BOAD's outlook for the next fifty years in the financing of renewable energies

1-Comprehensive presentation of the event:

1.1-Background

The main challenges the WAEMU energy sector is facing include: the constant deficit in power generation and transmission; high electricity prices; high dependence on hydrocarbon resources, which puts significant pressure on public finances and leaves countries highly exposed to volatility in oil prices and supply; negative environmental impacts and lack of adequate investment in clean energy.

Indeed, in the energy sector, the region has a low rate of access to electricity (41.63%, compared to 89.57% globally and 47.67% in sub-Saharan Africa) with disparities between urban areas (more electrified) and rural areas (with very low rates of access to electricity). Tariffs are the highest, at around XOF107/kWh compared to XOF32/kWh in South Africa or XOF72/kWh in Morocco, for example, with a negative impact on basic social services and the development of industries. Furthermore, despite significant solar potential (estimated irradiation between 1,680 and 2,118 kWh/m2/year for 517,000 GWh of photovoltaic solar energy and 310,000 GWh of thermodynamic solar energy), several river basins (Niger, Volta, Gambia, Senegal), hydroelectric potential estimated at 2,367.76 GWh, wind potential estimated at 75 GWh and available resources (natural hydrogen, uranium, oil and coal), the sub-region is struggling to meet the electricity demand of around 23,653 GWh (with an annual growth of about 7.1%) by generating around 21,148 GWh, mainly from thermal sources (76%).

Nevertheless, progress has been made in some countries in the sub-region, notably Senegal, Côte d'Ivoire, Burkina Faso, Togo and Mali, with the emergence of large-scale solar and hydroelectric power plants as a community initiative in response to climate change. In this regard, Senegal has nearly 10 photovoltaic solar power plants with a combined capacity of 226 MWp and a wind power plant of 158.7 MW in Taïba Ndiaye (Thiès), and a "gas to power" initiative being launched. Côte d'Ivoire, with its hydroelectric and gas-fired thermal power plants, has become as a leader in the export of electrical energy to countries in the sub-region. In addition, interconnection projects between the countries have been initiated or are currently being implemented, including the 225 kV Côte d'Ivoire – Mali interconnection, the 225 kV Guinea – Mali interconnection and the 330 kV Nigeria – Niger – Benin – Burkina Faso interconnection.

1.2-Presentation of BOAD

The West African Development Bank (BOAD) is the common development finance institution of the member countries of the West African Monetary Union (WAMU). It was established by an Agreement signed on 14 November 1973, and became operational in 1976. Member countries include Benin, Burkina, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo.

BOAD is an international public institution whose purpose, as provided under Article 2 of its Articles of Association, is to promote the balanced development of its member countries and foster economic integration within West Africa. Since its inception, it has been supporting countries in the implementation of their national development strategies.

Since 2009, the Bank's activities have been conducted in accordance with five-year strategic plans adopted by the WAEMU Statutory Council of Ministers. The latest Strategic Plan 2021-2025, called the DJOLIBA plan, aims to achieve development impacts in terms of job creation, transport infrastructure to facilitate the movement of people and goods, access to food through agricultural production and increased energy production capacities.

The aim of the DJOLIBA Plan is to strengthen the impact of the Bank's interventions in five (5) priority areas: i) transport and information and communication technologies infrastructure and digitalization; (ii) generation and equitable access to energy and natural resources; (iii) agricultural production and food security; (iv) real estate (including tourist infrastructure) and housing, including low-cost housing, and (v) health and education.

In the specific field of energy, the ambition is to install 380 MW of additional capacity to improve the electrification rate and energy supply in the region. Cross-cutting impacts are expected to include: (i) 244,000 jobs created, including 16,700 in the SMEs/SMIs economic fabric as a whole, with a particular focus on young people and women, (ii) a contribution of XOF3,710 billion to countries’ GDP (i.e. an estimated annual contribution of 0.8% of the annual GDP of the WAEMU), (iii) XOF580 billion in tax revenue, and (iv) 18 million tonnes of CO2 avoided through the financing granted.

The assessment of cumulative achievements at the end of the second year of implementation of the DJOLIBA Plan indicates that efforts must be redoubled to improve indicators relating to: i) "Roads" (11.2% of the biennial target), ii) carbon dioxide reduction (1.3% of the biennial target), iii) public revenue (11.9%) and iv) rice production (39.9%). However, performance was better in indicators relating to added value (347.1%), employment (151.3%), drinking water production (121.0%), electricity supply (122.3%) and irrigated land (91.8%).

