Renort No. 3.51-MAS

Maauritius: Issues and Ontionsirgthe Er, yS Seo, r F!Lu Co)PY

11 I Li J LI- El i PC y JI-Yq~~Lk.I 4.LJ Ja

December 1981

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_-_ of the )oinf UNrii/Wn; - - C> ztor ,' -. : .This documert has a restricted .iirIL!41o1n tis contents may noi be uiscloUsewithout authorization from the Government, the UNDP or the World Bank.

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CURRENCY EQUIVALENTS

Calendar 1980 - US$1 = Mauritian Rupees (Rs=) 7=69January 1981 - US$1 = Mauritian Rupees (Rs.) 8.04

The Mauritian rupee is pegged to the SDR, at a rateset on Octnhpr 23 1Q7Q of Rs= 10 - SDR1.

FISCAL YEAR

July 1 - June 301

ABBRDEVITTA-rTnS AMND ATh RON'Q

COM Government of Mauritius

MEPD Ministry of Economic Planning &Development

MFPE Ministry of Fuel, Power & EnergyCEB Central Electricity Boardtoe ton of oil equivalentCWh L Imilll[IIon UWd L L-Kthours

BC Base Case ScenarioAEP Accelerated Energy Program

Energy equivalents anrd conversion factors are listedin Annexes I and II.

This report is based on the findings of an energy sector assessment missioncomprising Messrs. M. Ahmed (Economist) and I. Tuncay (Electric Power Engineer)who visited Mauritius in November 1980. Mr. C. Collins (Consultant) andMs. S. Baile (Researcher) assisted in the report's preparation. The reportis one of a series being carried out under the Joint World Bank/UNDP EnergyAssessment Program.

FOR OFFICTAT, U1SF ONLN

Report No. 3510-MAS

MAURITIUS

ISSUES AND OPTIONS IN THE ENERGY SECTOR

December 1981

This is one or a series or reports of thle Jo'Unt ULNDJr/Wuorl BLank

Energy Sector Assessment Program. Finance for this work has beenprovided, in part, by the UNDP Energy Account, anu the work hasbeen carried out by the World Bank. This report has a restricteddistribution. Its contents may not be disclosed without authori-zation from the Government, the UNDP or the World Bank.

TAKBLE OF CONTENTS

Page No.

I. SUMMARY AND MAJOR ISSUES .....................................

Country Situation ................................ 1Energy Sector Overview ............................. 2

II. ENERGY SECTOR DEVELOPMkNT .................................... 6

Resource Overview ........ .......................... 6Consumption Overview ....... .......................... 6Petroleum .................................................... 11

Exploration ................................................ 11Consumption ................................................ 11Supply .................... 13Pricing .................... 14

Electricity .................................................. 15Consumption ................................................ 15Supply ..................................................... 17Diesel Power ............................................... 18Hydro Power ................................................ 18Purchases from the Sugar Estates ..... ...................... 19Pricing .................................................... 20

Coal ....................................................... 23Renewable Energy Resources .... . ......................... 23

Solar ...................................................... 23Wave Energy ................................................ 24Wind Energy ................................................ 24Biomass ... 24

III. ENERGY OUTLOOK 1981-1990 .................................... 25

Overview ........................... .......................... 25Methodology and Assumptions ............... .. ................. 26Options for the 1980's ..................... 27

Increased Use of Hydro Power ...... ........................ 27Increased Electricity Generation from Bagasse .............. 28Electricity Generation from Coal ............ .. .............. 29Substitution of Gasoline by Ethanol .......... .. ............ 30Expansion of Non-Conventional Energy Development ........... 31Energy Conservation and Demand Management ....... . . . . eez 31

Summary of Projections ................... .................... 32Institutions and Planning ........ 34

TA-RLE OF CONTENTS (cont'd)

Page No.

IV. ENERGY SECTOR INVESTMENTS .................................... 36

Public Investment Program .................................... 36AAA._.t1tv. L TnveLstmn R.. .......................... '

Bagasse Electricity Scheme ................................. 37C-oal- Fired 'lower Station .................................................... 38

The Petroleum Refinery ..................................... 39

A %ThTfl UntLj.NIN £ At.I D

BMnlex I: lVonLversion rFactors: MetodlUogy and LA.LL1n

Annex II: National Energy BalanceAnnex III: Technical Assistance Requirements for Energy

Planning UnitAnnex IV: Electricity Tariff Growtn, 1975-80Annex V: Petroleum Product Prices and Rates of Duty for

Petroleum Product ImportsAnnex VI: Other Projections of Energy Requirements

MAPS

Mauritius (IBRD Map No. 15592)

SUMMARY AND MAJOR ISSUES

I. COUNTRY SITUATION

1.01 Mauirit4iu i4 a smqll and denselv nonplated 4sland. Depnite exnan-sion of other sectors since the 1970s, the economy remains dominated by sugarpnrnoidtion for p,cnort-. Fore4in trade i8 therefore of vital imnortance -

merchandise exports amount to about 50% of GDP - and the economy is essentiallyan open one with few direct reRtrictions on trade. With a ner canita GNP of

US$1,040 in 1979, Mauritius enjoys the standard of living of a middle income

country. Basic needs are substantially covered through Government programsalthough about 12 percent of the island's population of one million people

still1- live in abDsolute poverty.

1.02 C4nce independence in 19968 tIhe o0vaernment has sought to lay the

basis for the diversification of the economy by encouraging tourism, tea_.~jall.4_von anur4 SA @ he.@ e1stablishent of iAus a nit F inon an exor 4resno

LU±L L. LJ.tJ aV ant.U WI. I0 .a k _J-- LU V S % t.s SLflSO .tkL0& x Afl VAF L r -.-- e,

zone (EPZ). Helped greatly by the world sugar boom, this strategy had con-

siderable success until a few years ago. Economic growth averaged 7.3

percent annually between 1970 and 1977; employment growth was sufficient toh.alv e unemployment rates a.- there w as a moderate expar .sion inLS theL q ufIM

exports.

1.03 In recent years, however, severe economic difficulties have emerged.Tne colia-pse of worlU sugar priLces iLn 1976, the slowdown -In Le growth of EPZ

exports and a sharp increase in the price of oil and other imports havecombined to prouuce a rapLu deterioration ir. the Ualar.ce of paynts. As a

result, the current account deficit has grown substantially and is expected to* 4 liflOl I..~.*.. .- IL ..C fnn ",_ C.:_reach $160 miliion in FY81, equivalen; toL 14 pecetL;CLI ofL G. To LfLinar.Le t

gap Mauritius has had to resort to increasing amounts of non-project debt on

hard terms. Wnen this is combined wi'UthUW the dLebUt requiLredu to iInanLce the

public sector investment program, the resulting projected increase in debtservice ratios is sucn that if. not controlled the leveLs couldU become unten

able by the mid-1980s. Internally, the fiscal deficit remains extremely high

(14 percent of GDP) due to nigh public current arid capital expendItures (40percent of GDP).

1.04 The Government has become increasingly aware of these problems andhas formulated a comprehensive pLUgLamU of adjustments Lto Udeal wih tem. O

the basis of this program it has obtained a structural adjustment loan from

the Bank. 1/ Tne key elements of this program are to maintaIn an annual

economic growth rate of about 3.5 percent for the next few years and toreduce the external deficit on the current account to about 8 percent of GDPby FY85 in an attempt to keep the debt service ratio below 15 percent innormal years. This strategy wiii require restructuring ana reorientinginvestment to more productive sectors; restricting the growth in public and

1/ This loan complements the assistance being provided by the IMF in theform of a SDR 31.3 million Compensatory Financing Facility.

private consumption; and reducing the size of the public investment program

relative to GDP. it will also require a series of supply side measures to

strengthen and diversify the export production base while promoting fuller

exploitation of the economy-s import substitution potential. Developments in

the energy sector will have a crucial bearing on the success of these efforts.

Indeed the Governments proposed program of structural adjustment has already

taken into account some of the institutional recommendations made by this

mission. 1/

II. ENERGY SECTOR OVERVIEW

1.05 Mauritius primary energy requirements are met in rougtly equal pro-

portion from indigenous bagasse and imported petroleum, but these two sources

are used in very different ways. Bagasse, a by-product of the sugar industry,

is used almost exclusively to meet the energy needs of that industry and

its contribution as a direct energy source to the rest of the economy is at

present negligible. The energy requirements of the economy, excluding the

sugar sector, are met primarily (90 percent) from imported petroleum products

supplemented by a small amount of hydro-electricity and coal.

1.06 The crux of Mauritius- energy problem is the rising cost of these

petroleum imports. Although less than 186,000 toe in 1980, they absorb 7

percent of GDP and 16 percent of the country-s scarce export earnings. By way

of contrast, the comparable figures for 1973 were 3 percent and 6 percent

respectively. While the bulk of the increase in the oil import bill -- from

$10 million in 1973 to approximately $61 million in 1980 2/ -- is attributable

to increases in the international price of petroleum, over which Mauritius had

no control, a large part was due to the rapid rates of growth of petroleum

consumption in the mid-1970s. The main reason for this was, of course, the

generally buoyant economic climate that resulted from the boom in world sugar

prices which, in effect, insulated Mauritius from the impact of the first

round of world oil price increases. The five year period after 1973 saw an

increase in both the rate of growth of the economy (the GNP growth rate was 25

percent above that of the preceeding five years) and in the ratio of petroleum

consumption per dollar of GNP (which increased from 0.19 kg of oil equivalent

in 1973 to 0.24 kg of oil equivalent in 1978).

