Africa Energy Futures: Mauritius

Over the last 5 years, how has the energy mix changed, and what have been the key drivers?

In Mauritius, the primary energy requirements are met from a mix of imported sources (mainly petroleum products and coal) and local renewables. In 2020, 76.1% of the country’s electricity was generated from non-renewable sources: coal (39.5%), fuel oil and diesel (36.6%). The remaining 23.9% was obtained from renewable sources: bagasse (sugarcane pulp used as biomass fuel) (13.3%), photovoltaic (PV) (5.1%), hydro (4%), wind (0.6%) and landfill gas (0.9%). These figures represent a gradual growth in the share of renewable energy – particularly solar and hydro – in the country’s electricity generation.¹

Mauritius has encouraged the financing and development of PV power plant projects through both international competitive bidding and joint ventures between the local private sector and international companies. For example, the Henrietta solar farm that has been operational since February 2019 with a production capacity of 17.5 MW. There have also been several initiatives led by the Central Electricity Board (CEB), the public utility company, such as the installation of PV rooftop systems on 10,000 low-income households.

As regards institutional and regulatory changes, the government created the Mauritius Renewable Energy Agency (MARENA) under the MARENA Act 2015. MARENA is empowered, among other things, to oversee and promote the development of renewable energy in Mauritius, including research and innovation. In 2017, the CEB Act was amended to allow CEB (Green Energy) Co Ltd, whose function is to promote renewable energy, to participate in power projects without having recourse to public procurement.

What is the outlook for the energy and natural resources sector in the next 5 years? In particular:

Key policy decisions

In the 2022-2023 budget, the Government reaffirmed its commitment to the transition to a green economy and has outlined its intention to take on board the following measures:

Cleaner, Greener Renewable Energy

• A Green Transformation Package implemented to increase the country’s share of electricity supply from local renewable sources.
• Hybrid renewable energy facilities will be set up in partnership with private promoters for a total capacity of 140 MW.
• Investment by the CEB in an 8 MW solar PV farm at Henrietta by February 2023 to increase its capacity from 2 MW to 10 MW.
• A 1 MW solar farm will be commissioned at Grenade in Rodrigues.
• DBM Energy Ltd (DBM) will implement solar PV projects at its industrial buildings as well as other public buildings for a total capacity of 6.2 MW.
• Airports of Mauritius Ltd will invest in a 14 MW solar photovoltaic system as part of the greening of the SSR International Airport and the surrounding airport area.
• To allow the CEB to accommodate more renewable energy on its grid, a 20 MW battery energy storage system will be installed at Amaury, Mauritius.
• To encourage production and supply of renewable energy by households and non-commercial entities:
  (a) 5,000 solar PV kits with a total capacity of 9 MW will be installed on rooftops of households, religious bodies, NGOs, and charitable institutions; and
  (b) A loan facility of up to Rs 250,000 will be made available by the DBM to domestic consumers at a concessional rate of 2 % per annum to finance the acquisition of solar PV systems.
• Individuals and companies will also be allowed to generate renewable energy up to a maximum of 150 % of their annual requirement.
• The CEB will purchase electricity under the Medium Scale Distributed Generation Scheme (MSDG) at a feed-in tariff of Rs 4.20 per Kw/h.

Carbon Neutral Industrial Sector

The Government is committed to ensure carbon neutrality in the sector by 2030. To this end, a renewable energy transition framework is being implemented through:

(a) The generation of up to 150 % of existing usage by industrial users;
(b) The provision of an agreed feed-in tariff of Rs 4.20 for industrial users by the CEB;
(c) Allowing the setting up of both on-site and off-site PV installations by industries; and
(d) The introduction of a Carbon Neutral Loan Scheme by the Industrial Finance Corporation of Mauritius Ltd (IFCM) over 7 years at a preferential rate of 3 %.

A Committee will be chaired by the Prime Minister to fast-track the implementation of Renewable Energy projects to attain this objective.

Accelerating the Land Transport Electric Vehicles Transition

• The Metro Express will be fully operational on the Port-Louis – Curepipe corridor, as well as between Rose Hill and Reduit before the end of 2022.
• Metro Express Ltd will implement photovoltaic farms at its Richelieu Depot, at Barkly as well as at Ebene Recreational Park to cater for its electricity needs.
• To further promote the electrification of the public transport system, the IFCM will provide leasing facilities of 3 % per annum over 10 years to transport operators to acquire electric vehicles and charging infrastructure.
• Two-hundred electric buses will be acquired to renew half of the fleet of the National Transport Corporation.
• IFCM will provide concessionary leasing at 3.5 % per annum to companies renewing their company fleet to electric only.
• DBM will provide a 0.5 % loan of up to Rs 3 million to taxis and van operators over a period of 7 years for the purchase of electric vehicles.
• As from 1st July 2022, all hybrid and electric vehicles became duty-free.
• Introduction of a negative excise duty scheme of 10 % for the purchase of electric vehicles by individuals up to a maximum of Rs 200,000.

