenure and a pretty low feed-in tariff of approx. € 0.04 / kWh. A feed-in-law is not in place and not on the current policy agenda. Key problems hampering access to modern energy services in rural areas  Obstacles for grid based rural electrification Lack of a national distribution grid: Madagascar does not possess a countrywide electricity grid. The national power utility JIRAMA is operating selected grids only around major towns with the longest stretching between the capital Antananarivo and Antsirabé with an overall length of approx. 180 km. As the rural areas are only sparsely populated a significant extension of the national grid is only foreseen for the very long term. Thus, rural electrification will at least for the coming decade typically rely on isolated grid solutions and only for few cases on the extension of the national grid. Obstacles for off grid energy technologies and services Insufficient financial capacities of the Rural Electrification Agency (ADER): ADER has the mandate but restricted means to promote rural electrification. As an example ADER gets only 1/20th of the budget allocated to the national power utility JIRAMA (budget 2008). The political crisis since 2009 has further restricted ADER’s budget (from about 10 Mio€ in 2009 to 4Mio € in 2010). The private sector is involved in the financing of rural electrification schemes (usually with a 30% share of the total costs for an electrification project with renewable energies), but as the involved operators are mainly small to medium sized companies they are not able to raise significant capital (little experience with bank loans, difficulties with bookkeeping and setting-up business plans, operation of loss-making diesel power plants) Very low purchasing power of rural customers: Madagascar is ranked 143 of all 177 countries and belongs accordingly to the poorest countries in the world. The farmers in the rural areas of Madagascar still remain mainly on subsidence farming and only little revenues are available for energy purposes. On the other hand the costs per kWh produced with renewable energies is still very high, because of expensive equipment, that has to be imported, and high capital costs.