1.07 Since 1978, however, this situation has changed dramatically. The

doubling of world oil prices in 1979 came at a time when the Mauritian economy

was already having difficulty in adjusting to lower revenues from sugar

exports and a general reduction in living standards. Under these circum-

stances the response to higher oil prices was sharp and immediate -- between

1978 and 1980 the consumption of petroleum nroducts declined from a neak of

1/ Dee also Mauritius: Report on Structural Ad4-fmonf- T oan", World

Bank President's Report No. P-2999..

2/ This excludes approximately $18 million worth of jet fuel imports which

were used to meet thile requLrements of interr.tional airlines refuelin

in Mauritius and are consequently treated as reexports.

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210 thousand toe to 186 thousand toe. While this provided a much neededmeasure of inte-rim r-olief t-o t-he baanc of payments, it should not beinterpreted as the beginning of a longer term trend. Virtually all of thedecrease in petroleum consumption occurred in 1Q90 a year in which bothincome and output fell and the island was struck by an unusually severeseason of cyclones, whose only benefit was a 40 nprrent increase in the lPUPlof hydro-electric generation which reduced the demand for oil by a further5,000 tons.

1.08 This situation is not expected to continue. The Government'splan for the 1980s calls for sustained economic growth in the region of 3.5percent per annum and this will in turn require a higher level of.energysupply. However, if the Government is to ensure that the economy's legitimateonergy req.uiremnts are mae -at aAt c , a n srcti e Aous4 A.. nn i4n- effort 4is.'-LLL..J ~. M.'.jA-a.ami. a. a Lila . at. aLaao S.. 'wvO ., as tv.SJfOw~.~Av M.a,*&, a '" 6t o

required because a break from past trends will be needed. This report there-ffore proJects tLwo alternative scenarios for the 1980,s. The first -is the

"Base Case" scenario which broadly assumes the continuation of existing trendsanA only includes energy development proJects in the implemen.tatlon stages.On this basis the demand for primary energy is projected to rise from 211LIlUCILLU LUC L. L7O OVU JJV LIIOUbdIIU LVJ u) LIit cIIU ULI LIi uUC; . L/ 141LIILy

percent of this demand would continue to be met from imported oil at a pro-jectedu cost iLn 1990 of $14-0 million Lin 1980 dol'lars which wouldU be equiLva'lentto 9 percent of GDP. This is a level which would pose a serious threat'Lo thle country's externLal payments siLtuation andu its othLer d evelopmental

objectives. However, this scenario is not an inevitable one.

1.09 The report also presents an alternative scenario, the "AcceleratedEnergy Program" (AEP). Moving to this program will entail first, acceieratingthe substitution of cheaper energy sources -- both indigenous and imported --

for costly oil; and second, increasing the efficiency witn wnich aii rorms ofenergy are used in the economy so that a given level of output can be achievedwith a lower level of primary energy input. The main supply side optionsenvisaged under the program are a tenfold increase in the contribution ofbagasse as an energy source through improvements in the efficiency with whichit is utilized to generate electricity and, second, the setting up of acoal-fired power piant in the iatter hair of the decade. On the demand side,a concerted program of energy conservation to complement the already realisticpricing policy for energy products will result in a further moderation ofenergy consumption growth.

1.10 The Accelerated Energy Program is discussed in detail in Chapter IIIof this report. its successful implementation woula result in a primaryenergy consumption level in 1990 of 295,000 toe of which 58 percent or 172,000toe would be met from imported oil. Although this scenario would require theannual import of about 80,000 tons of coal, the projected energy import billby 1990 would be substantially lower -- by $52 million in 1980 dollars.

I/ All projections of primary energy consumption exclude the energy producedand consumed internally by the sugar industry.

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Mauritius would still depend on imported oil for over half of its energy needsbut this would be a far more manageable level than the one resulting under theBase Case (BC) Scenario. The two scenarios and their impact on importedenergy are compared in Table 1.1 below.

TABLE 1.1

ENERGY CONSUMPTION AND SUPPLY PROJECTIONS(Thousand TOE-s)

Actual BC Scenario AEP Scenario1980 1985 1990 1985 1990

Primary Energy Demnnd 211 270 330 270 330

T ess 0 0 0 15 3

Net Primar- EnergyDemand 211 270 330 255 *295

Met From:

Petroleum 185.9 235.6 295.6 196.3 172.0

Other Sources 25.1 34.4 34.4 58.7 123.0

% Imported

(Petroleum andCoal0 00 of) 77 71oaUdI) 02l 00 20 I I I I.

1.11 Achieving these savings will require a substantial amount of investmentin the energy sector, primarily for the setting up of a coal fired power plantand a nationwide program to increase the efficiency of bagasse used forelectricity generation. The cost of tnese projects still needs to be workedout in greater detail but the preliminary estimates which have been madesuggest that the cost of the first is likely to be in the range of $45-5Omillion, and that of the second in the range of $45-70 million (all in 1980$). Some additional investment will also be required in connection with theimplementation of an enhanced energy conservation program and an initial smallproject for ethanol production but these have yet to be quantified and theyare in any event unlikely to be substantial. Even allowing a conservativefigure of $15 million for them and assuming the upper end of the range for thetwo major projects, total investment costs for the Accelerated Energy Programof $135 million (in 1980 dollars) compare very favourably with the projectedannual savings figure of $52 million (in 1980 dollars) cited above. Naturally,all of these figures need to be worked out in greater detail than is possiblein this report. Rather, they represent the type of questions which should be

- 5 -

examined in the course of preparing a national energy plan which is also a

principal recommendation of this report. 1/ However, these figures do show

that the net benefits associated with an Accelerated Energy Program are likely

to be large and particularly important to Mauritius since the tight external

payments situation is expected to continue.

1.12 Finally, the timely implementation of the AEP will depend critically

on strengthening the currently weak and fragmented institutional framework for

the energy sector. The Government recognizes this problem and has recently

taken the important and welcome decision to set up a small energy planning

unit in the Ministry of Economic Planning and Development. This unit will

coordinate the work being done on various energy issues by different Government,

private and international agencies. It will also consolidate and expand the

existing energy data base and prepare, over the next two years. a long term

national energy plan. To discharge these responsibilities the energy planning

unit will requjirp considerable technical assistance in the initial stages.

Draft recommendations on the scope and nature of this assistance are discussed

in paras= 3=27-30 and Annex !II of this report. The most important element of

this package would be an experienced energy advisor whose services would be

required for a neriod of 18 - 24 months to help establish the unit and define

its scope of work and staffing requirements. The UNDP has indicated that it

would be willing to heln finance these servic-es through its ongoing program ofassistance in Mauritius, but additional financial support from other donoragencies is also likely to be needed.

1/ See paras. 3.28-30 below.

II. ENERGY SECTOR DEVELOPMENT

Resource Overview

2.01 Mauritius has only limited indigenous energy resources. There areno known reserves of oil, natural gas, coal or uranium and the hydroelectricpotential (about 100 GWhb) will be largelv exnloited by 1984. The main localsource of energy is bagasse, a by-product of sugar processing, which providesall of the energv for the stwar industry and some excess electricity for thegrid during the cropping season from June through December. The energyctirrentlv nrodtiud from bagqaeP i4s Peiu4valent to 200,000 toe per year, hutmore efficient use could increase this contribution by one third to one half.

2.02 Other forms of renewable energy are not currently used to a greatextent. Solar energy is used for hot water heating in some of the hotels andholds considerable potential. Studies of the potential of wind and waveenergy have resulted in recommendations for pilot projects to produce elec-tricity. The island's potential for geothermal energy is unknown at presental thourgh work on a government-financed survey is expected too commence shortly.

2.03 Non-commercial energy use is not sign.ficant n Ma-r -tius. Approxi-

mately 93 percent of the whole population has access to electricity butkVraonQ i5 the primary cokngl, fuel r- a -on -nt1y, the demand for firewood

is low. It may be assumed that recent kerosene price increases have resultedin 4ncreased firewood use but no Aat-a are ava4lab-le.

2).0 M' 11auritius ',,as no refinery andd imports all of its petroleum require=ments in product form. In 1980 petroleum consumption totalled 186,000 toe,w4ith fuel oil (used principally fJor electric power generation) accounting flor

35 percent of this figure.

Consumption Overview

2.05 Estimates of the level of primary energy consumption in Mauritiusd3epend critically on _ ho h otibto fbgas omein h uauep~iiu LL1LLI VLL 1LUW L11t- CU0ILLLIIULIU[1 01UCrlbt LU LUUt::Li[LL Lite- sUgarindustry-s energy needs is evaluated. On the basis of the theoretical calori-fic content oL t[he Dagasse used, Mauritius consumed in all about i26,000 toeof primary energy in 1980. However, this presents a misleading picture of theactual situation because the inefficiency with which bagasse is currently usedin the sugar industry means that its actual contribution on an oil replacementbasis is about 35 percent less than its theoretical calorific content. Onceallowance is made for this, the total energy consumption in the country fallsto about 410,000 toe, which translates into a per capita level of 450 kilogramsof oil equivalent -- a level that is broadly in line with commercial energyconsumption in other middle income countries in the Region.

TABLE 2.1

PRIMARY COMMERCIAL ENERGY CONSUMPTION, 1980 /a

Petroleum HydroProducts Coal Electricity Bagasse Total

Method I /b

'000 toe /d 185.9 1.0 18.4 321.0 526.3

Method ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~ r II Q/cn

AAAn tAAe 1Qr 0 1 1Q /. on/. A /.cA n

% 45.4 0.2 4.5 49.8 100

/a Prov'sional figures based onL data available in November, 1980./1 rL_ V ttL _1 T. TO JU U _ .I _ __ _ V. LI_ 1 _u_1_I __ F LV.

