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Cape Verde (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Total installed electricity capacity (2010): 116 MW
Diesel fuel: 72%
Wind: 22%
Solar: 6%

Total primary energy supply (2008): 121.4 ktoe
Oil and Petroleum Products: 97.3%
Biomass: 2.3%
Wind: 0.4%

Cape Verde does not have any fossil fuel resources, but consistent (and still mostly unexploited) renewable energy sources. Due to the strategic position of the country’s ports and airports, approximately half of the fuel imported to Cape Verde is re-exported. In 2009, electricity generation from diesel sources was 290.4 GWh, with 4.7 GWh generated from wind power. Close Energy sources
 

Reliance

The energy balance of Cape Verde shows a high dependency on imported fossil fuels (11% of total imports in 2009, costing US$ 78 million). Indigenous energy resources consist essentially of biomass, as wind energy production is limited. Renewables in total contributed 2.7% to primary energy in 2009, with the remainder being met by imported fuels. There are no petroleum refineries on the islands, only storage facilities.

The overall fuel demand of Cape Verde includes diesel, gasoline, kerosene for cooking, LPG, lubricants, marine diesel and Jet A1 fuel. Diesel and LPG are the most important in terms of oil product consumption. The major consumption of LPG is due to the country’s lack of biomass and fossil resources (particularly firewood and coal). Oil imports in 2009 were estimated at 2,336 bbl/day, including both crude oil and oil products.
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Extend network

The population in Cape Verde is approximately 513,000 (2010), distributed over 10 islands. The islands are not electrically interconnected, and have their individual power supply systems, operated by ELECTRA, the national power utility company. Around 88% of the urban population and 54% of the rural population had access to electricity in 2010, rising to over 95% in 2011, which compares favourably to the 60% average seen in other middle-income countries of sub-Saharan Africa. Rehabilitation work on the networks of Sao Nicolau and Brava has been carried out, and ELECTRA aims to rehabilitate the remaining six island networks (excluding Boavista Island, whose network is under private administration) by 2016. Transmission and distribution in the country occurs at a range of voltages, predominantly 33 kV and 0.4 kV.

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Capacity concerns

The national electricity grid is made of many non-interconnected grids. The small extension of each network makes electricity generation more expensive, lowering efficiency and limiting the possibility of balancing the power. Furthermore in Cape Verde the great number of power stations and the presence in most islands of more than one network decreases the general efficiency of the system. The electricity demands on each of the larger islands are typically in the range 10-20 MW. The electricity demands have been constantly growing during recent years, and dramatic growth is expected in the coming years, mainly due to planned developments of tourism on four of the islands – Santiago, São Vicente, Sal and Boa Vista. A single power price is applied across all the islands despite cost differences, on the grounds of social equity. In addition, the performance of ELECTRA as a utility has previously been limited, with transmission and distribution losses reaching 26% in 2009, and a traditionally low rate of cost recovery (71% in 2006). In addition, power outages are common across the country, with approximately 1,337 hours without power service in the country in 2010.

To improve this situation in more recent years, ELECTRA has gradually switched off the oldest and smallest power stations and has invested in electricity distribution infrastructures, in order to rationalise consumption of fuels and production of electricity, and lower the costs involved. The country, as of 2008, had one of the highest electricity tariff rates in Africa, with an average rate of US$ 25 cents per kWh. Close Capacity concerns
 

Renewable energy

Solar energy
The potential for solar energy of Cape Verde is very high: 6 kWh/m²/day. Due to the high potential it was intended that solar energy would cover 2 % of the total energy consumption by 2010, although implementation of this target has been limited. There are several successful PV-based applications for water pumping, lighting and telecommunication systems.

