Senegal, which in late 2014 discovered offshore oil reserves, is first and foremost a country with abundant solar, wind and bioenergy potential. The government has recognized this potential for some time: the national utility first applied renewable energy to rural electrification in the late 1970s.
However, the lack of a clear legal framework, weak implementation capacity within the government and at the national power company, and disappointing economic growth, have all held back the development of the power sector: its capacity is 864 MW for 14m inhabitants. In turn, the IMF estimates that power shortages and losses from transmission lines cost Senegal up to 1% of GDP growth per year.
The country hopes to reach an average yearly growth of 7.1% through its “Plan Senegal Emergent,” launched in early 2014. The plan foresees over $16bn of targeted spending up to 2018 ($7bn has already been pledged by the international community). However, the country’s aging oil-based generation fleet is not sufficient to support the targeted growth.
The government thus plans to add 545MW of fossil capacity (mostly coal), interconnection capacity with Mauritania (where gas was recently discovered) and 150MW of wind and 80MW of solar by the end of the decade, with further potential for independent producers. Some of those wind and solar projects have already signed power purchase agreements (PPAs) with the national utility, SENELEC.
That company has suffered persistent deficits in recent years, mainly due to operational inefficiencies and high production costs that cannot be passed onto customers as the government decided to freeze electricity prices in 2009. The deficit is covered by a public subsidy of $200m-$250m a year. Low global oil prices, if sustained and the completion of the restructuring program of SENELEC should help the government reduce this deficit.
In 2015, Senegal is also expected to launch the first tender within the framework of its renewable energy law, which was ratified alongside its implementing decrees in 2011-12. The law targets renewable sources covering 15% of primary energy supply (excluding biomass) by 2025. It will cover 50-100MW of solar and is supported by the World Bank. The “Plan Senegal Emergent” also foresees that the government will initiate a much-needed review of land allocation processes for developers, which has been one of the main reasons behind delays in bringing new capacity online. The completion of the first tender, and the commissioning of projects which already hold PPAs, could take Senegal’s on-grid renewable energy capacity from 2MW today to at least 150MW of wind and 132MW of solar by the end of the decade.
In parallel to the development of its main grid, Senegal is also advancing its rural electrification program. While rural electrification has been active for over a decade and faced considerable delays, there now appears to be momentum. The program splits the country into 10 concession areas, of which six have had land allocated, and construction is underway in three. Concession holders are granted a monopoly of 15 to 25 years in the area and are supported by government funds based on performance. The share of public investment can reach 34-46% in the first three years of the concession.
The first concessions have notably attracted France’s EDF and Morocco’s ONE. The country’s rural electrification agency is seeking funding and developers for the four remaining concessions. Senegal’s rural electrification legislation also leaves some room for businesses in the renewable energy mini-system sector, with installations under 50kW of capacity exempt of all power and grid regulation.
Key government agencies in Senegal’s energy sector include the Ministry of Energy, the Commission of Energy Sector Regulation, the National Agency for Rural Electrification, SENELEC and the Inter-ministerial Committee on Renewable Energy, which aims to ensure coherence in integrating renewable energy into the national grid.
Score Summary
Senegal scored 0.86 in Climatescope 2015, placing it 36th on the list of countries overall, an increase of one place compared with 2014. Its highest score was on Low-Carbon Business & Clean Energy Value Chains Parameter III.
On Enabling Framework Parameter I, Senegal dropped one place to rank 31st. Its score drew support from the country’s energy access policies, the relatively high prices of diesel and kerosene and growing demand for power.
The country slipped one place to 54th position on Clean Energy Investment and Climate Financing Parameter II, reflecting the absence of investment in projects so far.
Senegal also fell on Parameter III, losing three places to rank 25th. Its score was underpinned by the development of a number of value chains and service providers.
On Greenhouse Gas Management Activities Parameter IV, the country jumped six places to rank 41st thanks to an increase in its carbon offsetting activity.