Macroeconomic performance¹

Real GDP grew by an estimated 2.8% in 2018, after contracting 3.8% in 2017, supported by the Glencore debt renegotiation in February 2018 and substantial external financing. The fiscal balance was an estimated surplus of 0.1% of GDP, up from a deficit of 0.8% in 2017, thanks to increased revenue (mainly from oil), budget support, and control of total expenditure, particularly salaries (down 6%). The second review of the International Monetary Fund’s (IMF) Extended Credit Facility was approved in July 2018. Monetary policy is part of the Central African Economic and Monetary Community (CEMAC) stabilization policy. Inflation rose to an estimated 2.1% in 2018, from –0.9% in 2017. The current account deficit improved to an estimated 4.3% of GDP in 2018 from 6.6% in 2017, in conjunction with the improved trade balance (from 3.0% in 2017 to 8.4% in 2018) following the recovery in oil prices.

¹Source: African Economic Outlook, 2019, African Development Bank.: https://www.afdb.org/en/knowledge/publications/african-economic-outlook/

Business environment and private sector development²

According to the World Bank’s Doing Business 2019, Chad has made an important progress in improving business environment. It indicates that in the year under review Chad made starting a business easier by allowing registration of the articles of association at the one-stop shop. It also made property registration easier by halving the registration fee. The country made enforcing contracts easier by adopting a law that regulates all aspects of mediation as an alternative dispute resolution mechanism. But this is not without challenges. In its assessment, the International Monetary Fund provides that Chad scores poorly with respect to governance, corruption and business environment. Paying taxes, starting a new business, getting electricity, trading across borders, and protecting minority investors are particularly problematic. Based on IMF staff’s estimates of the elasticity of per capita real growth, Chad would gain significant benefits from improving the quality of governance and reducing the prevalence of corruption.11 In 2018, the Forum for the Recovery (“Forum pour la Relance”) organized by the private sector in Chad identified the fight against corruption as the first and foremost priority in order to support the role of the private sector in the economic recovery.³

The private sector in Chad operates in a rather difficult climate. In this regard, areas to improve include streamlining procedures for the creation of small and medium size enterprises, facilitating access to financing for exporting companies to foster trade, modernizing tax administration to reduce non-compliance, widening the tax base, and reforming regulation to facilitate investment in the electricity sector to increase access to reliable and affordable power supply needed to improve Chad’s competitiveness. In its 2018 Enterprise Surveys in Chad, the World Bank revealed the dual challenge of providing a strong infrastructure for electricity, water supply and telecommunications in addition to information on the development of institutions that effectively provide and maintain these public services.⁴

Source: World Bank, 2018. Enterprise Surveys.

In the energy sector, there are multiple bodies involved in the oversight of the oil sector. The oil sector is under the supervision of the Ministry of Petroleum and Energy, which is responsible for the development and
implementation of the government policies for the sector. In addition, the main bodies involved in the oil sector oversight are “Le Collège de Contrôle et de Surveillance des Recettes Pétrolière” which is in charge of verifying the appropriate budgetary allocation and use of petroleum resources and SHT is the public enterprise that manages government oil assets.

²https://www.afdb.org/en/knowledge/publications/african-economic-outlook/
³WORLD BANK DOING BUSINESS 2020: Comparing Business Regulation in 109 Economies. https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf International Monetary Fund. 2019. Chad – Selected Issues. IMF: Washington DC.
⁴World Bank. 2018. Enterprise Surveys: What Businesses Experience. Chad 2019 Country Profile.

Key takeaways on the electricity sector

Electricity Access⁵

Energy access in Chad is extremely limited, reaching only 8% for electricity and 3% for non-solid fuels for cooking and heating. Electrification rate is The typology of electricity demand in Chaddistributed in favor of urban areas. Although Chad is endowed with significant and diverse energy resources (oil and gas, solar energy, wind energy, and biomNumber of inhabitants ass), these are only partly developed.

Installed capacity

The installed capacity was 190.2 MW in 2017. This remained the same in 2018. Of this thermal energy constituted 188.9 MW and renewable energy 1.3 MW. The available capacity is only 108 MW, i.e. an availability factor of 57%, which is extremely low. This is evidence of lack of maintenance.