Wind energy
According a study carried out by Helimax, Cape Verde is one of the 15 countries with the best wind resource in Africa. The plentiful wind resource is confirmed by monitoring by the World Bank - an average wind velocity of 7.5 m/s. At the end of 2004, there were 3 wind parks: in S. Vincent with an installed capacity of 900 kWh, in Sal with 600 kWh, and in Santiago with 900 kWh, delivering 2.9% of the electrical energy of the country. Recent developments have been made to the sector through collaboration between the Africa Finance Corporation, the Finnish Fund for Industrial Cooperation and Infraco, a consortium for African infrastructure development, in the Cabeólica project, operated by Cabeólica S.A. The project consists of a total of 30 turbines, with 11 installed as of November 2011, for a combined final output of 25.5 MW. Cabeólica S.A. will sell all power generated to ELECTRA under a PPA.

The context seems favourable for wind energy to be competitive. There is also an interest in small scale wind projects for small electrical grids in remote locations. Cape Verde is more favourable to small and medium scale projects mainly because of the characteristics of the demand of electricity and the electrical grid. However, the development of wind energy could be hampered because of restrictions on investment, and the need for further capacity building. Wind was also very popular in the past for water pumping purposes.

Biomass energy
Cape Verde has a very low biomass potential. The total production was estimated at 22,264 toe in 2004. This is a problem for households, especially in rural areas, with the urgent need for biomass energy for cooking purposes.

Geothermal energy
Geothermal investigations have concentrated mainly on the island of Fogo. However, no comprehensive study has been conducted as to the power generation potential. Gesto Energia S.A., an Italian geothermal energy company, recently identified a high-temperature reservoir that could allow for the development of 3 MW of geothermal capacity on the island.

Hydropower
There is almost no (economically feasible) potential for hydropower in the islands, predominantly due to the limited water resources in the country. Wave power has been considered for the island nation, with a Gesto study in 2011 indicating a potential of roughly 17 kW/m in some areas, mostly around the islands of Sal and Santo Antão.
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Energy efficiency

In 2010, the residential sector contributed most to total final energy consumption (29%). A major part of the energy consumption is for domestic use, transport, electricity production and water desalination. The Centre for Renewable Energy and Energy Efficiency (ECREEE) has been established in the capital city, Praia. This centre hopes to promote energy efficiency, in particular to ECOWAS members, but also to the entirety of Africa. The centre is involved in the establishment of demonstration renewables projects in the island. Supply-side efficiency has also been identified as an area for development, with the country still suffering from high technical losses. The Government aims to adopt the ECOWAS Regional Renewable Energy Policy and Energy Efficiency White Paper during 2012, as well as engaging in further GIS-based assessments of the RE and EE potential of the country.
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Ownership

Electricity market
The energy utility Empresa de Electricidad e Agua (ELECTRA, www.electra.cv) was first incorporated in 1998 (law no. 86/98), and, by the end of 1999, the state had sold 51% of its stocks for €45.5 million to a Portuguese consortium under Portuguese government control. The state and municipalities continued to hold 34% and 15%, respectively. The consortium committed to investing €65 million, obtaining a 50-year concession. ELECTRA invested considerably at the beginning of their mandate, but problems began to arise in relation to tariffs. At the end of 2001, the management complained that the tariffs did not cover the rise in fuel costs.

By September 2005, ELECTRA was unable to provide service reliability, and due to financial losses, it lost its entire initial capital. In 2006 the quality of service further deteriorated, despite a 6.5% tariff increase. Cape Verde re-acquired control of the company and AdP/EdP remained as a technical partner and minority shareholder in a complex operation, involving the recapitalisation of ELECTRA, and cancellation of the 1999 contracts and future obligations. The €71 million debt accumulated by the company was acquired by a local bank (Banco Comercial do Atlantico), controlled by a formerly state-owned Portuguese bank (Caixa General de Depositos). The debt has been transformed into bonds (guaranteed by the Cape Verde government) and subsequently offered to the market. Although these actions stabilised the problems of debt and management, operational difficulties remain. As of 2010, the State currently owns 51% of Electra, with private companies holding 34%, and municipalities in the country 15%. ELECTRA is responsible for the generation, distribution and sale of electricity in the country, and the production and distribution of drinking water in Sao Vicente, Sal, Praia and Santiago Vila Sal Rei on Boavista.

