HARDLY-HIT BY THE OIL-PRICE HIKE IN 2008, CONSTRAINED BY AN INADEQUATE ENERGY SYSTEM, SENEGAL HAS BEGUN TO EXPLOIT ITS IMMENSE RENEWABLE ENERGY POTENTIAL, WITH SOLAR POWER IN THE LEAD. THE NUMBER OF PROJECTS HAS BEEN RISING FOR TWO YEARS NOW, A PRIME EXAMPLE BEING SENERGY, THE COUNTRY'S FIRST PRIVATE SOLAR POWER PLANT AND THE LARGEST ONE IN WEST AFRICA, 80% FINANCED BY PROPARCO. THE AIM IS TO HELP BOOST SENEGAL’S ENERGY SECURITY AND FACILITATE THE TRANSITION TO LOW-CARBON DEVELOPMENT.

As in several other African countries, Senegal’s economic and social development is held back by sub-par performance in the energy sector. With 843 MW of nameplate power capacity in 2015 (whereas Morocco’s is ten times higher), the national power grid is ill-equipped to handle the growing needs of businesses and citizens alike. There are many reasons for that deficiency, among them over a decade of under-investment in generation capacity and Senegal’s high dependency on fossil fuels, with thermal power plants accounting for 90% of total output. But things got even worse in the period from 2008 to 2011, when the global oil shock upended the country’s energy sector. The result was massive power cuts and a profound social crisis, as demonstrated by the ‘electricity riots’ of 2011. Moreover, Senegal’s electricity prices are among the highest in West Africa (almost twice as high as in the Ivory Coast), despite a 2009 freeze on rates and generous State subsidies to the national power company, Senelec, until 2014. According to an IMF estimate, those subsidies are equal to 2% of GDP.

The goal is clearly to break free of the tyranny of a single fuel source, which was the case with oil for several decades.
 

Thierno Alassane Sall, Minister of Energy and Development of Renewable Energies

In a global economy short of breath, Africa provides significant opportunities for stimulus and shared growth.
 

Macky Sall, President of the Republic of Sénégal
Chantier du site Senergy
No economic take-off without reliable, affordable, sustainable energy
This, then, was the backdrop to the ambitious roadmap for economic and social development adopted by the government in 2012. Titled Plan Sénégal Emergent (PSE), the plan places major emphasis on energy security. The government aims to increase national production capacity by 10% to 15% a year, while reducing the country’s reliance on high-polluting imported fossil fuels, which represent a burden for both households and Senegal’s public finances. If the plan is successful, the share of petroleum products in the country’s energy mix could drop from 90% to 45% in 2017, while solar and other renewable energy sources could rise to 20% of nameplate capacity, offsetting that drop. For Thierno Alassane Sall, Minister of Energy and Development of Renewable Energies, the goal is clearly “to break free of the tyranny of a single fuel source, which was the case with oil for several decades”.
In line with the Sustainable Energy for All (SE4ALL) global initiative launched by the United Nations in 2012, President Macky Sall has also pledged to electrify the country’s rural areas. And rightly so. Whereas 90% of Senegal’s urban population is connected to the power grid, barely one out of four country-dwellers is. Moreover, that average encompasses large disparities, with some areas below the 5% mark.
Panneaux solaire de la centrale Senergy au Sénégal
West africa's largest private solar power plant
To carry out this large-scale change, the government has turned to independent private power producers. A number of power purchase agreements have been signed or are being negotiated. Initiated by the French investment company Meridiam, Senegal’s sovereign wealth fund Fonsis and the solar power firm Solairedirect (an Engie subsidiary), co-financed by Proparco, a member of the Agence Française de Développement (AFD) Group, Senergy is the largest private solar power plant project anywhere in West Africa. The project was launched in 2011 by an American-Senegalese entrepreneur. Due to the capital-intensive nature of solar energy projects, Fonsis threw its weight behind Senergy in 2013. The sovereign wealth fund then managed to bring Meridiam on board (see box) to structure the deal and settle the basic engineering questions. In a country with no previous industrial- scale solar energy infrastructure, “we needed to address a whole host of regulatory and engineering issues, some of them complex and costly”, explains Mathieu Peller, who heads Meridiam’s West Africa office. “For example, securing land tenure in an area with multiple layers of property rights, devising adequate compensation for the local population, working out contract terms and conditions and connecting to the power grid.”