Adopting an Effective Demand Management Strategy

The Energy Efficiency Management Office will:

(a) Introduce mandatory Minimum Energy Performance Standards for air conditioners; and
(b) Extend the mandatory energy labelling to television sets and tumble dryers.

Moreover, local authorities will be required to replace 10 % of street lighting in secondary roads by stand-alone electric lamps annually.

Main policy challenges

A main goal of the government is to significantly increase (from 13% to 60%) the share of renewables in the energy mix. A primary challenge remains whether the existing national electricity grid has the capacity to take up the increased power generated from renewable sources. Indeed, the modernization of the country’s national electricity grid; for example, through the use of smart technologies, is a prerequisite to accelerate the uptake of renewable energy. Unless this issue is tackled by government, the promising measures announced in the budget above will not produce visible results.

Because renewable energy is not entirely waste-free, the lack of a proper and efficient framework to safely dispose of used solar cells, batteries and PV panels could potentially hamper the country’s goal towards achieving environmental sustainability.

Furthermore, and even though there have already been institutional changes in the energy sector recently, the proper expansion of renewable energy capacity will require further supporting policies to allow for fair and transparent development from tariff setting to technical adaptation of the grid.

Finally, a potential challenge remains as to whether the appropriate process and regulatory framework could be implemented without undue delays and ideally before the end of 2022.

The anticipated role that renewables and/or new technologies will play

In today’s challenging context marked by the impact of the COVID-19 pandemic that has shaken Mauritius’ economy and the surge in prices of petroleum products, it is anticipated that renewable energy will play a pivotal role in the country’s development.

Indeed, both solar and wind are important natural resources for Mauritius due to its location and climatic conditions which allow for all year-round intensive sunlight and adequate wind. It is anticipated that developing new technologies in these sectors will enable Mauritius to fully tap into the potential of its local renewable sources, thereby significantly maximizing their share in the energy mix.

The abovementioned incentives addressed to households and non-commercial entities with respect to supply of renewable energy will also certainly accelerate the transition into a more climate resilient country.

Furthermore, the incentives and subsidies on electric and hybrid vehicles will encourage a “greening” of the transport system in Mauritius which currently accounts for a significant proportion of energy consumption. The use of ethanol which is being produced only for export should also be encouraged.

What are the key investment opportunities in the energy and natural resources sectors over the next 5 to 10 years?

The setting up of additional solar plants, wind farms, battery energy storage system in Mauritius as well as other hybrid renewable energy facilities with increased capacities to supply the grid, has the potential to attract both private sector and foreign investments in the production of PV cells and wind turbines, which could lead to local job creation. The energy transition framework is also expected to generate at least Rs 20 billion of private investment over the next 3 years.

There is also the potential for developing hydro power plants in view of the development of new technologies such as cascading hydro power plants, a new way to utilize low level lying watercourses for harnessing energy.

A feasibility study on the potential to develop offshore wind farms could potentially represent an opportunity for Mauritius to develop its ocean economy into an important industry to sustain economic diversification, job creation and wealth generation.

The Government confirmed in the 2022-2023 budget that, in order to finance the implementation of the country’s sustainability roadmap, (i) a Carbon Credit trading framework will be prepared, (ii) an Environmental, Social and Corporate Governance (ESG) framework will be developed, and (iii) an inaugural Sustainable Bond will be issued.

With particular focus on sustainability, and on reducing carbon emissions, how will the energy and natural resources landscape change over the next 5 to 10 years?

With the view to drive forward the sustainability agenda, the government has the goal of producing an additional 200 MW from renewable resources by 2025, thus increasing the country’s share of energy from renewable mix to 40 %. The Government is also committed to ensure carbon neutrality in the industrial sector by 2030. Indeed, this is a highly ambitious but not entirely unrealistic goal.

In light of the investments proposed by the government in the 2022-2023 budget on renewable energy and the fact that Mauritius has excellent natural resources such as sunshine, wind, biomass, hydro and wave potential, it is undeniable that in the next five to ten years the energy mix will shift more towards green and renewable energy. It is anticipated that solar, hydro and wind energy will become crucial vectors onto which the country’s economic and environmental sustainability will depend.

However, the country’s energy profile is currently dominated by fossil fuels. In that regard and together with the challenges identified above, it is believed that the shift to achieving 40% of the share in the energy mix from renewable sources by 2025 and carbon neutrality by 2030 might certainly be extended by the end of the next ten years or even after.

DLA Piper Africa is a Swiss verein whose members are comprised of independent law firms in Africa working with DLA Piper.

¹ As per statistics for 2017, 21% of electricity was produced from local renewables.