/L , rielLIIUU I: Ddgdasse lnpUL CclCUd LtU Ull LoItULCLlodl CclULollIC CUIoieIt.

7c Method II: Bagasse input calculated on oil replacement basis./u Details of tnese ana otner conversion factors used can be found in

Annex I and II.

Source: Staff Estimates based on GOM data.

2.06 These differences in estimates of aggregate energy consumptionhighlight the fact that from an energy viewpoint Mauritius can be dividedinto two distinct parts: the sugar industry which relies primarily on bagasseand the rest of the economy which depends mainly on petroleum products. Theenergy needs of the sugar industry are directly reIated to the amount of sugarprocessed in any given year, which in turn is determined by the size of thesugar cane crop. Despite the fact that the size of this crop has varied inrecent years due to climatic factors, the sugar industry has managed to remainlargely energy self-sufficient because the availability of bagasse, its mainfuel, is directly proportional to the size of the sugar crop.

TABLE 2.2

BAGASSE USE BY THE SUGAR INDUSTRY

Equivalent toe consumedSugar Prodiure BagasseRUsed TOOO'

000 tons 000 tons Method I /a Method II /b

1975 501.9 1,439 227.2 142.41976 679-9 2___4 336.9 91131977 664.5 2,007 316.9 198.71978 670.4 2,087 329.2 206.61979 662.9 2,104 332.1 208.31980 Ic 630.0 2,000 315.3 198.1

/a Bagasse input calculated on theoretical calorific content.I V JJ 6 aoa- iLnpu c.alculate d l onVoil re p .l-CL* --- t a-4

7c Provisional.

2.07 There is nonetheless a close link between the sugar industry andenergy consumptUio L iLn thl1e rest of the economy. First, there i th.e directdemand for diesel fuel for transporting sugar to the loading and collectionLteImIJnalIds, Whlich aLLUUnIt L o.r approx muatLCy a qjuaL *c- fU tLUtll diesell con sUJ.IUImp

tion on the island. And second, the value of sugar export revenues has acriLtiLcaL impact orn UIL Le generaL 'leve'L of economi.c activity andu incomes. Ninetypercent of the energy requirements of the other sectors are met from petroleumproduucts either dULrectly or in th'le form oi Ulargely ol baseu eLectrLcLty.

PRIMi1M1RY E'NERG Y CONS'UIZrPTION EXCLUDING SAELLFl GENERAItiUAN DBY UGAR r rACTORIES'000 toe a/

Petroleum Hydro PercentYear Products Coal Power Bagasse Total Imported /b

i975 145.3 0.3 12.5 3.7 161.8 90.01976 172.1 0.7 12.2 5.6 190.6 90.71977 195.8 0.7 12.4 5.3 214.2 91.71978 210.8 0.9 13.1 5.7 230.4 91.81979 210.7 0.9 13.1 5.7 230.4 91.81980 /c 185.9 1.0 18.4 5.7 210.5 88.8

Annual Av.Growth Rate1975-80 5.1 27.2 8.0 9.0 5.4

Ia Conversion factors are given in Annex I./b Coal and petroleum.7i Provisional.

Source: Staff estimates based on data from GOM, CEB and Shell (Mauritius).

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2.08 A detailed analysis of the sectoral distribution of energy consump-tion in Mauritius is made difficult by the lack of robust data at a suffi-ciently dissaggregated level. The strengthening of this data base should beone of the priority tasks for the recently established energy planning unit inthe Government. The preliminary estimates -presented in Table 2.4 below shouldtherefore be treated as. indicative of broad orders of magnitude and subject toa considerable margin of error. Nevertheless, they are useful in providing abasic understanding of energy consumption patterns on the island and inidentifying the priority areas for further detailed work. The methodology andassumptions used in their derivation are presented in Annex II of this report.

2.09 As these figures show, the transport and domestic sectors account foran unusually high proportion of total energy consumption (about 75 percent)with the industrial sector accounting for less than a fifth. This is largelya reflection of the fact that there is only a small industrial sectoroutside of the sugar industry and that the'se figures exclude self generationwhich supplies the bulk of the sugar industrvys needs. The bulk of thisremaining industrial energy is consumed in the form of electricity with directburning of furnace oil being restricted mainlv to toa and tohrrno drving. Thpfigures for industrial energy consumption also include the use of electricityfor irrigation pumping mainlv in t-he nort-hpf part of the island-

2.10 Enprgyu ncnamptnA in the trnansnrt sector 'a divided -rughly equally

between gasoline for cars, vans and other light transport and diesel used forbhuisP and trucks. In 1978 it was estimated that about a quarter of the diesel

sales to transport were for the movement of sugar to the loading terminals andanothpr niqurter w a apoun,ntoA for My busla t-rnnanprt-; however, these -,t4mates

need to be verified. i/ The public transport system in Mauritius isex.lusivelly road-lb-aseud. PDassenger t ranX-LsporAt, is by buse -and taisan

L~OOcI6cL LLLIO .'LL U)V UUDOc aLIU LaA.J aLikL

products are distributed by trucks and vans. Passenger transport is notorganized on very efficient lines. Allout 3,50 taxi serve the torit- are~ ~A.L~~c*LU 2.LI~O~ ~U J ~ L -.J*' L~~L O=LVC LAtE LVUL.LOL LUIatCL

and the better-off local residents, but their efficient operation is hamperedbU)y regulatios whLLciL requLre LIlem 'Lo pic up passengers onl'y Ulrom tleiLr bUaseof operation. Consequently, they generally charge return fares and make thereturn Journey to their bUase without passengers. The 11,J00 bJuses on theisland are used by nearly three-quarters of the population. Buses are run bytthe natiLona±L Uus company, niLne pr'Lvate bus compan'Les andU numLU1erous individualowner-operators. There is no clear demarcation of the respective roles oftLese operators andU thLe allocation o' routes 's less than satisiactory, withservice on some routes being unreliable while on others there is considerableuuplication. The Government is aware of these proDlems ana is aEtemptLing todevelop a more efficient and coordinated transport strategy with Bankassistance. 2/ mThe need for-thnis is reinforced by the high proportion ofenergy consumed in the transport sector. It is important, therefore, that

1! Some diesel may also be used in private diesel automobiles whose useis encouraged by the relative prices for gasoline and diesel but nodata are available. See also paras. 2.21 below.

2/ This assistance is being provided under an Urban Rehabilitation andDevelopment Project (Loan 1926-Mas).

MAURITIUS

TABLE 2.4

SEC1'ORAL DISTRIBUTION OF COMMERCIAL 'ENERGY

1979

'000 toe

HeavyLight Transport Transport Domestic Inrduatry Co=miercIaI Total

D:Lrect

Petroleum Products

Gasolinet 48.1 - - - - 48.1

Diesel - 54.0 - 54.0

Kerosenr - - 26.2 - 26.2

LPG - - 2.1 - - 2.1

F'uel O0L- - - :14.9 - 14.9

Coal - 0.9 - 0.9

Indirect

Share in total electricconsuzmtion percentag4e - 45.9 30.7 23.4 lOO.00

toe, equivale:ntconsumed - 38.6 25.8 19.8 84.2

TOTAL 48.1 54,0 66.9 41.6 19.8 230.4

% share 21 23 29 18 9 100

Notes: 1) Excludes self generation by sugar indlustry.

2) toe equivalenlt of electricity consumption is based on conversion factor of. 4,500 kWh/toe for hydro,bagasse and t1ie=al gerLeration to approxitate actual heat rate of oil-fired thearmal generatitm.

-3). Total. maQnot .Add.up dtueqto roun.dinrg,,

Source; Mlssion. estimates based on data supplied by GOM, CEB and Shell. ftauritius).

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reliable and more detailed information on the sector be gathered to assist inidentifying the ways 'Ln which i'ue'l effliciency andu th'e sector's overalJloperation could be improved.

2.11 The domestic sector accounts for 29% of total energy consumption,mainly in the form of kerosene and electricity. Because 933% of the popula-tion has access to electricity, it would be reasonable to assume that verylittle kerosene is used for lighting and that the bulk of household keroseneconsumption is for cooking. Nevertheless, it is difficult to come up with anaccurate estimate of how many families use kerosene for this purpose. Assum-ing that the average family which uses kerosene requires between 1 and 1.25gallons per week implies, with 1979 kerosene sales of 7.1 million gallons,that approximately 63 to 78% of the 175,000 families on the island rely onkerosene as their primary cooking fuel. By implication, the remaining 22to 37% use LPG, wood or electricity, with the majority relying on electri-city. Household consumption of electricity is analyzed in paras. 2.23-25below. This high degree of reliance on kerosene as a cooking fuel raisesthe possibility of further encouraging the use of LPG, which can often be amore economic alternative. The energy planning unit should study this pos-sibility further.

2.12 Finally, the commercial sector accounts for about 9% of energyconsumption, almost exclusively in the form of electricity. A significantpart of this demand is for ai conditioning in hotels and offices. The CEBestimates the air conditioning load from these sources to be about 2MW butthe installed load may be somewhat larger because of less than full occupancyrates in the hotels.

2.13 The above discussion provides a preliminary overview of the patternof energy consumption on the island and shows that the priority areas forfurther analysis are the domestic and transport sectors and the sugar indus-try which are the major consumers of energy. It is important that these esti-mates be confirmed through a systematic process of data collection and analysisso that policy decisions can be taken on a more informed basis and the poten-tial for improving the efficiency of energy use in these sectors can be betterestimated.