Production⁶

Chad's energy situation is characterized by a crisis in resources and technologies. Consequently, less than 4% of the population has access to energy which is supplied on a non-regular basis at a high cost. 90% of the energy used is provided by firewood and charcoal, 6-7% by petroleum products and 3-4% by thermal sources. In 2000, the Government launched a program in N'Djamena to replace the use of wood fuels through the use of butane gas. The majority of Chadian households (69 %) use electricity for lighting and 11% of households use it as cooking fuel. Over 80% of electricity is consumed by households in the capital N’Djamena. The population also uses biomass as an energy source and the Société Sucrière du Tchad – Sugar Company of Chad (CST) – uses bagasse to produce energy.

The predominance of wood fuels in the energy supply and the coverage of a quality basic service of electricity and in a continuous way are still and will remain for a long time a challenge. Aware of this situation, Chad launched in 2012 a comprehensive program for renewable energy. Thus, to make energy accessible to a majority of the population and especially to promote renewable energy, the Government established the Agency for Renewable Energy Development (ADER).

Table 1 The typology of electricity demand in Chad⁷:

Production costs⁸

The tariff for LV consumers has been set in 2014 to 125 FCFA/kWh (19€c/kWh), with a social tariff at 85 FCFA/kWh (13€c/kWh) for consumption up to 150 kWh in a month. Overall, and considering also MV/HV consumers and fixed payment, the average tariff billed by the SNE is of 140 FCFA/kWh (21€c/kWh) for a total cost of service of 250 FCFA/kWh (38€c/kWh) in 2018, entailing a gap of around 0.17€/kWh sold. This gap has been covered over the last four years by a Government subsidy through the supply of in-kind diesel – around 11 trucks per day leaving the SNE responsible for paying 30% of the fuel deliveries from Société des Hydrocarbures du Tchad - and the supply of electricity from the refinery free of charge.

The reasons behind the high cost of service to end-consumers are (i) high thermal generation cost with a variable cost between 16 and 20 €c/kWh for diesel, associated with high rental costs for the Agrekko and Vpower plant equivalent to around 6 €c/kWh (ii) high losses from the utility and (iii) relatively high internal cost for the utility.

Tariffs⁹

In Chad, the discrepancy between tariffs and generation costs weighs heavily on the country’s finances. Electricity imports and exports are liberalized. Electricity generation is open to competition or can also be awarded under a declaratory regime either for self-generation or for IPP. IPPs can sell directly to large consumers after the exclusivity period set that should be set in SNE delegation contract and would pay a transit fee to use SNE transmission network. Under the law, electricity tariffs are to be set at a level allowing to recover the cost of service which is not currently the case, including the delegation fee and the benefit margin. Higher costs of isolated systems are also to be reflected in the tariff, which could therefore be differentiated from the on-grid tariff for isolated systems.

⁵African Development Bank. 2019. Desert to Power Implementation Strategy for Chad. Abidjan: African Development Bank.
⁶Climate Investment Funds. Expression of Interest Plan of Chad to participate in “Scaling up Renewable Energy Program in Low Income Countries”.

Country strategy on the environment and climate change¹³

Policy and regulation

In the energy sector, there is a strategic framework for energy policy in Chad that is defined in "The letter of policy and strategy for the electricity sub-sector." The letter defines primary and secondary objectives: on the one hand meeting the energy needs of the entire population in particular electricity at a lower cost; on the other hand, expanding access to energy for industrial and agricultural production.

In an effort to create incentives and favorable conditions for the improvement of the business environment, many initiatives have been taken to promote the Energy Sector in Chad. These are:

• The development of an energy Master Plan;
• The implementation of a new institutional and regulatory framework to substantially improve the management of energy issues and, in particular, electricity consisting in particular of (i) the complete restructuring of the Société Nationale d’Electicité (the national electricity company) and (ii) the creation of an independent agency responsible for the regulation, development, access and promotion of investment in the sector.

