Context
The electricity sector in The Gambia was characterised by heavy dependence on fuel imports to meet its electricity demand; nearly all electricity in the country was produced by fossil fuel-based generation technology (light fuel oil (LFO)/heavy fuel oil (HFO) power plants). Although energy demand continued to rise, the national electricity supplier, NAWEC (National Water and Electric Company), faced difficulties generating sufficient financial revenues to maintain and upgrade the systems and infrastructure, especially in the two regional grids outside the Greater Banjul Area. This was mainly due to underinvestment, an inflexible tariff system, and rising fuel prices. At the same time, multiple barriers prevented Independent Power Producers (IPPs) from adding capacity to regional grids, including: a lack of security around the payments made by the off-taker (NAWEC) and a lack of experience with larger scale renewable energy installations in isolated regional grids or lack of interest of IPPs due to a challenging investment environment.
Goals and approach to transformational change
To enable transformational change in The Gambia’s energy sector and address existing investment barriers for independent power producers, the project aimed to support an IPP in investing in the construction and operation of two solar PV plants in Farafenni and Basse, resulting in 10.5 MW of installed solar capacity. In parallel, it planned to improve the institutional and regulatory framework to attract private sector participation in The Gambia’s electricity market, in particular by supporting the government in developing key contractual arrangements such as Power Purchase Agreements (PPA), a Grid Connection Agreement, and a Land Sub Lease Agreement.
Through these activities, the project was intended to deliver tangible benefits to energy consumers in the two grids, including improved quality of life through a more reliable and sustainable electricity supply. Businesses in Farafenni and Basse were expected to benefit from a more stable daytime energy supply, enabling enhanced operations. In addition, the national utility, NAWEC, was expected to benefit from capacity development during implementation and was intended to replicate collaboration with IPPs in other regions of the country.
Components and support mechanisms
The financial support mechanism was intended to offer a de-risking mechanism aimed at mitigating private investment risks. This was planned to be achieved through a power purchase agreement (PPA) guarantee, whereby the IPP would be compensated using funds provided by the Mitigation Action Facility, via the guarantee, in the event of a payment default by NAWEC.
At the same time, the project aimed to prepare replication of its approach by supporting the preparation of additional feasibility studies for comparable solar power plants with capacities of 10–20 MW each. These studies were intended to identify financially viable projects that could subsequently be supported through the same risk guarantee mechanism.
Long-term impact
By replacing electricity generated by fossil fuel-based power plants, the project expected to reduce greenhouse gas (GHG) emissions of around 13,000 tonnes per year and 322,019 tonnes of CO2 across the 26-year lifetime of the solar PV technology.