Petroleum

2.14 Exploration. Mauritius- offshore prospective area amounts to about300,000 sq. km. if the Mascarene Shelf is included. Two-thirds of this is inwater deeper than 200 meters. There has been no exploration activity in thearea since,1975 when Texaco released its offshore license after five months ofmarine seismic work and two dry wildcats on the Mascarene Plateau. There wereno petroleum rights in force at the end of 1980 and no applications had beenreceived during the year. The Government should continue to respond positivelyto any indications of interest in hydrocarbon exploration bv nrivate oil rnmnn-nies. The energy planning unit should also determine whether the Governmentcould take any stens to encourage the resumntion of nrivate hydrocarbon explo-ration, which would require more in-depth geological studies, including a betterevaluation of results from Texar s eXpnloratinn Pffnrt-

2.15 Consumptionn Between 1975 and 1978, the consumption of petroleumproducts grew at an average annual rate of 13.2 percent with the consumptionof fuel oil growing at a much higher rate. Since 1978, this trend has beenreversed dramatically.

- 12 -

TABLE 2.5

PETROLEUM PRODUCT CONSUMPTION, 1975-80toe 1/

2/ Gas OilYear Gasoline (Diesel) Kerosene Fuel Oil LPG Total

1975 32,523 53,009 17,595 41,036 1,106 145,2691976 38,760 56,692 20,498 54,955 1,183 172,0881977 46,141 64,537 24,109 59,639 1,379 195,8051978 49,688 64,554 26,178 67,696 1,732 210,8481979 48,126 60,037 26,176 74,263 2,105 210,7071980 38X635 56-416 23;535 65.294 2.070 ]85-992

Average Annual Growth Rate

1975-78 15.1 7.3 14.1 18.1 16.1 13.21978-80 - 11.8 -7.3 -5.2 - 1.8 9.3 - 6.1

/1 Conversion factors are given in Annex 1./2 Consumption figures may differ from annual import figures due to

stock changes.

Sourre: Staff estimates bhasd on data from GOM; Shell and EDF.

2.16 The reasons behind this rapid pre-1978 growth and the subsequentsharp decline have bhen oitlined Perlier- The high nrp-1q78 growth rnte for

fuel oil consumption stemmed directly from increased power generation and fromthe substitution away from diesel to fuel oil for thermal power production.This substitution was also responsible for the relatively modest growth inaas o-il (dee)consumption ar.n bsud tos0m-e extent t-he fact flint thetransport sector was exhibiting strong fuel consumption growth. Since1978, petroleum product consumption has Aropped An al s1et1 o T h pw,r.

sector, the loss of sales and the increased output from hydro plants -- bothdue lo cyclone ClaudetLe == comlb.ineA Wt ith higher tariffs to proAuce a sh arp

swing in fuel oil consumption. In the transport sector, private motoristsreacteu sharply tLo tLe 15'0 percenL increase in the price of gasoline and e

showdown in economic activity; consequently, the demand for that product fellUy 20 percenit. 'L/ ThCere was oIrly a maCLrg.lL1na ULUJ LL U.Ldo iLecL petLLreumU cnLsUump=

tion by the industrial sector but this fails to account for the much largerindirect decline brought about through lower industrial demand for electric'ty.These factors are reflected in the figures in Table 2.6 below.

1/ In real terms the price of gasoline increased by 60% between 1978 and1980.

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TABLE 2.6

SECTORAL DISTRIBUTION OF PETROLEUM PRODUCT CONSUMPTION /aPercent

Light HeavyYear Domestic Industrial Transport Transport Power Generation Total

1975 12.9 5.1 22.4 33.9 25.7 1001978 13.2 6.4 23.6 26.4 30.4 1001980 /b 13.8 7.0 20.8 27.3 31.1 100

Growth Rates

1975-78 14.3 22.3 15.1 4.2 19.6 13.21978-80 - 4.3 - 1.8 - 11.9 - 4.6 - 4.9 -6.1

/a See Annex II for the assumptions underlying these estimates.7. Provisior.al.

Source: Staff estimates based on data from GOM, Shell and EDE.

2.17 Supply. Mauritius - petroleum product requirements tare importeddirectly by five marketing companies -- Shell, BP, Esso, Caltex and Total.These companies report the volumes and prices to the Government for theassessment of import duties and the approval of retail price levels but theGovernment is not otherwise involved in the petroleum supply business. Mostproducts are purchased from the parent organization of the companies involvedand originate in MitdLdL'Le E asLtern refineries, except Lfor LPG. -which.4CI comes almost

exclusively from Singapore. So far this arrangement has served the countrywel i1 n ters of ensuring uninterrupted supply even ir. -imes of internationalWCLJ Li L ticL CIU.LiUliLO L-L p LU UjjJyV L .- LU LJA-LC L L. LE. iL .Lui.

shortage. The dialogue between the oil companies and the Government is goodand th "Le Goverr.ment hLas recently beg u n L.o maki-e more ext£ensilve use0 of the

companies' analytical and data processing capabilities.

2.18 These five companies are also responsible for the retail marketingof petroLeum prouucts. They U-WLI and opaLtLe Lith LIV gUaoLLi1n eL ULLb sLL LoIt

island, a number which appears high in relation to the island's size. 1/ Thismay be a reflection of the fact that the present retail pricing s-ystem whichallows the companies "a reasonable return on their investment" may undulyemphasize market share considerations over efficiency. The Government shouladiscuss this question with the marketing companies to ensure that it is notresulting in a higher than necessary price to the final consumer.

1/ These are divided among the five companies as follows: Shell - 29;Be - 13; Esso - 23; Caltex - 26; Total - 19.

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2.19 A study by the French firm, EquiDetrol, has suagested building a

20,000 barrel/day refinery in Mauritius to supply the local market and also

the nearby island of Reunion. This nrQnogal is discussed in Dara. 4.10 - 4.12.

Pricing of Petroleum Products

2.20 In general the pricing of petroleum products in Mauritius has been

satisfactory and has adequately reflected the increase in import costs. Since

19715 thle retail -rice of -etroleum nroducts has increased on average by 350%

with fuel oil prices rising somewhat less than this and gasoline prices at a

higher pace. The retail prices charged for petroleum products are also

broadly in line with those prevailing in other comparable developing countries.

These factors are reflected in the table below-

TABLE 2.7

COMPARATIVE PRICES OF PETROLEUM PRODUCTS

US $/UTS gallon

--------Comparative Prices-------

Retail Price Of which % Increase Retail Retail C.I.F.

Product Mauritius Tax Since Jan 75 Kenya Sri Lanka Mauritius

Nov. 80 Feb. 81 Dec 80 Nov. 80

PremiumGasoline 2.57 1.30 399 2.82 1.85 1.12

RegularGasoline 2.47 1.30 403 2.62 - 1.08

Kerosene 1.34 - 352 1.28 0.70 1.08

Diesel 1.53 0.21 373 1.80 0.97 1.06

Fuel Oil 0.94 1/ 279 0.77 0.93 0 80

1/ Fuel oil taxed at the advalorem rate of 24% on C.I.F. value.

Source: Ministry of Prices, Govt. of Mauritius and Bank Staff Estimates

2.21 These figures also show that the retail price for all petroleum

products in Mauritius is higher than the import cost, which is not the case

with regard to kerosene and diesel prices in many developing countries. This

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policy deserves to be commended and should continue to be pursued in thefuture. 1/ However, two further points need to be considered. First, as inmany other developing countries, the retail price differential between gasolineand diesel oil is proport4onately much greater than the differential inrelative import costs. This is frequently a source of concern to countrieswhich attempt to match the mix of product demand to the output of theirdomestic refineries because the demand for diesel grows at a much more rapidrate than tle dema[d fLor gasoline. NLot havng a uomestiLc reinery, MauritLusdoes not have to worry about this particular problem, but the differentialcould still ue the cause ou a misallocatLon of resources in terms of itseffect on the choice of vehicle type. Specifically, individual owners mayfind it profitable to switch to diesel-engined vehicles whose higher initialcost would be outweighed by the lower relative fuel price, when for theeconomy as a whole there would be no such offsetting savings. At thisstage we do not have enough information to evaluate how significant thisdistortion has been but this is an area which deserves some further study.

2.22 The second point relates to the retail price of gasoline in absoluteterms. As mentioned above, the current price of $2.47/2.57 per gallon isbroadly in line with the price charged in both developing countries and inindustrialized countries as a whole. However, at some stage the Governmentmay wish to raise this price either as a revenue raising measure or toencourage conservation or the use of public transport. In that event it wouldbe important to ensure that the effect of this action on the gasoline/dieselprice differential noted above is taken into consideration. Such a measurewould also have to proceed hand in hand with an improvement in the quality andefficiency of public transport services. And finally, one would have toconsider the effect of a smaller gasoline market on the eventual viability ofany program to develop fuel alcohol which could only substitute readily forgasoline and not diesel oil.

Electricity

2.23 Consumption. Between 1975 and 1979, electricity consumption inMauritius grew at 11.2 percent a year. However, in 1980 the combined effectof cyclone Claudette and a 50 percent tariff increase held sales to 290 GWh,which was about the level of sales in the previous year. Despite the growthin overall consumption, the sectoral demand pattern has not shown any signifi-cant change except that domestic electricity use has been increasing morerapidly than the others and now accounts for 45.4 percent of total electricityconsumption.

1/ Annex V of this report contains details of the import duties charged onpetroleum products and of the historical evolution of CIF and retailprices for these products.

