CONFIDENTIAL On the Road to Durban: Promoting Sustainable Energy Access in Africa: Pre-UNFCCC COP17 African Energy Ministers Conference
Towards Sustainable Universal Energy Access in Africa: Building Climate-Resilient Energy Systems
Eddy Njoroge, MD & CEO, KenGen 15 – 16 September 2011, Sandton Johannesburg, South Africa
Disclaimer: No part of this report may be circulated, quoted, or reproduced for distribution without prior written approval from KenGen. All the information contained herein was prepared for information to the Pre- UNFCCC COP 17 African Energy Ministers. OUTLINE:
1 Africa, the Continent of the Future
2 Four Building Blocks for a Climate-Resilient Energy Systems in Africa
a Scaling Up Renewables b Energy Efficiency c Financing Clean Energy d Regional Interconnectivity
3 Experiences and Approaches (Kenyan Case) 4 Way Forward
Ngong, Kenya 5.1MW
1 1 HIGHLIGHTS ON AFRICA
Key Facts
• Comprises 54 sovereign states (28% of all the world sovereign states are in Africa).
• About 30 million km² it is greater than China, USA, USA Europe, India, and Japan combined. India
• Is the world's 2nd-largest and 2nd most populous continent China
• With ~ 1 billion people it accounts for ~ 20% of the world’s population
Japan
Source: http://en.wikipedia.org/wiki/Africa; http://goafrica.about.com/b/2010/10/18/how-big-is-africa.htm; http://www.nationsonline.org 2 1 HIGHLIGHTS ON AFRICA: A lion on the move…
Africa Today Africa Tomorrow
• Collective GDP – US$ 1.6 trillion • Collective GDP in 2020 – US$ 2.6 ( ~ equal that of Brazil & Russia’s) trillion
• Combined consumer spending – • Combined consumer spending in US$ 860 billion 2020 – US$ 1.4 Trillion
• No. of African Companies with • Portion of Africans living in cities by revenues of ~ US$ 3 Billion – 20 2030 – 50%
Climate-Resilient Energy Systems will secure Africa’s sustainable growth and prosperity!
Source: McKinsey Global Institute 3 1 ENERGY CONSUMPTION IN AFRICA
Gas
6% In adequate power supply is the most severe limitation to new business Petroleum 25% development and expansion in Africa
56% Biomass
4% Coal 9% Electricity
Source: IEA 2008 4 1 AFRICA CURRENT CAPACITIES Africa Current Installed Capacities (~ 123GW) Some Statistics North Africa ~ 48GW (mainly Oil & Gas) • Very low per capita consumption ~ 140kWh compared to ~1,200kWh in developed. • High average tariffs of UScts ~15 per kWh, mainly from temporary thermal sources.
• Losses of about US$ 3b Sub-Sahara Africa ~ 31GW per year through (mainly Hydro) operational inefficiencies. • Carbon emission levels at a high of about ~315g per kWh (Kenyan case).
South Africa ~ 44GW (mainly Coal)
Source: EIA 2008; Afrepren Nairobi; http://www.infrastructureafrica.org; KenGen Analysis 5 1 AFRICA HUGE CHALLENGE! • Low Electricity Access (~ 42%).
Population Urban without Rural Electrification electrification electricity electrification rate(%) rate (%) rate (%) (millions) Africa 587 42 69 25 Developing Asia 799 78 94 69 Latin America 31 93 99 74 Middle East 22 90 99 72 Developing countries 1,438 73 91 60 Transition economies 3 100 100 100 & OECD World 1,441 79 94 65
Africa 587 42 69 25 North Africa 2 99 100 98 Sub-Saharan Africa 585 31 60 14
Opportunity and Challenge is huge!
Source: IEA: World Energy Outlook 2010 6 OUTLINE:
1 Africa, the Continent of the Future
2 Four Building Blocks for a Climate-Resilient Energy Systems in Africa
a Scaling Up Renewables b Energy Efficiency c Financing Clean Energy d Regional Interconnectivity
3 Experiences and Approaches (Kenyan Case) 4 Way Forward
Ngong, Kenya 5.1MW
7 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables Africa power generation is around ~ 590TWh with about 17% from renewables
11,780 589,592 28 59,859
100,602
161,308 Only 17% from 256,015 renewables! We need to reverse raise this to 50% by 2030
Coal Gas Renewable Oil Nuclear Other Total Gwh Sources sources
Source: eia 2006 8 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables Africa Power Generation (~101TWh)
100,602 900 0 0 27 511 640 875
The focus across Africa need to be more Hydro 97,649 additions along base-load Geothermal, Wind and Solar!
