Reforming the electricity industry in East Africa David Newbery Cambridge University CMIEP Autumn Seminar Cambridge, 6 November 2004 http:// www.econ.cam.ac.uk/electricity
Africa: the Dark Continent Source: Eskom Uganda 5%; Kenya 15% electrification D Newbery CMI Cambridge Nov 2004 2
Uganda and Kenya visit with World Bank Aug/Sep 2004 both countries reforming ESI Uganda fully unbundled, concessioned Kenya partly unbundled, mixed low electrification, variable costly power, poor interconnections, past inefficiencies, corruption lost decades: Uganda civil war, Kenya stagnates private management as possible cure? D Newbery CMI Cambridge Nov 2004 3
1,500 km D Newbery CMI Cambridge Nov 2004 4
Existing grids Long, fragile low voltage Source: Acres: EAPMP D Newbery CMI Cambridge Nov 2004 5
Generation in Uganda 1957-2001 2200 275 2000 1800 1600 1400 1200 Generation less sales exports 250 225 200 175 150 GWh/year MW capacity 1000 800 600 400 200 0 sold Uganda effective capacity 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 D Newbery CMI Cambridge Nov 2004 6 125 100 75 50 25 0
Uganda: history Amin coup 1971, GDP collapses capacity deteriorates from 150 MW to 100 MW prices peak 19 cents (1979), losses to 41% corruption: a cancer in ESI 1986 Museveni starts recovery FDI returns, growth resumes, capacity needed 1994: IPP dam? Implausible without reforms UEB proposes SB with IFI-financed dam 1999: cabinet goes for unbundling, privatisation D Newbery CMI Cambridge Nov 2004 7
Bujagali Nalubaale (Owen Falls ) D Newbery CMI Cambridge Nov 2004 8
Uganda: generation sources 285 MW capacity at Nile Source almost run-of-river, output varies with Lake level, October 2004 at 220 MW 2004: peak demand 350 MW, daily load shedding ~100 MW (?) private thermal back-up Nile potential: 2,000-2,800 MW Next choice - Bujagali: 200-250 MW 1998 AES signs PPA with UEB and GoU D Newbery CMI Cambridge Nov 2004 9
Uganda restructuring Electricity Act 1999 unbundles UEB into UEGCL, UEDCL, UETCL (G,D &T) 2001 UEGCL: 20 yr concession to Eskom 2003 UEDCL: 20 yr concession to Eskom/Globaleq 04 T: UETCL 2001 SOE, holds PPAs, exports, Electricity Regulatory Authority issues, modifies licenses, establishes & approves tariffs 2004 Gen capacity fee = $5.4/MW/hr = $47/kW/year domestic tariff 9c/kWh + 52 c/month large industrial: peak = 4c/kWh + $10/month D Newbery CMI Cambridge Nov 2004 10
Pricing and investment hydro costly, lumpy $1,400-2,000/kW interest cost (10%, LF:75%) = 2.1-3 cents/kwh op. cost = 0, or export value, or VUE (71 c/kwh) peak demand evenings: voting households transmission expensive ($120 m for Bujagali) weak interconnection to Kenya: 50-80MW Kenya has storage hydro strengthen link as part of hydro expansion plan but expensive ~ $500/kW? D Newbery CMI Cambridge Nov 2004 11
D Newbery CMI Cambridge Nov 2004 12
Kenya electricity production 5,000 10,000 4,500 non-hydro 9,000 4,000 hydro 8,000 3,500 GDP $(95) m 7,000 3,000 2,500 2,000 6,000 5,000 4,000 GWh/year US$(1995) millions 1,500 3,000 1,000 2,000 500 1,000 0 0 1971/72 1973/74 1975/76 1977/78 1979/80 1981/82 1983/84 1985/86 1987/88 1989/90 1991/92 1993/94 1995/96 1997/98 1999/2000 2001/02 D Newbery CMI Cambridge Nov 2004 13
Kenya: brief history KPLC as SB, SO,T&D; various G authorities 1994-5 EdF advises separating commercial from regulatory functions Tariffs < 30% LRMC, WB presses to raise Electric Power Act 1997 unbundles G, allows IPPs expensive IPP PPAs signed 1998 2004 barge mounted plant towed off 1997 KenGen established 1998 ERB established not independent responsible for merit order 2001 drought, emergency G leased, KPLC losses D Newbery CMI Cambridge Nov 2004 14
Kenya capacity and output 1200 Generation 1000 Thermal KenGen 800 Thermal IPP 4,800 MWh MW 600 Hydro 400 200 Imports Geothermal 2,400 MWh 0 Capacity MW Output 2002/3 scaled to peak demand 0 D Newbery CMI Cambridge Nov 2004 15
