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Energy and Water Costs in Cabo Verde: The High-Price Reality

If you're planning to operate a business in Cabo Verde, understanding energy and water costs is critical—these utilities represent one of the most significant operational expenses you'll face. Cabo Verde's electricity and water tariffs are among the highest in Africa and globally, driven by the country's dependence on imported fossil fuels and energy-intensive desalination. Here's what you need to know about these costs and the government's efforts to bring them down.

Electricity: Among Africa's Most Expensive

Cabo Verde relies heavily on imported petroleum products to meet approximately 80-83% of its energy needs, making the country highly vulnerable to international fuel price fluctuations. The domestic energy sector is dominated by ELECTRA S.A.R.L., a vertically integrated state-owned utility, with prices regulated by the Agência de Regulação Económica (ARE).

Industrial and Commercial Electricity Tariffs

As of the most recent data, businesses face the following electricity costs:

  • Industrial consumption (medium tension): 10.80 CVE per kWh (approximately €0.098)
  • Industrial consumption (special rate): 12.50 CVE per kWh (approximately €0.114)
  • Average business cost (2021-2022): $0.311 to $0.390 per kWh

For comparison, residential consumers paying over 40 kWh monthly are charged 17 CVE per kWh—demonstrating that while industrial users receive some preferential pricing, all electricity in Cabo Verde is expensive.

Historical Context

World Bank reports from 2011 cited power costs as high as $0.40 to $0.44 per kWh—among the highest in the world at that time. While prices have moderated somewhat, they remain a major competitive disadvantage.

The Impact on Business Operations

The effect of these high costs on business viability is substantial:

  • Hotels: Energy expenditures account for up to 50% of total operational costs, compared to the typical 3-10% in developed markets
  • Manufacturing: A major pharmaceutical producer and exporter estimates that water and electricity consume roughly 10% of sales revenues
  • Port operations: Supplying electric power to vessels costs the supplier's sale price plus 20% (minimum 100 kWh); refrigerated containers incur 115 CVE per container per hour

System Reliability Issues

Beyond high costs, the system suffers from low reliability and poor performance. High technical and non-technical losses (including theft and low payment recovery rates) further compromise service quality, creating additional challenges for businesses requiring consistent power.

Tariffs Are Pan-Territorial

Importantly, tariffs are pan-territorial—the same price applies across all islands despite varying generation costs. This means businesses on islands with higher generation costs receive some cross-subsidy, while those on islands with lower costs pay slightly more than actual production expenses.

The Renewable Energy Opportunity: A Massive Price Gap

Perhaps the most striking aspect of Cabo Verde's energy landscape is the enormous gap between regulated tariffs and the actual cost of renewable energy production.

The Price Discrepancy

In 2022, the regulated tariff set by the Multisetoral Regulatory Agency of the Economy (ARME) was €255 per MWh. Meanwhile, recent solar photovoltaic projects demonstrated generation costs between €31 and €52 per MWh—meaning renewable energy can be produced for approximately 80-85% less than the regulated tariff.

This massive gap explains why companies are aggressively pursuing solar installations despite the capital investment required. The payback period for solar systems can be remarkably short given these economics.

Water: The World's Most Expensive Desalinated Supply

Cabo Verde faces severe water scarcity, relying on desalination for approximately 85% to 99.5% of water supplied to the population. Over 80% of potable water is produced using diesel-powered reverse osmosis desalination plants, creating an intrinsic link between energy and water costs.

Water Tariffs

The cost of water in Cabo Verde is staggering:

  • General price: 190 CVE per m³ (approximately €1.73)
  • Historical benchmarks: $3.26 to $6.05 per m³ depending on usage
  • Peak historical rates: Over $4 per m³ in 2008, ranking among the top three most expensive in Africa
  • Hotel rates: €4 to €7 per m³ reported by hoteliers
  • Tourist activity tariff (Porto Novo, 2021): Up to 545.36 CVE per m³ (approximately €5)

To put this in perspective, World Bank reports historically cited Cabo Verde's water tariffs at $4.43 per m³—making it one of the most expensive water supplies on the African continent.

Production Costs vs. Tariffs

The actual production cost for industrial desalinated water is estimated at approximately €0.50 per m³, with the average production cost in Porto Novo in 2021 at 158 CVE per m³. The difference between production costs and what businesses actually pay reflects the energy intensity of the process and system inefficiencies.