Hydro Solar PV Solar Primary Wind Geothermal Municipal Biogas Renewable Thermal Solid Waste Sources Biomass Gwh
Source: EIA: 2006 9 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables Africa renewable potential Key Renewable Energy Sources
1 Hydro: > 100,000MW The total cost of bridging Africa’s 2 Solar: Enormous! power infrastructure gap over the next 3 Wind: Huge! decade will be 4 Geothermal: >10,000MW about US$ 41 billion
a year! 5 Biomass: Limitless!
Resources required to scale6 Wave Potential: Significant! up renewables to secure affordable tariffs and reduce emissions by about ~400% by 2030!
Source: African Development Bank; KenGen Analysis 10 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables
Hydro
Africa is still the world’s region which has exploited less than 7% of its feasible hydropower potential
Source: http://moproblems.files.wordpress.com/2011/04/arton58711.gif 11 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables
Geothermal Africa has the potential to generate >15,000 MW of energy from geothermal power . In particular, Kenya is the first African country to exploit geothermal energy in a significant way, by involving both the private and public sector in its development.
12 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables
Wind
North & Eastern Africa (Kenya, Ethiopia and Madagascar) and South Africa have highest wind potential to be exploited in the continent.
http://www.geni.org/globalenergy/library/renewable-energy-resources/world/africa/solar-africa/index.shtml 13 2(a) CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables
Solar
Much of Africa is well exposed to sunlight, but photovoltaic technology is generally too expensive. PV panels are making a contribution in more remote areas where it may well be cheaper than alternatives such as diesel.
http://www.geni.org/globalenergy/library/renewable-energy-resources/world/africa/solar-africa/index.shtml 14 2(b) CLIMATE-RESILIENT ENERGY SYSTEMS: Energy Efficiency
Key Message
1 Approximately 35% of all generated power in Africa is lost through transmission losses and use of inefficient devices.
2 Improving energy efficiency has a potential of reducing CO2e emissions globally by 8.2 gigatonnes by 2030.
3 Improved efficiencies will reduce investment required for new capacity; reduce pollution and increase competitiveness!
Source: http://www.iea.org; KenGen Analysis 15 2(c) CLIMATE-RESILIENT ENERGY SYSTEMS: Financing Clean Energy Global Clean Energy Investment (US $ billions 2008) … by region
119 Africa 3 Wind 51.8 South America 12
Solar 33.5 Asia & Oceania 24 Biofuels 16.9
Biomass & Waste to Energy 7.9 North America 30
Marine & Small Hydro 3.2
Geothermal 2.2
Efficiency 1.8 Need to scale Europe 50 up Africa renewable Other low carbon tech services 1.5 investment by ~300% through 2030 2008
Source: New Energy Finance, UNEP SEFI 16 2 CLIMATE-RESILIENT ENERGY SYSTEMS: Financing Clean Energy
Government Should contribute ~ 30% of Development Financial Inst. total renewable financing required! Commercial Banks
Funding Vendor Finance ~ US$ 40 Sources billion Joint Ventures required annually… Private Sector
PPPs Potential CDM revenues by 2012 is estimated at ~US$ 800m in Africa (a very low Capital Markets (ABS, Bonds) achievement – only ~4% of the global estimates) CDM
Source: UNEP 2008; KenGen Analysis 17 2 CLIMATE-RESILIENT ENERGY SYSTEMS: Regional Interconnectivity
• Economies of scale - larger power markets provide a large customer base reduces the risk of investment
• Increased system reliability and security of supply
• A good generation mix to mitigate the effects of drought in the power pools.
• Reduce dependency on thermal generation especially in Sub- Saharan Africa
Source: UNEP 2008; KenGen Analysis 18 OUTLINE:
1 Africa, the Continent of the Future
2 Four Building Blocks for a Climate-Resilient Energy Systems in Africa
a Scaling Up Renewables b Energy Efficiency c Financing Clean Energy d Regional Interconnectivity
3 Experiences and Approaches (Kenyan Case) 4 Way Forward
Ngong, Kenya 5.1MW
19 3 DEMAND-SIDE ENERGY EFFICIENCY – KENYAN EXAMPLE
• Started in around 2001 through the Green Energy Fund(GEF) and Kenya Association of Manufacturers (KAM)
• Government of Kenya giving annual support of ~US$ 250,000.
• Energy Management Awards sponsored by power sector Companies started in 2004.
• Total cumulative savings calculated around ~US$ 50 million.
Estimated annual emission reductions of ~ 600,000 CO2e
• Total cumulative savings calculated around US$ 50 million.
• Potential estimated annual savings is in the region of US$ 40million.
