The Electrification of Africa: Problems and Solutions

1. The Electrification of Africa:Problems and Solutions NS4054: Energy Security Major Brandon Brown Major Michael LeBrun Capt Ellen Canup LT Gregory Seitz

2. Overview • Introduction • Problems • Case Studies • Ethiopia • Nigeria • South Africa • Solutions • Conclusion

3. Introduction • Energy Poverty in sub-Saharan Africa (SSA) • Access to Electricity: 32% (Overall); 94% in Northern Africa • Rural Areas: 10% (Average) • Extremely Poor or Post-Conflict Areas: < 5% • Power Generation Capacity of SSA • Overall: 68 gigawatts • Less: South Africa • General Energy Poverty Problems/Concerns • A Major Impediment to Economic and Social Development • Health and Safety Concerns = Spain’s capacity = 28 gigawatts

4. Challenges for African Electrification • Governance • Infrastructure Issues • Environmental Constraints • Terrorism

5. Governance Challenges • Poor Governance and the Resource Curse • Many SSA Nations Blessed with Abundant Natural Resources • Patron-Client Relationships Leaves No Personal Incentive to Re-Invest Resource Rents into Development or Modernization!! Correlation Between Failed States Ranking to Electrification Rates Correlation Between Energy Development and Human Development

6. Energy Sector Challenges • “Africa suffers from a pronounced [energy] infrastructure deficit…” • Exorbitant Costs Associated with Access and Modernization • “Not only is power in short supply, but it is also extremely costly.” • 3 times more expensive • Financial Requirements • World Bank Findings • Investment Challenges

7. Environmental Challenges • Environmental Constraints • Water Scarcity • SSA Reliance on Hydropower Energy • Droughts • Power Deficits

8. Terrorism Challenges • “Electricity infrastructure is increasingly becoming a preferred targets…” • More prevalent in Northern Africa • Targets of Opportunity in SSA • Nigerian Rebels in the Niger-Delta (MEND) • Boko Haram • Al Shaabab

9. Case StudiesEthiopia and Nigeria

10. IntroductionNigeria & Ethiopia • Energy Resources • Countries With vs. Countries Without • Impacts on Electrifying Africa • Political • Economic • Social • Environmental

11. Introduction: Nigeria & Ethiopia

12. Background: Ethiopia • Population: 99 Million • Economy: $144.6 billion (10.3% Growth) • Minimal Production of Oil and Natural Gas • 172 out of 187 Countries on the HDI • Access to power: 26.6 % of the Population • Urban: 100 % • Rural: 7.6 %

13. Ethiopian Power Production • Electricity generation at 2,145 MW • 9.6% fossil fuel • 88.7% hydro • 1.8% other renewables • Exports 60 MW to Djibouti; 120 MW to Sudan • The Growth and Transformation Plan designed to increase capacity to 8,000 MW • 7 * hydroelectric projects • 2 * wind power projects

14. Ethiopian Power Consumption • Demand at 2,500 MW • Expected to Increase to 13,000 MW by 2030 • Only half of the population is located geographically close to the electricity grid • Traditional biomass for household cooking accounts for 89% of total domestic energy consumption

15. Ethiopian Power Issues • Hydropower Project at Lake Tana, the source for the Blue Nile • Threatens Egypt’s rights to the Nile • The Nile Waters Agreement of 1959

16. Background: Nigeria • Africa’s Largest: • Population: 181 Million • Economy: $1.049 Trillion • Exporter of Oil and Natural Gas • 153 out of 187 Countries on the HDI • Access to Power: 55.6 % of the Population • Urban: 83.6 % • Rural: 34.4 %

17. Nigerian Power Production • Oil and Natural Gas • Mainstay of the Country’s Economy • 75% of government revenue • 95% of total export revenue • Pollution Contributing to Damaged Air, Soil, and Water Resources • Vulnerable to Drop in Crude Oil Prices

18. Nigerian Power Production • One of the Lowest Rates of Electricity Generation: 6,090 MW • 65% fossil fuel • 33% hydro • 1% biomass and wind • Poor Maintenance of Facilities • Inadequate Transmission and Distribution Networks

19. Nigerian Power Consumption • Electricity Demand at 10,000 MW • CA: 37 Million People / 60,000 MW • Load Sharing, Blackouts, and a Reliance on Private Generators • Shortage in Natural Gas for Domestic Use • Plans to Increase Hydroelectricity Generation Capacity to 5,690 MW

20. Nigerian Power Issues • Money Talks • Reliance on Resource Rents = Political Instability • Hydropower: • Pro: Moves away from biomass • Con: Displacement of Society • Zungeru Hydroelectric Project

21. Case StudySouth Africa

22. Household Electrification Country Est. population (m) % access Angola 12.7 5.0 Botswana 6.2 22.0 D.R Congo 50.95 6.7 Lesotho 2.1 5.9 Madagascar 15.4 11.1 Malawi 11.0 5.0 Mauritius 1.2 50.0 Mozambique 17.6 5.8 Namibia 1.7 20.2 South Africa 42.3 66.0 Swaziland 1.0 20.0 Tanzania 33.7 10.5 Zambia 10.0 18.0 Zimbabwe 11.9 20.0 Average 20.75

23. Background • Combination of grid and non-grid (renewable) electrical sources • Public/private venture between DoE and Eskom • Eskom achieved 35% electrification during the 1980s • >5.2M homes and 12,000 schools connected between 1994-2010 • 46,000 homes, 12,000 schools, and 345 clinics provided with non-grid power between 2002-2010 • Backlog of 3.4M households as of 2014 • Power programs address energy needs of rural customers but also: • Poverty eradication • Sustainability • Stimulate economic development

