Opportunities & Challenges Presentation to Distributed Wind - - PowerPoint PPT Presentation

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The Ghana & Tanzania Power Sectors: Opportunities & Challenges Presentation to Distributed Wind Energy Association

Washington, DC February 13, 2013

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Agenda

I. Overview of USAID Approaches and Assets for Power Sector Reform II. Partnership for Growth: Overview

• III. Partnership for Growth: Ghana
• IV. Opportunities & Challenges in the Ghana Power Sector

V. Partnership for Growth: Tanzania

• VI. Opportunities & Challenges in the Tanzania Power

Sector

• VII. Discussion & Wrap-Up

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Energy is a Critical Success Factor

Energy supports multiple development objectives

• Energy for Economic Growth
• Key constraint, e.g., PFG Ghana and Tanzania
• Key competitive factor
• Failing energy sectors have large impacts in Afghanistan, Kosovo, Pakistan,

Tajikistan, Kyrgyzstan, etc.

• Energy is a key input to agriculture, education, and health

The Bulk of USAID’s Energy Program now focuses on Interagency Priorities

• At the frontline of Diplomacy, Defense, Development:
• Since 2007 support for CPC’s and Haiti has grown; energy reconstruction

is by far the largest component of USAID’s energy programming

• Global Climate Change

Energy Security is a key strategic concern for US Dept. of State’s new Energy Resources Bureau

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USAID FY 2012 Energy Spending

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Energy Spending by Country/Region/Bureau

Pakistan - $150 Million Afghanistan - $229 Million Haiti - $12.74 Liberia - $11.5 E3 - $24.1 Africa

• $20

Total: $511 Million

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Fixing Troubled Utilities

Our objective is to “turn- around” deeply troubled national electricity utilities, stop huge revenue and energy losses, and expand coverage

Government of Haiti Payments to Electricity Sector

US $ Millions 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 Transfers to electricity sector $8 $9 $15 $27 $42 $36 Total Gov of Haiti expenditures $216 $267 $374 $397 $580 $480 % of budget 4% 3% 4% 7% 7% 8%

DABM Gross Profit

(250.0) (200.0) (150.0) (100.0) (50.0)

• 2007

2008 2009 2010 2011 2012 2013 2014 2015 Million USD Base Case ICE Secretariat and AEIC

Afghanistan: Increasing Losses Projected

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A Proven Theory of Change

Sector Reform for Large Networked Utilities Technology & Management Innovation

Better Service Broader Coverage Sustainability Clean Energy Lower Cost National & Regional Infrastructure Businesses

Investment Utilities that do their job!! Donor & Partner Roles Intermediate Result End Result Grid or Off-grid, the underlying dynamic is that of a sustainable energy business.

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• 1. Based on Strategic Analysis
• Analysis of Trends &

Strategic Opportunities

• Private Sector and

Donor Partners

• Develop Policy

Options jointly with Host Country public and private sectors

• 2. Support for Sector Reform
• Regulatory capacity
• Corporatization & good

corporate governance

• Management

contracts, concessions & privatization

• 3. Commercialization
• Customer enumeration

and needs analysis

• Marketing, distribution

and business plans

• Innovations - B2B,

mobile, metering, finance

• 4. Capital Development
• Foundation: a flexible

but strategically-driven plan

• Attract private

participation when possible

• Host country

contracting when possible

• Invest in critical

systems, such as SCADA, MIS/ERP, metering, CIS, and Billing Systems

• 5. Evaluation
• Rigorous evaluations
• Analyze interim results

and adjust

• Identify and train

USAID/USG staff on best practices

• 6. Hand off To Host

Country

• Use on-budget and host

country contracting

• Establish agreements that

require sustainability

A Proven New Approach

In the new approach to energy, USAID focuses on changes needed to make investments sustainable

• Our focus will be standing

up a utility that can pay its bills, sustain services, and build new infrastructure

• Decentralized services

complement the larger grid

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Kabul Electricity Services Improvement Program Results

$56,936,170 $81,659,574

$0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000 Fiscal Year 2009 Fiscal Year 2010

50% 37%

0% 10% 20% 30% 40% 50% 60%

Fiscal Year 2009 Fiscal Year 2010 Aggregate Technical & Commercial Losses in Kabul

43% Revenue Increase in First Full Year Reduction of total electricity losses by 26%

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Example: Kabul Electricity Sector Improvement Program (KESIP) Revenue Protection Initiative

Clamp-on Ammeters to identify theft and unregistered connections PDA Smart Phone for data capture and transmission 50,000 optical port digital meters