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TABLE 2.8

SECTORAL DISTRIBUTION OF ELECTRICITY CONSUMPTIONPercent

CEB &Year Domestic Commercial Industrial /1 Irrigation Sundry

1975 40.2 21.5 24.1 7.0 7.01978 45.2 21.9 27.4 4.0 1.21980 45.4 22.7 27.8 2.6 1.4

Average Annual Growth

1975-78 19.5 16.2 21.2 - 4.3 - 23.81978-80 1.8 3.7 2.3 -17.9 7.1

/1 Excludes electricity generated and consumed by the sugar industrv.

Source: CEB Annual Repnrts.

2.24 Given the high sharp of Pltrtriritu rAnniimp_ in t-he householdsector, it is useful to analyze the end use pattern of consumption within thissector. This pattern can he estimaterd frnm the GFEB-s sale figures whichsubdivide residential consumers, for tariff purposes, into groups with speci-fic maximum ratings for permissible installed equipment These figures, whichare presented below for 1979, indicate that electricity consumption varieswidely among households with over half the consumers averag 1

than 1.2 kWh per day. At the other end of the scale, are the high electricityconsumers - who -account for five percent of the connections b,ut 19% onf tot a1

sales - with an average daily consumption level of 10 kWh.

TABLE 2.9

DOMESTIC ELECTRICITY SALES BY CONSUMER CATEGORY

Average dailyIrLstalled Jani.=Sept. 7 9 £NumbLer o01 uonsumpt'Lon per

Tariff Equipment Rating Units Sold Consumers ConsumerG'wln k'wln

110 300 W 27.66 84,347 1.2120 300 - 3,000 W 27.30 30,792 3.3130 3,000 - 10,000 W 26.01 15,390 6.2140 10,000 w 19.04 6,993 10.0150 Day use 0.63 166 14.0150 Night use 0.27 166 2.7

Source: CEB

17

2.25 Most people in the first tariff group use electricity primarily forlighting and to run a television, the use of which appears to be quite wide-spread. The better-off families use electricity for a variety of purposes:electric cookers (estimated by the CEB to account for 15 percent of householdelectricity sales), water heaters (18%) and other domestic appliances such asrefrigerators, air conditioners, etc. (5%). Water heaters are estimated tobe used by about 10 % of the population but as they are subject to an off peaknight time tariff, their use does not pose any capacity problems for the CEB.On the other hand, the use of electric cookers is believed to be a major causeof the abnormally high evening peak which characterizes the present structureof electricity demand. Between 6:00 p.m. and 9:00 p.m., electricity demand ison average 70 MW compared to the day time average of 40 MW. In such a situa-tion, generating capacity has to be geared to meet the evening peak and,simultaneously, to allow a security margin for prolonged droughts and formaintenance/repair of thermal generators. If this trend is allowed to con-tinue, the CEB would have to invest heavily in thermal generating plantswhich would be underutilized most of the day. This in turn would inevitablybe reflected in electricity rates.

2.26 One way of moderating the effects of this problem is to introduce adaylight saving time scheme, which would even out the evening peak demandduring the summer by spreading the amount of energy consumed over a longerperiod. In this way, the time in which lights are used could be separatedfrom the point in time when cooking, water heating and most household appliancesare switched on. The Government has announced its intention to implement sucha measure by 1982 and a committee has recently been set up for this purpose.Other options which need to be considered include the potential effectivenessof extending the use of peak power pricing to electric cookers, the staggeringof working hours for Government and industrial workers and a study of thecosts and benefits associated with the various longer term household cookingfuel options. The costs of installing double-rate meters for electric cookersmay be too high when compared with expected benefits and a detailed studyis necessary before such a program is implemented.

Electric Power Supply

2.27 The Central Electricity Board (CEB) supplies power to practicallythe entire island through its grid which reaches 93% of the population. Thereare three sources of power: hydropower, diesel generation, and purchasesfrom the sugar estates which use bagasse for electricity generation. As thefollowing table shows, the system relies heavily on (oil fired) thermalgeneration to supply electrical energy. Installed capacity at the end of1979 was 146 MW consisting of 123 MW of thermal and 23 MW of hydro. Anadditional 13 MW of capacity is available during the sugar crop season (June- December) hut not on a firm basis.

- 18 -

TABLE 2.10

ELECTRICITY GENERATION BY SOURCE

Hydro Thermal Purchases /1

Year GWh % GWh % GWh % Total GWh

1975 56.2 25.1 151.2 67.5 16..7 7.4 224.11976 54.8 20.3 190.1 70.4 25.3 9.4 270.21977 56.5 18.4 227.5 73.9 23.9 7.8 307.91978 54.0 16.1 256.2 76.5 24.9 7.4 335.11979 59.2 16.7 270.2 76.1 25.7 7.2 355.11980 82.8 23.3 245.4 69.2 26.8 7.5 355.0

/1 Purchased from sugar estates.

Source: CEB annual reports.

2.28 The growth of electricity demand over the past five years has notbeen matched by a corresponding growth in power generation facilities.Maximum demand usually occurs around December, at a time when generatingcapacity is low. Hydro electricity is reduced to 6.8 MW out of a potentialcapacity of 23 MW. At the same time, electricity generated through theburning of bagasse is reduced as most of the sugar factories have completedtheir crop season by then. As a result, the CEB has to rely almost exclu-sively on its diesel plants. Over the period 1975-77, because of the problemsof drought, together with the technical problems encountered with thethermal sets and a very sharp increase in demand, the CEB had to resort toload shedding. After the experience of the 1975-77 period, careful attentionhas been given over the next plan period to the provision of adequate infra-structure and stand-by capacity in order to be able to cope with unexpectedshortages due to climatic and other factors.

2.29 Diesel Power. CEB-s diesel generation is confined to two stationsof roughlv similar size -- Fort Victori. and St- T.oiii,- hot-h nper t-he canital=

Their combined total and effective capacities are 123 MW and 109 MW respec-tively An expansion iQ under-wa at St Louis involving two 12 MW diesel setswhich will be operational in the second half of 1981. At that point allavailable land at these two sites will be no-ied. The Mer Rouge site 4sbeing considered for the third power station which is now being studied. Thedecision or. a fuel sourue for that plant [hasot yet Ieen made.

2).30n u.ydro Power. Alth1,ough- Maur-iu Iny good4 ranalcodtos.4. LL .Li 'J�LM* C L. LIL'.JL 'I L UL LL.LU~ CLIJ.4.7 6 UIJU LCd 1.1 L IL._ U L .L_LUL± Lbii

the number of suitable hydro-electric sites is limited due to the combinationoi several fLactors: catcLhment areas are small, and the combination of a

storage dam with an adequate head of water is not often available. Also,

- 19 -

there are many established water rights on the existing rivers for irrigationpurposes. The plants which CEB operated in 1980 and their capacities aregiven below:

TABLE 2.11

CEB HYDROELECTRIC GENERATING CAPACITY(1980)

Total Capacity Firm Dry Season CapacityMW MW

Ferney 10.0 0.9Tamarind Falls 7.0 4.6Eau Bleue 4.0 0.0Cascade Cecile 1.0 0.4Magenta 0.94 0.9

Total 22.94 6.8

Source: E de F study of the power sector, 1979.

2.31 Electricity prorruio4n frnm hydro schemes ic conannAl and available

mostly between February and September. The only scheme with a reservoircapable of supplying pee_r for meetine t h-g tha system's daily peak demiand is

Tamarind Falls. The other schemes have little firm supply capability and areoperatted to mii 4 m4 ze diesel fuel cOnsumtio4n

2t.3 tJ~Several hydro proJects have bCeen cons ideredA over th.e past few years.The Central Water Authority is considering a multi-purpose irrigation/watersupply/hydroelectric 1powf- scheme ntAsatist butthe MU plar.t-11 w

not provide any firm capacity during the dry season and its economic feasibilityhas yet to be determined. CEBis currently constructing a'30 MWT hydro power.hoc~ ~ ~ ~~~~~~~~~~ ,fi AkjlFt4fJ rw . oF z^ -, -_..F 5 - -^ .. 7 LI_ r.

plant at the Champagne site on the Grand River Southeast. This plant will beready for operation in 1984 and will generate some 40 fW. annruall.y. Practically

all of the island's hydro power potential will be developed at that time andonly smaller, run-ofl'-rilver schemes willJ. bDe left. Th.e contribution from suclh!schemes is not well estimated.

