Speed up the energy transition in Africa

< 210 mm >< 210 mm >

Noo

r con

cent

rate

d so

lar p

ower

pla

nt in

Mor

occo

© F

abric

e Ju

quoi

s, A

FD

Agence Française de Développement

SPEED UP THE ENERGY TRANSITION IN AFRICA

Cre

atio

n: P

lane

t 7

–Mar

ch 2

016

10

-31-

1482

/ P

EFC

cer

tifie

d /

This

publ

icat

ion

com

es fr

om su

stai

nabl

y m

anag

ed fo

rest

s and

cer

tifie

d so

urce

s. /

pef

c-fr

ance

.org

< 208 mm >< 208 mm >< 208 mm >< 208 mm >


AGENCE FRANÇAISE DE DÉVELOPPEMENT

< 210 mm >

Speed an energy transition towards a more sustainable, resilient and inclusive modelIn 2014, Africa accounted for 16% of the world’s population, less than 6% of energy consumption and 3% of greenhouse gas emissions. With an average annual economic growth rate of 4.5% over the past five years, Africa is experiencing increasing demand for energy and a significant need for infrastructure to meet this demand. The continent has huge untapped renewable energy potential to achieve this (hydropower, geothermal, biomass, solar and wind energy).

Sub-Saharan Africa is also faced with a marked energy divide: over 65% of the population still does not have access to an electricity service and over 80% uses traditional fuels (wood, charcoal) for cooking. Various energy solutions can be considered to address this: extend and increase the density of grids, or decentralized solutions, in which renewable energies have an important role to play.

In this context, Africa’s energy transition will combine the development of its renewable energy potential and the development of access for all. This will result in a low-carbon growth path.

Energy: An engine for developmentThe 7th Sustainable Development Goal (SDG), adopted by the United Nations General Assembly in 2015, focuses exclusively on energy: “Ensure access to affordable, reliable, sustainable and modern energy for all”.

The 13th SDG is related to the fight against climate change. Energy is central to AFD’s climate mandate. It participates in the initiatives announced during COP21 in Paris for renewable energies and access in Africa.

Energy in Africa: Some facts and figures ■■ Over 600 million people do not have access to electricity on the continent, mainly in rural areas in Sub-Saharan Africa;

■■ The total installed generation capacity stands 28 GW in Sub-Saharan Africa, excluding South Africa, i.e. the equivalent of a country like Argentina;

■■ With an average tariff of EUR 0.17/kWh, the cost of electricity for users in Senegal is higher than in France;

■■ It is estimated that households and companies spend USD 5bn every year to compensate for the lack of access to a reliable electricity service in Sub-Saharan Africa;

■■ Conventional fuels (particularly wood and charcoal) account for over half of Africa’s primary and final energy balance;

■■ Africa has substantial energy resources: hydrocarbon reserves, strong solar and wind potential, and 10% of untapped hydropower potential in the world.

North Africa (Morocco, Algeria, Tunisia, Libya, Egypt)

100% access

North Africa (Morocco, Algeria, Tunisia, Libya, Egypt)

Very different situations on the same continent

South Africa

Sub-Saharan Africa (excl. South Africa)

85% access

South Africa

Sub-Saharan Africa (excl. South Africa)

33% access

Total installed capacity (GW) and REN penetration rate

43 GW, incl.

2.5% of REN

28 GW, incl. 21% of REN, but 1% excl. hydropower

57 GW, incl.

5.5% of REN

180 million

inhabitants

973 million

inhabitants

54 million

inhabitants

Populations and electricity access rates

< 208 mm >< 208 mm >



■■ Promoting the creation of renewable energy and energy efficiency projects (46% of the activity);

■■ Developing access to electricity in rural and peri-urban areas (13% of the activity and experiencing strong growth), by financing grid extensions or decentralized solutions via stand-alone grids or individual kits;

■■ Securing power systems (41% of the activity), by strengthening and upgrading existing transmission grids, creating new national and regional interconnections, and supporting distribution companies.

AFD also focuses on assisting in the definition of public policies and the implementation of appropriate regulatory and institutional frameworks.

AFD supports the strengthening of the governance and capacities of actors in the sector – and especially assists State-owned companies in improving their operational and financial performance.

Between 2012 and 2015, AFD’s commitments for the energy sector in continental Africa stood at EUR 3.5bn. Due to the diversity of contexts, AFD focuses its operations on three areas:

Africa: At the core of AFD’s energy strategy

Kenya © James Keogh

Strong partnership with European actorsAFD’s operations are often conducted in cofinancing with the European Union and the other donors, who are key partners for both infrastructure cofinancing and thematic reflection.

For example, under the Energy partnership between the European Union and Africa, AFD has led a series of studies which aim to demonstrate the potential of renewable energies (Renewable Energy Cooperation Programme).

Wide range of financial tools for public and private actors

AFD provides long-term financing to support the diversity of public and private actors: sovereign or non-sovereign loans for mega-projects, direct private loans, direct equity investments or via dedicated funds through its subsidiary PROPARCO, loans intermediated by local banks for smaller projects (SUNREF credit lines), support for vocational training…

The private sector already benefits from over 25% of financing and is set to play an increasingly important role.

