Thursday, July 11, 2013

Diversifying energy sources in Senegal

Efforts to diversify Senegal’s energy sources continue to bear fruit, with the import-dependent country announcing several promising new foreign investment initiatives in recent months that look to improve the sustainability of electricity generation.
Maintaining a secure electricity supply is crucial for Senegal, given its push to increase secondary and tertiary economic activity. Among the more notable developments include the announcement in May of this year that the West African republic will begin importing liquefied natural gas (LNG) from the US. In February the government had announced that it was planning a 150-MW power plant to be fired by LNG. Also in the works is a 250-MW facility to be built by South Korean firm KEPCO and fueled by coal. Combined, these two plants would boost Senegal’s installed capacity by more than 60%.
While Senegal is heavily dependent on imported hydrocarbons, the renewables segment has received a boost of activity, with Austrian investors planning to bring solar power to 19 rural Senegalese villages, and US-based company Green Energy USA set to invest $250m to install solar-powered streetlights in Senegal’s cities.
These initiatives are collectively part of the new Senegalese administration’s broader “Programme 2013-17”, which aims to improve energy independence and reduce reliance on expensive imported oil. As Director of Energy Ibrahima Niane said in February, “The energy policy of Senegal is now based on an energy mix combining thermal, hydro, coal, gas and especially renewable energy.”
The government would like to see the share of natural gas rise to 25-35% by 2017, with 25% targeted for coal. A combined goal of 15% for renewable energy and biofuel has been set for 2020. By comparison, as recently as 2010, oil (48%) and biomass (47%) accounted for the vast majority of the energy supply, while coal contributed 5% and renewable energy 0.4%.
The combination of ambitious goals and low electrification rates – less than 50% overall and only 20% in rural areas – mean that opportunities for investment and growth could be significant.
There are promising signs that Senegal may finally be in a position to take advantage of its long-standing potential to develop renewable energies. Hydroelectric generation comprises a small amount of current production – primarily from the Senegal River Basin, which has an estimated potential capacity of up to 2000 MW – but other forms of generation offer significant promise. The raw materials for wind and solar power are abundant. Annual irradiance ranges from 1850 KWh per sq metre in the north to 2250 in the south.
In certain regions, solar power has already shown the ability to improve rural electrification by as much as 25%. Meanwhile, average wind speeds reach up to 5.8 metres per second along the northern coast, making this the most promising area for the development of wind farms in West Africa.
The government appears serious in its efforts to develop the sector, actively pursuing investment and purchasing opportunities abroad, and issuing a candid assessment of past shortcomings. Capacity-building is also at the forefront, including technical training programmes conducted in cooperation with Germany.
Nonetheless, certain challenges remain for Senegal to generate higher levels of private investment.
Regulatory and tax hurdles persist, making investment in renewable energies more costly. The purchase price for electricity – currently set at CFA70/kWh (€0.11/kWh) by Senelec, the state-owned electric utility – is also too low to be attractive for renewable energy producers. However, the government is looking at a range of incentives, including feed-in tariffs and power purchase agreements, to address this imbalance and provide more certainty for investors.
To date, discussions about implementing a feed-in tariff have not progressed beyond feasibility studies. In its October 2012 Energy Sector Policy Letter, the government stated only that it would continue to study the issue. Taxes and tariffs on imported solar panels also remain high, totaling over 20%. A stronger distribution network and better technical training is also needed to encourage demand for renewable alternatives in rural communities outside of Dakar.
Despite these obstacles, it is clear that the energy sector has improved significantly since 2011, when the country suffered from persistent blackouts, and that the government is committed to continuing efforts at reform and innovation. The combination of a stabilising economy and a growing demand for modern energy services suggests that projects using renewable sources in particular are well-positioned for continued growth.