Kenya: generation options peak demand 833 MW, supply 1121 MW dominated by hydro, some storage (months) little left unexploited, remainder expensive geothermal costs $3000/kW = $73/MWh thermal $70-90/MWh (MS diesel cheapest) IPPs: capacity payments: $213/kW OCGT; $305 MSD; $502 geothermal + (high) variable fuel cost D Newbery CMI Cambridge Nov 2004 16
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Kenya: average nominal electricity costs US cents/kwh domestic customer 150 kwh/mnth average all customers Industrial 100 MWh/mnth D Newbery CMI Cambridge Nov 2004 17 US cents/kwh (official rate) Jul-85 Jul-86 Jul-87 Jul-88 Jul-89 Jul-90 Jul-91 Jul-92 Jul-93 Jul-94 Jul-95 Jul-96 Jul-97 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02 Jul-03
12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 Kenya: real average tariffs 15.0 12.0 9.0 6.0 Kenyan Shs (2004 prices) US cents/kwh (2004) 4.00 3.00 2.00 1.00 0.00 Domestic 150kWh/m average all customers Industrial 100MWh/m domestic 50 kwh/m average all customers 3.0 0.0 Jul-84 Jul-85 Jul-86 Jul-87 Jun-88 Jun-89 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 D Newbery CMI Cambridge Nov 2004 18
Where next? New Energy Act due 2004 to establish: independent regulator, State Geothermal co. sells steam IPO of 30% of KenGen Rural Electrification Agency Unbundle T from KPLC, eligible customers Still need a BST and sensible tariff Better trading with Uganda Medium speed diesels least cost? Lends itself to IPPs Could KenGen do it cheaper? D Newbery CMI Cambridge Nov 2004 19
East Africa Co-operation? East Africa Federation collapsed acrimoniously after independence East African Community restored 2000 develops EA Power Master Plan Study 2004 Uganda: run-of-river hydro Kenya: some storage hydro, geothermal Tanzania: gas, potential access to SA but transmission weak, distances long D Newbery CMI Cambridge Nov 2004 20
Existing and planned interconnectors Source: Acres EAPMP D Newbery CMI Cambridge Nov 2004 21
Alternative links 100 MW 200 MW Source: Acres EAPMP D Newbery CMI Cambridge Nov 2004 22
East Africa Power Master Plan Least cost expansion plan for region 2003-4 aim at 220+ kv Upgrade Uganda-Kenya to support Bujagali interconnector for increments in capacity (200MW) connect Arusha-Nairobi GoK and GoT jointly finance study EA Power Pool until integrate with SAPP needs Govt MOU, coordination, control, settlement D Newbery CMI Cambridge Nov 2004 23
Rural electrification very expensive, very low demand (50 kwh/m) quite high solar panel penetration no tradition of cooperatives as in Asia, US, commercial use to justify local distribution bids for best value capital subsidy tariff needs to cover running cost Output-based aid promising (Mozambique) Uganda ahead of Kenya with REB D Newbery CMI Cambridge Nov 2004 24
What do we learn? At independence vertically integrated ESIs OK (?) corruption undermined management, investment hydro, geothermal hard to sell to private investors IPPs and private finance costly separate building/drilling from concession to operate? Management contract works well in Tanzania is it sustainable? Or only if it evolves into a concession? Concession for D and G looks promising takes care, time to negotiate, few potential players Donor financing still needed? D Newbery CMI Cambridge Nov 2004 25
Reforming the electricity industry in East Africa David Newbery Cambridge University CMIEP Autumn Seminar Cambridge, 6 November 2004 http:// www.econ.cam.ac.uk/electricity
Acronyms - 1 BST: Bulk supply tariff D, G, T: distribution, generation, transmission EAPMP: East Africa Power Master Plan ERB: Electricity Regulatory Board (Kenya) ESI: electricity supply industry GoK, GoU: Govt of Kenya, Uganda IFI: International Financial Institution IPP: independent power producer KPLC: Kenya Power and Light Company LF: load factor D Newbery CMI Cambridge Nov 2004 27
Acronyms - 2 MOU: Memorandum of Understanding MSD: Medium speed diesel PPA: Power Purchase Agreement OCGT: open cycle gas turbine (can run on jet fuel) SB: Single Buyer SO: System Operator REB: Rural Electrification Board SAPP: South Africa Power Pool UEB: Uganda Electricity Board VUE: value of unserved energy D Newbery CMI Cambridge Nov 2004 28