Breakdown of financial tools for AFD Group’s energy commitments in Africa for 2012-2015

(total: EUR 3.5bn)

PROPARCO

Non-sovereign loans

29 %

12 %52 %

Sovereign loans

Grants

7 %

Over a quarter of the funds benefit private investors

< 210 mm >



Africa: At the core of AFD’s energy strategyWhile Africa has substantial potential for renewable energy generation (excluding large-scale hydropower), it still remains marginal in the energy mix. Yet in comparison with imported fossil fuels, which are costly and volatile, renewable energies today offer competitive solutions. The obstacles to their development in Africa are:

■■ Institutional: investors need to minimize transaction costs and secure the purchase of electricity produced over the long term;

■■ Financial: although the investment cost is offset by the extremely low operating costs, it is deemed to be high;

■■ Technical: the transmission and distribution grids, especially the control-command systems, are often unsuitable for absorbing intermittent energy sources.

AFD works to remove these obstacles by proposing: support for strengthening regulatory frameworks, long-term concessional loans, and the integration of “smart grid” components in projects.

Benin

Cameroon

Congo

Côte d’Ivoire

Burkina Faso

EthiopiaDjibouti

Egypt

Ghana

Guinea

Kenya

Mali

Morocco

Mauritania

Mozambique

Madagascar

South Africa

Namibia

Niger

Nigeria

Uganda

Rwanda

Senegal

Cabo Verde

Tanzania

Togo

Tunisia

Zambia

Mauritius

Types of project

Sustainable energy

Wind

Solar

Geothermal

Hydropower

Biomass/biogas

Industrial energy efficiency via credit lines

Secure energy

Power grids and companies

Vocational training

Accessible energy

Access

< 210 mm >< 210 mm >



The term “renewable energies” covers a wide range of sectors: stored or renewable, continuous or intermittent resources; technologies with varying levels of maturity; centralized or decentralized equipment, capacity ranging from a few Watts to several hundred MW.

In addition, a resource like solar energy is accessible all over Africa, whereas others are much more localized – hydropower, wind and geothermal energy sources.

The various sectors are complementary and the diversification of renewable supplies contributes to strengthening the resilience of Africa’s energy systems. Each sector involves a specific objective:

Promoting energy efficiency and demand management in the various sectors of the economyLAFD targets various types of actors in order to implement measures to manage energy consumption:

■■ The industrial sector: it sometimes consumes over half of commercial energy due to the use of obsolete and inefficient equipment. Changes in processes or marginal optimizations have an impact on climate issues, the energy bill and competitiveness. AFD targets medium-sized enterprises via SUNREF credit lines.

■■ The service sector: it covers various applications such as businesses, offices, administrations and hospitals.

■■ Municipalities, managers of public building stocks and urban services: the major issues are urban lighting, urban transport (with co-benefits in terms of air pollution and the fight against congestion), energy recovery from waste (biogas production), and heat and cold networks. AFD operates via sovereign or non-sovereign loans.

■■ Electricity companies: reduction of grid losses, demand respons, optimization of combined cycle gas-fired power plants, cogeneration.

■■ Individuals: refurbishment of residential buildings or renewal with more economical household appliances. In this case, AFD operates through public or private third parties, who handle the financing like a service company (ESCO).

Promoting the creation of renewable energy and energy efficiency projects

HYDROPOWER

Mobilize large, medium and small-scale hydropower in order to meet different needs

Mozambique © Bruno Leclerc, AFD

WIND ENERGY

Exploit the potential of coastal areas by managing the intermittent nature

SOLAR ENERGY

Harness this energy which is available everywhere and quick to deploy on a large scale and for a large range of applications

Mauritania © Didier Grébert, AFD

GEOTHERMAL ENERGY

Support the development of this sector in the Rift Valley

Kenya © James Keogh

Kenya © Jérôme Saulière, AFD

BIOELECTRICITY

Create local value by structuring agro-energy sectors

Mauritius, central Bagasse © Albioma

< 208 mm >< 208 mm >< 208 mm >< 208 mm >



< 210 mm >

© Augustin Le Gall

Reducing the energy divideAccess to electricityIn terms of access, there are wide disparities between African regions. In North Africa, the electrification rate is close to 100%, following the first programs conducted twenty years ago. However, in Sub-Saharan African countries, the average electrification rate in rural areas stands at 15%, and peri-urban areas do not systematically benefit from the electricity services provided in large cities.

AFD supports national electrification policies in order to provide as many people as possible with access to an electricity service tailored to their needs. The solutions implemented vary depending on the dispersion of homes and their distance from the grid:

■■ Small urban centers near the grid benefit from a grid extension and an increase in its density;

■■ When the villages are further away, stand-alone hybrid power plants, combined with a mini-grid, are installed;

■■ For more dispersed housing, individual solutions such as micro-solar kits or cable solar kits are more appropriate.

Domestic fuels and local biofuelsWood and charcoal are the most frequently used fuels in Africa’s rural and suburban areas. AFD finances forest or plantation management projects to supply fuel to cities.

