Expert Meeting on Trade and Climate Change: Trade and Investment Opportunities and Challenges under the

Clean Development Mechanism (CDM)

27-29 April 2009

Low Carbon Energy Projects in Sub-Saharan Africa

byGovinda R. Timilsina

World Bank

"The views expressed are those of the author and do not necessarily reflect the views of UNCTAD"

Christophe de Gouvello, Felix B. Dayo, Massamba Thioye, Govinda R. Timilsina

The World BankWashington, DC

Expert Meeting on Trade and Investment Opportunities and Challenges under the Clean Development Mechanism

UNCTAD, GenevaApril 27-29, 2009

World Bank Study: Low Carbon Energy Projects in Sub-Saharan Africa

Presentation Outline

►Introduction

►Methodology

►Key Results

►Main Challenges

►Conclusions

►Discussion

IntroductionDistribution of approved CDM projects

(source: UNFCCC)

World Bank’s high priority for development in SSA includes poverty reduction, modern energy access, and integrating climate change in economic development.

6.5%4.2%CDM projects in pipeline6.8%4.1%Registered CDM projects

Until 2012 CERSNumber of ProjectsSSA Share of World Total:

Methodology

Selection of GHG mitigation option

Cost information for project

and baseline methodologies

Data, parameters and assumptions

for scaling up potential

Estimation of GHG mitigation using CDM

baseline methodologies

Investment cost curvesTechnical potential for GHG reductions at country and

regional levels

CDM Methodologies used to Estimate GHG Mitigation

ACM0012; AM0055; AMS-III.P; AM0009; AM0037; AMS-III.C,K, S

FGR, Refinery, BRT,Biodiesel – Tran

Fuels in Transport

AM0041CharcoalWood fuel for Households

MethodologyProject TypeSector

ACM0012; AM0055; AMS-III.P; AM0009; AM0037; AMS-III.K; AM0005;

FGR, Refinery, Clinker

Fuels in Industry

ACM002; ACM004, ACM007;ACM0012; ACM0013; AMS-I.A, B, C, D; AMS-II.B, C; AMS-III.Q; AM0052; AM0061; AM0005; AM007; AM0014; AM0015; AM0019; AM0020; AM0022; AM0024; AM0026; AM0029; AM0032; AM0042; AM0044; AM0046; AM0048; AM0058

CCGT, CHP (IND, SUG), Residues (AGR, F, W), Typha, Biodiesel –Elec, Hydro, LFG, EE –IND, EE –HH, CFL

Electricity supply & demand

Methodology (Cont’d)

Potential CDM Projects and Emission Reduction

# of Projects or PoAs MtCO2 Reduction

3

13

18

20

20

26

26

30

40

46

49

55

60

63

67

68

204

211

321

373

406

553

555

Landfill gas capture to energy

Methane leakage reduction

Coal mine methane

Electricity T&D loss reduction

Non-lighting electricity for industry

Waste gas recovery in oil ref inery

Hydroelectricity projects

Energy efficient appliances

Typha australis*

Clinker reduction in cement manufacturing

Compact f luorescent lamps

Flared gas recovery

Fuel sw itch

Shift to Bus Rapid Transit (BRT)

CHP for sugar mills

Improved charcoal production

Open to combined cycle gas fired pow er plant

Improved steam system

Forest residues

CHP for industry

Wood-processing residues

Agricultural residues

Biofuel from jatropha

9.0

0.7

24.7

11.3

1.4

43.4

528.6

74.4

31.0

28.4

132.7

917.6

66.2

260.2

24.4

224.8

360.8

366.4

625.8

729.4

203.4

1,408.4

3,712.0

3,227projects

total

9,785MtCO2total

Emission Reduction by Project Type

Biodiesel-Elec37.9%

Residue-Agr14.4%

Refinery0.4%

Typha0.3%Other

2.5%

Clinker0.3%

CHP-Sug0.2%

T&D0.1%

Charcoal2.3%

BRT2.7%Hydro

5.4%Residue-Forest

6.4%Residue-Wood

2.1%CFL1.4%

EE-HH0.8%

CCGT3.7%

Steam3.7%

CHP-Ind7.5%

FGR9.4%

LFG0.1%

Biodiesel – Tran0.7%

EE-Ind0.01%

Methane leakage reduction

0.01%

CMM0.3%

Current Emissions & Mitigation Potentials

Emission Reduction by Country

Other3.2%

South Africa23.4%

Nigeria15.1%

Angola5.2%

Ethiopia4.9%

Mozambique4.2%

Tanzania3.3%

Zambia3.0%

Kenya2.7% Somalia

2.6%

Congo Dem7.0%

Benin0.8%

Malawi0.9%

Mali1.0%

Botswana1.3%

Ivory Coast2.3%

Burkina0.8%

Chad1.0%

Gabon1.1%

Senegal1.0%

Guinea1.2%

CAR1.3%

Congo Rep1.2%

Sudan1.2%

Zimbabwe1.6%

Madagascar1.4%

Uganda1.6%

Cameroon1.7%

Ghana1.9%

Namibia2.2%

Value of Emission Reduction (Millions of US$)