USAID electricity sector reform programs apply innovative technologies on a large scale

Innovative Technology

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• DABS can track supply and losses to zones & feeders
• Scheduled load shedding improves quality of service
• Voltage stability improves

Example: Substation & Junction Station Grid Metering

SCADA meter Fiber Optic Communications Accurate Metering of High Voltage Panel

Original meter New meter

Application of Innovative SCADA Technology in Kabul

Innovative Technology

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Innovative Technology

Part of “eBreshna” initiative; user-friendly customer interface for billing, payment and service issues over mobile phone. Includes partnership between DABS, local telco operator (Etisalat) and two local banks (Pashtany Bank and Azizi Bank) that accept payments for DABS service.

• Delivers customer bill by SMS
• Increases number of bill

payment points

• Eliminates human data entry

errors

• Provides fast and accurate

electronic reconciliation of bank and DABS payment records

• Maximizes DABS revenue by

ensuring timely delivery of accurate bills

Cell Phone Based Billing and Account Management in Kandahar

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Partnership for Growth (PFG) Overview

• The Partnership for Growth is a White House initiative with

four countries: Philippines, El Salvador, Ghana, and Tanzania.

• In 2011, the USG, in partnership with each government,

carried out a Constraints Analysis to identify “binding constraints” on economic growth.

• Power was identified as a top constraint in Ghana (also

Credit) and Tanzania (also Rural Roads).

• In 2012, the USG negotiated Joint Country Action Plans

(JCAP) with each partner government.

• Implementation of the JCAPs for Ghana and Tanzania is to be

formally started shortly; some activities are already underway.

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PFG Ghana

• The JCAP for Power in Ghana is focused on 5 areas of

action: 1) Strategy and Planning 2) Institutional, Regulatory, and Structural Reform 3) Electricity Demand and Generation Capacity 4) Transmission and Distribution Infrastructure and Operations 5) Rural Access  The USG will bring inter-agency resources to bear, including USAID, MCC, USTDA, DOS, DOE, DOC, EXIM, and OPIC  The USG will assist in attracting private investors to Ghana

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Ghana: West Africa Overview

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Ghana: Key Information

• Political Leadership: President John Mahama (ascended at death of

President Mills, then elected in December to new term)

• Elections: Held December 7, 2012
• Population: 24.6 Million
• GDP: $37.16 Billion (2011)
• GDP Real Growth Rate: 13.6% (2011); Target 9.4% (2012)
• Budget: $10.38 Billion (2011)
• Central Bank Reserves: $4 Billion, fell 20% in 2012 (Gold, Cocoa, and Oil

are major sources of hard currency)

• Bank of Ghana Policy Rate: 15%
• Inflation Rate: 9.5%
• 5-Year GOG Bond: 26%
• 2-Year Fixed Rate Note/Savings Account: 23%

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Ghana: Power Sector Overview

• The state-owned Ghana power sector has been separated into

Generation, Transmission, and Distribution:

 Volta River Authority (VRA) is the principal generator, with 1,040 MW of hydropower capacity and interests in 700 MW of thermal generation  Grid Company of Ghana (GRIDCO) (formerly part of VRA) owns and operates the transmission system  Electricity Company of Ghana (ECG) is the main distribution company, with 2.4 million customers  Northern Electricity Distribution Company (NEDCO) (owned 100% by VRA) serves central and northern Ghana, with 400,000 customers  The Public Utilities Regulatory Commission (PURC) regulates electricity and gas.

• As the owner of VRA, GRIDCO, ECG, and NEDCO (through VRA), the GOG exerts

significant influence through CEO/MD and BOD appointments, but also derives benefits in the form of unpaid electricity bills and VAT revenue. GOG’s Ministries, Departments, and Agencies (MDAs) make up 25% of ECG’s billed revenue (and a similar proportion of NEDCO’s billed revenue) and the account is over 18 months in arrears, totaling 428 Million Ghana Cedis (approximately $225 Million at current exchange rates).

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Ghana: Interconnected Transmission System

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Ghana: Current Situation

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Ghana’s distribution system is in a serious state:

• Reported collections, as low as 88%
• GOG delays payment, accounts for

25% of ECG and NEDCO revenue

• Technical and non-technical losses

as high as 28.8% and rising

• Aggregate Technical, Commercial, &

Collections Losses for ECG are 43.48% and for NEDCO are 38.91%.

