Senegal’s Gas-to-Power Ambitions: Securing Scale and Sustainability

Senegal has undergone an important political evolution with the recent elections and peaceful transition of power. Yet certain priorities remain consistent for the Senegalese government and population, including increasing the supply and affordability of energy. Achieving this is essential to addressing lingering energy poverty in the country and driving further economic development.

Following significant gas discoveries, and with the ongoing development of several gas projects, many Senegalese expect that domestic use of gas will be the answer to Senegal’s energy needs.

While gas will have an important role, including in directly increasing power generation, the size of gas-to-power plans and their interplay with renewables plans will be a critical determinant of whether the government achieves its energy and sustainable development goals.

The government risks falling short of its goals if it (a) pursues as large an expansion of gas-to-power capacity as envisaged in recent plans and (b) underestimates the role that renewables could play in the country’s future energy mix.

The most recent government plans, as set out in a policy review undertaken by the International Energy Agency (IEA) in collaboration with the Senegalese government, envision developing gas-to-power capacity of more than 3 gigawatts (GW) (through converting existing thermal plants and building new ones). However, the government may struggle to implement this plan. It faces risks of a gas shortage and a shortage of funding to build the necessary infrastructure.

Our modeling suggests that while the amount of domestic supply currently envisaged by the government is sufficient to meet expected demand, it may ultimately prove lower and slower to materialize than the government expects. The Yakaar-Teranga project is particularly critical for supply. Yet a range of factors increase the uncertainty around the project’s development and design. These include BP’s exit from the project, the impending audit of the petroleum sector promised by the new administration that may prompt contract renegotiations, and the global energy transition.

The government might also face a funding shortage. In addition to its plans to increase investment of public money in upstream projects such as Yakaar-Teranga, we estimate that it might need to find at least USD 2.2 billion to construct the planned pipelines and power plants. But the pool of financing available for gas-to-power infrastructure is shrinking given global climate concerns and associated pressure on financiers. The reduction in international public finance is a particularly significant challenge given its role in derisking projects for private capital.

In contrast to the government’s plans for gas, plans for renewables are unclear. The aim of Senegal’s recently announced Just Energy Transition Partnership (JETP) is to increase the share of renewables to 40 percent of installed capacity by 2030—possibly to around 1 GW. However, current plans do not indicate any additional renewables capacity in the longer term (beyond 2030) despite the catalytic impact that the JETP should have on this potential.

If that remains the case and the plans detailed in the IEA policy review are the only ones realized, even if Senegal does reach the JETP target of 40 percent renewables by 2030, gas will increasingly dominate the mix in the long term.

A larger role for renewables alongside gas could offer a less risky pathway to achieving Senegal’s energy goals as well as other benefits, such as freeing up gas for non-power uses. The lack of detail on renewables plans may reflect the fact that the government is in the process of developing the JETP investment plan. Officials also might worry that the JETP financing will not materialize.

Nevertheless, as the government is making decisions on the gas sector now, a full accounting of the interplay between gas and renewables cannot wait. Otherwise the government risks locking Senegal into using large quantities of gas far into the future. Any delay will inhibit the catalytic impact of the JETP on longer-term renewables prospects and thereby prevent the country from benefiting as renewables become increasingly cheaper and more secure than gas.

This more balanced approach will still likely require a significant expansion of gas-to-power capacity from today’s levels, and Senegal’s international development partners should recognize this by providing necessary financial and technical support. However, the government should right-size this expansion. It should use gas as a complement to renewables by employing gas as a “peaker” as much as possible. To achieve this, the government must make careful choices about gas plant technology and carefully negotiate gas purchases and gas power plant contracts.

Pursuing a pathway with a larger role for renewables is not without its own challenges given their higher upfront costs and the need for grid investments to address intermittency. We estimate that the additional 346 MW renewables capacity required to reach 1 GW by 2030 could cost around $920 million (exclusive of any necessary grid upgrades, flexibility systems, and energy storage capacity). 

Senegal’s international development partners must deliver on their JETP promises in the near term, including by bringing down high financing costs and making riskier investments in hard-to-finance projects. They must also provide more money in the longer term. Rich countries must reverse their dismal records on meeting their climate finance commitments.

At the same time, Senegal’s government must create a stronger enabling environment for both gas-to-power and renewables investments. It should produce a credible long-term strategy on power sector development that provides clarity to relevant stakeholders, including investors. It should also resolve the overlapping responsibilities between institutions and provide more clarity on the processes and procedures for making key regulatory decisions. 

Building more public consensus and trust will support the credibility of this long-term planning and the stability of the regulatory framework. Given high public expectations of the transformative impact of gas-to-power, greater public awareness of the various opportunities, risks and trade-offs could change the narrative and allow for the new administration to adapt the energy strategy as appropriate. The new president’s commitment to transparent governance bodes well in this regard, paving the way for Senegal’s new administration to refine and implement its energy plans with greater transparency and inclusivity than past administrations.

The above actions will give Senegal a better chance of achieving the energy future that the government’s strategy is striving for.