In the field of electrical energy specifically, with regard to the implementation of the Djoliba Strategic Plan up to September 2023, the Bank has increased installed electrical energy capacity since 2021 to 235.9 MW with a renewable energy share of 115.9 MW, or 49.13% of installed capacity, thus contributing to the Plan’s objective of financing at least 39% of the 380 MW capacity in renewable energy. This involves the Blitta photovoltaic solar power plant in Togo (phase 2 extension from 30 to 50 MWp), the Kourouba hydroelectric power plant in Mali (3.9 MW), the Awandjélo photovoltaic solar power plant in Togo (42 MWp), the Koudougou solar power plant in Burkina Faso (20 MWp) and the Niakhar solar power plant in Senegal (30 MWp). Prior to the DJOLIBA plan, BOAD financed phase 1 of the Blitta photovoltaic solar power plant (30 MWp) and the Akuo Kita solar power plant in Mali (50 MWp). The Bank also financed decentralized rural electrification projects using solar photovoltaic systems in Togo (317 localities), Mali (50 localities with support from the Green Climate Fund) and Senegal (1000 localities with the support of the Green Climate Fund) and Niger (47 localities). 

Successful implementation of the Djoliba guidelines in the various areas mentioned above requires the development and operationalization of sectoral intervention strategies. Among the priority areas targeted, energy is one of the top priorities of global, regional and national agendas.

Indeed, at the global level, governments have committed to achieving the Sustainable Development Goals (SDGs) by 2030: SDG 7 aims to "ensure access to affordable, reliable, sustainable and modern energy for all"; SDG 12 aims to "ensure sustainable consumption and production patterns" and SDG 13 aims to "take urgent action to combat climate change and its impacts".

As at 31 July 2023, the Bank's energy operations in WAEMU amounted to XOF1,456,084.67 million, or 18.53% of its total financing of XOF7,857,105.05 million to the Union’s economies. BOAD's operations in this area have involved generation (thermal, solar and hydroelectric), transmission (national and interconnected grids) and distribution facilities in WAEMU countries.

1.3-Prospects

Several projects are planned to boost the development of electricity generation and increase the installed capacity to almost 18,143 MW in 2033, more than two-thirds (69%) of which will be from renewable sources (including hydroelectricity). To facilitate trade within the regional energy market, the member countries have planned electricity transmission line projects to strengthen interconnections between them. Donors and development aid institutions play an important role in financing projects to boost the supply of electricity in West Africa, both in terms of generation and transmission.

As part of the Common Energy Policy (CEP) and the Regional Initiative for Sustainable Energy (IRED), the WAEMU Council of Ministers adopted, on 30 September, 2022, the Energy Sector Development Strategy (SDPE) based on the following vision: "In an open and competitive regional market, WAEMU has viable and sustainable energy poles that are aligned with best practices with an optimal energy mix based on effective partnerships, for universal access to electricity by 2033". The SDPE is the expression of the shared commitment of the Member countries to strengthen energy integration in the interest of economic and technical efficiency, and to ensure the security of the Union's energy supply in a spirit of solidarity.

The implementation of projects and their prioritization have made it possible to build a portfolio of 171 projects stemming from the energy sector for the 2023-2027 period. The total cost of these projects over this period is estimated at XOF11,524 billion. Of the 171 projects, 78 are seeking financing for a total amount of XOF5,700 billion. The total capacity to be developed over the 2023-2027 period is 7,603 MW. 17 solar production projects worth XOF614 billion are currently seeking financing, with a roundtable scheduled for November 2023.

1.4-Talking Points

To attract new investors and promoters in the sub-region to energy projects, BOAD, through its Energy Department, will present: (i) the Bank's experiences in financing and implementing renewable energy projects, with successes and difficulties and (ii) the strategy for implementing green projects over BOAD’s next fifty years. New cooperative ventures with financing institutions will make it possible, on the one hand, to access cheaper resources for financing solar projects, especially for the private sector, and on the other hand, to create financing lines for project studies with a view to the origination of solar projects in the sub-region. This presentation will be developed during the side-event, with a view to enabling BOAD to make a lasting commitment to financing the energy transition during the next fifty years.