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Commitment of the African Development Bank in the Renewable Energy Sector

The Role of the Private Sector Department of the AfDB

Youssef ArfaouiRenewable Energy Expert

Sustainable Biofuel Development in Africa – Opportunities and ChallengesJuly 30 - 1st August 2007 –Addis Ababa

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. Introduction - Bio-Fuel Development

. Focus Areas of OPSM - Renewable Energy

. Rationale for interest in Renewable Energy

. AfDB Commitment, Role and Intervention

. Conclusion

Outline:

Existing capacity end-2004 Power generationSmall hydropower 61 GWWind power turbines 48 GWBiomass power 39 GWGeothermal power 8.9 GWSolar PV, off-grid 2.2 GWSolar PV, grid-connected 1.8 GWSolar thermal power 0.4 GWOcean (tidal) power 0.3 GWTotal renewable power capacity 160 GWHot water/space heating  Biomass heating 220 GWthSolar collectors for hot water / heating (glazed) 77 GWthGeothermal direct heating 13 GWthGeothermal heat pumps 15 GWthHouseholds with solar hot water 40 millionBuildings with geothermal heat pumps 2 millionTransport fuels  Ethanol production 31 billion litres/yearBiodiesel production 2.2 billion litres/year

In 2004, the power generated by RE was around 160 GW.

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

Country Ethanol (Billion liters) Bio-diesel (Billion Liters)

Brazil 15 ----

United State 13 0.1

China 2 ----

Germany 0.02 1.1

France 0.1 0.4

Italy --- 0.35

Canda 0.2 -----

Thailand 0.2 -----

Spain 0.2 -----

Denmark --- 0.08

Czech Republic --- 0.07

Australia 0.07 -----

World Total 31 2.2

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Estimated Job creation by developing RE-projects

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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

The Middelgrund wind farm – Copenhagen - Denmark

30 MW hydropower - Tunisia

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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.

The reasons, the AfDB has chosen to focus on RE:

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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

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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

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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)

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The Current ADB Investments in Renewable Energy (OPSM)

Madagascar: Small Hydro 15 MW – Euro14 M

Uganda: Bujagali Hydro 250 MW – Euro120 M

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Identified RE - Capacity  Applied Technology and Capacity (MW)  

Country Wind Hydro Cogen Bio-Fuel Waste to Energy Geothermal Total

Djibouti           45 45

Eritrea           15 15

Ethiopia     64     50 114

Kenya 600 30 77     280 987

Madagascar 20 220   NA     240

Malawi   8         8

Mali 1,2           1,2

Namibia 40           40

Rwanda   5         5

Senegal 20           20

South Africa 140     NA     140

Sudan     86       86

Swaziland     135       135

Tanzania   5 23     31 59

Tunisia 100           100

Uganda   35 25     60 100

               

Total 921,2 283 346 0 0 371 1921

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• 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

Development and deployment of RET:

Objectives – and Strategic Plan 2005 - 2010 of the OPSM:

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• 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

RET projects can benefit from the CDM- Carbon Trade facility. The present cost of tCO2 is around Euro

12. (Emission Reduction)

As guidelines to investors planning investment in RET projects, the

Power Generation Costs in 2002 and the projected for 2010 are as follows:

  Capital costs(US$/kW)

Low-side generationcosts(Cents/kWh)

High-side generationcosts(Cents/kWh)

Low-side generationcosts 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

Source: IEA 2003

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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

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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

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For further information:

Youssef ArfaouiRenewable Energy ExpertPrivate sector Department

y.arfaoui@afdb.org

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Thank you