Liquid fuels market
In the petroleum sector, the Empresa Nacional de Combustíveis (ENACOL, www.enacol.cv) and Shell Cape Verde are responsible for the commercial system of supply. The stated main objectives of ENACOL are the import, processing, distribution, transportation, storage, and re-marketing of hydrocarbons and their derivatives. Close Ownership
 

Competition

The electricity sector is vertically integrated. ELECTRA handles generation, distribution and commercialisation of electricity services in the majority of the islands (including water in some islands). ELECTRA is currently owned by the government in majority. Water and power distribution on Boavista Island have been leased to a private company, Água e Energia da Boa Vista (AEB).

In March 2007, the state decided to divest its share in ENACOL through an Initial Public Offering. 28.7% of the capital was sold, with the government maintaining a controlling stake. As of 2009, following the listing of ENACOL on the stock exchange in 2007, the main shareholders became Portugal’s Galp Energia and Petrogal, with 45.03%, and Angola’s Sonangol with 38.13%. The Cape Verdean state owns a 2.13% share, with the remaining 14.7% in the hands of small shareholders. ENACOL achieved a majority market share in 2009, with 54.8% of the market. Close Competition
 

Energy framework

The general policy objectives, defined in the National Energy Plan for 2003-2012, and reaffirmed in the Growth and Poverty Reduction Strategy Paper are “to guarantee the satisfaction of the energy needs…and at a cost that contributes to improve the well being and the quality of life of the population, and for the competitiveness of the national economy, without creating macroeconomic or environmental imbalances or else aggravating the dependence on the outside”. These principles are translated into more specific policy objectives:

1) Consolidation of the Energy Sector on 3 levels;
i) Structural: enhancing the infrastructure for production, storage, transformation, transport and distribution of energy, to cover a greater area of the national territory;
ii) Access; increasing the population’s access to the commercial forms of energy;
iii) Institutional: endowing existing entities with means for policy-making and adaptation of technologies, establishing regulatory entities;

2) Guarantee of energy Security through;
i) Diversification of the energy sources by resorting, above all, to the utilization of indigenous resources

3) Guarantee of Competitiveness of the national economy; through
i) Regulation, prices and tariffs policy;
ii) Incentives for competition, decentralised and self-production,
iii)Incentives to limit waste and losses in the consumption of energy,
iv)Incentives for better efficiency in the energy supply systems;

4) Minimise the environmental impact of production, transformation and utilization of energy.

The GPRSP does not fix any targets for energy access, renewable energy sources, or energy saving, but specific targets were in the National Energy Plan 2003-2012. The GPRSP reaffirms the role of the state in tariff policy, and, the importance of a regulatory body.

With support from Gesto Energia S.A., the Government developed a Renewable Energy Plan (2010-2020) in 2010, with a target of producing 50% of the country’s energy requirements from renewables by 2020. The Government aims to achieve this solely through the promotion of the private sector, without the use of any form of feed-in tariff mechanism, and Law n1/2011 sets out a framework for Independent Power Producers (IPPs) in the country. The Law established a regime for micro-generation, and guaranteed a Power Purchase Agreement (PPA) for 15 years, for all IPPs utilising renewable energy, as well as setting out conditions for self-producers, and codifying the tax exemption on the import of RE equipment. Nearly 600 MW of RE projects are seen as having economic potential, and the Government aims to invest over €600,000 in the projects and requisite infrastructure by 2020. As of 2011, €126,000 had been mobilised.
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Energy debates

By 2020, the government intends to reduce energy costs, which are currently about 70 % higher than the European Union average. The strategy is to open the energy market to national and international private sector investments, and to reorganise and privatise ELECTRA. Using the various international instruments for RE promotion and the development of incentives for RE are key objectives to increase the participation of the private sector and facilitate an RE sub-sector in the country. Capacity building will be facilitated, especially through the University of Cape Verde.  Close Energy debates
 

Energy studies

Cape Verde is a member of the Economic Community of West African States which is working towards greater regional cooperation in energy. ECOWAS has approved an Energy Protocol that outlines principles for cross-border energy trade and investment. The country has also signed the West African Power Pool agreement with fellow ECOWAS members, Guinea, Guinea-Bissau, Liberia, Mali, Senegal and the Gambia. During the second phase of this agreement, the country hopes to expand interconnection between islands.

