The Role of Power Pools in the Development of the African Electricity Industry

Transcription

1 The Role of Power Pools in the Development of the African Electricity Industry Cornelis van der Waal Programme Manager Energy and Power Supplies Frost & Sullivan (Africa) May 2009 CTICC, Cape Town, SOUTH AFRICA

2 Agenda International Developments African Developments The Need for Power Pools Requirements for the Development of Power Pools Risk Management IPP Involvement Future of African Power Pools

3 Introduction Role of Electricity in Economic Development well Documented Yet Africa Remains Under-Electrified Likely that Most Planned Projects will Not Materialise Yet Africa Increasingly Stable and Investor Friendly Potential Solution: Power Pools!

4 Timeline for Major International Market Developments Major Issue Fuel Supply And Costs Oil passes $100 per barrel Continued acceleration of coal-fired power Rising world oil prices dampen demand for liquid fuel after 2015 Acceleration of Natural gas Resurgence Of Nuclear Growth of natural gas kept in check by high gas prices Coal reaches Almost 45% of energy Consumption, following growth in India and China Global Energy Demand Strong growth In all regions Growth dominated by India & China Deceleration and maturation of EU Long-running boom in Russia Developing economies pass 40% of electricity demand Global Energy Demand almost double 2000 levels Electricity generation passes 30,000 billion kwh Environment Issues China overtakes the US as the world s biggest emitter of CO2 Accelerated investment in carbon capture and storage 20% Renewable Energy in Europe Stationary fuel cells contribute to distributed generation Global CO2 Emissions reach 40 Gt

5 Demand Outlook by Region Global Net Electricity Consumption (World), Global Demand Growth of 3.6% Growth in Developing Countries Faster China 8.3% India 6.6% Latin America 5.1% Africa 4.1% Billion kwh Net Electricity Consumption by Region (World), % of World Consumption 35,000 30,000 25,000 20,000 15,000 10,000 5, Year Year Source: Frost & Sullivan and EIA Latin America North America Rest of Asia China India Africa Middle East Russia Europe Source: Frost & Sullivan and EIA

6 Global Electricity Spending Asia will be the next Energy Leader of the Planet Africa Less than 7% of Global Spending Main Focus on Generation at Present Financial Crisis will Make Access to Capital Increasingly Difficult Cumelative Investment ($ Billion) Global Electricity Investment by Region (World), ( ) 2,000 1,800 1,600 1,400 1,200 1, Middle Russia Other Africa OECD Latin EU Other Asia US and China Other East OECD Pacific America Canada Source: Frost & Sullivan Global Electricity Investment by Region (%) ( ) Middle East 2.5% 2.5% 4.0% 4.5% Russia 18.5% Other OECD 6.5% Africa 8.0% OECD Pacific Latin America EU 17.5% 8.0% Other Asia US and Canada China 12.0% Other 16.0% Source: Frost & Sullivan

7 Africa in Perspective Snapshot Overview Sub-Saharan Africa is in dire need of additional generation capacityto avert a looming power crisis A growing demand for electricity in the sub- Saharan African region Insufficient generation capacities Only 23.0 percent of the continent s population had access to electricity in 2007 SSA total electricity generation only 1.8 per cent of the world s total in 2007 >$563 billion needed Booming economies with growth in excess of 4 per cent Years of underinvestment in generation and T&D infrastructure Failed planning & maintenance programs An additional 270GW is needed in the next 25 years

8 Key Drivers & Restraints Global Market Drivers and Restraints, 2009 Certainty and Critical Grid in Africa High Economic Rising Growth Population Increased Urbanisation Growth Market Drivers Market Restraints Rural Electrification Programs Unimportant Increased Regional Cooperation Global Lead Time for Products Reduced Equipment Prices Very Certain High Cost of Feedstock Increased Political and Investment Stability Economic Development Increased Demand for Electricity Corruption and Political Intervention Lack of Project Funding Lack of Skilled Employees Critical Bureaucracy Lack of Finance Political Risk Note: The length of the arrows represent the degree of impact. Source: Frost & Sullivan Market Drivers Uncertain Market Restraints