24. Funding Sources Eskom Connections Infrastructure Grid Electrification Municipalities Connections Infrastructure Fiscal Independent Contractors Non-grid Electrification Municipalities

25. Financial Constraints • Multi-year funding required • Financial accounting and auditing plans • Common technology and IT platforms • Sufficient manpower for electrification projects • Engineers and contractors in short supply • Establish national and regional technical standards • Electrification projects need to be QA’d against these standards

26. Political Constraints • Shortage of qualified engineers and contractors, especially in rural areas • Bureaucracy • Lack of existing or dilapidated infrastructure for new projects • Escalating costs: base metals and remote areas • Backlog due to rate of new homes outpacing electrification efforts • Criminal element (theft, vandalism, illegal connections, bypassing meters, etc) • Lack of enthusiasm/support for non-grid projects

27. Non-Grid Electrification • Primarily remote areas • Far from existing grid supply or difficult terrain • Easier to establish local renewable supplies • 46,000 solar home systems (SHS) installed since 1994 • Customers need to be informed about the technology • Mass deployment required for efficiency and acceptance • Multi-year funding including financial commitment from customers • Free Basic Electricity (50 kWh per month) for poor households

28. Challenges • Rural electrification does not make commercial sense: socio-economic responsibility • Requires large investment of capital • Impossible to recover operation costs in most projects • No maintenance required • New technological developments do not always lead to new projects • Pilot programs may not be suitable for mass deployment

29. South Africa: Way Ahead • Effective electrification requires long-term commitments from governments, communities, and industry • Part of critical infrastructure: service vice commercial venture • Non-grid/renewable supplies are high maintenance and high cost • Electrification is a long-term investment for development and stability • Power supplied to all bordering countries

30. Solutions

31. Future: Increasing Demand • Energy demand in sub-Saharan Africa is currently very low – at 570 million tons of oil equivalent (Mtoe) – but there are several factors pointing towards potentially rapid and prolonged growth: • Strong economic expansion • Increasing urbanization • Industrialization and modernization • Burgeoning middle class in many countries • Legacy of unmet energy demand

32. Outlook for Governance in Energy • Angola, Cameroon, Ethiopia, Ghana, Kenya, Rwanda and South Africa, have national energy strategies, but the time horizon often varies (typically from five to twenty years)as does the extent to which they are regularly updated or systematically implemented • Ethiopia, Ghana and South Africa have a relatively integrated set of energy policy documents. In some cases, energy or sectoral strategies are part of broader strategies designed to boost economic development or reduce poverty, such as in Rwanda • Mozambique (natural gas master plan), Nigeria (gas and renewables master plans), and Tanzania (power system master plan) are characterized more by strategies or plans for particular sectors • Most countries have electricity access targets and policies in place, but fewer have objectives and approaches related to clean cooking

33. Infrastructure Options Notes: Costs could vary significantly depending on electricity tariffs, population density and the delivered cost of diesel. The quality of service for the different technologies also varies: additional investment in batteries or back-up power may be needed to compensate for the variability of renewables or intermittent grid supply. O&M = operation and maintenance.

34. Future of Oil Oil has been central to Nigeria’s modern history, but for many the large revenues have not been translated into tangible socio- economic benefits

35. Country Specific Plans • Mali plans to increase hybridization of its mini-grids by adding PV capacity to diesel power plants • Tanzania’s Rural Electrification Agency also favors hybrid diesel-PV systems for remote areas that are expected not to be connected to the main grid before 2020 • Namibia is exploring the option of using barges with power plants to help plug an electricity shortage that may reach 300 megawatts in the next two years, Finance Minister Calle Schlettwein said. The government is also considering coal, gas and solar projects

39. China’s investments in SSA has grown 40-fold since 2003 and its state-owned enterprises have been able to roll out projects quickly and in every country on the continent, primarily building things like hydroelectric dams on the Nile, highways to oil regions and railways to carry iron ore. • China’s government joined with the African Development Bank to create the $2 billion Africa Growing Together Fund • U.S. development in Africa has been private-sector driven and concentrated in just a few countries including Liberia, Mauritius and South Africa. In August 2014,U.S. companies pledged $14 billion in investments  In 2013, the U.S. began the Power Africa initiative to build electricity grids and generators across six countries by working with African companies and U.S. partners that have top-of-the-line technology, including General Electric, and offering $7 billion in financial support and loan guarantees. But by the time of Obama’s 2015 trip to Africa, Power Africa projects had not delivered any electricity.

40. IEA Scenario Based Projections

43. Addressing Corruption in the Energy Sector • Transparency International’s 2014 Corruption Perception Index, 60% of African countries fell outside the top 100, suggesting that corruption across the continent is inescapable • Competition and interaction between a variety of state and non-state stakeholders, and decision making can be heavily influenced by domestic politics and geopolitical considerations when significant public funds are being spent

44. Conclusion • The successful development of the energy sector will be a crucial factor in determining the pace of economic and social development in Africa • Understanding and guiding the directions in which Africa’s energy sector is set to develop is therefore essential for policymakers and investors

45. Summary • Introduction • Problems • Case Studies • Ethiopia • Nigeria • South Africa • Solutions • Conclusion

46. Questions?

47. Back-Up Slides

48. Energy Development Link to Human Development, 2011 Source: For Human Development Index data, United Nations Development Program, For Energy Development Index data, http://www.worldenergyoutlook.org/resources/energydevelopment/theenergydevelopmentindex. SSA Nations Return

49. Failed States and Electrification Rates, 2009 Sources: Electrification rates as of 2009 from the IEA database in World Energy Outlook 2011. Failed States Index as of 2012 from Foreign Policy and the Fund for Peace. SSA Nations Return