Chad has spelt out is policy on the environment and on climate change in its National Adaptation Plan (NAP). The issue of environment protection is enshrined in articles 47 and 52 of the Constitution of Chad, and Act N°014/PR/1998 defines the general principles for protecting the environment. In 1992, Chad signed the United Nations Framework Convention on Climate Change (UNFCCC), which was ratified on 30 April 1993. Since then, the country has produced the Initial and Second National Communications relating to climate change, in accordance with the relevant UNFCCC provisions. This demonstrates Chad’s desire to make an effective contribution to the global effort to combat global warming, to which the country is highly vulnerable given the fragility of its ecosystems and its economy, which is highly dependent on sectors that are sensitive to climate change.

Chad is undertaking a number of interventions to fight climate change, including activities such as planting thousands of trees each year and implementing the national programme for the development of green belts around Chadian cities. In addition to these green belts, ten million trees are being planted as part of the African Great Green Wall initiative, and National Tree Week has been officially launched. Chad has also established a Special Fund for the Environment (FSE) in 2013, in order to mobilise its own resources through the establishment of specific taxes. Under its INDC, Chad intends to reaffirm its determination to contribute to the global effort to reduce GHG emissions and reinforce its resilience to climate change, implementing coherent programmes which will enable it to become an emerging country by 2030, whilst favouring low-carbon development, as far as possible with the means available.

¹²http://www.eu-africa-infrastructure-tf.net/activities/grants/djermaya-solar.htm
¹³Intended Nationally Determined Contribution (INDC) for the Republic of Chad

Regional Integration and Chad’s Energy¹⁴

Projects by multilateral and bilateral institutions

There are a number of projects that are driven by international financial institutions and donors catalysing integration of Chad’s energy sector into regional development.

The African Development Bank intervenes in the Chad energy sector through two projects: (i) Chad-Cameroon interconnection project and (ii) Djermaya solar IPP (32 MW), and (iii) the Quadran project (2x15MW). The structure of the Djermaya project is expected to be replicated in 2020 for the Quadran project (2 x 15 MW) and Djermaya Phase 2. Additional SEFA funding could potentially be sourced to support feasibility studies for these projects, as well as fund advisors to help with transaction structuring and execution.

Beyond these projects, and as long as the interconnection between Chad and Cameroon is not commissioned, there will be limited room to include additional intermittent PV in the grid without undermining network stability. It is therefore recommended to undertake a network study that will give recommendations in terms of back up storage in the networks that will be necessary to integrate additional capacity. This study will guide the design of new solar plus storage facilities that would be subsequently tendered building on the project documentation developed for the Djermaya project. An ADF public sector project could then act on the findings of the study and finance the installation of the requisite backup storage facilities to facilitate the integration of more variable input into the grid.

In the longer run, the commissioning of Chad – Cameroon interconnection expected by 2028 will enable smoother integration of PV to the grids. Strong long-term synergies are expected between the Chadian and Cameroonian grids, with possible exports of PV generation from Chad during daytime, and import to Chad of baseload hydro or thermal generation during nighttime. The interconnection, associated with long term increase demand in Chad should enhance the stability of the network and diversify the energy mix of the country, thus enabling the absorption of additional PV generation any base load power imported.

Other potential measures that can contribute to facilitating an enabling environment for further private sector investment in Chad are (i) removing import taxes and duties on solar equipment (10% on price of equipment according to latest WTO data, HS Code 854140), and (ii) working with the Government of Chad to implement certain key provisions of the 1999 Electricity Law (Loi 14), which provided the basis for the creation of a regulatory body to oversee the electricity sector (but which never materialized). These types of measures would require high-level discussions with senior cabinet members and other officials of the Chadian Government, which could be facilitated by onboarding Chad as a focus country of the Africa Energy Market Place (AEMP).

Given the low electrification rate in the country, there are villages and small cities that are not reached by the grid. Another action would be building on initiatives in Burkina Faso or DRC, to implement rural electrification projects based on the competitive procurement of solar based mini grids.

Table 3: The proposed strategic approach will focus on the below described axes:

Regional electricity market

Assuming that regional states can overcome the obstacles identified earlier, the integration of West Africa's growing power-generating capabilities could create the region's first true power market. Currently, only about 7% of the electricity produced in West Africa is traded. However, in July 2018 the WAPP launched a trading market (with its headquarters in Cotonou, Benin) that will allow ECOWAS member states to trade their surplus electricity. The World Bank estimates that an integrated power-trading system in the region could bring operational and power-generation cost savings of USD 5bn-8bn a year by allowing countries to import cheaper and more cleanly generated electricity.