Sited on 64 hectares of former farmland near Mekhé (130 km north of Dakar), the Senergy power plant will encompass 92,000 solar modules with total nameplate capacity of 29.5 MW. That will be enough to cover the annual electric power needs of a city with over 200,000 inhabitants at a cost that makes it competitive with the country’s thermal power plants. The electricity it generates will be sold to Senelec under a 25-year power purchase agreement. In addition, 34,000 tonnes of C02 equivalent emissions will be avoided per year thanks to this low-carbon infrastructure.
“On this project, Meridiam has made a long-term commitment that was a compelling argument for our partners,” says Peller. “Proparco’s involvement since 2013 was also essential to convincing Senelec and the government to invest. The organization’s reputation and demanding approach gave our consortium real credibility, not to mention that Proparco has provided 80% of the funding – through a €34.5m loan – on competitive terms.”
Homme sur le chantier de la centrale Senergy
Involving the local population from the outset
Meridiam is an investment firm specializing in essential infrastructure. “Our goal is to have a positive impact on the areas where we invest, to meet the long-term development needs of the government and local population,” Peller states. Right from the start, the impact issue was central to the project negotiations. “The primary challenge was purchasing land owned by 66 small farmers,” explains Abdourahim Ba, Managing Director of the firm Engineering & Environment Services, in charge of the environmental and social (E&S) questions surrounding the project.

“The negotiations got going in 2013 with the chiefs of the neighbouring villages, who called together all the interested parties. The aim was to identify the ideal site and the people who would be affected, hold public outreach meetings and basically talk to everyone until everyone approved.” In addition to compensation for landholders as required by Senegalese law and in keeping with the demands of a funding provider like Proparco, the Senergy project includes a number of measures designed to benefit local communities. Unskilled labourers from neighbouring villages will be hired, preference will be given to local contractors and E&S work will be promoted. Furthermore, “a plan for restoring the livelihoods of local inhabitants has been drawn up. Under the plan, a well will be drilled and between 12 and 25 hectares of land will be purchased to offers farmers the means to engage in long-term agriculture. Most farming in Senegal takes place during the rainy season. But with the new well, the villagers can engage in ongoing, more diversified farming,” Mr Ba points out. In partnership with a local bank, a microcredit mutual benefit society will also be made available so that women and youth can develop business activities. A maternity clinic will likewise soon be built in Santhiou- Mékhé. Finally, a committee holding monthly meetings has been set up to monitor delivery on the project owner’s commitments.
Inauguration par le Président Macky Sall de la centrale Senergy
More solar power, more know-how
The Senergy facility is scheduled to come on stream in July 2017, but Meridiam and Proparco are already working to develop a second, extremely similar solar power plant just a few kilometres away from the first one. And this new project won’t be the last one, either.

The Senegalese government’s renewable energy goals have won over bilateral and multilateral development finance institutions and aroused interest among independent private power (IPP) producers. “Six solar power plant projects are currently in the development or construction stages in Senegal,” says Papa Mademba Biteye, a technical advisor to the Ministry for Energy and Renewable Energy Development (Meder). “By the end of 2017, they will be generating another 105 MW of power, with 150 MW more to come in 2018 from Senegal’s first wind farm.” On top of those 255 MW, an additional 100 MW will be commissioned in two years as part of the Scaling Solar programme launched by a World Bank subsidiary to support private- sector initiative. Even so, there is still insufficient funding to fulfil Senegal’s ‘green’ aspirations. “The private sector is where the financial resources are,” stresses Mamadou Mbaye, the Executive Director in charge of Energy and Mining at Fonsis. “Our mission is to use the resources allocated by the State to attract private funding for greenfield projects by deconstructing investor apprehensions about financial risk in Senegal. For example, insurance companies make 30% to 40% of their equity investments in North America, versus under 5% in Africa. We need to secure dedicated financing for low-carbon infrastructure quickly. So why not try to line up partial guarantees provided by development finance institutions or via the Green climate Fund to obtain a higher credit rating for Senegal?”