2.33 Purchases from Sugar Estates. The sugar estates burn bagasse togenerate steam lfor elec'rLcLty generati'Lon andu process hI'eat. CEB hL'as Lfor sometime provided back-up electricity for start-up and emergencies and haspurcasedU any excess eLectrLcLty which shle sugar estates have geeratedU.These purchases have totalled about 25 GWh per year in recent years or 4 kWhper ton ofI cane processeu. CEBD Ihas madUe eflflorts to iLncrease prouuctiLoni fromexisting and future power plants of sugar estates in order to postpone cons-truction of new generating capacity to meet demand. To that end, CEB nas

- 20 -

signed long-term agreements with the Medine and F.U.E.L. estates to purchaseenergy during the crop period from their new facilities. By 1982, purchasesof energy should reach 40 GWh. The generating capacities at the sugar estatesare as follows:

TABLE 2.12

SUGAR ESTATES GENERATING CAPACITY, 1979

Total Capacity Effective CapacityMW MW

F.U.E.L. 4.0 3.5Savannah 1.3 1.2Constance 1.0 1.0Beau Champ 1.25 1.1Mon Desert Alma 1.4 1.4Mon Loisir 1.1 1.1Others /a 4.8 3.5

Total 14.85 12.80

Ia Ten factories whose individ,Al canncitv is 1ess than 1=0 MW emach

Sou~rce: GEBR

Pricing of Electricity

2.34 CEB revised its tariffs in 1979 and retained a fuel adjustmentclause based on fuel costs in the previous month to ensure that operatingcosts were covered. The tariffs charged in 1980 are shown in Table 2.13.The block structure of the rate encourage s conservat4io since all add4-itnalunits consumed are priced equally. An off-peak rate is offered for domesticconsumers bUL Lthe m1aJULorLy LLave seLeU LLt Lt u redgu Lda tariff. iliere ±is VeLy

little variation in the tariffs for different classes of consumer. In 1980average tariffs were Rupees 1.017 per k1WhI (Us)V3.3) compared with Rupees 0.657per kWh (USd8.6) in 1979. Although the average tariff is now closer to theeconomic cost of supply, CEB'S long-r.ange madLgin[l coUSL sh[OUlU be recalculatedon the basis of the revised least cost long-range power development andconstruction program and the tariffs should be adjusted if necessary. Thegrowth rates for the tariffs over the past five years are contained in AnnexIV. The application of the fuei adjustment ciause, wnicn was first intro-duced in 1973 on a limited basis and extended to all tariffs in February1980, has been temporarily suspended since April 1981. However, the Governmentincreased electricity tariffs by 10 percent in December 1981 and a furtherincrease is planned for the first half of 1982. This should help to maintainthe financial position of the CEB but an early return to the more automaticadjustment mechanism would be a preferable option.

2.35 There are several choices for future generating capacity. Thisreport provides a very preLiminary estlmate of tLleLr relative costs baseon broad assumptions regarding their capital requirements and operatingcosLs. F'or coaL p'Lants, capiLtal costs were ass-umedU to bU ei500 --- KW-V of

installed capacity, operating and other costs would be 3% of capital costs,andu coal wouLUd cost $80 per ton. DaseU oL tlle stuuy Lor tLe ruLL plant, abagasse based plant would cost $750 per KW and we estimate operating costswould be 2.5% of this amount annually. Oil-fired capacity would cost $1300per KW with operating and other costs at 2.5%. Fuel oil consumption would be

./25 kg per Kwh. These plants would all have 25 year lives. For comparisonwe have used the cost of the Champagne hydro electricity scheme which isexpected to be about $62 miiiion for annuai generation oi 4u uwn. Tne liie orthis project will be 50 years. Based on these very general assumptions, andusing a 10% discount rate, the costs per Kwh from each source would be3.34, 7.54, 9.4i and 15.84 for bagasse, coal, oil and hydro, respectivelycompared with CEB-s estimate ot generation costs of 6.6t/kWn in 1980. 1!These costs are in 1980 US dollars and we must emphasize that they are roughestimates and detailed studies are necessary before any decisions are taken.

1/ Use of a higher interest rate of 15% would not alter the ranking ofthe four alternatives considered here.

- 22 -

TABLE 2.13

ELECTRICITY TARIFFS IN 1980

Monthly Minimum DemandClass Consumption Range Cost Per Unit Charge Charge

Rs/kWh Rs. Rs/KVA

Domestic 0-25 kWh 1.10 1/(Regular) All additional 0.77

Domestic 0-30 kWh, Days 1.20 75.00-(Day and All additional 0.77Night) 2/

All units, nights 0=55

Flat Rate, All units 1.37 24.00 per Kilowatt -

Commercial &Industrial

Maximum Demand, All units 0.70 630.00 42.00Commercial andIr.dustrial!

I.dustrial, All Units 1.07 -Restricted

Sugar 0-20,000 kWh 1.00 1/FactoriesStand-by

All addi.L±Utional r0. 70

StreetLighting All Units 1.00

Irrigation,Off-peak 3/ 0-50 kWn 0.77

All additional 0.60

Irrigation,Peak All Units 1.50

Pumping,Off-Peak 3/ All Units 0.73

Pumping,Peak All Units 1.50

1/ Minimum charge varies according to connected load.2/ Day tariff applied between 0700 hours and 2100 hours.3/ Off-Peak refers to 21.5 hours not including the evening peak.

Source: CEB.

Coal

2.36 Mauritius imports very small quantities of coal used for specific

purposes (foundries). The purchases have varied broadlu over the pastyears from 1300 toe in 1965 to only 300 toe in 1970, reaching an averagelevel i.n 1077 of 70 t-oe. The level of coal imports in the future denpndscritically on the outcome of the CEB-s plans for coal-fired power generation.

C'AL AMN COVK TIMORDTC

Year tce toe ('000)

1968 1,430 1.01974 1,190 0.81977 1,110 0.71979 1,300 0.9

Renewable Energy Sources

2.37 Solar. Mauritius receives large amounts of solar radiation on a

regular basis and the potential for displacing imported petroleum products is

beginning to be realized. 1/ A number of major hotels are already using or

studying solar energy for hot water heating and this market will probably bethe first of any size. The residential water heater market will develop as

incomes increase and the small number of families currently using water

heaters grows accordingly.

2.38 Solar energy systems are currently imported in both component form

and as fully assembled units. Local manufacture of solar panels is also beingconsidered and has been carried out on an experimental basis. However, therehave been some problems of quality control and the bulk of the market con-

tinues to be supplied from imported kits.

2.39 The economics of solar water heating systems is already attractive

and will become increasingly so as fuel oil (and electricity) prices rise. No

direct subsidy therefore appears to be required at this stage. The Governmenthas recently taken the sensible decision to substantially reduce the import

duty on solar water heaters which will further help popularize this type of

equipment. Three further measures should also be considered. First, the

competitiveness of solar water heaters for the hotel industry would be

greatly enhanced if the investment made for their installation were treatedin the same way for income tax purposes as other development expenditures.

1/ Studies by the Meteorologial Services Department 2f the Government of

Mauritius show that between 1,700 and 1,800 kWh/m are available annually.

- 24 -

Second, the Government should urgent-l consider takina advantaae of thisenergy option for its own commercial and service buildings such as hospitalsand schools which currently rely on conventional sources for water heating.This will have an added "demonstration" advantage for popularizing solar waterheating system6s. Finally, once the reside.tial market begins to grow somesort of scheme might be warranted to ensure that potential users could borrowthe investment required for thi4s purpose albeit at commercial rates of interesl

Wave Energy

2.40 A wave energy project has bUee under co,siLLLeraiLL LLf L Lte suLLcoast of Mauritius since 1959 but progess has been minimal because itstechnical and economic viability has yet to be proven. Following a series ofreviews, the Government now intends to submit to the EEC a proposal for thecompletion of the technical work necessary For the preparation of afeasibility study of the project.

Wind Energy

2.41 Wind energy has not been used in Mauritius in the past but recentlya program of wind evaluation has been started with UNDP assistance. UNDP isfinancing a pilot project involving construction and operation of about tenwind sensors. The objective of this program is to assess the wind potentiaifor electricity generation in Mauritius, taking into account the problemsposed by the risk of cyclones.

Biomass

2.42 A project to produce ethanol from sugar cane or molasses is beingstudied in Mauritius but this is not a new industry for the country. Duringthe 1930s when gasoline was expensive, Mauritius produced and used a motorfuel known as "cernite" which was made up of a mixture of 64 percent hydratedalcohol, 30% ether and 6 percent gasoline. It was phased out as gasolinebecame cheaper. Around 1940 when the country began experiencing difficultiesin gasoline supply as a result of World War II, the production of fuel alcoholwas resumed. In 1949, a Power Alcohol Committee strongly recommended thatanhydrous alcohol be produced in Mauritius to be used as fuel for motor carsin a ratio of 25 percent anhydrous alcohol and 75 percent petrol. However,this project was abandoned in 1951 following the sudden rise in the price ofmolasses and the development of the bulk export trade.

III. ENERGY OUTLOOK 1981 - 1990

Overview

3.01 Duuring the next decae, Ue auriLlus mus t at temUpL LU L UUrdu 'LS

dependence on imported petroleum products. As discussed in Chapter II, therapid growth of demand in the second half of the seventies has been arrestedand 1980 saw a substantial decrease in consumption which was caused by severalfactors. The degree to which the country-s import dependence in the 1980s canbe reduced will depend on whether it can use its indigenous energy resourcesmore effectively and on whether it can manage to moderate the demand growthrate for all energy sources. It will also require a substantial strengtheningof the current institutional and policy framework for managing the energysector and the allocation of a relatively larger share of public resources forenergy development projects.

3.02 In this chapter two sets of energy demand and supply projectionsare presented for the 1980s. 1/ The first is a "Base Case" forecast whichassumes the continuation of existing conservation and petroleum substitu-tion programs but no additional policy changes. On this basis the demandfor primary energy is projected to grow to 270,000 toe by 1985 and 330,000 toeby the end of the decade. Petroleum product imports under this scenariowould rise to 236,000 toe by the mid 1980s and to 296,000 toe by 1990.

3.03 The second set of projections is called the Accelerated Energy Pro-gram. This program sets more ambitious targets for energy conservationand for the substitution of oil by cheaper indigenous and imported energysources. Its successful implementation would result in a 1985 petroleumimport requirement only marginally higher than today and an absolute declinein petroleum product imports by the end of the 1980s. Primary energy con-sumption would also grow more slowly due to a vigorous conservation effort --to 255,000 toe by 1985 and 295,000 toe by 1990. The investment costs of thisprogram are estimated at about $100 - 150 million in 1980 dollars.