• 150 MW load shedding, ongoing
• 1,485 MW available with peak

demand of 1,748 (2011)

• Poor customer service (connection

delays, metering delays, payment difficulties)

• De-capitalization of the system.
• Mismatched Revenue & Expenses:

Foreign currency exposure accelerating downward slide

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International References

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But this situation, although severe, is not unprecedented internationally…

AES EP ESKOM UEDC AMPLA DESCO

Non-Technical Losses Before

98% 60% 70% 100% 47%

Non-Technical Losses After

1% 3-5% 4% 1-2% 9.6%

Examples of Approaches Used

• Commercial

process redesign

• Revenue

protection

• New

business processes

• Plastic meter

encasement

• AMR
• Service drop

with coaxial cables

• Commercial

process redesign

• Revenue

protection

• AMR-

InfoPOD

• Aerial

bundled & coaxial cables

• Feeder level

balancing

• Commercial

process redesign

• Revenue

protection

• Communal

metering

• Feeder and

transformer level balancing

• HR reform
• Internal

control systems

• Commercial

process redesign

• Revenue

protection

• Transverse

aerial distribution

• Placement of

LV over MV lines

• AMR
• Commercial

process redesign

• Revenue

protection

• Service drop

with ABC & secure cable connections

• Prepayment

meters

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Ghana: Gas Infrastructure

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Ghana: Thermal Generation in Operation

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Operating Thermal Generation: 1) Takoradi T1 (VRA) - 330 MW CC (State-owned (VRA)) 2) Takoradi TICO T2 IPP (VRA/TAQA) – 220 MW. This plant will be completed by a CC project of 110 MW, which USAID’s AIP is currently supporting. Financial closure of the addition expected within 6 weeks. Need for Gas T1 + T2 = 123 MMscfd (contract with N-Gas through WAGP, which USAID supported). 3) Sunon Asogli IPP (Chinese-owned) – 200 MW CC in Tema – Need for gas: 30MMscfd 4) CENIT IPP – 126 MW in Tema. Ex- GECAD project taken over by Ghana pension and insurance fund. Looking for an operator. Need for gas 30MMscfd 5) VRA Tema - 126 MW built by GECAD – State Owned – Need for gas 30

• MMscfd. CENIT and VRA Tema can be coupled for a steam addition of 125 MW.

6) Ghana Mining Companies - 80 MW in Tema – Built up from used equipment, HFO, unlikely to be ever using gas.

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Ghana: Thermal Generation in Development

Thermal Generation in Development: 1) Cenpower Kpone IPP (KIPP) 350 MW CC in Tema, which USAID is supporting through AIP. PPA and GCSA signed, sent to Parliament. Next step is for Cenpower/Infraco/AFC to introduce a new equity partner and negotiate with lenders. Need for gas 55MMscfd 2) VRA Domunli, 450 MW. A “Power Zone” will be created at Domunli, west

• f Ghana, not too far from the Jubilee gas treatment plant. VRA may

ultimately be looking for a private partner, but the information we have now is that this project is considered state-owned. Need for gas 70 MW 3) WAPP Domunli, also in the Power Zone. 450 MW. AIP is contemplating support, in continuity of USAID/AFR past assistance. Need for gas 70 MMscfd 4) Sunon-Asogli Expansion – 200 MW CC. Apparently not moving on due to lack of gas. Need for gas 30 MMscfd 5) VRA Takoradi T3- 300 MW – Currently in development, state-owned. Need for gas 50 MMscfd.

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Ghana: Medium & Large Hydropower

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Ghana: Clean Energy Opportunities

• Ghana presents numerous opportunities in clean/renewable energy:

 Hydropower: The Ghanaian and regional system is hydropower-based; GOG is favorably disposed to development of remaining sites (e.g. Juale).  Wind: 150 MW offshore wind project has been looked at by GE and Vestas; could be well-integrated with VRA’s hydropower generation (locate east of Accra, near to Akosombo).  Solar: VRA is constructing 10 MW (2 MW at 5 sites) in northern Ghana.

• The World Bank is assisting PURC in development of feed-in tariffs

for renewable energy, including hydropower to 100 MW

• Main focus of USG is on clean energy development as well as

reduction in flared natural gas associated with oil production

• USAID is a long-term supporter of the West African Power Pool

(WAPP), to promote regional electricity trade and development.

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Distribution Reform: The Imperative

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Distribution reform is a precondition for sustainability

• f the power sector…

Generation and transmission cannot achieve efficiency within a poorly functioning distribution sector.

