Power policy

Senegal has set itself a target of 15% renewable energy by 2025, which will be met as soon as 2020. The target will likely be raised to 18% by 2023. Clean energy auctions have been held, the most recent being the World Bank-backed ‘Scaling Solar’ tender. The auction saw 60 megawatts of PV awarded for the rock-bottom price of $0.038 per kilowatt-hour. In August 2020, the government issued a decree that exempts 22 renewable-energy equipment types from value-added tax. The technologies eligible for this incentive are wind, biogas, PV and other solar-powered technologies, such as solar pumping kits and solar water heaters. A new program will introduce a payment for all excess energy generated over 20 years for residential biogas and solar.

Power prices and costs

Recent years have seen an influx of renewables investment in Senegal, and the Scaling Solar auctions will make a further contribution to helping the sector develop. Bid prices achieved in the auctions are indicative of the sector’s growing maturity, even factoring in the power-price depression due to the de-risking measures applied to projects. The Taiba N’Diaye wind farm, commissioned in 2020, was financed by $378 million of U.S. and Danish concessional funding. The sector will likely continue to rely on such development finance in the near term. However, in 2019 the country attracts only $63 million, 14% of 2018’s investment.

Power prices in Senegal have not changed a great deal over past years but are on a downward trajectory as the government tries to reduce rates. The trend should continue as new renewables projects and domestic gas discoveries drive down production costs, which are higher than elsewhere in the region due to a reliance on costly diesel generation.

Power market

Only power generation has been liberalized in Senegal, with transmission and distribution remaining vertically integrated. Independent power producers, such as APR and Aggreko, operate a larger fleet than that of state-owned utility Senelec. The 1.2-gigawatt power mix is dominated by oil and diesel, with solar PV, large hydro, natural gas and coal filling in the remainder. Additional power is imported from two dams in Mali. A renewables transition is under way, with 169.5 megawatts of solar installed in 2019 and a 158-megawatt wind farm commissioned in 2020. However, government support for future additions is likely to be affected by the discovery of major gas reserves off Senegal’s coast, with extraction set to begin in 2022. A pivot back toward thermal energy is under way, as the government plans to modify oil plants to use natural gas and to build several combined-cycle gas turbines.

Doing business and barriers

Senegal’s electrification scheme has fallen short of expectations, since being initially hailed as revolutionary when it was launched in 2008. The private concessionary framework assigned 10 rural districts to operators, setting out yearly electrification targets in the process. But operators have fallen behind on their goals while charging prohibitive fees. With national electrification at 70.40%, the 2025 universal-access target seems ambitious. More generally, Senegal is a dynamic market – demand is growing fast, and the economy is buoyed by a young, skilled workforce.

As is common in the region, market-friendly policies are implemented at a slow rate. Off-grid developers have bemoaned the fact that import-duty waivers do not apply to their products, pushing up project costs. However, developers have praised the fact that, despite lengthy bureaucratic processes, the authorities have been efficient when it comes to permitting projects. Senelec is said to pay IPPs in a timely manner and the utility is in better financial health than its regional peers, having restructured its finances while introducing a successful prepayment scheme.

EV market

The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage.

EV policy

The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage.

Buildings market

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.

Buildings policy

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.