Sun-Blessed Madagascar Turns to Solar to Reduce Energy Costs

(Bloomberg) -- Madagascar's state power utility may become profitable by 2020 as the Indian Ocean island nation builds more solar plants to cut electricity-production costs, Energy Minister Lanto Rasoloelison said.

The government is overhauling the state-owned power company, known as Jirama, with World Bank help as it seeks to provide universal electricity access by 2030 in a country where less than one in seven people are connected to the grid. About half of Madagascar's electricity comes from thermal sources, according to the World Bank.

The government is targeting reducing the cost of producing power to 580 ariary (14 cents), compared with the 850 ariary per kilowatt hour it costs to produce electricity from fuel oil and diesel, Rasoloelison told reporters Tuesday in the capital, Antananarivo. Subsidies enable the utility to sell power at 640 ariary per kilowatt hour, President Hery Rajaonarimampianina said last week.

Madagascar has large solar-energy potential, with almost all regions of the country receiving more than 2,800 hours of sunshine per year, according to the Africa-EU Renewable Energy Cooperation Programme. The government's New Energy Policy targets producing 85 percent of the country's electricity from renewable sources by 2030, according to the programme's website.

Solar Plants

Last week, the government commissioned a 20-megawatt solar plant in Ambatolampy, central Madagascar. Jirama, which generates, transmits and distributes electricity in the country of about 24 million people, will buy the power from the facility operated by GreenYellow SAS of France at 480 ariary/kWh, according to Rajaonarimampianina.

The solar plant cost 25 million euros ($29.1 million) and will power 50,000 homes including in the industrial town of Antsirabe and the capital, Antananarivo.

Another plant with similar capacity is in the works and will be financed by the World Bank and its private-sector arm, the International Finance Corp., the Washington-based lender said. Jirama plans to install 41 hybrid plants throughout Madagascar to bring down the overall cost of power, its communication director, Francesca Andriamampionona, said by phone Tuesday.

Madagascar is ranked 185 out of 190 countries in terms of the difficulty, delay and cost of getting electricity, according to the World Bank's Ease of Doing Business survey last year. In 2016, the state allocated the equivalent of 3.1 percent of its gross domestic product to “unaffordable and poorly targeted” fuel subsidies and transfers to Jirama and its national carrier, the bank said.

To contact the reporter on this story: Aina Rahagalala in Johannesburg at arahagalala@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Helen Nyambura

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