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• Change service drops, metering & billing
• Enumerate and regularize customers
• Incentivize employees

The recovery cycle

Fact: When the UEDC was reformed, it used the same amount of electricity pre- and post- reform even though power supply increased from 0-6 hours per day to 24 hours per day.

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International References

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Several examples demonstrate important insight into the reform process… both what can be achieved, as well as what should be avoided…

Country Approach Oman Unbundling, under state ownership Jordan Privatization by divestiture Morocco Long-term concessions India, Bhawindi Private franchise Georgia (UEDC) Management contract, followed by divestiture Georgia (Telasi) Divestiture failure

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Interventions (ECG & NEDCO)

• Institutional Reform – State Company Best Practices/IPO of 15-20%
• f shares in 3-5 years
• HR/Change Management/Training/Position Descriptions &

Salaries/Promotions

• Modern IT Platform/MIS/Enterprise Resource Planning(ERP)
• CIS/Billing System/GIS/Customer Enumeration
• Commercial Improvements/Meter Reading/Anti-Theft Campaign
• Technical Loss Reduction – Feeder Replacement, Congested Area

Strategies

• Cost of Service - Rates & Revenue Department
• Corporate Communications/Consumer Services/Marketing
• DSM/Load Management/Distribution-level SCADA
• Finance/Internal Audit

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PFG Tanzania

• The JCAP for Power in Tanzania is focused on the following six

measures: 1) Establish Cost-Reflective Tariff Structure 2) Minimize Revenue Loss 3) Strengthen Legal and Regulatory Institutions 4) Improve Sector Planning 5) Increase Key Sector Institutional Capacities 6) Promote Private Investment in Power  The USG will bring inter-agency resources to bear, including USAID, MCC, USTDA, DOS, DOE, DOC, EXIM, and OPIC  The USG will assist in attracting private investors to Tanzania

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Tanzania: East Africa Overview

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Tanzania: Key Information

• Political Leadership: President Jakaya Kikwete (Note: Zanzibar has its own

President for internal matters)

• Elections: Held in October 2010
• Population: 46.9 Million
• GDP: $23.33 Billion (2011)
• GDP Real Growth Rate: 6.7% (2011)
• Budget: $6.125 Billion (2011)
• Central Bank Reserves: $4 Billion (Tourism, Gold, and Coffee are major

sources of hard currency)

• Bank of Tanzania Policy Rate: 12%
• Inflation Rate: 12.7% (2011)
• 5-Year GOT Bond: 14.8%
• 2-Year Fixed Rate Note/Savings Account: 11.6%

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Tanzania: Power Sector Overview

• The state-owned Tanzania power sector concentrates Generation,

Transmission, and Distribution in a single hand:

 TANESCO is the principal generator, with a mix of hydropower capacity (560 MW) and thermal generation (300 MW+ with own generation and IPPs under Emergency Power Plan; Songas is largest and oldest IPP)  TANESCO owns and operates the transmission system, but is dependent on multilateral development banks and donors for expansion of the transmission system  TANESCO is the main distribution company, with 700,000 customers (12% coverage); ZECO distributes power on Zanzibar. TANESCO’s technical and commercial losses approximate 24%.  The Rural Energy Agency (REA) (funded by 3% surcharge on electricity bills) is responsible for grid expansion and off-grid projects serving isolated communities  The Energy and Water Utilities Regulatory Authority (EWURA) regulates electricity.

• As the owner of TANESCO, the GOT exerts significant influence through MD and

BOD appointments, but also derives benefits in the form of unpaid electricity bills and VAT revenue.

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Tanzania: Clean Energy Opportunities

• Tanzania presents numerous opportunities in clean/renewable

energy:

 Hydropower: The Tanzanian and regional system is hydropower-based; GOT is favorably disposed to development of remaining sites (e.g. Stiegler’s Gorge).  Wind: Offshore wind opportunities exist off of Zanzibar.  Solar: Resource exists, but resource assessment and feed-in tariffs are needed.  Geothermal: Resource exists, but at very early stage of development.  Biomass: Resource exists (Bagasse); not yet developed.

• The World Bank, African Development Bank, JICA, SIDA, Norway,

and KfW, among others, are active in the Tanzanian power sector

• Main focus of USG is on clean energy development as well as

assistance to GOT to develop its offshore natural gas reserves

• USAID is a long-term supporter of the East African Power Pool

(EAPP) and the Southern African Power Pool (SAPP), to promote regional electricity trade and development.

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Contact Information

USAID/EEE/EI/Energy Team Contact: Dorian Mead Email: dmead@usaid.gov Email 2: dmead@afr-sd.org

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