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 PreUNFCCC 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
b
c
Scaling Up Renewables
Energy Efficiency
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,
Europe, India, and Japan
combined.
USA
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
( ~ equal that of Brazil & Russia’s)
• Collective GDP in 2020 – US$ 2.6
trillion
• Combined consumer spending –
US$ 860 billion
• Combined consumer spending in
2020 – US$ 1.4 Trillion
• No. of African Companies with
revenues of ~ US$ 3 Billion – 20
• Portion of Africans living in cities by
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%
Petroleum
In adequate power
supply is the most
severe limitation to
new business
development and
expansion in Africa
25%
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.
Sub-Sahara Africa ~ 31GW
(mainly Hydro)
• Losses of about US$ 3b
per year through
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%).
Africa
Developing Asia
Latin America
Middle East
Developing countries
Transition economies
& OECD
World
Africa
North Africa
Sub-Saharan Africa
Population
without
electricity
(millions)
587
799
31
22
1,438
Electrification
rate (%)
Urban
Rural
electrification
electrification rate(%)
rate (%)
42
78
93
90
73
69
94
99
99
91
25
69
74
72
60
3
100
100
100
1,441
79
94
65
587
2
585
42
99
31
69
100
60
25
98
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
b
c
Scaling Up Renewables
Energy Efficiency
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
28
589,592
59,859
100,602
161,308
Only 17% from
renewables!
We need to
reverse raise
this to 50% by
2030
256,015
Coal
Source: eia 2006
Gas
Renewable
Sources
Oil
Nuclear
Other
sources
Total Gwh
8
2(a)
CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables
Africa Power Generation (~101TWh)
27
511
Source: EIA: 2006
900
0
0
100,602
The focus across Africa
need to be more Hydro
additions along base-load
Geothermal, Wind and
Solar!
97,649
Hydro
640
875
Solar PV
Solar
Thermal
Primary
Solid
Biomass
Wind
Geothermal Municipal
Waste
Biogas Renewable
Sources
Gwh
9
2(a)
CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables
Africa renewable potential
Key Renewable Energy Sources
The total cost of
bridging Africa’s
power infrastructure
gap over the next
decade will be
about US$ 41 billion
a year!
1
Hydro: > 100,000MW
2
Solar: Enormous!
3
Wind: Huge!
4
Geothermal: >10,000MW
5
Biomass: Limitless!
Wave Potential: Significant!
6
Resources required to scale
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
Source: http://www.iea.org; KenGen Analysis
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!
15
2(c)
CLIMATE-RESILIENT ENERGY SYSTEMS: Financing Clean Energy
… by region
Global Clean Energy Investment (US $ billions 2008)
119
Wind
South America
12
Asia & Oceania
24
North America
30
Europe
50
16.9
Biofuels
7.9
Biomass & Waste to Energy
3.2
Geothermal
2.2
Efficiency
1.8
Other low carbon tech services
1.5
Source: New Energy Finance, UNEP SEFI
3
33.5
Solar
Marine & Small Hydro
Africa
51.8
Need to scale
up Africa
renewable
investment by
~300%
through 2030
2008
16
2
CLIMATE-RESILIENT ENERGY SYSTEMS: Financing Clean Energy
Government
Development Financial Inst.
Should contribute ~ 30% of
total renewable financing
required!
Commercial Banks
Funding
Sources
Vendor Finance
Joint Ventures
~ US$ 40
billion
required
annually…
Private Sector
PPPs
Capital Markets (ABS, Bonds)
Potential CDM revenues by
2012 is estimated at ~US$
800m in Africa (a very low
achievement – only ~4% of the
global estimates)
CDM
Source: UNEP 2008; KenGen Analysis
17
2
CLIMATE-RESILIENT ENERGY SYSTEMS: Regional Interconnectivity
Source: UNEP 2008; KenGen Analysis
•
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 SubSaharan Africa
18
OUTLINE:
1
Africa, the Continent of the Future
2
Four Building Blocks for a Climate-Resilient
Energy Systems in Africa
a
b
c
Scaling Up Renewables
Energy Efficiency
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
263
17,754
1,600
2,200
Geothermal is
the future
source of power
for Kenya
4,200
Planned to increase
geothermal from the
current share of 13%
of national capacity to
around 30% by 2030
4,812
4,679
Geothermal
Thermal
(Coal,
Gas & Oil)
Nuclear
Imports
(Hydro)
Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030
Wind
Hydro
Total
Capacity
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
Total
Source: KenGen;
Drilling
Steam
Field
Power
Plant
500
Substation Consul&
tancy
Transmission
685
955
Adminstration
Interest
During
Construction
22
3
FIRST STEP IN FINANCING GEOTHERMAL – KENYAN CASE
EXAMPLE
Financing Options/Sources
1.
Wider Capital Markets (Equity
& Fixed Income instruments)
• Financing early
Wellhead Generation
PIBO
US$ 300million
• Production drilling for
Olkaria 280MW
-
2.
Source: KenGen;
Development Financial
Institutions (DFIs): AfD, ADB,
KFW, IFC, ROPARCO, DEG,
World Bank, JICA, EIB, and
others.
3.
Commercial & International
Project Finance Banks.
4.
Vendor Financing.
5.
Government.
6.
BOT/BOOT/Concessions.
7.
PP- Partnerships /Strategic
Investor(s)
8.
Joint Ventures.
DFIs
~KSh. 900million
• Financing 280MW
Olkaria Power Plant
GoK has
committed funds
to accelerate
geothermal drilling
(~Ksh 350million)
23
3
KENYA VIEWPOINT ON RENEWABLE FINANCING OPTIONS
Financing Options
Geothermal Activity
Govt.
(thro’
MoE)
OpCapital
Com- Vendor Joint erator/
Market
DFIs mercial Financ Ven- Owner PPPs
(ABS,
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
C.2
Environmental & Social Impact
Assessment(ESIA)
C.3 Steam Field Development
C.4 Substation & Transmission Line Development
C.5 Power Plant Construction/Early Generation
C.6
Resource Management (Operations) & Further
Development
Source: KenGen;
24
3
CONCESSIONAL MULTI-FINANCING GEOTHERMAL – KENYA
EXAMPLE (OLKARIA I&IV 280MW)
US$ ‘million
Financing Breakdown
Olkaria I Olkaria IV
(140MW) (140MW) Total
GoK KenGen
Drilling Costs
142
186
328
Steam Field
100
68
168
Power Plant
201
194
395
Substation &
Transmission
22
13
35
Consultancy
16
14
30
Administration
Resettlement Action
Plan
20
21
41
29
-
10
10
10
1
1
1
24
33
57
526
540
1,065
Board of Consultants
IDC
Total
Exchange Rate
IDA
JICA
KFW
313
7
107
EIB
AFD
Total
Funds
15
328
54
168
201
76
3
118
395
32
35
30
30
12
41
10
1
1
57
316 103
57
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
b
c
Scaling Up Renewables
Energy Efficiency
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
(Water and Steam)
Injection Well
(Water)
28
BACK UP
29
30