Africa Energy. Transformative Impact, Lessons Learned, and the Way Forward. Zayra Romo. Energy Unit - Africa Region World Bank November 2013

Transcription

1 Africa Energy Transformative Impact, Lessons Learned, and the Way Forward Zayra Romo Energy Unit - Africa Region World Bank November 2013

2 Summary 1. Energy sector development is necessary to reduce poverty and increase shared prosperity but presents large challenges 2. Africa energy portfolio growing exponentially but not enough. Some key lessons learned 3. Great opportunities for transformative impact for the WB along the energy value chain Generation Transmission and Distribution Access Why is this important? What is needed? What are we doing overall? What are the key lessons learned? What is the situation in each segment of the energy chain? Reduced cost of production (low carbon, low cost generation) Regional integration (regional power pool development) Improved pricing (sector reform, effective tariff structures) What current projects are showing the way? Knowledge and Partnerships Leverage our limited resources and expand south to south cooperation What should we focus on going forward? 2

3 1. Energy Sector Development Challenges 3

4 Energy Access Reduces Poverty Increased energy access = economic growth, poverty reduction, and shared prosperity Access to modern energy services linked to each of the MDGs SE4All targets universal access to modern energy services, necessary to achieve MDGs Energy consumption per capita vs GNP per capita Most of Africa Source: Examples: South Africa - households with access spent 3 5% of their incomes on energy, compared with 14 16% for those without access Tanzania - presence of electricity in a village increased income from nonfarm business activities by 61%. Nonfarm income in villages with electricity was 109 times that in villages without electricity Expenditure on electricity per quintile in Africa (US$) 4 5 Source: AICD expenditure survey database Q1 Q2 Q3 Q4 Q5 East South Central West Average 4

5 Challenge: Low Access & Low Supply Africa installed generation capacity is about 80 GW 600 million people and 10 million SMEs have no access Outside South Africa, consumption is 1% of OECD levels Energy growth did not keep pace with GDP growth Demand growing rapidly to about 800 TWh by countries face regular interruption of services Sales lost (interruptions): 6% formal, 16% informal sector Nearly 80% of households rely on solid biomass for cooking ~500,000 deaths a year are attributed to indoor pollution Lack of energy disproportionately affects women/children 5

6 Challenge: Investment Need Currently, about 1-2 GW of new installed capacity deployed a year. Africa needs 6-7 GW Access growing no more than 1% per year in the last decade At this rate, less than 60% of Africans will have electricity in their homes by 2030 Energy Need Energy shortfall of 80% Currently, $9-10 billion invested yearly to provide first access to modern energy Africa needs up to $40-50 billion yearly for universal access by 2030 Financiers Current Investment Trend Avg. Yearly Investment ($B) Cumulative Till 2020 ($B) World Bank Other Multilaterals Emerging financiers Private sector Total Financing shortfall of 80% African Power Pool Regions Investment Needed Avg. Yearly Investment ($B) Cumulative Till 2020 ($B) CAPP EAPP SAPP WAPP Total

7 2A: Opportunities for Transformative Impact Generation Transmission and Distribution Access Knowledge and Partnerships 7

8 Situation: Hydro and Thermal Potential Country Hydro developed in last decade (GW) Hydro potential in next decade (GW) Ethiopia Guinea DRC Sudan Mozambique Others ~2.2 ~6.6 Hydro 8.5 GW developed in last decade 30 GW potential for next decade 5 highest potential: Ethiopia, Guinea, DRC, Sudan, and Mozambique Opportunities for Gas to Power TOTAL Country IPPs to date (GW) Potential (GW) Technologies South Africa Coal, Gas Nigeria Gas Botswana Coal Kenya Geothermal, oil Mozambique Coal, Gas Others ~ Coal, Gas, Oil Next 5-7 years TOTAL Mainly gas Thermal 3.1 GW of thermal IPPs to date 4 GW potential in next 5-7 years 5 highest potential: South Africa, Nigeria, Botswana, Kenya, and Mozambique Opportunities in Gas to Power, in particular 8

9 Situation: Opportunities for Gas to Power Gas as a Squandered Resource Resource: Huge proved reserves in Nigeria Mainly associated gas Rationale for Bank involvement: Energy access Flaring avoidance Possible Interventions: GGFR Gas and power pricing reform Risk/contract guarantees Infrastructure finance Gas: Game-changer? Resource: Huge undeveloped discoveries Non-associated gas, LNG Rationale for Bank involvement: Governance, macro management Industrial development Possible Interventions: Revenue management TA Institutional capacity building Local gas market development Forward/backward linkages (SME s) Gas: Alternative to Coal? Resource: Pipeline gas from Mozambique Potential coal-bed methane Offshore exploration beginning Rationale for Bank involvement: Lower carbon growth strategy Possible Interventions: Regional pipeline expansion Regulation of shale gas activities 9

