Commitment of the African Development Bank in the Renewable Energy Sector

1. Commitment of the African Development Bank in the Renewable Energy Sector The Role of the Private Sector Department of the AfDB Sustainable Biofuel Development in Africa – Opportunities and Challenges July 30 - 1st August 2007 –Addis Ababa YoussefArfaoui Renewable Energy Expert

2. . Introduction -Bio-Fuel Development. Focus Areas of OPSM - Renewable Energy . Rationale for interest in Renewable Energy . AfDB Commitment, Role and Intervention. Conclusion Outline:

3. Existing capacity end-2004 Power generation Small hydropower 61 GW Wind power turbines 48 GW Biomass power 39 GW Geothermal power 8.9 GW Solar PV, off-grid 2.2 GW Solar PV, grid-connected 1.8 GW Solar thermal power 0.4 GW Ocean (tidal) power 0.3 GW Total renewable power capacity 160 GW Hot water/space heating Biomass heating 220 GWth Solar collectors for hot water / heating (glazed) 77 GWth Geothermal direct heating 13 GWth Geothermal heat pumps 15 GWth Households with solar hot water 40 million Buildings with geothermal heat pumps 2 million Transport fuels Ethanol production 31 billion litres/year Biodiesel production 2.2 billion litres/year In 2004, the power generated by RE was around 160 GW.

4. Ethanol and Bio-Diesel Production - Top12 Countries, 2004 (Billion liters)

5. Estimated Job creation by developing RE-projects

6. OPSM Focus area: The Private Sector Department of the AfDB focuses mainly to develop (a) the wind energy area and (b) the small size hydropower – And (c) the bio-fuel, (d) Geothermal, (e) Co-generation 30 MW hydropower - Tunisia The Middelgrund wind farm – Copenhagen - Denmark

7. The reasons, the AfDB has chosen to focus on RE: • RE addresses the needs and contributes to improve living standards of the rural poor • RE is in line with the Strategic Plan of the ADB for Infrastructure, that considers RE as one of the pillars of sustainable development • RE is an untapped natural resource in Africa • RE is Suitable for the Rural Areas and decentralised power supply • RE is Environmentally friendly • RE is affordable compared to other fossil fuel resources • Significant increase in employment opportunities, mainly in rural areas.

8. Commitment of the OPSM of the AFDB is to: “Develop and promote the Application of RE” Example: The wind energy application in Africa. OPSM has initiated the wind energy study for Africa, with the objectives to identify the main barriers, such as: • Legal and regulatory • Economic and Financial • Technical • Limited local capacity

9. If the biofuel market is to be developed as Bankable projects and exploited efficiently, the following has to be developed: • The legal frame / policy has to be prepared and approved • Off-taker agreements has to be negotiated (probably standard version) • Concession has to be clarified • Feed-stock agreements and security has to be negotiated • Environment policy related to the bio-fuel production and application has to be prepared / developed

10. The Current ADB Interventions in promoting the use of Renewable Energy • Morocco: Solar/Gas Thermal Power Station (250 MW, 30 MW Solar) (EUR 200 Mio) • Egypt: Solar/Gas Thermal Power Station (120 to 150 MW)

11. The Current ADB Investments in Renewable Energy (OPSM) • Madagascar: Small Hydro 15 MW – Euro14 M • Uganda: Bujagali Hydro 250 MW – Euro120 M

12. Identified RE - Capacity

13. Development and deployment of RET: Objectives – and Strategic Plan 2005 - 2010 of the OPSM: • Raising the interest of private sponsors and other potential investors of the potential of RE and existing opportunities in Africa • Mobilizing required funds for project preparation • Performing feasibility studies and developing most promising RE projects

14. RET projects can benefit from the CDM- Carbon Trade facility. The present cost of tCO2 is around Euro 12.(Emission Reduction) • Therefore The OPSM’s objective is to Assist the investors to prepare all necessary documentation to qualify RE projects to benefit from the Carbon Trade Facility

15. Capital costs (US$/kW) Low-side generation costs (Cents/kWh) High-side generation costs (Cents/kWh) Low-side generation costs by 2010 (Cents/kWh) Small hydro power 1,000 - 5,000 2 - 3 9 - 15 2 Solar PV power 4,500 -7,000 18 - 20 25 - 80 10 - 15 Concentrating solar power 3,000-6,000 10 - 15 20 - 25 6 - 8 Bio- power 500 -4,000 2 - 3 10 - 15 2 Geothermal power 1,200 -5,000 2 - 5 6 - 12 2 - 3 Wind power 850 -1,700 3 - 5 10 - 12 2 - 4 As guidelines to investors planning investment in RET projects, thePower Generation Costs in 2002 and the projected for 2010are as follows: Source: IEA 2003

16. In order to allow the OPSM of the AfDB to support and participate in financing RE projects, the following conditions have to be fulfilled: • The contractual arrangements are in place • The project has to be developmental oriented • The project is technically feasible • The sponsors have the required financial and technical capacity to run the project • The project is financially and economically viable • The regulatory framework is favourable for Renewable Energy projects • The project has a reasonable size

17. Conclusions • Renewable energy is an appropriate response to the needs of the poor / grassroots in Africa • The major areas of focus are: • Cogeneration • Geothermal • Hydro power • Wind energy • The New area of consideration is: • The Bio-fuel development/investment The Bank (OPSM) offers: • Flexible and tailor made instruments • Support to sustainable projects, through financial and technical assistance and institutional capacity building programs

18. For further information: Youssef Arfaoui Renewable Energy Expert Private sector Department y.arfaoui@afdb.org

19. Thank you