Emelly Mutambatsere Principal Economist African Development Bank South Africa

Emelly Mutambatsere Principal Economist African Development Bank South Africa

Outline of presentation i. Background ii. iii. iv. The study Africa s wind energy potential Mapping market development v. Explaining trends vi. Policy implications

Background The problem Possible solutions

The problem Africa s energy problems are well documented: Low power generation capacity per capital Low grid access rates High systems operation costs High but non-cost reflective tariffs Unstable electricity systems; unreliable supply High connection charges; connection delays

Possible solutions Conventional fossil fuel based solutions Cost effective Several African countries are well endowed Clean energy path Africa s reserves of renewable energy resources are the highest in the world (WEC, 2010) More than half of the top 30 countries by measure of endowment in renewable energy resources located in Africa (Buys et al 2007)

The study Why wind? Objectives Data and sources

Why wind? Wind now the world s fastest growing energy source. Installed capacity grew at ~30% pa between 1996 & 2008 Exponential growth in ongoing/planned projects in Africa Wind technologies rapidly advancing. On-shore wind now competitive on generation cost basis But Africa s potential largely underdeveloped. Accounted for below 1% of installed capacity in 2011

Objectives Contribute to filling the knowledge gap on development of wind energy markets in Africa What is the potential? How much of this has been developed? How is the market evolving? What explains this trend? What direction should policy take?

Data and sources Data sources: International Energy Agency Wind maps from various sources MDB s project databases Bilateral donors project databases Project finance databases UNFCC Analyzed non-parametrically for a continent-wide mapping of the market.

Africa s wind energy potential Africa s wind speed map On-shore wind energy potential

Wind Speed Map The best winds observed in: Cape Verde, Mauritania, Morocco, Tunisia, Algeria, Egypt, Djibouti, Eritrea, Somalia, Seychelles, Lesotho, South Africa, Madagascar

On-shore potential Buys et at (2007) measure potential in tons of oils equivalent Important assumptions regarding wind speed, location, technology efficiency, turbine density. Most on-shore potential located in coastal areas Large inland potential observed in Chad and Kenya

Somalia Sudan Libya Mauritania Egypt Madagascar Kenya Chad Ethiopia Cape Verde Tunisia Morocco South Africa Mozambique Tanzania Angola Namibia Seychelles Congo Congo, Dem Mauritius Comoros On-shore potential (mtoe) 60 50 40 30 20 10 High Low 0

Mapping market development (Major trends)

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Capacity (MW) 1. Installed capacity 1200 1000 800 600 Annual capacity Cumulative capacity 400 200 0

Egypt Morocco* South Africa Kenya Namibia Ethiopia Djibouti Ghana Mauritius Nigeria Tunisia Tanzania Mozambique Algeria Mauritania Cape Verde Eritrea Capacity (MW) 2. Coverage 4000 3500 3000 2500 2000 1500 1000 500 0 Planned Ongoing Completed

3. Geographic location

4. Project size/capacity Installed Capacity (MW) Completed Ongoing Planned Total 1,104 1,731 10,907 Range 0.2 140 5 300 10 5,000 Mean 37 108 227 (126) Median 25 95 110 Standard Deviation 40 86 701

Project Cost, USD million 5. Project size/cost 1000 800 600 400 200 0 1985 1990 1995 2000 2005 2010 2015 2020 Project completion year (actual or expected)

reflecting a phased approach to sector development Pilot Small, lack of familiarity with technology, insufficient georeferenced resources and data sets Semicommercial/ Demo Further technology testing, developing public sector capacity Commercial Sufficient resources to fund large scale operations

USD million per MW 6. Cost per capacity unit 6 5 4 3 2 1 0 0 50 100 150 200 250 300 350 Installed Capacity per Project (MW)

Unit cost, USD million per MW correlated to procurement method 6 5 4 3 2 1 0 0 1 2 3 4 1=Public; 2=PPP; 3=Private Linear (1=Public; 2=PPP; 3=Private)

Unit cost, USD million per MW and exhibiting market specific trends 4.0 3.5 Egypt 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1985 1990 1995 2000 2005 2010 2015 2020 Project completion year (actual and expected) Morocco South Africa Expon. (Egypt) Expon. (Morocco) Expon. (South Africa)

7. Project sponsors Completed Public sponsored - governments (78%) PPP 7% Private sponsored - 14% Pipeline ongoing and planned Public sponsored - governments (37%) PPP 11% Private sponsored (52%)

8. Lenders Financing for Completed Projects, % of value DFIs, % of Non-Concessional Funding in Completed Projects

9. CDM ¼ of the projects benefited NPV of CO2 sales revenues estimated at 5%-20% of initial project cost Anecdotal evidence points to positive effects on commercial viability But ¾ of projects still not applying or failing to access CDM

Trends: a recap Market dev. started slow with N. Africa dominating SSA is quickly catching-up Installed capacity expected to more than double after completion of ongoing projects. A 5-fold increase expected if all planned projects are implemented. Size of projects is increasing, private sponsorship is on the rise, and some countries are managing to leap-frog All regions except C. Africa have completed/ongoing projects DFIs the lead lenders; still very low commercial debt flowing into projects; grant financing is shrinking.

Outlook Despite this progress, the share of wind in Africa s generation mix is expected to remain low 2% total by 2030 (IEA) Most progress is in MICs. Lower progress in LICs even those with the highest wind energy potential.

Explaining trends Technical, Economic, Climate change, Business environment.

Explaining trends Technical considerations Intermittent, non-storable resource Economic considerations Value for money affected by technical features of wind, subsidies on fossil fuels Climate change considerations Not as high on the political agenda of low income countries as access Business environment considerations Still inadequate in low income countries; evolving in MICs

Policy implications Political commitment is a prerequisite to market development Establish champions Provide clear legislation Correct market distortions Fund feasibility studies, develop geo-referenced databases Invest in regionally integrated power systems

Thank you.