9 Planned Future Projects in Selected African Countries West Africa (Nigeria Excluded) 20 Power projects planned 3472 MW of additional capacity Hydro power accounts for 52.2% of the total new additional capacity Ivory Coast accounts for 38.7% of the total new additional capacity Nigeria Mambila project 2000 MW of additional capacity Hydro-based power station Feasibility studies DRC Inga (I, II, III) and Busanga to add a combined 4390MW Hydro-based power stations The refurbishment of Inga I & II cost approximately $226.7 million The scale of the investment suggests a PPP must be adopted East Africa 21 Power projects planned 7870 MW of additional capacity Hydro power accounts for 79.0% of the total new additional capacity Tanzania and Ethiopia are expected to account for 89.4% of the total capacity Namibia/Botswana Namibia expected to add approx. 1680MW 47.6% of the total additional capacity to be gas-based Botswana expected to add at least 3800MW by 2013 South Africa 5-year build program to cost over $37.8bln 59.7% of the total new capacity is still expected to be coal-based Government guarantees to reach $17.5 billion Public utility credit metrics have deteriorated Source: Frost & Sullivan

10 Some Country Information Country Population (Million) GDP (US$ Bil) Annual Demand Growth Installed Capacity (MW) Access Rate Planned Projects (MW) (2007) Cost (US$ Billion) Angola % 1,150 13% Botswana % % 3, DRC % 2,446 6% 10, Lesotho % % Malawi % 284 7% Mozambique % 2,209 6% 4, Namibia % % 1,700 1,3 South Africa % 40,000 75% 18, Swaziland % % 1, Tanzania % % 1, Zambia % 1,760 19% 2, Zimbabwe % 1,961 34% 3, Sustainable Investment: Energy Security, Economic Development, Environmental Protection

11 African Electricity Transmission and Distribution Current African Demand as a Result of Underinvestment SA $2.5 Billion West Africa $1.1 Billion Rural Electrification Projects Technical Losses Reduction Country Interconnection $ Million Transmission Losses in Select African Countries (2007) Uganda Sudan Angola Ethiopia Kenya Eritrea M alawi Tanzania Zimbabwe Zambia Lesotho Botswana South Africa 0% 10% 20% 30% 40% 50% Nigeria Benin, Ghana Ivory Togo Coast T&D Spending within WAPP ( ) Niger Burkina Faso Mali Senegal Guinea Source: Frost & Sullivan Guinea Gambia Sierra Bissau Leone

12 Why are Power Pools Needed? Opportunity to Develop Energy Resources Opportunity to Expand T&D Grid Opportunity to Increase Bilateral Relations Opportunity to Increase Skills Distribution Opportunity to Generate Revenues Opportunity to Reduce Wastage Opportunity to Create Economies of Scale

13 What is Needed for a Power Pool Excess Generation Capacity Availability of Information Awareness of Partners Needs Trading Platform Information Systems Power Pool Interconnected Grid Contractual Agreements MRO Services Political Support and Drive Technical Integration Source: Frost & Sullivan

14 The African Power Pools The Dream North Africa West Africa (WAPP) Central Africa (CAPP) East Africa (EAPP) Southern Africa (SAPP)

15 Feedstock Options Solutions Pro s Con s Gas Fast and Flexible Limited Gas Reserves Volatility of the price New Coal Nuclear Renewable (Wind and Geothermal) Hydro Fuel available Technology well understood Price benefit (large scale) Fuel available No emissions No fuel costs Cheap, clean Long Lead Times Needs water Dirty Expensive, need skills Storage solutions needed Resources far from demand Long lead time Coal Gas Hydro Diesel Oil Nuclear Geothermal

