During two fully packed days this week developers, financiers, government officials and other key stakeholders met at the Pullman Hotel in Dakar, Senegal to learn about and discuss «Competitive Solar Solutions West Africa». The Solarplaza-organised event was supported by key institutions like the World Bank and its affiliate IFC, the national Development funds Proparco, DEG, FMO as well as the regional Africa institutions like ECREEE, Ecowas Centre for Renewable Energy and Efficiency. A number of companies like Scatec Solar that I represent also co-sponsored the conference.
The event was not only useful for participants; it also revealed some insights of interest to a broader public. Below are some highlights that I noted:
Fossil power generation expensive
The countries in the region – Senegal, Mali, Burkina Faso, Ghana, a.o. – typically spend hundreds of millions of dollars on importing diesel and fuel oil for electricity generation. This despite the fact that on average only half the region’s 300 million population have access to electricity.
Although hydropower traditionally plays a major part in the energy mix, it cannot catch up with demand that grows by 5-10 % per year. The avarage generation cost of diesel in the region is around 300 CFA (0.64$) per kilowatthour, and 150-200 CFA (0.3-0.4$) for power generated from Heavy Fuel Oil (HFO), it was said. The price of fuel and diesel has increased more than 100 % the last decade, and is expected to continue to rise. In 2013, the procurement of fuels represented more than 60 % of Senelec’s total said Mamadou Sene of SenRe Africa.
As the electricity tariffs are regulated, end-users in West Africa typically pay only about 50 % of what it costs to produce electricity by fuel or diesel. This means the national electricity companies are all struggling to survive financially and taxpayers have to cover the growing deficits with rescue financing from the state. Only in Senegal, this subsidy of Senelec’s fossil power generation costs the public purse between 160 and 200 million dollar a year.
Solar PV much cheaper than fuel
Not only do the countries have abundant solar resources, solar PV is also much cheaper than today’s default fossil solution. As demonstrated at the conference, the cost of electricity from utility-scale solar PV has dropped dramatically the last years, and is now estimated to be around 80-90 CFA (0.17-0.19$) per kWh depending on costs of financing. In other words, by replacing diesel and fuel-generated power with solar-generated power, utilities and big customers can cut generation costs with more than 50 %. And as the lessons from South Africa and other countries tell us, the costs of generating electricity from solar PV will drop further in the years to come if the countries start investing in developing the market.
Solar PV can be big in West Africa
One often hears that that solar PV can only play a limited role due to the fact that the sun doesn’t shine at nights. But another good story from the conference is that solar power has much bigger potential in the region than normally assumed. In a study that was presented by Gregoire LENA of Club ER, it was assumed that wind and solar shall never exceed 30 % of the load and that PV capacity in each country shall not exceed 50 % of the maximum power load at noon.
Given these assumptions, already with the current grid, the countries can build more than 500 MW of solar PV the first coming years. By 2025 the potential is more than 1100 MW, equal to close to 15- 20 % of total power generation. The latter estimate is assuming that decided interconnection links in the West African Power Pool are built. As expected, the projected deployment of PV would lead to a significant shift in the energy mix. The use of hydropower would shift more heavily to night hours and evening peaks, and the share of diesel and fuel oil would drop significantly.
Lack of bankable solar projects
A large number of solar power IPP-projects (Independent Power Producers) have been announced in the region the last years, but none have yet been realised. As explained by the World Bank and the Development Finance Institutions, there are sufficient funds available – what’s lacking is solid, bankable projects.
Governments and utilities can do a lot, however, to support the emergence of good projects. They can set prequalification criteria that favour project sponsors with a proven track-record and access to finance, and they can make sure projects are selected on the basis of not only price but also quality. In addition, they can attract investments in developing the national PV supply industry by setting ambitious long-term targets for solar PV deployment.
Soft loans can speed up solar revolution
Reaching the 1150 MWp of solar PV by 2025 would require some 2 billion USD in cumulated investments. Although traditional financing is available, access to concessional finance would no doubt speed up the transformation.
The West African countries could make a common appeal to the industrialised nations, for example in relation to the preparations of the so-called Green Fund, that could enable private clean energy projects to receive 20 % of project costs as so-called soft loans with an interest rate below 2% p.a.
As climate funding this would be highly efficient, as it could help replace more than 100 million tons CO2 from fossil fuel generation in the region.
Supporting clean-energy investments in Africa is probably the smartest thing the world can do to support support sustainable development, so why wait?