Sustainable Access to Energy in Africa Presentations/14h00 e Njoroge...1 OUTLINE: b Energy Efficiency c Financing Clean Energy d Regional Interconnectivity 1 Africa, the Continent

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.

On the Road to Durban: Promoting Sustainable Energy Access in

Africa: Pre-UNFCCC COP17 African Energy Ministers Conference

15 – 16 September 2011, Sandton Johannesburg, South Africa

CONFIDENTIAL

Eddy Njoroge, MD & CEO, KenGen

Disclaimer:

Towards Sustainable Universal

Energy Access in Africa: Building

Climate-Resilient Energy Systems

1

OUTLINE:

Energy Efficiency b

Financing Clean Energy c

Regional Interconnectivity d

1 Africa, the Continent of the Future

Scaling Up Renewables a

Four Building Blocks for a Climate-Resilient

Energy Systems in Africa 2

Experiences and Approaches (Kenyan Case) 3

Way Forward 4

Ngong, Kenya

5.1MW

2

HIGHLIGHTS ON AFRICA

Source: http://en.wikipedia.org/wiki/Africa; http://goafrica.about.com/b/2010/10/18/how-big-is-africa.htm; http://www.nationsonline.org

1

Key Facts

• Comprises 54 sovereign

states (28% of all the world

sovereign states are in Africa).

• Is the world's 2nd-largest and

2nd most populous continent

• About 30 million km² it is

greater than China, USA,

Europe, India, and Japan

combined.

• With ~ 1 billion people it

accounts for ~ 20% of the

world’s population

USA

India

China

Japan

http://en.wikipedia.org/wiki/Africa

http://goafrica.about.com/b/2010/10/18/how-big-is-africa.htm







3

HIGHLIGHTS ON AFRICA: A lion on the move…

Source: McKinsey Global Institute

1

Africa Today

• Collective GDP – US$ 1.6 trillion

( ~ equal that of Brazil & Russia’s)

• Combined consumer spending –

US$ 860 billion

• No. of African Companies with

revenues of ~ US$ 3 Billion – 20

Africa Tomorrow

• Collective GDP in 2020 – US$ 2.6

trillion

• Combined consumer spending in

2020 – US$ 1.4 Trillion

• Portion of Africans living in cities by

2030 – 50%

Climate-Resilient Energy Systems will secure Africa’s

sustainable growth and prosperity!

4

6%

56%

Gas

Coal

Petroleum

4%

9%

25%

Biomass

Electricity

Source: IEA 2008

ENERGY CONSUMPTION IN AFRICA 1

In adequate power

supply is the most

severe limitation to

new business

development and

expansion in Africa

5

AFRICA CURRENT CAPACITIES 1

Some Statistics

• 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.

North Africa ~ 48GW (mainly Oil & Gas)

South Africa ~ 44GW (mainly Coal)

Sub-Sahara Africa ~ 31GW

(mainly Hydro)

Source: EIA 2008; Afrepren Nairobi; http://www.infrastructureafrica.org; KenGen Analysis

Africa Current Installed Capacities (~ 123GW)

• Losses of about US$ 3b

per year through

operational

inefficiencies.

• Carbon emission levels

at a high of about ~315g

per kWh (Kenyan case).

http://www.infrastructureafrica.org/

6

Population without

electricity (millions)

Electrification

rate (%)

Urban electrification

rate (%)

Rural electrification rate(%)

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 & OECD

3 100 100 100

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!

AFRICA HUGE CHALLENGE! 1

Source: IEA: World Energy Outlook 2010

• Low Electricity Access (~ 42%).

7

OUTLINE:

Energy Efficiency b








Way Forward 4

Ngong, Kenya

5.1MW

8 Source: eia 2006

589,59211,780

256,015

Oil

59,859

Renewable

Sources

100,602

Gas

161,308

Coal Total Gwh Other

sources

28

Nuclear

CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables 2(a)

Africa power generation is around ~ 590TWh with about 17% from renewables

Only 17% from

renewables!

We need to

reverse raise

this to 50% by

2030

9

100,602

Renewable

Sources

Gwh

Biogas

0

Municipal

Waste

0

Geothermal

900

Wind

875

Primary

Solid

Biomass

640

Solar

Thermal

511

Solar PV

27

Hydro

97,649

Source: EIA: 2006

CLIMATE-RESILIENT ENERGY SYSTEMS: Scaling Up Renewables

Africa Power Generation (~101TWh)

The focus across Africa

need to be more Hydro

additions along base-load

Geothermal, Wind and

Solar!

2(a)

10


Key Renewable Energy Sources

Source: African Development Bank; KenGen Analysis

Africa renewable potential

1 Hydro: > 100,000MW

2 Solar: Enormous!

3 Wind: Huge!

4 Geothermal: >10,000MW

5 Biomass: Limitless!

6 Wave Potential: Significant!

The total cost of

bridging Africa’s

power infrastructure

gap over the next

decade will be

about US$ 41 billion

a year!

Resources required to scale

up renewables to secure

affordable tariffs and reduce

emissions by about ~400% by

2030!

2(a)

11

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


Hydro

2(a)

12

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.


Geothermal

2(a)

13

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

Wind

2(a)

14

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


Solar

2(a)

15

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!

