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.