However, the potential new market throws up several complex political and technical challenges, which will require close cooperation and determination among policymakers, regulators and utilities if they are to work. Throughout much of the region, local power utilities are expected to hinder the conclusion of trading agreements, and low capitalization, ongoing supply problems, poor domestic collection capacity and corruption are likely to result in poor collection of payments, making it difficult to enforce international contracts. Such problems have already been reported in pre-existing projects operating on a smaller scale, such as the West African gas pipeline system linking Nigeria, Benin, Togo and Ghana. After force majeure was declared on the supply of gas by Nigeria at the start of the project in 2011, the pipeline underperformed and the Ghanaian authorities consequently underpaid for supply. The WAPP will need to instigate measures to improve the power sector's creditworthiness, provide guarantees and involve regional institutions, if it is to take the lead in ensuring that the region's electricity infrastructure stands a chance of succeeding, once it is built.

¹⁴African Development Bank. 2019. Desert to Power Implementation Strategy for Chad. Abidjan: African Development Bank.

Electricity Regulatory Index

Regulatory assessment

So far, Chad has not captured in the African Development Bank’s Electricity Regulatory Index.

National utility

General profile

SNE is responsible for generation, transmission and distribution of power. The large majority of SNE activities are in and around Ndjamena, where a 90kV loop connected to the 66kV line to the refinery at Djermaya was completed last year. Excluding the captive power plants of the upstream oil and gas operators, around 189 MW (109 MW available) is the total country installed capacity. Out of it, 56MW comes from three (3) third party suppliers, namely V-Power, Aggreko and the refinery (SRN). V-Power and Aggreko are facilities under short term leases and hence expensive. Other generation facilities are owned by SNE. Generation is currently exclusively based on diesel supplied from the Djermaya refinery. Aggreko was fueled with 75% of HFO, enabling significant cost savings but was stopped in 2017. While the total installed capacity is 188 MW, the available capacity is only 108 MW, i.e. an availability factor of 57% which is extremely low. This is evidence of lack of maintenance. In order to facilitate capacity additions, a substantial program of reinvestment on existing generation facilities would be required.¹⁸

The National Electricity Company (SNE), the main electricity supply institution, is characterized by, among other things, dilapidated electricity distribution network, the financial imbalance and the commercial underperformance. SNE's infrastructure is concentrated in N'Djamena, where the distribution network is very obsolete and covers only a third of the city's current area. The networks of the provinces, of recent construction, pose for the moment not too much problem. However, they require extensions to meet the needs. SNE faces enormous marketing problems with its product given the low billing and collection rates and the shortfall caused by fraudulent connections. It is also experiencing a huge operating deficit due to low own resources and a high level of expenses caused largely by the purchase of fuel and lubricants which accounts for 80% of the operating burden. Conscious of the importance of energy for the development of the country, the government has installed in N'Djamena a 60 MW power station which is currently operational. In addition, the Djarmaya refinery will supply 20 MW to the City of N'Djamena. The urgency is to solve the question of the N'Djamena network so that users can benefit from this production capacity. In addition, the State decided, as part of its support to the social and operators, to reduce the cost of KWH to 125 CFA francs, a drop of 49%. The commissioning of the Djermaya refinery producing gas and access to stoves on the market at reasonable prices are major elements that will eventually contribute to the substitution of wood for butane gas.

To ensure the coordination national policies on the development of renewable energy, the Agency for the Development of Renewable Energy (ADER) was established in August 19th, 2013 by Ordinance. The ratification process of the Ordinance by the Parliament, the signing of the decree of operation and the appointment of Directors are underway.

ADER's mission consists in:

- Participating in the design of the national plan and of the plans of sectors and regions for the development of renewable energy after the evaluating and implementing the resource mapping of the country’s different areas.

- Advising and centralizing information on all the measures necessary to implement the national strategy for the development of renewable energy and on the energy efficiency measures developed by the government.

- Mobilizing investment and setting up the financial mechanisms and tools to ensure the implementation, operation and monitoring of all projects, whether initiated by communities, public bodies or individuals,

- Conducting activities and projects of economic, commercial and industrial nature in vocational and university training contributing to the promotion of renewable energies.