3.04 The test facing the Government of Mauritius is to ensure that

through its intervention and guidance the actual situation at the end of thedecade is nearer the second set of projections than it is to the first. Thebenefits from achieving this move can best be measured in terms of the costsof inaction. The oil import bill under the BC forecasts would absorb 20percent of export earnings by the end of the decade even if world oil pricesrose no faster than 3 percent per annum in real terms. 2/ Given the alreadyserious external payments position that is being projected for the Mauritianeconomy as a whole, any means of reducing the current account deficit shouldbe given high priority. The Accelerated Energy Program is one such option.

1/ All projections exclude energy produced and used internally by thesugar industry.

!/ There is also the additional risk of supply interruptions in the

event of global shortages which in turn could result from political oreconomic uncertainties-

- 26 -

Methodology and Assumptions

3.05 In the absence of detailed market surveys, projections of energydemand are normally made on the basis of past trends. This is an inherentlyrisky process but deficiencies can be minimized by using as a basis thosehistorical trends which are least likely to change in the near future, bymaking specific allowances for likely future developments and by comparingthe resulting projections with the experience of other countries to see ifthey are reasonable.

3.06 In this report, the forecasts for primary energy demand are basedon the projected rate of growth of GDP and on the historical relationshipbetween the growth in energy consumption and the growth in GDP. Of course thegrowth in energy consumption also depends on changes in energy prices but,without sufficient data to separate these effects, we assume that the imnactof future price increases will not be significantly different from thatP3nPribncvd dlirinQ the haRp nprind. RnprQv nrinrp in thp 197n'q thp hncpperiod, rose in real terms at rates unlikely to be repeated in the 1980's andthe nroiprtions will if anvthing- undprstatp the grnwth in Pnprgy consulmptionassociated with a given increase in GDP. For both sets of projections it isassumed that GDP growth will average 3.9 neraent ner annum throughout thhir8

decade. For the BC forecasts it is also assumed that the historical figurefor thp eneryv/MfP elasticitv of 1.2:1 will nontin,ep tn hold for thP rePt ofthe decade. On this basis, the demand for primary energy is projected to growt- 4.2 npercent nper annum. For the AFT nroneortion thep ientifiation of

potential savings from conservation programs results in a more moderate rateof nrimarv energy growth of 3 0 percent per annum. Finally, these prn4anted

growth rates are applied to a notional base energy consumption level, which isthe average of the 1979 and 1980 figures to arrIve at the figures cited inpara. 3.02 and 3.03 above. The choice of this two year average as the basefor future pro4ections stems from the fact that 1980 was an extremely unusal

year. The impact of cyclone Claudette on power sales and the 20 percent fallin gasoline consmptIon that resulted from a near doubling of gasoli.e pricesare events which have had an important once-and-for-all effect. It would bemisleadir.g to extrapolate tuis effect directly ir,to -le future.

U1~LC ~ L'J~AA.J. aj L.J L LU.L& .L. L. %.LL ~ L..Ly .&. i L .LLI L. UL.U

3.0r7 Wthi.14n this broal overall framework -le proj-ected 'eve' of petrole-um-J.JVI " ±.LL.IL.L. LIJ L UL. U U Y L~.LJ. iL LI r,L LLi ~ jL J LLU JL~ L j~Li.er

product imports is calculated on the basis of residual demand after alternativeenergy sources hLave lUeeU accounted fLor. T is an appropriate methodlo for

making these projections because of three factors. First, the almost exclusivereliance of the Mauritian economy on petroleum products for energy implies thatthe bulk of alternative energy development will effectively substitute forenergy that would otherwise have been obtained from petroleum. Second, tnesupply of energy from these alternative sources can be estimated with reason-able accuracy because they consist largely of aiscrete ana well lentifleaprojects. Third, the lack of robust disaggregated data on sectoral consumptionpatterns makes it impossible to project fuel consumption at a sectoral leveland aggregate from that. We have also discounted in these projections thepossibility of meeting any of the country-s petroleum requirements from

- 27 -

indigenous petroleum discoveries, as the possibility of any such discoveriescoming on stream in the next decade is negligible because there is no ongoing

or planned oil exploration effort in the country. 1/

Options for the 1980s

3.08 Various options are open to the Government in the pursuit of itsenergy sector objectives. On the supply side the most important options lie

within the electric power sector which currently relies heavily on petroleum.These include:

(i) increased use of hydroelectric power;

(ii) increased electricity generation from bagasse; and

(iii) electricity generation from imported coal.

Outside the power sector, interfuel substitution possibilities are more11mited. In the transport sector there is the option for

(ivu) substitiution of gasoline by ethanol.

And in the commercial and service sectors. some petroleum and electricity

consumption may be reduced through the

(v) expansion of the non-conventional energy developmentprogram.

Finally, a -ronram of

(vi) energy conservatior. and demand management could have

a substantial effect on moderating the rate of growthof energy demand in all end-use sectors but particularlyso for transport and commercial/residential uses. Thepotential contribution of these ontions is discussed

below.

Increased Use of Hydroelectric Power

3.09 For both the BC and AEP projections we assumed that the onlyadAdi4tia1 hydro capacity to come onstrean durino this decade would be the

Champagne hydro project in 1984. This project will add 26 MW of firm capa-city, raising total sys4em capacity to 141 M.1, but its contribution in

energy terms will be much lower because of the low availability of water. Itsprojected' average ar,nua'l output of 40 Grll'v will result in a total hydro genera-tion level of about 110 GWh which would save the equivalent of 24,000 tons of

1/ Various aLterLatiLve proJections of energy Aemand in Mauritius have been

made in recent years. Annex VI of this report provides a brief discussion

of these projections and compares them to the projections made in this

chapter.

- 28 -

oil. Other major hy,dro sch-eme s are unlikel eCo make aor tion to elec-

tricity supply in this decade and the potential for mini hydro generation hasnot bLeen 4ncludedi in these proJections because it has not been syteaticallyevaluated and, in any event, it is unlikely to be substantial. However, aprexl" L - - -C4+Sais unL V C, ainsi .V3ti...,L SJ._ L- kV -LLLL.. aJ. . LC0 .O -It.It.I, ali Clll

inventory will soon be available.

Increased Electricity Generation from Bagasse

3.10 The sugar industry currently sells a small amount (25 GWh/annum) ofsurplus power to tie nat'onal grLU and plans are undCeLway tL iLLcrease thLIS

level to about 40 GWh (9,000 toe) by 1982. For the BC projection in thisreport we have assumed that there will be no further increases in the levelof bagasse-fired electricity generation beyond this level. However, thisneed not be the case. The more effective use of bagasse for electricitygeneration is the single most important supply side option open to theGovernment, and the increase underway is a small fraction of the finalpotential of this resource.

3.11 The main reason for this potential is the inefficiency with whichbagasse is currently burned to produce steam and electricity for the sugarindustry. The current surplus of 4 kWh/ton of sugar cane processed compareswith a theoretical potential surplus of over 40 kWh/ton of cane. With a sugarcane crop of 6 million tons, this would provide 250 GWh per annum to thenational grid -- an amount which is equivalent to the total thermal electricitygeneration on the island today. To achieve this potential would requirean extensive program of equipment renovation and modernization (high pressureboilers, condensing turbo-alternators, etc.) and the introduction of a processthat could enable the bagasse to be stored for use in the intercrop period.Under such a process, bagasse is dried and pelletized enabling it to be usedmore efficiently in the intercrop period. The capital costs of this processstill need to be worked out in detail but based on representative estimatesthey appear to compare favourably with other energy sources that are beingdeveloped. For example, the cost of a project to install such equipment alongwith new boilers and generating equipment at the F.U.E.L. sugar estate hasbeen estimated at Rs. 110 million (US$14 million) with an expected supply of52 GWh per year to the grid. Capital costs of this 20 MW plant would beUS$750 per KW.

3.12 While this appears to be a promising option a number of uncertain-ties still need to be resolved. First, the technology for pelletizing thebagasse to enable it to be used in the intercrop months is still relativelynew and the results of the trials now being conducted in Hawaii and elsewhereneed to be evaluated further. Second, because of economies of scale, maximizingthe potential energy contribution of bagasse may require some reorganization andmodernization of the sugar industry. The Sugar Commission will examine theemployment effects of such action and will also determine whether it would benoliticallv or sociallv accentable. Third. the detailed costs of such aprogram have yet to be calculated. Finally, an agreement has to be reachedbhetwepn the Government; the Central Electricity Board and the Sugar Industryon the sharing of capital costs and the basis for pricing the resulting

elect _cal output. These questions are the subject of an ongoing study beingcarried out for the Government by consultants financed by the Caisse Centralede Cooperation Economique. The results of this study are expected by the endof 1981 and the formulation of a comprehensive bagasse energy plan must awaitthese results. Nevertheless, preparatory work could start in a number ofthe larger sugar factories whose role as energy producers is already wellestablished. 1/

3.13 In our AEP projections we have assumed that these issues will beresolved at an early stage and that the program for a bagasse-based energyscheme will develop at a rapid rate. We have therefore projected a commensu-rate increase in the level of bagasse-based electricity generation to 150 GWhby 1985 and to 250 GWh by the end of the decade. In terms of oil savings,these figures represent 33,000 toe and 56,000 toe by 1985 and 1990 respectively.

