Madagascar, one of the Earth’s great natural wonders, suffers from severe problems. It has long been plagued by political instability and the country’s development indicators are among the worst in Africa. In particular, access to electricity is strikingly low — barely a third of the population enjoys a grid connection, according to World Bank data.

Nearly half of the power that does feed into Madagascar’s grid comes from burning heavy-fuel oil (HFO), a highly polluting method of generating electricity that is considered obsolete across most of the world. 

Madagascar’s government is now pushing to unlock the island’s renewable energy potential as it seeks to extend electricity access to 70% of the population by 2030. Boosting the power supply is also vital to attracting industry to the island. Mining is already a vital source of export revenues and the government is looking to secure further investment into high-demand critical minerals, such as the graphite and cobalt used in technologies such as electric vehicle batteries.

Hydropower

One of the most significant projects on the drawing board is the proposed Volobe hydroelectric power plant near Toamasina in the east of the island. This will have a run-of-the-river design, where power is generated from turbines placed within pipes in the river, and the dam does not create a large reservoir.

The development will provide a “massive boost” to the country’s electricity grid, says Nicholas Delaunay, chief investment officer at Antananarivo-based Axian Energy, one of the investors in Volobe. The scheme’s planned capacity of 120 megawatts (MW) is set to increase Madagascar’s overall electricity supply by 20%.

He adds that Volobe will also result in “a dramatic cut in the power production costs for the country”. A spokesperson for CGHV, the corporation established to manage the project, told fDi that Volobe would result in annual savings of $100m for the state-owned utility, Jirama, which is mired in financial crisis — partly due to its purchasing of power from HFO plants to sell to consumers at subsidised rates.

CGHV expects Volobe to reach financial close around the end of 2025. Construction could begin the following year, with generation by 2030.

Yet, despite a seemingly convincing economic case, financing a project like this would not be possible without a large-scale injection of concessionary capital and the support of development partners. 

Africa50, an infrastructure investment platform established by African governments and the African Development Bank, took a 25% stake in CGHV when it was formed in 2019.

Africa50’s involvement has helped to bring the project “closer to bankability”, says Anas Charafi, senior investment director at the platform. “We actively support the project with our project development know-how and our expertise in raising debt financing,” he says. The US International Development Finance Corporation agreed to provide technical assistance for Volobe in September, while the EU has pledged concessional loans.

Land challenges

Madagascar could potentially install 7800MW in hydropower capacity, according to a 2014 World Bank study. The country’s solar and wind potential is also extensive.

But foreign investors have reasons to be nervous about entering the country. “Madagascar has a history of political volatility, as popular protests, coups d’état, assassinations and impeachments have forced out the majority of post-independence presidents,” warns Trevor Kibet Langat, an analyst covering eastern and southern Africa for advisory firm Control Risks. 

While current president Andry Rajoelina has consolidated power in recent years, Mr Kibet Langat cautions that civil unrest and crime continue to cause headaches for renewable energy project operators.

Land rights is a particularly thorny topic on the island, says Velomahanina Razakamaharavo, a research fellow at the University of Reading in the UK specialising in social conflicts in Madagascar. But while land rights are often contested, she stresses renewable power projects can enjoy community support, providing developers are sensitive. “People need electricity,” she points out. “So as long as it benefits the local population — as long as the benefits are shared and their rights as well as the traditions are respected — there should not be a problem with the community.” 

Even so, Ms Razakamaharavo explains that the cultural concept of fady — cultural taboos, including for certain groups to enter particular areas — can cause complications. In the past, she says, Madagascar has had “very big problems” with infrastructure projects where the workforce was recruited from outside the local area. 

Going off-grid

The sheer remoteness of many parts of the vast island makes connections to grid infrastructure a distant prospect. This is problematic both for rural communities and for mining companies that operate in remote areas. These companies generally have to rely on their own power plants, which typically run on HFO — but many are looking for alternatives.

CrossBoundary Energy, a developer of distributed energy systems, is already working on two off-grid renewable energy projects for mining companies in Madagascar, and is pursuing at least three further opportunities in the sector, says Richard Stanford, the company’s technical director.

In April, President Rajoelina inaugurated the first phase of a solar and battery storage project developed by CrossBoundary to power a mineral sands mine operated by Rio Tinto in the south of the country. A subsequent development will install wind power capacity using second-hand turbines.

“The fundamental reason why Rio Tinto and other mines are turning to renewables is that it is offering substantial savings against their alternative sources of energy,” says Mr Stanford. Major mining companies are also looking to reduce their carbon emissions, he adds. The project will ensure around 60% of the mine’s energy demand can be met by renewable sources. 

As with other renewable energy projects in Madagascar, the Rio Tinto scheme has come with many hurdles. “The biggest challenge that we faced was on logistics,” says Mr Stanford, referring to delays in the shipping of key components, as well as the difficulty of transporting equipment on sometimes treacherous roads.  

For Madagascar, delivering renewable power should be worth the effort. A vastly expanded power supply, made possible by low-carbon sources of power, certainly offers the hope that the island can turn a corner and enjoy a brighter future.

Ben Payton is a freelance journalist based in London. 

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This article first appeared in the October/November 2024 print edition of fDi Intelligence