Energy-Water Nexus

The link between energy and water costs is direct and substantial:

  • Electricity accounts for 40% of total desalinated water production costs
  • In 2010, approximately 6.3% to 7% of total electricity generated nationally was consumed for water desalination activities
  • The dependence on diesel-fueled power generation makes electricity costs the primary driver of water expenses

System Losses

Historical water system losses reached 36.1% in 2010, meaning more than one-third of produced water never reached paying customers—a staggering inefficiency that contributes to high tariffs.

The Private Operator Advantage

The performance gap between public and private water operators is revealing. Tourism operators in Sal served by the private concessionaire Águas de Ponta Preta (APP) report water costs representing approximately 15% of operational costs—roughly half the 30-50% paid by those served by ELECTRA. This dramatic difference suggests substantial efficiency gains are possible through professional management.

Port Water Supply

For vessels temporarily berthed at port, water supply costs the supplier's sale price plus 20%, subject to a minimum supply of 5 m³.

Mitigation Strategies: Private Self-Supply

Given these prohibitive costs, many businesses—particularly in tourism—have taken matters into their own hands:

Private Desalination Units

Dozens of tourist resorts, primarily on Sal and Boa Vista, have installed their own desalination units to mitigate costs and ensure reliability. This capital-intensive solution reflects the economic reality that even expensive private infrastructure can provide better value than public utility rates.

Government Initiatives to Reduce Costs

The government recognizes that high energy and water costs represent critical constraints on economic competitiveness and has implemented several initiatives:

Renewable Energy Targets

  • 2030 goal: Generate 50-54% of electricity from renewable sources
  • 2040 goal: Achieve 100% renewable energy
  • Current projects: Solar photovoltaic installations demonstrating €31-52 per MWh production costs

Tax Incentives and Exemptions (2025)

The government offers several fiscal measures to reduce costs:

  • Reduced IVA (VAT) rate: 8% on electricity and water transmission to final consumers (down from standard rates)
  • Solar equipment imports: Photovoltaic panels, inverters, and batteries for agricultural solar energy production are exempt from Import Duties and IVA
  • Renewable energy materials: Materials incorporated into renewable electricity production are exempt from import duties
  • Desalination equipment: Machinery and equipment for agricultural water desalination are exempt from Import Duties and IVA
  • Agricultural water/electricity: Certified farmers may receive IVA exemption on water and electricity used exclusively for agricultural activity

Social Tariff Support

The 2025 State Budget allocates 259 million CVE to finance social electricity tariffs, demonstrating government commitment to making energy accessible despite high baseline costs.

Infrastructure Investment

A €4 million investment on Santiago Island will install photovoltaic systems in 38 water wells and 18 pumping stations for water management and irrigation—directly addressing the energy-water nexus.

Scheduled Tariff Reductions

Electricity tariffs were scheduled to decrease by an average of 9.91% to 14.81% through June 30 (specific year not stated), partly due to increased renewable energy penetration.

Strategic Implications for Business

Budget Realistically

When planning operations in Cabo Verde, energy and water costs must be treated as major line items—not afterthoughts. For hotels, budget up to 50% of operational costs for energy. For manufacturing, plan for 10% of sales revenue to cover utilities.

Consider Self-Supply

If your operation has significant energy or water needs, analyze the economics of:

  • Installing solar photovoltaic systems (generation costs €31-52 per MWh vs. €255 regulated tariff)
  • Private desalination units for tourism operations (potentially cutting water costs in half)

Location Matters

If possible, locate on Sal and negotiate service from Águas de Ponta Preta rather than ELECTRA for potentially 50% lower water costs. Understand that despite pan-territorial electricity pricing, some islands may have better actual service reliability.

Leverage Tax Incentives

Take full advantage of:

  • 8% reduced IVA rate on utilities
  • Import duty exemptions for solar equipment
  • Agricultural water/electricity exemptions if applicable

Plan for Unreliability

Beyond costs, factor in system reliability issues. Consider backup generators, water storage, and other contingency measures to maintain operations during outages.

The Bottom Line

Energy and water represent among the highest operational costs businesses will face in Cabo Verde—easily 5-10 times more expensive than in developed markets. The country's dependence on imported fuel and energy-intensive desalination creates an unavoidable cost structure that materially affects competitiveness.

However, the massive gap between regulated tariffs and renewable energy production costs creates an opportunity: businesses willing to invest in solar and private water infrastructure can achieve substantial savings and greater operational control. Combined with government tax incentives and the national push toward renewable energy by 2030-2040, the long-term trajectory points toward improvement—but near-term reality requires careful planning and significant budget allocation for utilities that would be routine expenses elsewhere.