The deal will mobilise 2.5 billion euros for Senegal & will help increase the share of renewable energy installed capacity to 40%
As the discussions around just energy transition and fossil fuel phase out ramps up globally, alongside the Summit for a New Global Financing Pact in Paris, yet another name got added to the list of countries that have signed a Just Energy Transition Partnership (JET-P) deal.
Senegal has become the fourth country after South Africa, Indonesia and Vietnam to sign the JET-P deal, with the International Partners Group comprising France, Germany, the European Union, the United Kingdom and Canada.
The deal was announced June 22, 2023 and will mobilise 2.5 billion euros for Senegal in new and additional financing over an initial period of 3-5 years. The European Commission’s official website said the finance would come from international partners and multilateral development banks and a draft investment plan will be prepared within 12 months.
The partnership will offer significant opportunities for investment from the private sector, sovereign wealth funds and philanthropic foundations, according to the official website of the President of France. No mention of grants or concessional loans being a part of the finance was found in the official statements.
The official website of the President of France also mentions that the partnership will help accelerate the deployment of renewable energy and increase the share of renewable energy to 40 per cent in terms of installed capacity of Senegal’s electricity mix by 2030.
It will also help with the publication of a vision for a long-term greenhouse gas emission development strategy for Senegal by COP28, due to be finalised in 2024. Senegal’s new nationally determined contributions, which were to be published at COP30, will reflect the climate ambitions undertaken in this deal.
The current share of renewable energy in Senegal is around 31 per cent of the installed capacity. A 2015 Senegal government planning document had set a target of 20 per cent renewable energy in the electricity mix by 2020 and 23 per cent in 2030.
The same year, a new target for 30 per cent of photovoltaic and wind in the electricity generation mix was set for 2025. The 20 per cent target for renewable energy production in the electricity mix was achieved by 2021.
Under this deal the installed capacity target stands at 40 per cent for 2030, but there isn’t any electricity generation target set under the deal as of now.
As of 2020-21, the total installed capacity for power generation in Senegal was around 1.2 to 1.5 gigawatts, generating 5.6 terrawatt-hours of electricity. The country currently relies heavily on imported fossil fuels to meet its energy demands.
Heavy Fuel Oil (HFO) was responsible for generation of around 85 per cent of the electricity for the country back in 2010, although this share has come down substantially due to a large shift towards gas and some coal as well as the recently growing solar and wind. But still, HFO continues to hold the largest share of fuel in the electricity mix of the country.
Senegal adopted a gas-to-power strategy in 2018, following discoveries of oil and gas reserves between 2014 and 2017. “We will allow Senegal to develop its gas projects because gas is a transitional energy. What we want to do is get the big emerging countries out of coal as a priority,” said French President Emmanuel Macron during the Paris Finance Summit.
It is rather rare to hear the Global North advocating for emerging economies to use natural gas as a bridge fuel — usually the expectation is to directly switch from coal / oil to renewables. But the question is: What is different in this case?
Is it about fulfilling Europe’s own need for natural gas through export?
In 2022, a Germany-Senegal gas plan came up, under which the German government was supporting the Senegalese government in export of gas and LNG resources to Europe and in ensuring that the extracted gas can be used by domestic power plants as well, according to Deutsche Welle, a German news broadcaster.
Infrastructure to export the gas, including a floating terminal for LNG, is already being built in Senegal. The first flows of fossil gas from the Greater Tortue Ahmeyim field are expected in December 2023. It is one of the single-largest gas projects in Senegal.
The African civil society has been raising voices against obtrusion by the Global North in Africa’s natural resources and energy policies. Mohamed Adow, director of Power Shift Africa, tweeted in response to President Macron’s statement:
President Macron says he would “allow” Senegal to develop its gas because he views gas as a transitional fuel. This is outrageous coming from a former colonial power & shows how Macron is using his economic strength to dictate energy policies in Africa for the benefit of Europe https://t.co/xfTtZdV2so— Mohamed Adow (@mohadow) June 23, 2023
As of 2021, the population of Senegal was 16.8 million, according to the World Bank. Alongside signing the JET-P deal, a big challenge for Senegal is that of providing energy access to all its population.
Approximately 4.8 million people (slightly below 30 per cent) still lack access to electricity in the country (especially in the rural areas) and are dependent on polluting energy sources like firewood and charcoal for cooking. The country has targeted to provide electricity access to all its citizens by 2025.
South African President Cyril Ramaphosa expressed his views on their JET-P deal at the Paris Finance Summit, saying “The financing of $8.5 billion offered to South Africa has been far below their estimated need of $98 billion and we must have a greater emphasis on grants and concessional loans.”
Moreover, a recent report titled Beyond Climate Finance by Delhi-based think tank Centre for Science and Environment (CSE) found that Senegal is one of the developing countries whose annual debt burden exceeds the cost of achieving its climate goal or NDC.
“A high debt burden coupled with high cost of capital makes renewable energy unaffordable in many developing countries,” said Avantika Goswami, Programme Manager, Climate Change at CSE and a co-author of the report.
“For this reason, there have been calls from many developing country leaders for more concessional and grant-based funding to be channelled for climate mitigation and adaptation, and this is crucial for energy transition”.
Senegal annually emits around 13.6 million tonnes of CO2, excluding land use change, which is hardly .03 per cent of the global CO2 emissions (37.12 billion tonnes) as of 2021. Clearly the need for action is much more globally (including Global North) and especially support for renewable energy growth is required in the Global South, where the cost of capital for renewable energy is still very high.
Nivit Yadav, Programme Manager, Industry Unit, Centre for Science and Environment, said, “The past JET-P deals have largely been focusing on coal phase out and have had targets on capping coal based power in a country, whereas in this deal, for now what seems like a positive point is that its major focus is on enabling the growth of RE rather than acting as a stick on the fossil economy.”
In the past few months, there were a lot of back channel talks going on about the possibility of India signing a similar JET-P deal, but they didn’t yield a concrete outcome.
The discussions over a JET-P deal with India have still not found a final conclusion due to these three major reasons: First, the huge scale and the diverse and complex ownership of the Indian power sector, which makes it challenging to make everyone agree on the same terms; second, the nature of majority of finance under the past deals being in the form of loans as in the case of South Africa; and third, to have absolutely no form of international condition or compromise with respect to India’s energy security and development, said Yadav. “Any such deal with India could happen only if India’s conditions are well considered.”
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