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Methane leakage reductionNon-lighting electricity for industry

Landfill gas capture to energyElectricity T&D loss reduction

CHP for sugar millsCoal mine methane

Clinker reduction in cement manufacturingTypha australis*

Waste gas recovery in oil refineryFuel switch

Energy efficient appliancesCompact fluorescent lampsWood-processing residues

Improved charcoal productionShift to Bus Rapid Transit (BRT)

Open to combined cycle gas fired power plantImproved steam systemHydroelectricity projects

Forest residuesCHP for industry

Flared gas recoveryAgricultural residuesBiofuel from jatropha

(5US$/tCO2) (10US$/tCO2)

Total value at 5US$/tCO2: $48.9 billionTotal value at 10US$/tCO2: $97.8 billion

Potential Clean Electricity Generation and Savings

CDM Project Type Electricity Generation Capacity (MW)

Annual Generation (GWh)

Clean electricity capacity addition and energy production Landfill Gas 10 49Coal Mine Methane 109 809CHP - Sugar mill 661 3,489Typha australis 593 4,675Waste gas in oil refinery 659 5,777Wood Residues 4057 31,987Hydro 6,443 35,961CCGT Power 5,931 51,912Forest Residues 12,483 98,415CHP - Industry 17,844 156,314Agri. Residues 27,504 216,842Biodiesel - Electricity 27,748 218,767Flared Gas Recovery 44,826 353,409Total Additions 148,868 1,178,406

Electricity savings and capacity avoidance Efficient Motors in Industry 740 5,837Efficient Appliances in Households 1,412 11,131Compact Fluorescent Lamps 15,248 17,269T&D Loss Reduction 4,056 31,974Total Savings 21,456 66,211 Existing in SSA in 2006 68,675 375,496

Current Electricity Generation and Future Potential under the CDM

GHG Abatement Investment Curve

Charcoal (225)Landfill (9)

CMM (25)

Cement (28)

Jatropha (3,712) Hydro (529)

CCGT (361)

Refinery (43)

Cogen (729)

Typha Val (31)Agr. Res (1,408)

Lighting (133)

Cogen SCM (24)

Wood Residue (203)Forest Residue (626)

0

5

10

15

20

25

30

35

40

45

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000GHG Reduction in Million Tons

Inve

stm

ent R

equi

red

Per U

nit o

f GH

G R

educ

tion

Key Barriers

Financial barriers (high perceived risks)

Infrastructure and market barriers

Lack of skilled human resources

Lack of awareness and information sharing

Institutional and regulatory barriers

Strategies to Overcome Barriers

Building confidence in investment community; alternative carbon financing (e.g., WB’s CTF)

Establishment of regulatory framework (e.g., setting of feed-in tariff)

Infrastructure planning and investment for market access (e.g. transmission lines, rural roads)

Dissemination of technical and economic information on clean energy technologies (e.g., information campaigns with equipment providers)

Strategies to Overcome Barriers (Cont’d)

Strengthening skills and knowledge of local manpower on clean energy technologies (e.g., training targeting specific labor forces)

Technical assistance and R&D for efficient and sustainable resource use (e.g., modern technologies for local biomass)

Development of institutional capacity to facilitate carbon financing (e.g., CF training activities)

Potential Role of the World Bank

Continue sector policy dialogue to raise awareness about opportunities and synergyStrengthen external technical expertise Policy supports in overcoming institutional and regulatory barriers Leadership to offer multi-country coordination for larger clean energy initiatives (GGFR, interconnections, etc.)Promotion of private-sector participation (PRGs for IPPs, etc.)High priority to SSA countries in alternative carbon financing (e.g., CTF, FCPF, of the World Bank)

Conclusions

Contrary to general perception, SSA offers huge potential for CDM (the energy sector alone could host 3,227 CDM projects with project lifetime GHG reduction potential of 9,785 million tCO2).These projects could attract US$ 155 billion in investment and could produce carbon revenues of US$ 97.8 billion at price of US$10/tCO2

Approximately 150 GW of clean electricity capacity (> 2 times the current capacity) can be added, and 22 GW (> 30% of the current capacity) can be avoidedDespite the promising potential, realization is severely constrained by a long list of barriersInternational donor organizations should take the lead in helping SSA realize its CDM potential

Acknowledgement

Norwegian Trust Fund World Bank Institute All researchers and support staff involved in the project

Thank You - Merci