São Tomé and Príncipe Secures $24.5m AfDB Grant to Push Diesel-Heavy Grid Toward Clean Power
São Tomé and Príncipe has secured a $24.5 million African Development Fund grant to begin prising its power system away from costly imported diesel and toward a cleaner, more reliable electricity future. Backing a wider $30 million investment, the Energy Transition, Efficiency and Expansion Project will add solar and battery storage, modernise grid operations, cut losses and expand access, in a small-island economy where daily outages and high fuel costs have long defined the limits of growth.
São Tomé and Príncipe | May 18, 2026 -The African Development Fund has approved a $24.5 million grant package for São Tomé and Príncipe, setting up a wider $30 million clean-energy investment aimed at loosening the island state’s dependence on imported diesel, stabilising electricity supply and moving the country closer to its National Energy Compact target of universal electricity access and a 50% renewable-energy share by 2030.
The financing will back the Energy Transition, Efficiency and Expansion Project, known as ETREEP, a six-year programme scheduled to run from May 2026 to November 2031. Its purpose is deliberately practical: add renewable generation, strengthen weak distribution networks, cut system losses, modernise grid control and help the national utility collect more of the electricity it already produces.
For São Tomé and Príncipe, the approval is more than another development-bank intervention. It is a bid to break one of the most expensive and stubborn energy traps facing small island economies: a power system built overwhelmingly around imported fuel, exposed to volatile prices, high production costs and daily outages that fall hardest on hospitals, schools, businesses and households.
A Diesel Problem Years in the Making
The case for ETREEP begins with the structure of the country’s electricity system. Nearly 95% of São Tomé and Príncipe’s power generation relies on imported fossil fuels, with production costs estimated at $0.30 per kilowatt-hour, among the highest in Africa. The result is an electricity economy where fuel dependence shows up not only in tariffs and subsidies, but in reliability.
Daily power cuts lasting three to four hours have become part of the operating environment for the country’s social services and private sector. At the same time, more than 34% of generated electricity is lost before it becomes paid consumption, a combination of technical weakness in the grid and commercial leakage that has eroded the financial position of Empresa de Água e Eletricidade, the state water and electricity utility.
That makes the project’s sequencing important. ETREEP is not being introduced into a blank policy space. It builds on the foundations of the earlier Energy Transition and Investment Support Project and now sits inside São Tomé and Príncipe’s National Energy Compact, which commits the country to universal electricity access and a 50% renewable energy share by 2030. The compact places the country’s renewable ambition against a still-small base, reflecting the scale of the transition required in a system long dominated by diesel-fired generation.
From Policy Compact to Physical Assets
The new AfDB-backed project translates that policy ambition into three linked interventions: renewable generation and storage, distribution rehabilitation and expansion, and system modernisation. The combination is designed to avoid a familiar pitfall in power-sector reform, where new generation is added to networks too weak to deliver it reliably or utilities too financially fragile to sustain it.
On Príncipe Island, ETREEP will finance a 4-megawatt peak solar photovoltaic plant paired with a 2 MWh battery energy storage system. The installation is intended to reduce dependence on fuel-based generation and position Príncipe Island, a globally recognised biodiversity hotspot, for renewable-based power self-sufficiency.
On São Tomé Island, 1,000 outdated streetlights will be replaced with energy-efficient LED fixtures, improving public safety while lowering consumption. Across both islands, more than 40,000 prepaid electricity meters will be installed, a central plank of the project’s commercial reform agenda. The meters are expected to improve billing discipline, increase collections and help reduce non-technical losses from 34% to 20%.
The project also provides for the rehabilitation and upgrade of low-voltage networks on Príncipe Island and the modernisation of the national dispatch centre, the operational nerve centre of the power system. That dispatch upgrade matters because a grid that is moving from diesel-heavy generation into solar and storage needs better real-time monitoring, control and balancing capacity.
Fixing the Utility Behind the Grid
ETREEP also reaches into the institutional machinery of the sector.Empresa de Água e Eletricidade, known as EMAE, is the public entity responsible for electricity production, transmission and distribution, as well as water services. The company has administrative and financial autonomy and operates under the supervision of the central state body responsible for water and electricity.
The project will provide capacity building, technical training and consulting support to EMAE and the Ministry of Infrastructure and Natural Resources. That institutional component is not decorative. In a system where weak collections, high losses and subsidy pressures have become part of the sector’s balance sheet, grid hardware alone cannot deliver reform.
The targets are therefore both social and fiscal. Fifty thousand households are expected to benefit directly, while 2,000 new electricity connections are planned. Billing and collection rates are projected to rise from 50% to 80%, a shift that could ease pressure on the national budget by reducing the subsidies required to keep the power system functioning.
ADF Money, Fragility Finance and the Small-Island Test
The African Development Fund is contributing $19.02 million from its ADF-16 allocation and $5.43 million from the Transition Support Facility’s Pillar I window. The ADF is the concessional arm of the African Development Bank Group, providing grants, concessional loans, project preparation support and guarantees to low-income regional member countries.
The Transition Support Facility’s Pillar I provides upfront country allocations that selectively support projects aimed at addressing fragility and building resilience in eligible countries. In the case of São Tomé and Príncipe, the relevance is clear: energy insecurity is not only a technical problem, but a structural vulnerability for a small island state exposed to imported fuel costs, limited fiscal space and climate pressures.
The AfDB financing is expected to be complemented by an additional $5 million in parallel financing from other partners, with the Government of São Tomé and Príncipe providing in-kind support. That brings the investment envelope to roughly $30 million, modest by continental infrastructure standards but potentially consequential for a country of just over 200,000 people.
The Human Dividend
The project’s development logic extends beyond megawatts and meters. For women, more reliable power and improved street lighting are expected to reduce some of the everyday burdens created by unreliable electricity, from household energy management to mobility and safety after dark.
For young people, the project includes direct employment and green-skills training for 200 people in solar and electrical maintenance. In a country where youth make up a large share of the population and unemployment remains a major social pressure, the skills component gives ETREEP a labour-market dimension that clean-energy projects often claim but do not always operationalise.
“This project is more than infrastructure. It is a statement of belief — that small island nations deserve modern, sustainable energy, and that with the right partnerships, they can achieve it,” Pietro Toigo, African Development Bank Country Manager for Angola and São Tomé and Príncipe, said.
For the AfDB, the grant reinforces the ADF’s role as one of the continent’s main concessional instruments for countries that cannot easily absorb hard debt on commercial terms. For São Tomé and Príncipe, it is a more immediate proposition: replacing a costly diesel habit with a cleaner, better-managed electricity system.
The test now moves from approval to execution. If ETREEP delivers on its targets, São Tomé and Príncipe will not merely add solar panels, batteries, meters and dispatch equipment. It will have moved the country measurably closer to a cleaner, less import-dependent power syste
