Transcript Document

Ten Things Journalists Need
to Know About
Africa’s Energy Sector
Africa Infrastructure Country Diagnostic:
a multi-stakeholder effort
Key Message #1
Africa is starved of power
Africa is starved of power
• Generation capacity inadequate and has been
stagnant for 20 years
– 48 countries have combined capacity equal to Spain
• Only one in four Africans has access to power
– Most countries will fail to have universal access by 2050
• Power consumption pitifully low and falling
– Enough to power one light bulb per person for 3 hrs/day
Huge gap with respect to Asia
Generation capacity (MW /mln population)
Electricity consumption (kWh/capita/yr)
Access (% of households)
Anatomy of Africa’s power supply crisis
Main Cause or Trigger
Natural Causes (Droughts)
Oil Price Shock
System Disrupted by Conflict
High Growth, Low
Investment/Structural Issues
Key Message #2
Africa is increasingly
dependent on expensive
emergency generation
Immediate response has been to lease
emergency power generation capacity
Emergency
Generation Capacity
Emergency Generation
Capacity as % of Total
Cost of Emergency
Generation as % GDP
Angola
150
18.1%
1.0%
Gabon
14
3.4%
0.5%
Ghana
80
5.4%
1.9%
Kenya
100
8.3%
1.5%
Madagascar
50
35.7%
2.8%
Rwanda
15
48.4%
1.8%
Senegal
40
16.5%
1.4%
Sierra Leone
20
133.3%
4.3%
Tanzania
40
4.5%
1.0%
Uganda
100
41.7%
3.3%
Key Message #3
Power shortages are a brake
on economic growth and
competitiveness
Changes in growth per capita due to
changes in infrastructure
Power outages represent a heavy burden
on the economy
Contribution of infrastructure to total
factor productivity of firms
Key Message #4
Africa faces a huge power
sector financing gap
Huge power investment backlog
• To remedy this 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$40.6 bn/yr
Existing spending: US$11.6 bn/yr
Efficiency gap: US$5.9 bn/yr
Financing gap: US$23.6 bn/yr
Power sector spending needs
equal 6.4% of total SSA GDP
US$ billion per year
Capital
expenditure
Operation &
maintenance
Share of GDP, %
Total
Capital
spending expenditure
Operation &
maintenance
Total
spending
26.72
14.08
40.80
4.16
2.19
6.35
LIC Fragile
4.49
0.71
5.2
11.7
1.84
13.54
LIC Non Fragile
7.56
2.15
9.70
6.85
1.95
8.79
MIC
6.29
7.9
14.19
2.32
2.92
5.24
Resource Rich
8.42
3.35
11.3
3.77
1.79
5.29
SSA
Key Message #5
Africa’s power is very
expensive
0
Zambia
Nigeria
Malawi
Congo
Ethiopia
Tanzania
Mozambique
South Africa
Lesotho
Ghana
Namibia
Côte d'Ivoire
Benin
Niger
Cameroon
Rwanda
Kenya
Senegal
Burkina Faso
Uganda
Madagascar
Cape Verde
Chad
US cents
Africa’s power much more expensive
than elsewhere: effective tariffs
35
30
25
20
15
10
5
Typical level of power tariffs
in other developing countries
Power prices increased substantially in
recent years, but not on par with costs
Average operating cost
Average revenue
High power cost driven by small scale of
production and inefficient technology
Historical and long-run marginal
costs of power
Long-run marginal
Historical
US/kWh
Trade expansion
Trade stagnation
SAPP
13.9
0.06
0.07
EAPP
19.0
0.14
0.13
WAPP
21.4
0.18
0.19
CAPP
48.5
0.07
0.09
0.17
0.17
Island states
LIC
21.6
0.12
0.13
MIC
14.8
0.11
0.12
Key Message #6
Most of Africa’s power is
currently generated from coal,
with less than 10% of
hydro-potential exploited
Coal is Africa’s largest single source of
power, but will lose ground to hydro
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Actual
Trade Expansion
Scenario
Hydro
Oil and Gas
Coal
Trade Stagnation
Scenario
Other
Africa is behind all other regions in
developing its hydro-potential
Key Message #7
Power trade would help to
reduce costs and facilitate a
shift to cleaner hydro
The promise of regional power trade
• By achieving economies of scale in production
regional power trade would save Africa US$2bn/yr
• Exports: dominated by DRC, Ethiopia and Guinea
• Earnings could amount to 2-6% of GDP
• Huge investments needed to become exporters
• Imports: cover >50% of needs in 16 countries
• Savings >US$ 0.03 per kWh or over 1% of GDP
