Importance

1. Importance of Energy

Energy is the backbone of modern social life and economic activity. The modern economy is difficult to imagine without energy, as it powers all economic activities. Any agricultural activity beyond basic subsistence requires energy to achieve meaningful levels of productivity. All manufacturing activities require reliable and affordable energy to produce efficient and economically viable goods. The construction and maintenance of other vital infrastructure (such as ICT) also require reliable and affordable energy.

Energy-dependent economic activities are synonymous with job creation. With affordable and reliable energy supply, economic activities that would otherwise be impossible become feasible. This leads to the production of goods and services and, consequently, the generation of jobs. These developments result in income generation and poverty reduction. Access to energy also directly affects people's quality of life. Energy makes it possible to provide health services and deliver quality education. The modern household is filled with appliances that cannot function without access to energy.

It is therefore not surprising that there is a strong positive relationship between energy and economic growth. There is a strong relationship between firm productivity and electricity availability. Additionally, the reliability and affordability of power have been shown to have a strong positive effect on GDP growth. In contexts such as The Gambia, the lack of affordable energy has forced households to use fuelwood for cooking, which causes serious respiratory health effects.

2. The Current Energy Situation in The Gambia

When discussing the energy sector, it is important to consider all sources of energy used by households and businesses. This comprehensive approach ensures that the energy needs of all segments of society are taken into consideration. While electricity from the national utility is the most predominant source, other energy sources currently play major roles in the Gambian context. In particular, the use of cooking gas (liquified petroleum gas - LPG), firewood, and charcoal are highly prevalent and therefore represent important energy sources for a large number of households. Recognizing these sources is necessary for coherent energy strategy and policy formulation.

The key features of the energy situation in The Gambia are:

  1. Unreliable electricity supply: The Gambian electricity situation is in dire straits. The Gambia is currently characterized by low effective access, unreliable energy supply, and high energy tariffs. While an access rate of 62% may appear impressive, especially relative to the sub-Saharan African average of about 50%, the reality on the ground is quite different. The electricity supply is irregular with frequent outages, which has destroyed many expensive electrical appliances. Some rural areas can go for weeks without power. Even when there are no outages, there are severe voltage fluctuations in many neighborhoods that render appliances unusable. The unreliability of energy has also prevented the development of new industries and hindered the growth of existing ones.

  2. High cost of energy: The cost of energy in The Gambia is extremely high. The electricity tariff in the country is among the highest in Africa. The average tariff rate is about US$0.23, which ranks among the highest on the continent and globally. Moreover, The Gambia's energy tariffs are increased at a very high frequency. The driving factor behind such high end-user tariffs is inefficiency in energy transmission and distribution, with average losses of about 20%. The global average is 8% and the African average is about 10%. Using the average tariff rate, the value of those transmission and distribution losses is almost US$20 million per annum. While some of these losses are technical, a significant component represents non-technical losses (meaning corruption).

  3. Low generation capacity: The current generation capacity in The Gambia is less than 100MW. Outside of small island states, this is one of the lowest in Africa. This level of generation is insufficient for the country's energy needs. The country currently imports far more energy than it generates locally. While there is nothing inherently wrong with energy importation, the scale in The Gambia is excessive relative to consumption needs. This arrangement will not enable the country to achieve energy independence. The limited level of generation also constrains the country's ability to harness renewable energy, because low baseload power cannot support significant investments in renewable energy such as solar, which has intermittent supply.

  4. Over-reliance on environmentally destructive fuel-wood: As urbanization in the country increases rapidly, there is growing demand for household energy. In particular, there has been significant growth in demand for cooking energy. Unfortunately, this demand has been met through high rates of firewood and charcoal use, as grid-supplied electricity and LPG are too expensive for the average household. These alternatives are expensive financially and have a destructive effect on the country's forests.

current state

Intervention

3. How well is the government managing the sector?

The current government's approach to the energy sector leaves much to be desired. With the help of the World Bank, a well-articulated energy sector strategy (Strategic Roadmap 2021-2040) was developed. However, the execution of that energy roadmap has been bungled. As a result, the document's goal of universal electricity access in The Gambia by 2025 is significantly off-target. Electricity access remains limited, its supply is highly unreliable, it is expensive for average households and businesses, and an unreformed NAWEC remains a financial drain on the country's limited resources.

  1. Distribution without generation: The most visible of the government's attempts to address energy solutions has been the expansion of the distribution network by connecting numerous rural areas to the electricity grid. However, increasing connections without a corresponding increase in generation capacity is effectively putting the cart before the horse. After all, electrical wiring alone does not produce electricity to be consumed by households and businesses.

