Energy Strategy for Senegal

According to article 25 of the Senegalese Constitution introduced by the constitutional revision of the law n° 2016-10 of April 05, 2016: “Natural resources belong to the population. They are used to improve their living conditions. The exploitation and management of natural resources must be transparent and in such a way as to generate economic growth, promote the well-being of the population in general and be ecologically sustainable...”. In this context, the discovery of offshore oil and gas fields inspired the adoption of the <<Gas to Power>> strategy at the end of 2018, as part of a proactive approach to resource management.

However, the start of production in June 2024 was preceded by a change of regime in March 2024. Confirming the strategic document, the current government has set out Senegal's overall energy strategy in its National Transformation Agenda to 2050. On one hand, it aims to achieve energy autonomy, through the production of electricity from the transformation of national resources. On the other hand, it aims to supply clean, competitive energy to meet domestic needs as a priority, for households, businesses and industry.

Then, as part of the Just Energy Transition Partnership (JETP) and in light of the International Energy Agency's review of its energy policy, Senegal committed to raising its renewable energy target to 40% of installed capacity by 2030. (nearly 1 KW).

The regulation of the electricity, oil and gas sectors has been unified through the commission for the regulation of the energy sector, created by law 2021-32 of July 09, 2022. Thus, the regulatory authority's scope of competence has been extended to downstream hydrocarbons and intermediate and downstream gas, which were respectively the responsibility of the former Electricity Sector Regulatory Commission and the former National Hydrocarbons Committee (CNH).

The energy strategy is therefore perfectly in line with the main thrusts of the Agenda. Indeed, it contributes to the competitiveness of the national economy by supporting industrialization ambitions that integrate raw materials into global value chains. It is also in line with sustainability, in that it pursues the diversification of energy sources with increasing production of renewable energies.

In addition, the energy strategy helps to establish social equity by promoting universal access, reducing energy costs and prioritizing the satisfaction of domestic needs.

Finally, the rigorous management of resources requires the state actors involved to be at the service of the population's aspirations, given the importance attached to the governance of the institutions in charge of implementing the strategy. To this end, the PETROSEN group of companies has entrusted the internationally renowned firm Ernst & Young, in collaboration with a multi-disciplinary team of experts, with the task of drawing up a strategic plan based on an exhaustive diagnosis. Although the plan is currently limited to PETROSEN, there is no doubt that it lies at the heart of the country's energy strategy and, more generally, its economic strategy, which is designed to support its industrialization policy. This mission must be inspired by the best practices in governance and the use of appropriate methods and tools to ensure institutional efficiency.

Following the strategic axes identified, the strategic actions planned are:

- Strengthening sector governance;

- Implementing electricity regulations and planning principles;

- Installing new gas-fired and renewable energy power plants, converting oil-fired power plants to dual fuel and supplying power plants with local gas from the GTA, Yaakar-Teranga fields and via the Senegalese Gas Network;

- Diversification of transmission and distribution-sales networks, and operation of all rural electrification concessions.

Indeed, if in principle governance should be a powerful lever for development, guaranteeing rigorous management of resources and enabling the achievement of collective objectives, the current institutional set-up is marked by a plurality of public and private entities. The intervention of each in the implementation of the energy strategy, to ultimately achieve the common goal of accessible, clean and competitive energy for Senegal, does not fail to entail silo risks.

The implementation of this first strategic action on governance would therefore benefit from being accompanied by a rationalization, or at the very least, an optimal articulation between the various actors.

Implementing the strategy also requires technical and financial support from development partners, given the high costs associated with developing the required infrastructure. For example, the Gas to Power strategy is estimated to cost $2.2 billion, while Senegal's budgetary revenues for 2024 are estimated at $2.4 billion.

However, on top of the scale of the required financing amounts, their availability in the current context of energy transition is an impediment to investment in fossil fuel projects.

Indeed, the export credit agencies that finance energy infrastructure, and which have in fact participated in the financing of gas-fired power plants in Senegal, are seeing their intervention capacities limited by international climate commitments.

In the face of such constraints, successful implementation of the energy strategy requires diversification of financing methods, including innovative financing.