• IRR on inter-connections >100% pays back in <1 year
Numerous missing transmission links
needed to facilitate regional trade
Savings from power import (US cents per kWh)
0
Kenya
Gabon
South Africa
Namibia
Lesotho
Sierra Leone
Mozambique
Equatorial Guinea
Congo
Mali
Senegal
Burundi
Chad
Angola
Niger
Liberia
Guinea-Bissau
17 countries could save more than one
cent per kWh by importing power
8
7
6
5
4
3
2
1
100
90
80
70
60
50
40
30
20
10
0
Ghana
Mauritania
Burkina Faso
Malawi
Sierra Leone
Angola
Lesotho
Namibia
Guinea-Bissau
Burundi
Mali
Niger
Liberia
Botswana
Equatorial Guinea
Chad
Percentage of demand met by imports
16 countries would meet more than 50
percent of demand from imports
Power sector evolution in DRC and
Ethiopia critical for continent
Exports
(TWh pa)
Required Investment
Net Revenues
(US$m pa) (% GDP) (US$m pa) (% GDP)
DRC
51.9
519
6.1
749
8.8
Ethiopia
26.3
263
2.0
1,003
7.5
Guinea
17.4
174
5.2
786
23.7
Sudan
13.1
131
0.3
1,032
2.7
Cameroon
6.8
68
0.4
267
1.5
Mozambique
5.9
59
0.8
216
2.8
Note: net revenue based on illustrative profit margin of US$0.01 per kWh
Trade flows with trade expansion in the
East Africa Power Pool (TWh in 2015)
Trade flows with trade expansion in the
Southern Africa Power Pool (TWh in 2015)
Trade flows with trade expansion in the
West Africa Power Pool (TWh in 2015)
Trade flows with trade expansion in the
Central Africa Power Pool (TWh in 2015)
Key Message #8
Africa’s power sector
contributes little CO2,
and even less with trade
Role of power sector in carbon
emissions
• Bulk of Africa’s power emissions come from
deforestation and land-use changes
• Power accounts for only 10% of Africa’s emissions,
and (excluding RSA) <1% of global emissions
• By pursuing trade to its fullest extent, Africa would
reduce carbon emissions by 70 mn tons/yr
• A recent study estimates a further 740 mn tons/yr
could be saved through low carbon energy projects
• Under CDM with carbon priced at US$15/ton could
increase viable hydro share by 50 percent
Key Message #9
Africa’s power utilities are
highly inefficient
Improving utility performance through
institutional reform
• Cost of SSA power utility operational inefficiencies
US$3.2 billion per year or 0.5% of GDP
• Evidence that institutional reforms have an impact
on reducing inefficiencies
• Private sector has a role to play, but expectations
should be kept realistic
Inefficiencies average 0.5% of GDP
average cost of system losses and collection losses as
% of billings
Reform measures have a material impact
on hidden costs
400
350
300
250
200
150
100
50
Performance Management
contracts with contract or
incentives
concession
present
High
governance
High
regulation
High reform
yes
no
To what extent can the private
sector contribute?
Extent of PPI
Generation
Distribution
34 IPPs invest
US$2.5bn to
install 3,000MW of
capacity
16 concessions and
17 mgt or lease
contracts
Experience
Frequent
renegotiations,
costly to
utilities
One quarter of
contracts
prematurely
cancelled
Prospects
Likely to continue given
huge capacity
needs
Likely to continue given
significant
improvements in
performance that
have resulted
Key Message #10
Subsidies to the power sector
are massive and favor the
better-off
The challenge of cost recovery
• Most utilities recover only operating costs, leading
to power subsidies worth more than US$2.2bn/yr
• Access to power is almost non-existent among
poor households, hence subsidies pro-rich
• Existing high cost power unaffordable, but situation
will improve in the long term
Under-pricing average 0.36% of GDP or
US$ 2.2 billion per year
Access to electricity highly inequitable
across households
Source: Preliminary results AICD 2008
Affordability of monthly bill at cost
recovery prices:
US$ per month, consumption 50 kWh/month
LRMC
Historic
costs
Trade expansion
Trade stagnation
CAPP
24.3
3.5
4.5
EAPP
9.5
7.0
6.5
SAPP
7.0
3.0
3.5
WAPP
10.7
9.0
9.5
Green – affordable to all but poorest 25%
Red – unaffordable
Yellow – affordable to existing customers only