Vahid Alavian

Water and Hydropower AdvisorAfrica Region

The Energy Landscape,Investment Needs, and Opportunities

The World Bank

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

Energy and growth

Human Development Index (HDI)

Energy Consumed per Capita

Best-Fit Trendline

En

erg

y/C

apit

a

Power shortages are a brake on economic growth and competitiveness

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

NorthAfrica

West Africa East Africa SouthernAfrica

CentralAfrica

AFRICA

Per

cen

tag

e p

oin

ts o

f p

er c

apit

a ec

on

om

ic g

row

th

Telecom Power Roads

Energy availability is pitifully low

184

85 21

126

55 38 29

204

114

581

900

430

2108

0

200400

600

800

1,000

1,200

1,400

1,600

1,800

2,000C

amer

oon

Nig

eria

Eth

iopi

a

Ken

ya

Tan

zani

a

Uga

nda

Bur

kina

Fas

o

Gha

na

Sen

egal

Alg

eria

Egy

pt

Mor

occo

Wor

ld A

vera

geEle

c co

nsu

mp

tio

n (

kWh

/yr)

/Cap

ita

500 kWh/capita/year minimum consumption for reasonable quality of life

Energy use per person in Africa

Africa’s power is expensive

0

5

10

15

20

25

30

35

Cha

d

Cap

e V

erde

Mad

agas

car

Uga

nda

Bur

kina

Fas

o

Sen

egal

Ken

ya

Rw

anda

Cam

eroo

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Nig

er

Ben

in

Côt

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Ivoi

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Nam

ibia

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na

Leso

tho

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th A

fric

a

Moz

ambi

que

Tan

zani

a

Eth

iopi

a

Con

go

Mal

awi

Nig

eria

Zam

bia

US

cen

ts

Power tariffs in other developing countries: lower bound

Power tariffs in other developing countries: upper bound

High prices, low consumption

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

SAS

EAP

ECA

LAC

SSA

OEC

D 01,0002,0003,0004,0005,0006,0007,0008,0009,000

Afric

a

Asia

LAC

Chi

na

MN

A

ECA

OEC

D

Average tariff (US$ per kWh)

Power consumption (kWh pc pa)

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

Africa’s generation profile

0%10%20%30%40%50%60%70%80%90%

100%

CAP

P

EAPP

SAPP

WAP

P

Ove

rall

Other

Coal

Gas

Diesel

Hydro

0%10%20%30%40%50%60%70%80%90%

100%

CAP

P

EAPP

SAPP

WAP

P

Ove

rall

>500MW

100-500MW

10-100MW

<10MW

by source by scale

Coal is Africa’s largest single source of power, but will lose ground to hydro

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Actual Trade Expansion Scenario

Trade Stagnation Scenario

Hydro Oil and Gas Coal OtherSource:

Hydro potential in Africa is high

But, Africa is behind all other regions in developing its hydro-potential

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

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

Potential benefits from regional trade

01020304050

60708090

100

Cha

d

Equ

ator

ial G

uine

a

Bot

swan

a

Libe

ria

Nig

er

Mal

i

Bur

undi

Gui

nea-

Bis

sau

Nam

ibia

Leso

tho

Ang

ola

Sie

rra

Leon

e

Mal

awi

Bur

kina

Fas

o

Mau

rita

nia

Gha

na

Per

cent

age

of d

eman

d m

et b

y im

port

s

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

0

1

2

3

4

5

6

7

8

Gui

nea-

Bis

sau

Libe

ria

Nig

er

Ang

ola

Cha

d

Bur

undi

Sen

egal

Mal

i

Con

go

Equ

ator

ial G

uine

a

Moz

ambi

que

Sie

rra

Leon

e

Leso

tho

Nam

ibia

Sou

th A

fric

a

Gab

on

Ken

ya

Sa

ving

s fr

om

pow

er im

por

t (U

S c

ent

s p

er k

Wh)

But, critical transmission links for regional trade are missing

Power flows with trade expansion (TWh in 2015, mostly hydro)

East Africa

West Africa

Southern Africa

Central Africa

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

Three quarters of infrastructure spending is

financed by African tax-payers and consumers

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

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

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

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

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

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

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.

Thank you!