As part of the Renewable Energy Plan of 2010, Gesto Energia S.A. created a renewable energies atlas for the country, analysing the potentials of wind, solar, hydroelectric, wave and geothermal energies in the country. As of November 2011, the company is also developing the initial installation of two of the largest PV plants in Africa, of 5 MW and 2.5 MW, in the Santiago and Sal islands respectively. Close Energy studies
 

Role of government

The management of the energy sector in Cape Verde is under the control of the General Directorate of Industry and Energy (Direcção Geral da Indústria e Energia, DGIE) of the Ministry of Tourism, Industry and Energy, and the multi-sector Agency for Economic Regulation (Agência de Regulação Económica, ARE). The National Assembly enacts the laws and provides the statutes under which the Agency manages the energy sector.
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Government agencies

The biomass sector is managed by the Ministry of Environment, Rural Development and Marine Resources. This ministry also ensures the implementation of the production and the assembly of wind pumps and the construction of improved stoves. It also coordinates the Solar Regional Program – PRS (phase 1 and 2) of the European Union.
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Energy procedure

Cape Verde Wind Power PPP
Funded by the European Investment Bank and the African Development Bank at a cost of €60 million, the project comprises of the development, construction and operation of four onshore wind farms, including all interconnections from the wind farms to the local 20 kV grid connection points, and associated transmission infrastructure on the islands of Santiago (9.65 MW), Boa Vista (4.25 MW), Sal (7.65 MW) and Sao Vicente (5.95 MW) in Cape Verde. The wind farms will have a total installed capacity of 27.2 MW. Construction initially began in Winter 2011, and construction is hoped to be complete by mid-2012.

ADF Electricity Transmission and Distribution Network Development Project
The African Development Fund, in co-operation with the Government of Cape Verde and the Japanese International Cooperation Agency (JICA), aims to upgrade power distribution networks and improve service quality for approximately 94% of the population, by targeting six islands in the group. Funding for the project is primarily from the involved development agencies (98%). The project will extend the existing medium- and low-voltage networks, rehabilitate transmission lines and substations, install the SCADA system of control, defect identification and management equipment for three islands, and replace faulty metering equipment. The practical benefits of these measures will include the harmonisation of the involved islands’ electricity networks at 20 kV, the reduction of losses (both commercial and technical), and the improvement of electricity access rate and quality. Close Energy procedure
 

Energy regulator

ARE: Agencia de Regulacao Economica: The ARE (www.are.cv) has been created with Decrees no. 26/2003 and 27/2003. It is an independent regulatory agency with the responsibility for regulating energy, water, telecommunications, and urban and maritime transports. The ARE is also responsible for tariff fixation and realignment.
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Degree of independence

The ARE is an independent regulatory body, both in administration and the performance of its functions. The board consists of 3 members, a Chairman and two Directors, who are appointed by the Council of Ministers of the country. Financing comes from fees levied on licensed companies, and contributions from regulated companies.
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Regulatory framework

The Government of Cape Verde has already taken important measures to create incentives for the implementation of RE. Article 16 of the law nº 20/VII/2007, for example, allows the import of RE equipment such as solar panels, wind generators etc. with tax exemptions. The government further intends to strengthen the role of RE within its upcoming energy policies. The major objective is to reduce the high dependence on imported fossil fuels. The government thus intends to meet 50% of the overall energy needs (as opposed to 2.7% in 2008) by 2020 through RE resources.
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Regulatory roles

The DGIE is responsible for formation and implementation of energy policy, with the ARE in charge of regulation. Responsibilities of the ARE include:
  • to ensure regular and reliable access to regulated services,
  • protection of the interests of consumers through tariff-setting and service quality, and
  • ensuring the objectivity of rules and regulations, and transparency of commercial activities between company and customer.
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Energy regulation role