  2. Unsustainable power purchase agreement (PPA): Instead of investing in generation, the government has been purchasing power from external sources. This has entailed purchasing electricity from Senegal and Karpowership (a Turkish company that sells electricity from a floating ship). The PPA from Karpowership has been financially ruinous for the nation. Since 2018, the country has been annually paying more than US$30 million to Karpowership for 30MW of electricity. This PPA has continued for at least seven years, which means that the country has paid more than US$200 million. This may be the worst PPA arrangement for any country on record. The amount spent could have built a 200MW power plant in the country, which could generate power to supply every single household in the country. During this period, local energy generation actually fell below the level it was under the Yahya Jammeh regime.

    While not as detrimental as the Karpowership PPA, the importation of electricity from Senegal is also unsustainable. The country currently imports 50MW of electricity. The main problem is that the government (through NAWEC) does not have an arrangement in place to ensure that this importation is affordable. The country is currently four months behind schedule in paying Senegal for the power. This exposes the country to significant risk should Senegal demand overdue payments.

  3. Expensive and limited use of LPG: The energy situation is also characterized by limited use of LPG, known as cooking gas. The use of this energy source is constrained due to the lack of an implemented government strategy. Cooking gas in The Gambia is expensive—twice as high as in Senegal. The major reason for the high cost of LPG is the low storage capacity. There is currently storage capacity of only about 1,000 metric tonnes, which is too low for the country. As a result, there are no economies of scale, and consumers face high prices. There is also a distribution problem with a fragmented market and only a few outlets.

  4. Unreformed NAWEC: A major problem in the energy sector has been the poor management of NAWEC. All previous reform attempts have failed due to leadership failures at the institution itself and at the central government level. This national utility company has been one of the biggest sources of debt burden for the country. While there may be good justification for some of the loans that ended up on the central government's balance sheet, many of them have simply been misused due to an entrenched culture of corruption. For instance, millions of dalasi are lost annually through invoice mispricing in transactions with vendors. Payment amounts for power purchase agreements are frequently inflated, with senior officials pocketing the differences. Procurement contracts are often awarded at inflated costs to connected individuals and businesses. Equipment and fuel are frequently stolen at NAWEC facilities without any consequences.

4. PPA’s Solutions

Our party's goal for the country is energy abundance and energy security. This would require that energy is safe, accessible, reliable, and affordable for every household and business.

  1. Major reform of NAWEC and Energy Policy: The PPA leadership understands that previous attempts at reforming NAWEC have been half-hearted and unserious. Those failed reforms were frequently initiated and controlled by the very management and policymakers who caused the problems. It is therefore not surprising that this state-owned enterprise (SOE) has remained financially weak and operationally moribund. Real reform at NAWEC requires new leadership not only at NAWEC but also at the top level of the executive. Policy-level reform would entail the separation of energy and petroleum by removing them from a single ministry. At the NAWEC level, reforms would entail separating generation from transmission and distribution. It would also include separating electricity and water into separate entities.

  2. Increasing generation capacity: None of the important targets for the energy sector can be achieved without adequate local energy generation. However, this requires investments by the private sector in the form of independent power producers (IPPs). The country currently has no IPP with a local power plant under a long-term PPA. The main reason is that the current government has failed to improve the country's investment climate to incentivize such long-term, risky investments. Indeed, beyond investments financed by multilateral banks and donors, all activities that rely on the government are well behind schedule. The PPA-led government would target the installation of new power plants within the first year and doubling the generation capacity within three years. This would require improving our investment climate and attracting local and foreign investors as independent power producers.

  3. Increasing access to LPG: The PPA leadership understands that the energy problem faced by the average Gambian household, particularly in cooking, must be urgently addressed. Beyond the direct financial cost, the indirect costs through environmental destruction and health issues demand urgent action. The first action entails expanding the storage capacity at Mandinaring. This would allow LPG prices in The Gambia to fall to a level that would be financially more affordable than charcoal or firewood. The distribution system would also need to be improved. One effective way to enhance gas accessibility is to refocus the downstream market interventions of the Gambia National Petroleum Corporation (GNPC) away from solely marketing petrol. This means adding the marketing and distribution of LPG to households to its portfolio. The current locations of GNPC petrol stations would help increase gas accessibility to a greater number of households that need the product. The goal of GNPC's entrance into the market is to complement existing suppliers to enhance access.

  4. Development of bio-fuel: This is an energy source that serves as an alternative to fuel wood and is quite sustainable. It also has great potential in the Gambian context. The country is a significant grower of groundnuts and rice. Groundnut shells and rice husks are both key ingredients for briquette making for bio-fuel. Since these are grown annually, there is a sustainable supply of these inputs. Furthermore, their development and use would enable the shift away from fuelwood (charcoal and firewood), which are significant sources of deforestation and environmental degradation. The PPA-led government will provide incentives for development of the bio-fuel sector through financial incentives and capacity building to ensure a commercially viable bio-fuel market in the country.

solutions

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