Senegal is set to thrive as a key player in the oil and natural gas industry by making energy work for its economy. The country has taken great strides in proving that it is one of Africa’s leaders in oil and gas exploration.
Plan Senegal Emergent (PSE) sets access and cost of power as primary areas of investment in order to make Senegal an emerging economy by 2030. The cost of electricity in Senegal is currently among the highest globally. PSE states three objectives regarding power access: perfect availability of energy in sufficient quantity and quality, electricity costs among the lowest in the sub region ($0.09-0.12/kWh) to support economic competitiveness and halving household electricity bills.
Electricity production in Senegal has had a free market since 2004 and several independent power producers – as well as Société nationale d’électricité du Sénégal (SENELEC) – operate in Senegal, including GTI-DAKAR and South Africa’s power utility Eskom. SENELEC, however, is the sole operator in charge of distribution and transport of electricity across the country. The sector is regulated by the Regulation Commission for the Electricity Sector and several other agencies participate in the development of Senegal’s power coverage such as the Rural Electrification Agency and Renewable Energy Agency, among others.
A revamped national power company
In 2011, Senegal’s electric network underwent a total of 950 hours of power cuts throughout the year. The same year, the national electricity company SENELEC and the West-African Development Bank signed four agreements totaling almost $100 million of funding to develop Senegal’s power sector. Following restructuring, investment and equipment modernization, SENELEC brought that figure down to 24 hours in total in 2018. Every year, the company produces a surplus of 200 megawatts (MW) – approximately equivalent to the power needs of neighboring Mali – which is stored for potential future use or exports. Before 2014, the state-owned company was making losses and was subject to loans, leaving no room for reinvestment in infrastructure. In 2016, it reached a $52 million profit.
Such results were achieved through the PSE, launched by President Macky Sall, in which he aimed to make Senegal’s energy sector independent and self-sufficient. As part of the PSE, a priority of the plan was to make SENELEC financially strong and capable of investing in key infrastructure to expand capacity. Since the launch of the plan in 2014, $3.5 billion has been raised through a mix of public and private partners. In 2016, the Plan Yeesal SENELEC 2020 was launched, aiming to make the company a motor of Senegal’s growing economy. As part of the plan, SENELEC held for the first time ever an initial public offering in January 2018, through the regional stock exchange Bourse Régionale des Valeurs Mobilières, hoping to achieve $52 million to fund its development plan. The initial public offering was a major success as it mobilized over $66 million, due to the financial stability of the company, which reassured private individual investors.
Improved financial strength has allowed large investments to increase capacity. In 2015, capacity totaled 510MW. In 2018, cumulative capacity reached 1,200MW in the country, of which 200MW is solar. These expansions have provided the country with comfortable reserves – around 200MW each year – and allows for export to neighboring The Gambia.
A Diversified Energy Mix
Access to power is a major part of the PSE. Currently, foreign oil dominates the energy mix as almost 90 percent of electricity is produced from imported fuel. This translates to high prices, pollution and dependence on other states. Moving towards 2030 and development goals, Senegal wants to increase both the diversity of power sources, as well as economic efficiency. Clean energy is also a decisive factor, as the country aims to double the stake of renewable energy involved in the mix by 2030, in which Senegal projects it will need to produce 2000MW to satisfy local demand.
Coal is set to become a major source of electricity generation going forward. Despite strong resistance from the local population, an area around the communities of Bargny and Sendou, 35km away from Dakar, was chosen for the construction of a coal power plant. The plant aims to provide electricity for 3.5 million citizens with a 125MW capacity, just over 20 percent of the total population of the country. Criticized for its potential impact on the local fishing community and the environment, an impact study was run during preparation works for the project and social initiatives are implemented to benefit the locals.