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
n
Nig
er
Ben
in
Côt
e d'
Ivoi
re
Nam
ibia
Gha
na
Leso
tho
Sou
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!