Enactment of energy laws proposed by the DGIE occurs through the National Assembly. The DGIE sets energy policy for the country, including such laws as proposed by the ARE for regulation of the electricity sector.
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Regulatory barriers

Cape Verde offers many advantages in view of business activities for the development of RE. Over recent years, successful investment strategies gained up to US$ 1 billion (in 2007). Through the commitment of the Cape Verde government, adequate taxation, tariffs and financial mechanisms in favour of RE have been promoted. This is mainly due to the existence of a reliable legal framework with guarantees for intellectual property rights, and guaranteed safety for investments. It is hoped through the current Renewable Energy Plan that private-sector participation in the electricity sector will be further encouraged, and that the current PPP model adapted by the Government, with a guaranteed 15-year PPA, will continue to attract investment in the sector.
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References

International Renewable Energy Agency. Renewable Energy Country Profile: Cape Verde. Available at: http://www.irena.org/REmaps/countryprofiles/africa/CapeVerde.pdf [Accessed 20th September 2013]

Indexmundi. Cape Verde Oil - Imports. Available at: http://www.indexmundi.com/cape_verde/oil_imports.html [Accessed 20th September 2013]

Briceño-Garmendia, C. and Alberto Benitez, D., AICD. Cape Verde's Infrastructure: A Continental Perspectiev. August 2010. Available at: http://www.infrastructureafrica.org/system/files/Cape%20Verde%20country%20report.pdf [Accessed 20th September 2013]

ADB. Cape Verde Electricity Transmission and Distribution Network Development Project: Project Appraisal Report, 26 July 2011. Available at: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Cape%20Verde%20-%20Approved%20-%20electricity%20transmission%20and%20distribution%20network%20development%20project.pdf [Accessed 20th September 2013]

Finnfund. Cape Verde Celebrates Milestone in Africa's Largest Wind Power Project. Available at: http://www.finnfund.fi/ajankohtaista/uutiset11/en_GB/cabeolicaopen/ [Accessed 20th September 2013]

Ferrenbach, D., IRENA. Case Study - Cape Verde Islands and ECREEE Regional Approach. Presented at the IRENA Workshop on Accelerated Renewable Energy Deployment in Islands with Emphasis on the Pacific Islands, Sydney, Australia, 26 October 2011. Available at: www.irena.org/DocumentDownloads/events/Workshop_Accelerated_Renewable_Energy_Deployment/Session1/S1_2_David_Vilar_Ferrenbach111018_ECREEE_Presentation.pdf [Accessed 20th September 2013]

U.S. Department of State. U.S. Relations with Cape Verde. Last updated 9 August 2013. Available at: http://www.state.gov/r/pa/ei/bgn/2835.htm [Accessed 20th September 2013]

Gesto Energy Consulting. http://gestoenergy.com/ [Accessed 20th September 2013]

ELECTRA S.A. Empresa. Available at: http://www.electra.cv/index.php/Empresa.html [Accessed 20th September 2013]

MacauHub. Water and Power Distribution Privatised on Boa Vista island, Cape Verde. Available at: http://www.macauhub.com.mo/en/2010/09/07/9747/ [Accessed 20th September 2013]

ENACOL S.A.. Historia. Available at: http://www.enacol.cv/PresentationLayer/conteudo.aspx?menuid=46&exmenuid=8 [Accessed 20th September 2013]

MacauHub. ENACOL Consolidates Leadership of Cape Verde Fuels Market in 2009. Available at: http://www.macauhub.com.mo/en/2010/02/04/8539/ [Accessed 20th September 2013]

NARUC, Rodrigues, A. Promoting Renewable Energy Development: An Introductory Workshop for Energy Regulators. Available at: http://www.naruc.org/International/Documents/22%20CAPE%20VERDE-%20RE%20Country%20Presentation%20March%202011.pdf [Accessed 20th September 2013] Close References