African Business Engagement Needs and Opportunities Assessment
The Energy Landscape, Investment Needs, and Opportunities ...Investment Needs, and Opportunities The...
Transcript of The Energy Landscape, Investment Needs, and Opportunities ...Investment Needs, and Opportunities The...
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Vahid Alavian
Water and Hydropower AdvisorAfrica Region
The Energy Landscape,Investment Needs, and Opportunities
The World Bank
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Outline
• The landscape as we see it
• The energy and hydropower challenges
• The opportunities
• The investments
• Way forward
Based on key messages from the recently completed World
Bank Flagship Report: Africa’s Infrastructure - A Time for Transformation
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Energy and growth
Human Development Index (HDI)
Energy Consumed per Capita
Best-Fit Trendline
En
erg
y/C
apit
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Power shortages are a brake on economic growth and competitiveness
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NorthAfrica
West Africa East Africa SouthernAfrica
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AFRICA
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Energy availability is pitifully low
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500 kWh/capita/year minimum consumption for reasonable quality of life
Energy use per person in Africa
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Africa’s power is expensive
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Power tariffs in other developing countries: lower bound
Power tariffs in other developing countries: upper bound
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High prices, low consumption
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Average tariff (US$ per kWh)
Power consumption (kWh pc pa)
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Huge power investment backlog
• To remedy this energy situation Africa needs to build
� 7,000 MW of generation capacity per year
� More than five million new power connections per year
� An extensive transmission network
• The annual financing requirements are staggering
� spending needs: US$41 bn/yr
� financing gap: US$23 bn/yr
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Africa’s generation profile
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Coal is Africa’s largest single source of power, but will lose ground to hydro
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Actual Trade Expansion Scenario
Trade Stagnation Scenario
Hydro Oil and Gas Coal OtherSource:
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Hydro potential in Africa is high
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But, Africa is behind all other regions in developing its hydro-potential
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Need to think regional about hydropower
• Africa’s economic geography is a serious challenge
� 20+ countries with populations of <5 million
� 20+ countries with economies of <US$5 billion
� 60 international river basins
� 15 landlocked countries
• That means hydropower development must be at a regional scale
� Most countries too small to generate power efficiently
� Handful of countries with major hydro resources
� Upstream decisions compromise downstream availability
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Regional power trade: a necessity
• Economies of scale in production and regional power trade would save Africa US$2bn/yr
• Exports: dominated by hydropower (DRC, Ethiopia and Guinea)
� Earnings could amount to 2-6% of GDP
� Huge investments needed to become exporters
• Imports: cover >50% of needs in 16 countries
� Savings >US$ 0.03 per kWh or over 1% of GDP
� IRR on inter-connections >100% pays back in <1 year
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Potential benefits from regional trade
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17 countries could save more than one cent per kWh by importing power
16 countries would meet more than 50 percent of demand from imports
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But, critical transmission links for regional trade are missing
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Power flows with trade expansion (TWh in 2015, mostly hydro)
East Africa
West Africa
Southern Africa
Central Africa
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Power exporters stand to reap large benefits
• Volume of power traded could rise to 130 TWh pa
• Key countries with 74% of SSA power trade: DRC, Ethiopia, Guinea
• Net revenues from power trade for exporting countries: 2-6% GDP
• But only if investments can be financed
� Costs of additional investments for exporters: 8-24% GDP -- prohibitive
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Three quarters of infrastructure spending is
financed by African tax-payers and consumers
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Role of the private sector
Extent of PPI Experience Prospects
Generation
34 IPPs invest US$2.5bn to
install 3,000MW of capacity
Frequent renegotiations,
costly to utilities
Likely to continue given huge capacity
needs
Distribution16 concessions
and 17 mgt or lease contracts
One quarter of contracts
prematurely cancelled
Likely to continue given significant
improvements in performance that
have resulted
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Expectations from private sector
• Private finance in infrastructure is limited to certain niches
� Significant investment in ICT ($28bn), thermal power generation ($3bn) and ports ($3bn)
� Minimal appetite for hydropower, water utilities, rails and roads
• Private management helps narrow efficiency gap
� Positive impact on railroads, power and water utilities
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Hydropower: cleaner development path
• Bulk of Africa’s carbon emissions come from deforestation and land-use changes
• Power accounts for only 10% of Africa’s emissions, and (excluding RSA) <1% of global emissions
• A recent study estimates a further 740 mn tons/yr could be saved through a low carbon trajectory, including hydro projects
• With carbon priced at US$15/ton, viable hydro share can increase by 50 percent
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World Bank and Hydropower
The Bank's energy strategy in Africa : investments, policy advice, capacity building, and technical assistance
� scaling-up of generation capacity via transformative regional projects
� improving the effectiveness and governance of state-owned and private utilities
� rolling out energy access programs via sector-wide engagement
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World Bank and Hydropower
• Energy lending grew from US$260 million in 2003 to US$750 in 2007 and 2008.
