opportunity Abidjan, March 21 st , 2016 Africas energy gap: The - - PowerPoint PPT Presentation

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opportunity Abidjan, March 21 st , 2016 Africas energy gap: The - - PowerPoint PPT Presentation

The African energy opportunity Abidjan, March 21 st , 2016 Africas energy gap: The costs of the divide 89 93 621 60% 60% 4/5 BILLION MILLION MILLION US dollars of Of SSAs energy Africans do not Nigerians lack petroleum have


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The African energy

  • pportunity

Abidjan, March 21st, 2016

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2

621

MILLION

Africans do not have access to electricity Of SSA’s energy is consumed by South Africa

60%

Africa’s energy gap: The costs of the divide

4/5

OF THE POPULATION (727 MILLION)

Rely on solid biomass, mainly fuel wood and charcoal, for cooking

In Africa, the poorest households spend

X20

MORE PER UNIT OF ENERGY THAN THE WEALTHIEST HOUSEHOLDS with connection to the grid

600,000

AFRICANS ARE KILLED EVERY YEAR

By air pollution caused by the use of solid biomass for cooking

2080

On current trends, it will take Africa until

TO ACHIEVE UNIVERSAL ACCESS TO ELECTRICITY

89

BILLION

US dollars of petroleum exported by Nigerian in 2013 Nigerians lack access to electricity

60%

93

MILLION

80%

OF PRIMARY SCHOOLS HAVE NO ELECTRICITY

In 9 African countries, more than SOURCE: Africa Progress Panel

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3

Key messages for you today

We are already seeing a seismic shift in the energy landscape in Africa The investment gap is massive and is a central priority for change – also, it is a key driver of innovation The fundamentals driving these shifts are expected to continue to accelerate As a result, new energy solutions are already emerging and some are delivering at surprisingly large scale There is still lots of work to do, but Africa is beyond the point of no return

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Current energy per capita varies significantly across the world

2014, World average: 79GJ/capita

SOURCE: Enerdata (2015), Historic actuals; UN Population Division (2015), World Population Prospects: The 2015 Revision. XX Average per capita primary energy consumption GJ/capita 1 2013 due to limited data

290 130 221 93 28 37 62 229 294 China Indonesia India United States European Union Ethiopia Brazil Saudi Arabia 219 Russia 113 South Africa 63 Mexico Australia 31 Nigeria 144 Japan 31 Colombia 81 Argentina

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After a 15 year drought, Africa is building new capacity, this time with more private sector engagement

SOURCE: Africa Power Plants Database - UDI

MW installed

427 719 748 739 2 691 4 166 2 199 3 720 2005 1 200 1 544 634 1 547 1 094 766 1995 2 964 2 765 318 1 629 2000 191 536 2 123 1990 504 1985 2 700 3 461 2010 3 249 2 279 3 232 1 256 3 014 521 2014

Public sector Private sector

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Gas and solar are likely to play the biggest role in the future African energy sector

SOURCE: Bloomberg; World Development Indicators; IHS Global Insight; Global Terrorism database

Evolution of energy supplied – “aggressive solar” Implied incremental capacity additions

1 2010 values are actual; 2020 to 2040 are forecasts. Figures may not add up due to rounding 2 Based on differentiated load factors by technology: coal = 80%; gas = 85%; geothermal = 80%; wind = 25%; hydroelectric = 45%; solar = 20%

Commodity slump TWh of energy1 GW of capacity2

725 1,616 2040 2030 1,079 2020 444 2010

Gas Coal Imported fuels2 Hydro Geothermal Nuclear Wind Solar

2040 161 2030 50 68 2020

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Depending on who you ask, the power sector investment requirement ranges from $30 billion to $80 billion per year

SOURCE: McKinsey African Regional Electricity Model (AREM); WEO IEA Africa Energy Outlook 2014; Africa Progress Panel 2015; Brighter Africa 2014 1 2010 values are actual; 2020 to 2040 are forecasts. Figures may not add up due to rounding; 2 IEA Africa Energy Outlook 2014 estimates; 3 Africa Progress Panel numbers are for 2015-2030

Investment in power sector p.a. USD billion Capital investment 2014-2040 USD billion Target electrification rate %

8 IEA African century case 77 IEA new policies scenario 60 Africa Progress Panel 55 Brighter Africa report 33

845 14303 1624 2084 71 100 73 85

Current annual spend

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A number of other fundamentals are driving revolution in the African energy sector

Seismic shifts in delivered electrification Increased emergence of micro scale projects, which are easier to finance Electricity increasingly becoming top priority for donor organizations Pay-Go models increasingly becoming financially viable

845 437 291 286 13 2012 14 15 New connections per year in Kenya 000s

50 MW 50 x 1 MW VS.

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And we expect to see rapid cost reduction in storage development costs as well

SOURCE: McKinsey 1 Remaining cost components refer to power control system (PCS), communication & control, ancilliary activities and service costs (bottom to top)

381 256 145 108 50 Storage installation 940 63 122 22 161 195 30 32 34 88 40 67 28 5

  • ca. 2030
  • ca. 2025
  • ca. 2020

Horizon 1: 2015–20202 11 11 2015 price Horizon 3: 2026–304 100-125 ~50 Horizon 2: 2021–253 18 17 12 Cells BMS Pack Separator Cu foil Anode Full system Full system Cathode Electrolyte Other Material Cell manufacturing Al foil Cell overhead Horizon 1 (2015-2020) Technology matures Horizon 2 (2021-2025) Continued Improvements Horizon 3 (2026-2030) Innovative technologies 381 Storage costs1 USD/kWh Pack price evolution at 70% depth of discharge USD/kWh

Material and component cost reductions Manufacturing and overhead improvements Technology improvements

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Five big challenges to increasing electricity access in Africa

  • Support cost-reflectivity & transparency in cross-subsidy reform

Domestic policy/ regulatory environment Financing

  • Stable tariff path will bring in long term financiers – pension funds etc.
  • State should only finance “social equity” type investments e.g.,

distribution grid Role of the private sector and role of the utility

  • Utility provides stable environment and credible off-taker
  • Private sector to bring in new financing, technology innovation and skills

Rural electrification

  • Ensure that the intersection between off-grid and on-grid is effectively

managed and delivered Political will

  • Commit to ensuring the necessary reforms are implemented through the

political cycle

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The opportunity is now

It is time to take decisive action and turn around the narrative: to light up and power Africa – and accelerate the pace of economic transformation, unlock the potential of businesses, and drive much needed industrialization to create jobs AfDB President - Akinwumi Adesina