10 Going Forward: Investments in Generation Major investment in large-scale high impact projects and PRGs Efforts on fragile states Continuous policy dialogue to create better institutions/frameworks - can help bring private sector Potential Key Projects High Level Taskforce Projects Project Capacity (MW) Investment (US$M) Inga III (DRC) * 3,500 8,000 Lom Pangar (Cameroon) * 30 on site downstream 460 Menengai (Kenya) * Souapiti (Guinea) 515 1,000 Kaleta (Guinea) Cahorra Bassa- North Bank (Mozambique) 1,245 1,300 (* WB involved now) 10

11 2B: Opportunities for Transformative Impact Generation Transmission and Distribution Access Knowledge and Partnerships 11

12 Situation: Resources are Concentrated Renewable energy resources are widespread But, large-scale generation resources are concentrated in a few countries. These countries have small domestic markets There is a need for regional approaches and development of regional Power Pools Infrastructure (construction of transmission lines/substations) Institutions Outcomes: Reduces the cost of electricity Connects markets with resources Fosters overall economic growth Improves reliability of supply Countries in grey: potential net exporters Circles: Potential export capacity (red: funding not secured) 12

13 Situation: Regional Power Trade can Reduce Cost of Electricity Power Pool Yearly Cost Saving (US$B) LRMC (% decrease) CO 2 Emission (mtpa) IRR (%) Key resources WAPP EAPP CAPP Hydro EAPP SAPP Hydro, geothermal Hydro, coal, gas CAPP WAPP Hydro, gas Total SAPP 13

14 2C: Opportunities for Transformative Impact Generation Transmission and Distribution Access Knowledge and Partnerships 14

15 Situation: Energy Affordability Challenge Historic cost of generation in Africa are exceptionally high compared to other regions Consequently, the tariffs are also high 0,20 0,18 0,16 0,14 0,12 0,10 0,08 0,06 0,04 0,02 0,00 0,18 0,14 0,08 0,07 0,09 0,07 0,05 0,05 At current high tariff levels, very few of the poor unconnected households can afford a connection Yet, utilities are struggling to recover costs and rely on government subsidies 0,12 Africa South Asia East Asia USA OECD Source: OECD and World Bank studies Average historic cost Average residential tariff Average generation costs from systems mostly based on hydro USc 10/kWh against almost USc 30/kWh when mostly diesel. 0,14 15

16 Situation/Going forward: Off-Grid Programs Complement Investments in Distribution Lower service levels only way to reach many of the poor in an affordable way (for households and governments) Opportunity to scale-up access from successful pilots Lighting Africa Use of modern off-grid lighting for households and SMEs To date, 3.8M people provided access to clean, safe lighting Scale up to 20M homes (100M+ people) by 2020 Pilots in Kenya, Ghana. Ongoing scaling up through IDA Successful collaboration between IFC and WB Examples: Senegal, Tanzania, Ethiopia, etc. Africa Clean Cooking Energy Solutions Facilitates enterprise-based scale up of clean cooking Builds on both demand and supply side issues Examples: Uganda, Ethiopia, etc. Other options supported through IDA and trust-funds Off grid solutions for community level institutions such as: schools, clinics, and public buildings (Example: Sierra Leone) Biogas units (for heating, lighting, and cooking) (Example: Kenya) Mini hydropower (Example: Zambia) Mini and micro-grids (Example: Kenya) 16

17 2D: Opportunities for Transformative Impact Generation Transmission and Distribution Access Knowledge and Partnerships 17

18 Situation/Going forward: Knowledge Increased lending has crowded out formal analytical work in recent years but main instrument for knowledge creation and transfer is our operational work Improved global knowledge base and enhanced South-South Cooperation Know-how for improved pricing, better targeting of subsidies, etc. Clients want to learn from each other Bank s role of a connector Example: Power market workshop in Ghana with Brazilian expertise Example: Hydropower Development in Ethiopia with Brazilian assistance Example: International community of practice through Africa Electrification Initiative Accelerate policy reforms/sector frameworks DPOs to improve utilities viability and prepare enabling environment Example: Reform dialogue in Nigeria, Kenya; sector assistance to Senegal, Tanzania, etc. Provide TA and financing for preparation of bankable projects Preparation and project implementation assistance Example: Mozambique Provide TA and investment financing to support regional organizations Improved regional planning, coordination, technical and regulatory capacity Example: West Africa Power Pool Opportunity to learn from successful projects/pilots: Lessons learned from large hydropower projects (Example: Uganda, Cameroon, DRC) Sharing lessons on off-grid solutions (Example: Mali) Smaller renewable energy for households and SMEs (Example: Kenya) Efficient Lighting (Example: Senegal, Tanzania, Ethiopia) Clean Cooking (Example: Uganda, Ethiopia) Biogas, mini-hydro, mini-grids, etc. 18

