The African energy opportunity - Abidjan, March 21st, 2016 - Tralac
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The African energy opportunity Abidjan, March 21st, 2016
Africa’s energy gap: The costs of the divide
621 60% 89 93
60%
4/5 MILLION
Africans do not
have access to
Of SSA’s energy
is consumed by
BILLION
US dollars of
petroleum
MILLION
Nigerians lack
access to
OF THE POPULATION (727 MILLION) exported by
electricity South Africa Nigerian in 2013 electricity
Rely on solid biomass, mainly fuel
600,000
wood and charcoal, for cooking In 9 African countries, more than
In Africa, the poorest households spend AFRICANS ARE KILLED EVERY YEAR 80%
By air pollution caused by the use of OF PRIMARY SCHOOLS HAVE NO
solid biomass for cooking ELECTRICITY
X20
On current trends, it will take Africa until
MORE PER UNIT OF ENERGY THAN THE
WEALTHIEST HOUSEHOLDS
with connection to the grid
2080
TO ACHIEVE UNIVERSAL ACCESS TO ELECTRICITY
2
SOURCE: Africa Progress Panel
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
3
Current energy per capita varies significantly across the
world XX Average per capita primary energy consumption
GJ/capita
2014, World average: 79GJ/capita
219 Russia
China
European
130 Union 93
United States 290
294 Saudi Arabia 144 Japan
India
Mexico 63 28
31 Nigeria
Indonesia
Colombia 31 221 Ethiopia 37
Brazil 62
113
South Africa
Argentina 81 Australia 229
1 2013 due to limited data
SOURCE: Enerdata (2015), Historic actuals; UN Population Division (2015), World Population Prospects: The 2015 Revision. 4After a 15 year drought, Africa is building new capacity,
this time with more private sector engagement
MW installed
Private sector
4 166
Public sector
3 720
3 461
3 249 3 232
2 964 3 014
2 765 2 691 2 700
2 279
2 199 2 123
1 629 1 547 1 544
1 200 1 256
1 094
739 748 766 719 634
536 504 521
318 427
191
1985 1990 1995 2000 2005 2010 2014
SOURCE: Africa Power Plants Database - UDI 5Gas and solar are likely to play the biggest Solar Imported fuels2
role in the future African energy sector Wind
Geothermal
Coal
Gas
Hydro Nuclear
Evolution of energy supplied – “aggressive solar” Implied incremental capacity additions
TWh of energy1 GW of capacity2
1,616 161
Commodity
slump
1,079
725
68
50
444
2010 2020 2030 2040 2020 2030 2040
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%
SOURCE: Bloomberg; World Development Indicators; IHS Global Insight; Global Terrorism database 6Depending on who you ask, the power sector investment
requirement ranges from $30 billion to $80 billion per year
77
60
55
Investment in Current
power sector p.a. 33 annual
USD billion spend
8
Brighter Africa report Africa Progress Panel IEA new policies scenario IEA African century case
Capital investment
2014-2040 845 14303 1624 2084
USD billion
Target
electrification rate 71 100 73 85
%
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
SOURCE: McKinsey African Regional Electricity Model (AREM); WEO IEA Africa Energy Outlook 2014; Africa Progress Panel 2015; Brighter Africa 2014 7A number of other fundamentals are driving
revolution in the African energy sector
Increased emergence of micro scale
Seismic shifts in delivered electrification
projects, which are easier to finance
New connections per year in Kenya
000s 845
VS.
437
286 291
50 MW 50 x 1 MW
2012 13 14 15
Electricity increasingly becoming top Pay-Go models increasingly becoming
priority for donor organizations financially viable
8And we expect to see rapid cost reduction in
storage development costs as well Material and component cost reductions
Manufacturing and overhead improvements
Storage costs1 Pack price evolution at 70% depth of discharge
USD/kWh USD/kWh Technology improvements
940
Horizon 2 (2021-2025) Horizon 3 (2026-2030)
50 Horizon 1 (2015-2020) Technology matures
Continued Improvements Innovative technologies
108 381
Other Material 12
Al foil 11 5 34
Cu foil 17
145 Electrolyte 18 30
Separator 28
Anode
Cathode 67 122
256 Cells
Cell manufacturing 40 195
11
22 161
Cell overhead 88 ~50 100-125
BMS Full system 32
381
Full system 63
Pack
2015 price Horizon 1: ca. 2020 Horizon 2: ca. 2025 Horizon 3: ca. 2030
2015–20202 2021–253 2026–304
Storage installation
1 Remaining cost components refer to power control system (PCS), communication & control, ancilliary activities and service costs (bottom to top)
SOURCE: McKinsey 9Five big challenges to increasing electricity
access in Africa
Domestic policy/
regulatory • Support cost-reflectivity & transparency in cross-subsidy reform
environment
• Stable tariff path will bring in long term financiers – pension funds etc.
Financing • State should only finance “social equity” type investments e.g.,
distribution grid
Role of the private
sector and role of
• Utility provides stable environment and credible off-taker
the utility
• Private sector to bring in new financing, technology innovation and skills
Rural • Ensure that the intersection between off-grid and on-grid is effectively
electrification managed and delivered
Political will
• Commit to ensuring the necessary reforms are implemented through the
political cycle
10The 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
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