Source: KAM; http://www.the-esa.org/news/-/proposed-energy-efficiency-regulation-for-kenya; KenGen Analysis 20 3 KENYA PROJECTED NATIONAL CAPACITY EXPANSION MIX – 2010 to 2030 National Capacity Expansion (17,764MW) - 2030 17,754 263 1,600
2,200 Geothermal is the future source of power for Kenya 4,200
Planned to increase 4,812 geothermal from the current share of 13% 4,679 of national capacity to around 30% by 2030
Geo- Thermal Nuclear Imports Wind Hydro Total thermal (Coal, (Hydro) Capacity Gas & Oil)
Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030 21 3 ESTIMATED INVESTMENT CAPITAL FOR ~4,700MWe GEOTHERMAL EXPANSION – 2010 to 2030 US$ million 17,615
5,480 Estimated geothermal investment is in excess of US$ 17billion by 2030! 2,810
6,600
585 500 685 955
Total Drilling Steam Power Substation Consul- Admin- Interest Field Plant & tancy stration During Transmission Construction
Source: KenGen; 22 3 FIRST STEP IN FINANCING GEOTHERMAL – KENYAN CASE EXAMPLE
Financing Options/Sources • Financing early Wellhead Generation 1. Wider Capital Markets (Equity PIBO & Fixed Income instruments) US$ 300million • Production drilling for
Olkaria 280MW
- 2. Development Financial Institutions (DFIs): AfD, ADB, KFW, IFC, ROPARCO, DEG, • Financing 280MW World Bank, JICA, EIB, and DFIs Olkaria Power Plant others. ~KSh. 900million
3. Commercial & International Project Finance Banks.
4. Vendor Financing. GoK has committed funds 5. Government. to accelerate 6. BOT/BOOT/Concessions. geothermal drilling (~Ksh 350million) 7. PP- Partnerships /Strategic Investor(s)
8. Joint Ventures. Source: KenGen; 23 3 KENYA VIEWPOINT ON RENEWABLE FINANCING OPTIONS
Financing Options Op- Capital Govt. Com- Vendor Joint erator/ Geothermal Activity Market (thro’ DFIs mercial Financ Ven- Owner PPPs (ABS, MoE) Banks e tures funds/ Bonds) CDM A Resource Exploration A.1 Prospecting A.2 Detailed Surface Exploration A.3 Exploration Drilling & Well Testing B Resource Assessment B.1 Appraisal Drilling B.2 Feasibility Studies
C Power Plant Development & Operations C.1 Production Drilling & Well Testing Environmental & Social Impact C.2 Assessment(ESIA) C.3 Steam Field Development C.4 Substation & Transmission Line Development C.5 Power Plant Construction/Early Generation Resource Management (Operations) & Further C.6 Development
Source: KenGen; 24 3 CONCESSIONAL MULTI-FINANCING GEOTHERMAL – KENYA EXAMPLE (OLKARIA I&IV 280MW)
US$ ‘million Financing Breakdown Olkaria I Olkaria IV Total (140MW) (140MW) Total GoK KenGen IDA JICA KFW EIB AFD Funds
Drilling Costs 142 186 328 313 15 328
Steam Field 100 68 168 7 107 54 168
Power Plant 201 194 395 201 76 118 395 Substation & Transmission 22 13 35 3 32 35
Consultancy 16 14 30 30 30
Administration 20 21 41 29 12 41 Resettlement Action Plan - 10 10 10 10
Board of Consultants 1 1 1 1 1
IDC 24 33 57 57 57
Total Exchange Rate 526 540 1,065 316 103 120 201 99 108 118 1,065 Euro = 1.4 US$; US$=KES 76.5 = JPY 91.5
Source: KenGen; 25 OUTLINE:
1 Africa, the Continent of the Future
2 Four Building Blocks for a Climate-Resilient Energy Systems in Africa
a Scaling Up Renewables b Energy Efficiency c Financing Clean Energy d Regional Interconnectivity
3 Experiences and Approaches (Kenyan Case) 4 Way Forward
Ngong, Kenya 5.1MW
26 4 WAY FORWARD
• Government to commit more investment funds for renewable energy(not less than ~ 3% of GDP annually). ACT now • Developing economies to increase concessional funding to for renewable energy to approx. US$ 20 billion annually.
• Reform existing carbon markets in favour of Africa ACT together to tap carbon sources of investment funds.
• Interconnect and operationalise power pools.
• Government to provide cost-reflective tariffs
ACT differently • Regulators to be more proactive in driving efficiencies in the sector and attracting ppps
27 THANK YOU
Generator Cooling Towers Separators
Production Well Injection Well (Water and Steam) (Water)
28 BACK UP
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