In a similar frame of mind, Senegal’s President has urged public — and private — sector partners “not to overestimate the risk of investing on the continent. Africa has made substantial strides towards good governance and an improved business climate. Risk here is no higher than elsewhere. Besides, with the global economy clearly running out of steam today, Africa shouldn’t be equated with risk, but rather with opportunities to revive the economy and achieve shared growth.” Apart from the funding issue, the future of renewable energy in Senegal will also depend on support for appropriate policies and regulations that can ensure the financial viability of the relevant projects, particularly with regard to drafting power purchase agreements, setting guaranteed feed-in tarifs for IPPs and establishing capped, harmonized rates for the population. And it will mean enhancing the ability of power companies and public services to respond locally to the requirements specific to solar power. The need to incorporate such intermittent energy sources into the national grid is an engineering challenge that escapes no one’s attention in Senegal. And from that standpoint, a project like Senergy will contribute to the transfer of knowhow from Meridiam and Engie’s solar energy subsidiary Solairedirect to the people at Senelec and the Energy Ministry.
Epicier sénégalais
AFD GROUP AND THE ENERGY ISSUE IN SENEGAL
Over the past decade, the AFD, Proparco’s parent company, has provided close to €200m to Senegal’s energy sector, for the most part to help put Senelec’s finances and operations back on even keel. In 2008, €30m were invested to recapitalize the failing national electricity company. Three years later, following the ‘electricity riots’, the AFD was the first development finance institution to extend a loan (€60m) to rehabilitate Senelec’s production facilities, with the result that 110 MW of additional capacity was recovered and a total of 210 MW was put on a secure footing (equal to almost one fourth of nameplate capacity).

At the same time, a €1m subsidy was made available to the energy industry, chiefly for research and to enhance capabilities at the Energy Ministry and Senelec through the work of three engineering assistants. The Agency also contributes to investment programmes to help West Africa’s SMEs reduce their energy bills through energy efficiency and renewable energy projects, chiefly in Benin, Burkina Faso, the Ivory Coast, Senegal and Togo, granting its commercial banking partners (in Senegal, Orabank and SGBS) ‘green’ lines of credit totalling €30m (see www.sunref.org), coupled with a programme of technical assistance to the small businesses involved. Lastly, the AFD works to promote electrification of the countryside, including an €8m subsidy in 2008 to provide electricity to 18,000 households via solar power kits and extend the power grid.
Matthieu Peller, directeur du bureau Afrique de l'Ouest de Meridiam
MERIDIAM AS A LONG-TERM DEVELOPER AND INVESTOR
Meridiam SAS (‘Meridiam’) is a French investment company founded in 2005 that develops, finances and manages public-sector infrastructure projects on a longterm basis (25 years). The company partners with key engineering and financial firms – from planning to implementation and operation. On most projects, Meridiam is the majority or reference shareholder. The company currently has €5bn worth of assets under management invested in 49 projects worldwide, most of them in Europe and North America.

In 2015, Meridiam created MIAF, an African investment fund endowed with €300m. Its brief is to make roughly a dozen investments of between €10m and €40m each in social, transport and clean energy infrastructure projects. While Senergy is its first project in mainland Africa, Meridiam is already working in Madagascar and has responded to calls for tenders across sub-Saharan Africa. “We aim to establish our position on the continent as partners and suppliers of proven, competitive solutions for providing long-term sustainable development assistance spanning economic, social and environmental issues,” states Mathieu Peller in conclusion.