World Bank extends $160m to cut Senegal’s high power costs
The International Development Association of the World Bank Group has added another $70 million to bring total public-private partnership financing to $160m for SENELEC, Senegal’s electrical transmission and distribution company. The money is to boost overall system efficiency, cut technical and non-technical losses and improve bill collection.
According to the World Bank documents for the African PPP project, Senegal has been “trapped in a low-growth equilibrium since 2006”. For the last decade the economies of sub-Saharan Africa grew by 6% on average, while Senegal grew by 3.3% a year. Output per capita has grown even more slowly and growth has been very volatile. Real GDP growth of 6% is predicted for 2016-17.
A key part of the Government’s Emerging Senegal Plan, or “Plan Senegal Emergent – 2014” (PSE) is to improve the energy sector, overseen by the Ministry of Energy and Development of Renewable Energies. The national electricity utility is Societe Nationale d'electricite du Senegal (SENELEC) which is a state-owned enterprise and has a monopoly for transmission and distribution. Over 90% of the electricity is generated using heavy fuel oil and diesel.
According to the African PPP project document: “The high cost of electricity in Senegal impedes the competitiveness of industry and affordability of energy for households. Average electricity tariffs is US$0.24 per kilowatt-hour (kWh) compared to global average of approximately US$0.10 per kWh. The average electricity tariff is well above that of other key markets in the subregion such as Nigeria at US$0.09/ kWh, Ghana at US$0.11/ kWh, and Côte d'Ivoire at US$0.13 / kWh.
“Electricity supply has not kept pace with demand growth. The available installed capacity increased from 540 MW in 2010 to 605 MW in 2016, an increase of 12%. The situation has improved recently with new power plants coming online, such as the Taiba Ndiaye independent power producer (IPP) project in March 2016. However, the increase in installed capacity compares to an increase in peak demand from 429 MW in 2010 to an estimated 564 MW in 2016, an increase of 32%”.
The public-private partnership programme is expected to bring XOF 3.5 billion (about $6m) a year of increased revenue to SENELEC.
Key PPP project activities include the installation of pre-paid meters for residential customers and intelligent meters for large customers, which even under the current tariffs, could improve allocation and targeting of subsidies and improve SENELEC s commercial performance and cash position. It should improve reliability of electricity services in some place, particularly Greater Dakar. There is the equivalent of $32m for upgrading and modernizing the distribution network and its management. The additional project will supply over 310,000 meters of various types.
The World Bank is also helping SENELEC create a generation plan to diversify the energy mix and boost capacity, while cutting the costs of supply and limiting exposure to global oil price shocks. Gas discoveries and gas-to-power are likely to be important, as well as solar projects through the World Bank’s support line known as “Scaling Solar”.
The additional financing was approved at the end of July 2016 and will extend the Africa PPP project by 4 years to October 2020. For World Bank links, see here .