2(b)

16 Source: New Energy Finance, UNEP SEFI

1.5

1.8

2.2

3.2

7.9

16.9

33.5

51.8

Other low carbon tech services

Efficiency

Geothermal

Marine & Small Hydro

Biomass & Waste to Energy

Biofuels

Solar

Wind

119

50

30

24

12

3

Europe

North America

Asia & Oceania

South America

Africa

2008

… by region

CLIMATE-RESILIENT ENERGY SYSTEMS: Financing Clean Energy

Global Clean Energy Investment (US $ billions 2008)

2(c)

Need to scale

up Africa

renewable

investment by

~300%

through 2030

17

CLIMATE-RESILIENT ENERGY SYSTEMS: Financing Clean Energy 2

Source: UNEP 2008; KenGen Analysis

Funding

Sources Vendor Finance

Commercial Banks

Development Financial Inst.

Government

Joint Ventures

Capital Markets (ABS, Bonds)

Private Sector

PPPs

CDM

Potential CDM revenues by

2012 is estimated at ~US$

800m in Africa (a very low

achievement – only ~4% of the

global estimates)

Should contribute ~ 30% of

total renewable financing

required!

~ US$ 40

billion

required

annually…

18

CLIMATE-RESILIENT ENERGY SYSTEMS: Regional Interconnectivity 2

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 Sub-

Saharan Africa

19

OUTLINE:

Energy Efficiency b








Way Forward 4

Ngong, Kenya

5.1MW

20 Source: KAM; http://www.the-esa.org/news/-/proposed-energy-efficiency-regulation-for-kenya; KenGen Analysis

DEMAND-SIDE ENERGY EFFICIENCY – KENYAN EXAMPLE 3

• 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.

21

Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030

KENYA PROJECTED NATIONAL CAPACITY EXPANSION MIX –

2010 to 2030

4,812

4,200

2,200

1,600

17,754

4,679

263

Wind Imports

(Hydro)

Nuclear Thermal

(Coal,

Gas & Oil)

Geo-

thermal

Total

Capacity

Hydro

Geothermal is

the future

source of power

for Kenya

National Capacity Expansion (17,764MW) - 2030

3

Planned to increase

geothermal from the

current share of 13%

of national capacity to

around 30% by 2030

22

ESTIMATED INVESTMENT CAPITAL FOR ~4,700MWe

GEOTHERMAL EXPANSION – 2010 to 2030

Source: KenGen;

955

17,615

Interest

During

Construction

Admin-

stration

685

Consul-

tancy

500

Substation

&

Transmission

585

Power

Plant

6,600

Steam

Field

2,810

Drilling

5,480

Total

US$ million

3

Estimated geothermal

investment is in excess

of US$ 17billion by

2030!

23

FIRST STEP IN FINANCING GEOTHERMAL – KENYAN CASE

EXAMPLE

1. Wider Capital Markets (Equity

& Fixed Income instruments)

2. 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.

Financing Options/Sources

PIBO

US$ 300million

DFIs

~KSh. 900million

-

GoK has

committed funds

to accelerate

geothermal drilling

(~Ksh 350million)

• Financing early

Wellhead Generation

• Production drilling for

Olkaria 280MW

• Financing 280MW

Olkaria Power Plant

Source: KenGen;

3

24

KENYA VIEWPOINT ON RENEWABLE FINANCING OPTIONS

Geothermal Activity

Financing Options

Govt.

(thro’

MoE)

Capital

Market

(ABS,

Bonds)

DFIs

Com-

mercial

Banks

Vendor

Financ

e

Joint

Ven-

tures

Op-

erator/

Owner

funds/

CDM

PPPs

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;

3

25

CONCESSIONAL MULTI-FINANCING GEOTHERMAL – KENYA

EXAMPLE (OLKARIA I&IV 280MW)

Euro = 1.4 US$; US$=KES 76.5 = JPY 91.5

Exchange Rate

Source: KenGen;

US$ ‘million

Financing Breakdown

Olkaria I

(140MW)

Olkaria IV

(140MW) Total GoK

KenGen IDA JICA KFW EIB AFD

Total

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 526 540

1,065 316

103

120

201

99

108

118 1,065

3

26

OUTLINE:

Ngong, Kenya

5.1MW

Energy Efficiency b








Way Forward 4

27

ACT now

• Government to commit more investment funds for

renewable energy(not less than ~ 3% of GDP

annually).

• Developing economies to increase concessional

funding to for renewable energy to approx. US$ 20

billion annually.

ACT together • Reform existing carbon markets in favour of Africa

to tap carbon sources of investment funds.

• Interconnect and operationalise power pools.

ACT differently

• Government to provide cost-reflective tariffs

• Regulators to be more proactive in driving

efficiencies in the sector and attracting ppps

WAY FORWARD 4

28

Production Well

(Water and Steam) Injection Well

(Water)

Separators

Cooling

Towers

Generator

THANK YOU

29

BACK UP

30

Sustainable Access to Energy in Africa Presentations/14h00 e Njoroge...1 OUTLINE: b Energy Efficiency c Financing Clean Energy d Regional Interconnectivity 1 Africa, the Continent

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