Senegal’s bid for huge solar plant reflects African investor reticence

The country aims to be home to what it says will be the largest sun-power plant in west Africa but there is little sign of activity even after three years.

Two workers and their supervisor walk on their first day of work at the site of what is slated to be Senegal's largest solar plant in Santhiou Mekhe, Senegal. Nellie Peyton / Reuters

In an expanse of sand 100km north of Senegal’s capital, two men set to work digging up tree stumps to clear space for what could soon be the biggest solar plant in west Africa.

In less than a year, says the developer Senergy, this shrubby lot will be covered with 96,000 gleaming solar panels from China, injecting up to 30 megawatts into the grid.

It is an attractive prospect for a nation with a dire power deficit, and which currently meets most of its needs by burning imported oil in hugely inefficient diesel generators.

“The context is favourable,” says Karim Ndiaye, the investment director at the French private equity firm Meridiam, which bought out the original Senergy company in 2014.

“The president has made renewables a priority.”

Yet, three years after a deal was signed to build the plant, there were still no building materials in sight recently, just a couple of bulldozers bumping over dunes near Santhiou Mekhe village.

Sunshine is plentiful, solar panels get cheaper by the year and demand for power is skyrocketing but the newness of the technology, bureaucratic hurdles and investor fear of uncharted territory have held back the rollout of solar plants across Africa.

Solar is less than 1 per cent of Africa’s power generation. Outside South Africa and Algeria there are only a few utility-scale solar photovoltaic (PV) plants on the continent, the largest being a 20MW plant in Ghana.

Reuters collected data on more than 3,500MW of projects that have been commissioned in the past six years – approximatley equal to the combined output of Senegal, Uganda, Mali and Cameroon.

In Kenya and Burkina Faso, plants scheduled to open in 2014 are still awaiting construction. In Nigeria and Ghana, projects that began in 2010 and 2011 have yet to find finance.

“We are seeing the same trends everywhere in sub-Saharan Africa,” said Silvia Macri, an analyst at IHS Markit.

“There’s no experience with these projects, and not much clarity around the political framework.”

Lenders want dependable cash flows but in many countries weak legal frameworks, unclear land rights and poor transmission infrastructure make this hard to guarantee, Ms Macri said.

Even after construction began on the Senergy project, equipment still needs to be ordered and permits obtained, says Mathieu Peller, the regional director at Meridiam.

Horse carts trot past power lines in rural Senegal. Electricity is costly and 40 per cent of people have no access.

Cheap solar could change this.

Since 2009 the price of panels has fallen 80 per cent. Last year, the International Renewable Energy Agency, based in Abu Dhabi, said solar power costs were in line with or below those of fossil fuels.

Senegal is ahead of its peers on the continent in at least promoting renewables – its official target is 20 per cent of power from renewables by 2017, against 0.6 per cent now – but it has been overwhelmed by proposals.

After creating a renewable energy law in 2010 the government spent three years sorting through 82 proposals and accepted 10, most of which lacked the funds to see them through, says Yasser Charafi, an officer at the International Finance Corporation, the private-sector arm of the World Bank.

Senergy will sell power to the national electric company for about US$0.11 per kilowatt-hour, which is slightly less than the utility pays for diesel. The World Bank aims to help Senegal slash that by almost half, Mr Charafi says.

Kenya unveiled a renewable energy scheme in 2012 and was inundated with proposals. No plants are yet under construction.

Now it is considering an auction process to attract lower price bids, leaving developers in the lurch, says Tomas Adcock, the chief operating officer at the solar firm Kenergy Renewables.

“Investors are anxious about investing in projects that may never be built,” Mr Adcock says.

Kenya’s ministry of energy did not respond to a request for comment. Developers in several countries described a lack of clear policies, pressure to pay bribes, and negotiations that dragged on for years.

There is often no grid in place to transmit, a problem faced by Douglas Coleman, the projects director of Blue Energy, building a long-awaited 155MW plant in Ghana.

A few projects have beaten the odds. A different plant in Ghana was completed in April by the Chinese company BXC, and a 10MW plant in Uganda is almost built, led by firms in Paris and Dubai’s Access Power.

Nigeria signed its first solar power purchase agreements last month for 14 large-scale plants after four years of negotiations. They are now meant to close financing within a year, and finish construction 18 months later.

“To be honest, some might need more time,” says Yesufu Alonge, the head of power procurement at Nigeria’s bulk trader.

Follow The National's Business section on Twitter