16 The African Power Pools The Reality The Good Increased Awareness and Discussion Increased Co-operation Power Trading does Happen Various Projects (Westcor, WAPP etc) Increased Skills Transfers The Bad Underdeveloped Generation Capacity Underdeveloped T&D Infrastructure Lack of Contractual Agreements Lack of Country Co- Operation Underdeveloped IT Integration

17 Power Pool Activities Current Reality Future Development Ideal Functioning Study the Demand for Power To Determine each Members Role (New Build vs. Imports) To Define Areas where New Projects can be Started To Define where Electricity needs to be Imported To Balance the Energy Costs Electricity Trading (Experimental) Expansion of the T&D Grid Bilateral Government Agreement Management Legislative Enforcement (Development of Wheeling Agreements) Increased Regional Cooperation Efficient Electricity Trading Energy Cost Management Reliable and Stable Electricity Supply Regional Collaboration Not Affected by Political Interference Sustainable T&D MRO Activities (Cross Border)

18 So What is Needed? Increased Investment Increased Competition (Increase Efficiency) Effective Risk Management Re-look at Regional as Opposed to Country Energy Decisions

19 Reality of Investment Average Value of Investment ( ) Real GDP Growth (sub-saharan Africa), % 18% Real GDP Growth (%) Agriculture, 13% 31% African Infrastructrure Loans Distribution Others Infrastructure, 14% Transport, 10% Electrical T&D Projects, 6% May 2009, Energy CTICC, Production, Cape Town, SOUTH AFRICA 8% Water Infrastructure, 7% Medical, 17% Feeding, 15% Health Infrastructure, 10% 7% 24% FDI Inflows (Billion $) s 1980s 1990s Real GDP Growth FDI Inflows (sub-saharan Africa), Source: IMF FDI Inflows (Billion of U.S. dollars) Growth Rate (%) Growth Rate (%) Source: IMF

20 Risk Management is Key To Finance Investors need Access to Information Investors need Stability and Predictability Investors want to be Part of the Management of Projects What About new Support? (China) Access Risk Factors Investors Assess Before Investing Operations Construction and Compliance Ability to Supply Reliably Risk Factors Political Environmental Financial Source: Frost & Sullivan

21 IPP Involvement and Development IPP swill also Play a Significant Role Access to Capital and Skills Access to Technology and Experience Management of Systems and Relationships through Management Contracts Can we Afford a Single Buyer Model? Selected IPP s Operating in Africa (Africa), 2008

22 Attracting Investment What is Needed? Strategies Incremental Increase in Electricity Tariffs Diversification of the Energy Mix Support for an Energy-Independent Private Sector Continuous Electricity Imports Difficulty of Implementation High: Social and Political Implications Medium: A Function of the Nature of Available Feedstock Medium: Development of Cost Reflective Tariffs Medium to High What is needed? Political Will Financial Capabilities Political Will: Incentive Schemes such as Reduced Taxation could be Introduced Development of Regional Power Pools

23 Attracting Investment What is Needed? Strategies Revamping the Distribution Network Providing Guarantees to Utilities Electricity Rationing Programs Additional Temporary Power: Gensets Difficulty of Implementation Medium: Municipalities Disturbances Medium: Capital Availabilty Low, but Downward Effects on Economic Growth Expected Medium to High: Increasing Price of Fuel What is needed? The Example of South Africa: REDs? Political Will Consumers Willingness to Cooperate Financial Capabilities

24 Future Outlook for Power Pools in Africa The Outlook for Power Pools are Bright Every Country in Africa Stands to Gain but Needs to Contribute Investment in T&D Infrastructure Critical Utilities and Energy Ministries should Focus on Risk Management and Investor Friendly Environments Only Africa can Help Africa Do not Expect International Help

25 Frost & Sullivan Contact Details Cornelis van der Waal Programme Manager Energy and Power Systems Group John Raspin Practise Director Environment Group Kate Howarth Sales Manager Frost & Sullivan Vassilissa Kozoulina Account Executive Frost & Sullivan