OFID PAMPHLET SERIES ENERGY POVERTY IN AFRICA 39 Proceedings of a Workshop held by OFID in Abuja, Nigeria June 8 –10, 2008 ENERGY POVERTY IN AFRICA Proceedings of a Workshop held by OFID in Abuja, Nigeria June 8–10, 2008 The “OFID Pamphlet Series” was begun in 1977, a year after the establishment of OFID. The series is meant to promote a better understanding of the aspira- tions and problems of developing countries, including OPEC Member States. OFID is the multilateral development finance institution established by the Member States of OPEC in 1976 to promote South-South solidarity and strengthen cooperation between countries of the developing world. The opinions expressed in this pamphlet are those of the authors and should not be construed as necessarily representing either the view of OFID or its mem- ber countries. The OPEC Fund for International Development (OFID) Parkring 8, A-1010 Vienna, Austria P.O. Box 995, A-1011 Vienna, Austria Telephone: (+43-1) 515 64-0, Fax: (+43-1) 513-92-38 Internet: www.ofid.org Email: [email protected] Cover photo: Doug James/Shutterstock Design: etage.cc, Vienna,Austria Printing: Druckerei Odysseus, Himberg, Austria OFID PAMPHLET SERIES ENERGY POVERTY IN AFRICA Proceedings of a Workshop held by OFID in Abuja, Nigeria June 8 –10, 2008 OFID PAMPHLET SERIES 39 Vienna, Austria October 2010 Unless otherwise stated “dollars” ($) refers to United States dollars. “Billion” means a thousand million. Maps are for illustration purposes only and are not to be taken as accurate representations of borders. This publication is also available in PDF format on the OFID website at www.ofid.org 4 OFID PAMPHLET SERIES 39 Contents Foreword of the Director-General of OFID 13 I. Introduction and Overview 17 Akin Iwayemi II. Energy Poverty in Africa 39 Suleiman J. Al-Herbish III. Regional Integration of Power Systems: 49 A Tool for Reducing Energy Poverty and Accelerating Economic Growth Roger M. Gaillard IV. Powering Industrial Growth: 57 The Challenge of Energy Security for Africa Pradeep Monga V. Energy Access in Rural Areas 105 Phil U. Chineyemba VI. Expanding Energy Access through 121 Sustainable Energy Enterprises in Africa: Financing, Capacity-building and Policy Aspects Lawrence Agbemabiese VII. Africa’s Power Supply Crisis: Unraveling the Paradoxes 139 Waqar Haider VIII. Why Africa Lags Behind in the Energy Sector 169 Steve Olumuyiwa IX. Promotion of Public-Private Partnership 185 to Improve Energy Access for Poverty Reduction and Growth in Sub-Saharan Africa Adeola Adenikinju X. Energy and Poverty in Sub-Saharan African Economies: 209 Supply-side Issues Akin Iwayemi List of Tables, Figures and Boxes 6 Acronyms and Abbreviations 238 About the authors 240 OFID PAMPHLET SERIES 39 5 List of Tables, Figures and Boxes II. Energy Poverty in Africa Tables: 1 World energy production 42 2 Energy use per capita 42 3 Electricity production 46 4 Sectoral distribution of OFID's financing 47 Boxes: 1 OFID and the energy sector 41 2 Trade revenue and energy budgets 45 III. Regional Integration of Power Systems: A Tool for Reducing Energy Poverty and Accelerating Economic Growth Figures 1 Electricity consumption / population (kWh per capita) 51 2 Activities and operations of AfDB diversified across all regions and critical sectors (in percent) 53 IV. Powering Industrial Growth: The Challenge of Energy Security for Africa Tables: 1 World primary energy demand, 2005, 2015 and 2030 61 2 Basic energy indicators for country groups 63 3 African oil and gas reserves as of end 2005 67 4 Industrial energy intensity by country groups, 1990 and 2002 70 5 Heat shares in industrial energy use 74 6 Temperature ranges for industrial processes 75 7 African electrification rates, 2005 77 8 Electricity outages of firms in Africa 78 9 Basic patterns of energy consumption in East African Community (EAC) Countries 78 10 Energy access targets agreed by African ministers for 2015 82 6 OFID PAMPHLET SERIES 39 11 Investment requirements for increasing access to modern energy services in sub-Saharan Africa 83 12 Size of African power sector 91 13 Selected African countries’ restructuring profile 92 Figures: 1 Relationships between energy and achievement of the MDGs 59 2 Regional energy production in Africa, 2005 65 3 African energy consumption fuel shares, 1971 and 2005 66 4 Sustainable development impacts of increased energy efficiency 69 5 African electricity intensity, energy intensity and energy production intensity 70 6 Self-generation shares in African enterprises 89 Boxes: 1 Biofuels activities in Africa 76 2 Jatropha for biodiesel production in Africa 77 3 Access to thermal energy and mechanical power for productive uses in Africa 79 4 Integrating energy access into national strategies: Mali, Rwanda, Senegal 80 5 ECOWAS/UEMOA