19 Situation/Going forward: Partnership Periodic Coordination Meetings among DFI/IFI Partners (e.g. EC, AfDB) Identify common set of transformational projects (ex: Power Pools) Enhance synergies and avoid duplication (ex: on Fragile States) Deploy New Joint Instruments among DFI/IFI Partners To leverage large-scale financing needs (ex: Nigeria, Mozambique) Longer tenors for private lenders/investors (ex: PRG/PCG/MIGA ) Align trust funds with IDA Coordinate resources and goals Develop other partnerships when beneficial PIDA on transformative projects African Union on natural gas. SE4ALL, USAID, EU, Japan, Norway, Iceland, Spain, etc In country donors coordination activities 19

20 Joint Solutions Using all WBG Instruments IDA s sector engagement + IFC s long-term lending + MIGA s insurance = leverage private capital Examples: Kenya IPP Program (recently approved) Nigeria - Joint IDA, IFC, MIGA team for development of energy sector (proposed $1B PRG project - promoting private sector investment in gas to power) 20

21 3. Africa Energy Portfolio & Key Lessons 21

22 Growing Africa Energy Portfolio In recent years, Africa Energy Portfolio has grown significantly 53 active projects for a total commitment of about US$ 9.4 billion in 2012 (vs. 3.8 in 2009) Amount approved (US$ M) Operations approved , Growth creates challenges, particularly in terms of disbursement Focus to increase currently low disbursement ratio Commitment at risk has steadily decreased Pipeline of lending projects is large and diverse Planning US$ 1,012 million for FY 13 and US$ 2,269 million for FY2014 Focusing on key priorities: generation based on renewables, regional projects, access Broad engagement with clients for ESW/TA activities complements lending 22

23 Demand for Assistance is Strong Needs of our clients are diverse and evolving Type Total Lending (US$ M) % of Total New thermal generation 4,145 33% Renewables 2,169 17% Energy efficiency 1,890 15% Transmission & distribution 1,664 13% Other energy 1,348 11% Upstream oil, gas, coal 1,275 10% Total 12,491 Lending preparation and/or supervision in 32 countries out of 48 in Sub-Saharan Africa. Policy dialogue in others. Bank perceived by governments as honest partner in difficult reforms Clients increasingly demand financial support for large-scale generation and T&D projects Expect near-commercial speed for securing project financing and disbursement Private sector is not systematically engaged Since financial crisis in 2009, only 10 IPPs in SSA reached financial closure until 2011 WBG involvement in 3 IPPs with capacity of 700 MW Basel III implementation is increasing the cost of long-term funding Top-tier developers and lenders cite importance of back-stopping government risk 8 PRGs ongoing and 5 under preparation 23

24 FY13 Achieved Prod Line Proj ID LENDING DELIVERED IN FY13 # Proj Commit Amt IBRD/IDA P SN - Electricity Sector Support (FY12) IBRD/IDA P RW:Electricity Access Additional Financi IBRD/IDA P A - Eastern Electricity Highway Project IBRD/IDA P TZ-Energy Sector Capacity Building Prj IBRD/IDA P UG AF for ERT IPF 2 (FY13) IBRD/IDA P ZM-Lusaka Transm. & Dist. Rehab IBRD/IDA P LR-Accelerated Electricity Exp. (FY13) Recipient Executed A P Sierra Leone Energy Access Proj. - SLIDF Guarantees P CI-27 Gas Field Expansion Overall Result 9 1,

25 FY14 Pipeline 25

26 Consultancy and Projects Bank executed Assessments Strategies Analytical work Timely advice Resources about < $1,000,000 Government executed Feasibility Demand analysis Technical design Project (commercial and technical) design Technical assistance Energy assessments Analytical work Infrastructure investments (supply, design, install, etc) 26

27 Public information 27

28 Public information 28

29 Current opportunities

30 Questions 30