It is also active in structuring biofuel sectors, by ensuring they are complementary with agricultural policies and that the supplies are sustainable.

Strong commitment to rural electrification in Morocco AFD has provided EUR 250m of support to Morocco’s PERG program, the largest rural electrification program in Africa. In twenty years, the electrification rate has risen from 18% to 99%.

Innovative access modelsAFD is financing access to electricity in Kenya with the public operator (hybridization of small-scale power plants), and supports the development of innovative arrangements mobilizing the private sector in partnership with DFID. PROPARCO, via the FISEA investment fund, has provided EUR 5m of support to the Energy Access Ventures Fund, a fund that invests in SMEs which promote solutions for access to energy in Sub-Saharan Africa.

In East Africa, an innovative electrification model, using an individual solar kit and based on payment by mobile phone, is currently being developed (pay-as-you-go) by private operators. AFD Group is working to extend this model to West Africa.

© Laurent Weyl

< 208 mm >< 208 mm >




Securing electricity systems

Strengthening national power grids and supporting electricity companiesIn certain Sub-Saharan African countries, in some cases, less than half the electricity produced is paid for due to losses – technical and non-technical (illegal connections, absence of meters) – and the non-payment of bills.

In the context of rehabilitation operations, AFD finances the replacement of obsolete equipment and technical assistance in order to improve commercial and financial management.

Furthermore, with electricity demand increasing by 5 to 10% a year in a number of regions, it is necessary to strengthen and extend existing lines with new infrastructure (for example, by creating loops between several lines), in order to develop access to electricity and secure the supply.

Africa’s challenge lies in the coordinated transformation of generation systems and power transmission and distribution grids. Grid upgrading is an important issue in order to integrate decentralized generation and ensure there is a dynamic demand management. Tariff setting and bill collection are other important issues to ensure the equilibrium of the sector.

Development of regional interconnectionsRegional interconnections make it possible to transfer the power generated by large dams, for example, pool the electricity produced, and secure the supply. AFD has supported and is supporting several flagship projects in East and West Africa.

Grid upgrading by introducing smart gridsA first stage for a country with a defective power grid involves installing a reliable and comprehensive control-command center, and introducing automation on certain systems in order to optimize power transmission and distribution. The gradual deployment of smart grids provides a response to several core concerns for electricity companies: reduce technical and commercial losses and power cuts, stabilize the grid, add intermittent renewable energy capacity, and mitigate peak demand.

Vocational training: A major issue for Africa In addition to the capacity strengthening provided by each project, at national and regional level, AFD works to structure vocational training in sustainable energy activities. For example, it is financing centers in Morocco (IFMEREE) and Nigeria and, more generally, is supporting the Association of Power Utilities of Africa (UPUA).

Grid extension works in Burkina Faso © SONABEL

Substation allowing the electricity interconnection with Zambia © AFD

< 210 mm >


5 rue Roland Barthes 75598 Paris Cedex 12 – France Tel. +33 1 53 44 31 31 Fax +33 1 44 87 99 39 www.afd.fr

SUSTAINABLE DEVELOPMENT DEPARTMENT

Sustainable Transport and Energies Division

PRIVATE SECTOR, BANKS AND LOCAL AUTHORITIES DEPARTMENT

Financial Institutions and Private Sector Division


Agence Française de Développement (AFD), a public financial institution that implements the policy defined by the French Government, works to combat poverty and promote sustainable development. AFD operates on four continents via a network of 72 offices and finances and supports projects that improve living conditions for populations, boost economic growth and protect the planet. In 2015, AFD earmarked EUR 8.3bn to finance projects in developing countries and for overseas France.

Cre

atio

n: P

lane

t 7

–Mar

ch 2

016

10

-31-

1482

/ P

EFC

cer

tifie

d /

This

publ

icat

ion

com

es fr

om su

stai

nabl

y m

anag

ed fo

rest

s and

cer

tifie

d so

urce

s. /

pef

c-fr

ance

.org

Wind farm in Kenya © Jérôme Saulière, AFD

The French Facility for Global Environment / Fonds Français pour l’Environnement Mondial (FFEM) is a bilateral public fund initiated by the French Government in 1994. The FFEM secretariat and its financial management are entrusted to Agence Française de Développement (AFD). FFEM co-finances projects that encourage the protection of the global environment in developing countries. Its co-financing is exclusively via grants and is used for the implementation of pilot projects that combine environmental protection and economic development in the recipient countries. FFEM is an influential strategic instrument for the French policy on Official Development Assistance regarding global environmental protection. Its activities focus on the topics of biodiversity, international waters, climate change, land degradation and desertification, persistent organic pollutants and stratospheric ozone layer. By the end of 2014, FFEM had co-financed 275 projects with EUR 317m. Two-thirds were earmarked for sub-Saharan Africa and the Mediterranean.

www.ffem.fr - [email protected]

PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals . It s financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

www.proparco.fr

Agence Française de Développement https://www.facebook.com/AFDOfficiel

@AFD_France https://twitter.com/AFD_France

Agence Française de Développementhttps://www.youtube.com/user/GroupeAFD

Speed up the energy transition in Africa

Documents

Transcript of Speed up the energy transition in Africa