White Paper on Energy Access 81 6 CEMAC Action Plan 82 7 Hydro-power construction in Africa 96 8 India-Brazil-South Africa Declaration on Clean Energy 96 V. Energy Access in Rural Areas Figures: 1 Energy consumption in Africa in percent in 2001 106 2 The vicious circle of energy poverty 109 3 A virtuous circle to break out of energy poverty 110 4 Implementational flow of market-based models 115 5 Concession and rental approach of market-based models 115 6 Government-led model in China – financial flow 116 OFID PAMPHLET SERIES 39 7 List of Tables, Figures and Boxes VI. Expanding Energy Access through Sustainable Energy Enterprises in Africa: Financing, Capacity-building and Policy Aspects Boxes: 1 Vent et Eau pour la Vie (VEV) in Senegal 124 2 SODIGAZ: Butane gas distribution in Mali 124 3 Biomass Energy Tanzania Limited (BETL) 124 4 AREED Investments 2000–06 125 5 Amount financed by AREED and annual repayments 126 6 AREED loans and repayments in Ghana 129 7 AREED loans and repayments in Tanzania 130 8 Terms of AREED loans in Ghana 132 VII. Africa’s Power Supply Crisis: Unraveling the Paradoxes Tables: 2.1 Emergency power generation in SSA 145 2.2 Private participation power-sector transactions in SSA (review basic information) 153 2.3 Power-sector expenditure 157 2.4 Annualized power-sector expenditure requirements to 2015 159 Figures: 1.1 Evolution of power infrastructure in SSA relative to other regions 140 1.2 Electricity prices and consumption in Africa relative to other regions 141 2.1 Countries affected by acute power-sector crises in recent years 143 2.2 Drivers of operating costs for SSA power systems 147 2.3 Electricity costs and revenues by type of power system 149 2.4 Average power-sector revenue and various cost benchmarks 149 2.5 Electricity service coverage in SSA 150 2.6 Electricity service expenditure in SSA 151 2.7 Evaluation of power-sector reform 152 2.8 SOE governance characteristics 154 2.9 Frequency distribution of power-sector efficiency indicators 155 8 OFID PAMPHLET SERIES 39 2.10 Hidden costs of power-sector inefficiency 156 2.11 Long-term trends in external finance for the SSA power sector 158 Boxes: 1 Introducing the Africa Infrastructure Country Diagnostic 141 2 Regional and economic effects of South Africa’s power-supply crisis 144 VIII. Why Africa Lags Behind in the Energy Sector Tables: 1 World demographic and total energy consumption indicators: selected indicators for 2005 173 2 Selected world electrical power production statistics 174 3 Selected world energy and environment indicators 175 Figures: 1 Total primary energy supply The world in 1973 and 2005: regional shares of total primary energy supply 170 2 1973 and 2005 regional shares of electricity generation 172 3 Location of the Inga Hydro Power Project 181 IX. Promotion of Public-Private Partnership to Improve Energy Access for Poverty Reduction and Growth in Sub-Saharan Africa Tables: 1 Electrification rates by region 188 2 Electrification trend in selected countries in SSA 190 3A International initiatives to get energy to the poor 194 3B African regional initiatives to get energy to the poor 196 4 Sources of resources and allocation of risks under various PPP options 200 5 Types of government guarantees 201 6 Examples of off-grid power plant technologies 203 7 Possible IPP outcomes 204 OFID PAMPHLET SERIES 39 9 List of Tables, Figures and Boxes Figures: 1 Energy access and poverty links 185 2 Electrification rate in various regions (2002) 187 3 Regional comparison of rural population access to electricity 189 4 Access to electricity for upper income households among selected countries in SSA 189 5 Income distribution of access to electricity in selected countries in SSA 190 6 Dependence on biomass fuels 191 7 Impact of reforms on the pace of electrification of the poor 192 8 Private investment in power generation in developing countries 198 X. Energy and Poverty in Sub-Saharan African Economies: Supply-side Issues Tables: 1 Key socio-economic development indicators in Africa 214 2 Per capita energy and income for selected developed and African countries 216 3 Electric power consumption (kWh per capita) in African countries 1970–2001 219 4 Electric power transmission and distribution losses (percent of output) in African countries 1970–2001 220 5 Energy imports (percentage of commercial energy use) in African countries 1970–2001 223 6 Share of fuel in merchandise imports 2000–04 224 7 Biomass energy consumption (percent of total energy) in African countries for selected years 1970–2001 225 8 Energy resources in Africa 227 Figures: 1 Africa’s share in world oil production 1965–2005 217 2 Africa’s share in world oil consumption 1965–2005 217 3 Access to electricity in selected countries in Africa 222 4 Interlocking issues