replace the alternator.
I had the same problem
replaced the alternator and that solved the problem

timing belt idler and tension pulleys

the one that you showed in the picture is the one to replace I changed that same sensor last week on a 1997 850T and it resolved the problem The guy said that he had that light on for over a year and they could not resolve the problem. If u have a good scanner such as a Launch you would see the code...

that is the right sensor

P0500

maybe your problem is not the pnp but the vehicle speed sensor.
did you try checking for codes?
Is the check engine light on also?

you probably have a p0500 code.( vehicle speed sensor ) I repaired this same problem for a friend of mine by replacing the speed sensor. It is located on the top of the tranmission under the air filter box.

I have a friend whose shop i use to do all my work
> The shop is located on Farmers Blvd and Murdock Avenue in Saint Albans Queens
> I can be contacted on the following Cell Phone Number
> 917 562 1996
> Linden

I can help you.
I am located in Queens NY
I worked on volvo for a very long time including my own volvos

i would really appreciate if you would repost the schematics
Thanks