- Proposing and disseminating standards and labeling for equipment and devices producing energy from renewable sources

- Maintaining relations of technical and professional cooperation or partnership with foreign organizations pursuing the same objectives.

Table 5: Overview of SNE generation fleet

Source: AfDB, based on SNE activity reports¹⁹

Dispatch and SNE Cost of service

Under this conservative set of assumptions, the gap between average end-user tariff and cost of service is expected to narrow significantly from 17 to 6 €c/kWh thereby drastically reducing the need for Government subsidy. The liquidity situation of the company is expected to improve as well, with SNE cash available for operations gradually increasing from 34 MEUR in 2018, to 85 MEUR by 2025, while cash cost of the SNE increasing more slowly, from 33 MEUR in 2018 to 55 MEUR in 2025. As such, cash available for the SNE are sufficient to pay for cash costs including internal costs plus payments to IPPs with a comfortable margin, and the SNE should be able to finance its own share of diesel supply (30%). The graphic below depicts the projected SNE available cash for operations and cash costs of the company.

¹⁸African Development Bank. 2019. Desert to Power Implementation Strategy for Chad. Abidjan: African Development Bank.
¹⁹African Development Bank. 2019. Desert to Power Implementation Strategy for Chad. Abidjan: African Development Bank.

Mapping of ongoing programmes and projects

Donors interventions:

Table 2 Ongoing energy sector projects in Chad

²⁰African Development Bank. 2019. Desert to Power Implementation Strategy for Chad. Abidjan: African Development Bank.

Investment opportunities for the private sector²¹

Chad has enormous potential in terms of investment opportunities in the sector of renewable energies (solar, wind, biomass). There is a project for the establishment of a manufacturing photovoltaic system to solve the problem of electrification especially in the provinces and rural areas It should be noted that an unlimited amount of glass sand is available, which is the main material for the manufacture of solar panels. In addition, Chad records, in the north, from 2850 to 3750 hours of sunshine per year with an overall intensity of radiation from 4.5 to 6.5 kWh/m2 per day.

Chad is also one of the Sahelian countries where the use of wind energy is less difficult. Indeed, the average speed of calm winds varies from 2.5 m / s to 5m / s from south to north.

The Master Plan of the Energy Sector notes that Chad has a good potential for renewable energy, in particular, very good solar resources throughout the country, good wind potential resources in the north and a good biomass potential in the southern zone. Because of the diversity of its use (rural electrification and solar water pumping) and the low demand for equipment maintenance, solar energy (particularly photovoltaic plants) features an enormous potential for Chad.

There are no obstacles to the deployment of renewable energy in Chad. However, it should be noted that there is a need to provide adequate training for skilled human resources in the sector. The deployment of renewable energy will create a conflict of interest between the proponents of this sector and those of fossil fuels. Specific measures should be taken to ensure the safety of facilities.

Sample sources of concessional funding

• African Development Bank financing solutions: https://www.afdb.org/en/projects-and-operations/financial-products/
• A list of available sources are available here: https://www.get-invest.eu/funding-database/?_search=1
• Africa Renewable Energy Fund (AREF): https://www.gogla.org/africa-renewable-energy-fund-aref
• Africa Power Platform: http://www.africanpowerplatform.org/financing/grants.html
• Seed Capital Assistance Facility (SCAF): https://www.scaf-energy.org/
• Energy access Africa: https://energyaccess-africa.com/2016/10/10/funds-available-for-energy-access-companies-and-projects-in-africa/
• Energy Africa Infrastructure Fund: https://energyaccess-africa.com/2016/10/10/funds-available-for-energy-access-companies-and-projects-in-africa/
• IRENA/ ADFD: https://www.irena.org/ADFD/Project-Facility/Funding-Offer

²¹Climate Investment Funds. Expression of Interest Plan of Chad to participate in “Scaling up Renewable Energy Program in Low Income Countries”.

Contact information of local donor representations

About opportunities in the country

²²Desert to Power Implementation Strategy for Chad
²³https://wedocs.unep.org/bitstream/handle/20.500.11822/20496/Energy_profile_Chad.pdf?sequence=1&isAllowed=y

About private sector participation