• Energy lending in 2009 alone was US$1.2 billion.
• Hydropower lending 2009 contained 77 active projects for total investment of about US$ 3.5 billion (not including carbon funded).
• The portfolio is diverse: 28% storage, 48% run-of-river, 24% rehabilitation.
Sudan
Algeria
Libya
Mali
Chad
Niger
Iran
Egypt
Congo, DRC
Russia
Angola
Saudi Arabia
Turkey
Ethiopia
Iraq
Nigeria
Ukraine
South Africa
France
Spain
Namibia
Tanzania
Mauritania
Zambia
Kenya
Italy
Somalia
Mozambique
Yemen
Botswana
Morocco
Congo
Madagascar
Kazakhstan
Syria
Cameroon
Germany
Zimbabwe
Gabon
Romania
Ghana
Poland
Guinea
Uganda
Central African Republic
Senegal
Burkina Faso
Azerbaijan
Bulgaria
Austria Hungary
Cote d'Ivory
Tunisia
Benin
Greece
Serbia
Western Sahara
Eritrea
Malawi
Jordan
Liberia
Portugal
Georgia
Togo
Croatia
SlovakiaCzech Republic
Italy
Italy
United KingdomBelgium
Moldova
Sierra Leone
Belarus
Switzerland
Albania
Israel
Oman
Armenia
Lesotho
Slovenia
Burundi
Bosnia & Herzegovina
Macedonia
Rwanda
Kuwait
DjiboutiGuinea-Bissau
Qatar
Ireland
Swaziland
Cyprus
Montenegro
Lebanon
Equatorial Guinea
Greece
The Gambia
West Bank
Luxembourg
Equatorial Guinea
ComorosComoros
Andorra
Malta
Sao Tome & Principe
Bahrain
Gaza Strip
Jersey
St. Helena
Monaco
Gibraltar
Glorioso Is.
Juan De Nova I.
Vatican City
Fomi
Felou
Jebba
Karuma
KainjiBumbuna
Zungeru
Taoussa
Bujagali
Corumana
Metolong
Gibe III
Inga IIIInga III
Adjarala Lom Pangar
Mount Coffee
Ruhudji HydroInga I and II
Lower Kafue Gorge
JMP (Mendaya as illustration)
Legend
AFR Hydropower Project Pipeline
Type
Proactive Engagement
Under Consideration
WPA Commitment
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Summary: Meeting Africa’s energy needs …
• Power shortages are a brake on economic growth and competitiveness
• Infrastructure investment needs are massive and Africa faces a huge power sector financing gap
• Most of Africa’s power is currently generated from coal and less than 10% of its enormous hydro potential is developed
• Africa’s power is very expensive today, but can become cheaper
• Subsidies are high and generally pro-rich due to access
• Africa’s power utilities are inefficient
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Summary: Meeting Africa’s energy needs …
• Africa has the natural resources to meet its current and future energy demands
• Power trade would help to reduce costs and facilitate a shift to cleaner energy
• Development of hydro-power is key, but requires major financing and long lead time
• And development of hydro-power involves cross-border collaboration and a multi-purpose perspective
• Africa’s power sector contributes little CO2, and even less with trade and hydropower
• The World Bank is engaged in hydro for the long term.
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Thank you!