Electricity Generation from Coal

3.14 Using imported coal to generate a large portion of the country selectricity requirements is the other major supply side option. Preliminarycost estimates for a 29 MW coal fired steam plant supplying about 170 GWh perannum (equivalent to 70 percent of total thermal generation in 1980) have beenprepared by the Central Electricity Board. While these estimates need to berefined further, they show that the total cost per kWh produced from a new coal-fired nlant coming on stream bv 1984-85 would be less than the cost of Dowergenerated from existing diesel sets even if capital charges on these sets wereexcluded from these calculations. In making these calculations it was assumedthat the 1980 c.i.f. price of coal would rise from $55/ton to $100/ton by1984 and would escalate at 15 nercent ner annum thereafter. Bank staffestimate that small coal fired plants will cost $1500 per KW of capacity andthat noraitionn maintpnann,p and adminiAtratiup costs will nmoint to 3% of

capital costs annually. At a consumption rate of 3000 kcal per kWh and usinga rplatiuplv ronservative 1981 c.i.f. coal nrice of 880/ton for 6400 kcal/kgcoal, results in a per kWh production cost of 7.54 for a 30 MW plant producing170 GWh/yr. 2! The validity of these assumptions needs to be verifie indetail before a decision is taken on whether to proceed with the constructionof a coal-fired thermal power plant. They are useful, however, in that theyprovide reasonable estimates of broad orders of magnitude and a basis forcarruing out a morne dealed feasibilitu of thic ontionn

3.15 The CEB is understandably keen on pursuing thisa optin and its etaff

have been exploring the possibility of entering into a coal supply contractwith the region's largest coal exporter, the Republic of South Africa. OtherGovernment agencies are less enthusiastic, mainly because they are averse tothe idea of substituting one imported source of eneray for another whose

price may also rise in the future. While these considerations are important,

'/ ImT. ese couldU iLnclud e 'or example, FUELTTT 4 -, M an Beu C

_/ Assuming 25 year plant ±LLe ardU amortization at 10% interest.

- 30 -

it is difficult to reiect the coal option solely on this basis. Uncertaintyabout the future price of coal could be minimized through long term supplycontracts, and Australia, Botswana and Zimbabwe could prove to be more accept-able alternative suppliers in the medium term. The real question here is thatthe need and timing for a coal fired generating plant should be examinedwithin the context of a least cost power expansion program which compares thecosts -- nresent and exnected. including if appropriate a premium for risk --of all available alternatives. In this context the results of the proposedhagasse utilization study will be of critical importance.

_-i_ Tn the RC nroiections we have assumed that the coal option will notmaterialize during this decade. Under the AEP projections, however, we haveasCslamed that n In MW rnnl firPa nnwer nlnnt will hp hrouiaht on Rtream dtirinP

the second half of this decade. The contribution of this plant in terms ofoil savings is 38,000 toe by 1990. Of onuirse, the final derision on the sizeof the plant may well result in a different level of projected savings butthis is useful for comparative purposes. These savingq in nil imports will

have to be offset against the cost of importing coal. For our projections wehave aSsumeda o c.i.f. coal price of $115 0/ton i an1990 a-n an annual consumptIonlevel of 80,000 tons. 1/ This translates into a projected 1990 coal importbill of $12' million (4i current $) which imnlioea net energy import

savings of $28 million as a result of this substitution.

Substitution of Gasoline by Ethanol

3.17 Ethanol can be produced from cane juice or molasses, both of whichare exported from Mauritius. Th.en produced by -rocessing, fermentin-, anddistilling cane juice there is sufficient bagasse to provide all of thenecessary energy for the process. This is not the case for molasses fermen-tation, which requires external energy inputs. Such a project is currentlyunuer stud y in Maurit.1 .-Us. As noted earlier (para. L A1), Mauritiu 1has

produced ethanol for fuel use in the past and a project to produce thison a large scale in the 1O0s Ls currentLly unLUer consideration. TLM.ile `etechnology of this project is well tested, its economic feasibility inMauritius is uricertaLLin at thiLLs tiLme. n Udetailed feasibLiLy studuy for tILsproject carried out recently for the Government by a consulting firm indicatedthat the project would not be viable because or the unprecedentedly high worldprice of molasses. Since then, a supplementary report prepared by the sameconsultants has revised this conclusion because of a fall in internationalmolasses prices. While these conclusions and the underlying analysis stillneed to be reviewed critically, they serve to reinforce the need for cautionin avoiding premature public investment in this area. The Government recognizesthat the main justification for developing a fuel ethanol program in theMauritian context has to be an economic one and it is aware of the tradeoffbetween a lower gasoline import bill on the one hand and a reduction inmolasses exports on the other. In this context it is also important torecognize the fact that the program to substitute tuel oil with bagasse inthermal power generation implies that the bagasse needed to produce ethanolcan no longer be treated as a free input.

1/ Based on a 1981 coal price of $80/ton, no real increase inthe price of coal and a 7 percent p.a. general inflation level.

- 31 -

3.18 As such we have not projected any substantial fuel ethanol productionby 19895 for eithpr thp RB or AEP scenarios. Bevond that datep however, wehave assumed for the AEP projections, that a more favorable gasoline/molassesnrice ratio woiilrd lepd to a graidiial inrrpasp in ethanol nrneiiut-ion to aboiit 10

million litres by 1990. This would represent gasoline savings of about 5,300toe and result in a motor fuel with a 10-15 percent ethanol blend. This is asmall plant compared to others built in developing countries and while unitoutput costs will probabl- be high the capital cost i s unlikely t- excee million in 1980 terms.

Expansion of Non-Conventional Energy Development Program

3.19 Despite the longer term potential for non-conventional energysources di Ascussed Atn paras. 2.`n LA t a L d _ _ _ a _ a__ C>\UiLWE> t11D>UDCU | t o a . *JU-4. WV a UUVU X LllCY a ^ U ULL.L.L&C.y LU UdU&t a UIdJU L

contribution to meeting the island's energy needs in the coming decade. Theone possbLLLe exceptoion to tLLs i's the expandedU Use Uof sUoL WaLtL haL .

However, the size of the impact that their increased use is likely to have onthe prolJecteU UdemandU for othLer forms of energy 'Ls small, bUecause of the

limited use of water heating in Mauritius, and subject to a wide margin oferror because o1 LIth uncerLainLy in the assumptions. Consequently, we havenot included this in either our BC or AEP projections.

Energy Conservation and Demand Management

3.20 The Government has traditionally relied on a rational pricingpolicy to regulate energy demand and ensure efficient use. The retail priceof petroleum products and, since the introduction in 1978 of a fuel adjustmentclause, electricity tariffs have been raised to refiect their higher cost tothe economy. This policy should continue but a strong case can now be madeto complement and reinforce this through a more active energy conservationprogram. The World Bank has estimated elsewhere that by implementing such aprogram, developing countries as a whole could reduce their projected 1990energy consumption by about 10 to 15 percent. 1/ Mauritius is not likely tobe an exception to this generalization but a systematic identification andevaluation of conservation opportunities is hampered by the lack ofsufficiently disaggregated data on the sectoral distribution of energyconsumption. Nevertheless, some promising avenues can be identified and theseare discussed below.

3.21 in the transport sector which accounts for half of petroleum productconsumption, the main opportunities for fuel conservation lie in improvedtraffic management and maintenance practices in the near future and, over thelonger term, in a change in the composition of the vehicle fleet to more

1/ Energy in the Developing Countries; World Bank, August 1980.

- 32 -

fuel efficient vehicles. Immediate areas for investigation are the currentlyfragmented structure of the public passenger transport system and a study ofthe traffin management mreasures that ciould he introdticed to imnrove vehi_le

flows in the Port Louis area. These issues are the subject of ongoing studiesu_nder the Rank asi4ted TTrhan Rehahilitation and Development Project.

3.22 The other major notential for onseruationn liec in the inAdiutr4il

(including sugar) and commercial sector. The first step in the identificationof savings here would be to conduct energy audits for the larger consumers.Experience with these audits in other countries has shown them to be a cheapand effective way of IdentIfyincg the potential for substantial energy savings.Savings could also be effected through the introduction of revised buildingcAodes and st-ndards as the present regul-atio4nrs do not address the -energy con-

sumption aspects of building design. In the domestic sector savings could bebrought about byj the exp-ansion of peak -----er pricin to household user -- A

the implementation of summer day-light savings time which would help moderateL- IC ta 11.- L U V LL

6,U^L X Lc L * v- L. . ULO LU LLUS * 1CC LIC U .UC - Li * CCC LCC

for additional generation capacity.

3.23 In our AEP forecasts we have assumed that a combination of thesemeasures woulU relUuce the LeveCl of primaryy en y corsumption. proJecteL under

the BC scenario by 5 percent in 1985 and 10 percent in 1990. On the basis0L UdaLd dVda_LdU±L 'LrLom utL[eL UUUIL[LLesb LesUe estLmaLtes Um'Lgt'IL We'L L pLrve LU

be too conservative, but they provide an indication of orders of magnitude.

Summary of Projections

3.24 The above factors can now be summarized to produce the followingprojections ror 19o85 ana 199.

TABLE 3.1

ENERGY CONSUMPTION AND SUPPLY PROJECTIONSkIThousandl toe's')

nfl '...... A"fl fl....Actual DB SceLariLo ±iEr ScenLariLo

1980 1985 1990 1985 1990

Primary Energy Demand 211 270 330 270 330Less Conservation 0 0 0 15 35

Net Primary Energy Demana /Li Iu J-)U LJ L"

Met From:

Hydro 18.4 24.4 24.4 24.4 24.4Bagasse 5.7 9.0 9.0 33.3 55.6Coal 1.0 1.0 1.0 1.0 37.7Ethanol 0 0 0 0 5.3

Sub Total 25.1 34.4 34.4 58.7 123.0

Residual Demand forPetroleum 185.9 235.6 295.6 196.3 172.0

Petroleum as % of NetPrimary Energy 88 87 90 77 58

Imports - Coal andPetroleum 186.9 236.6 296.6 197.3 209.7

Source: Staff Estimates

3.25 The difference between these two scenarios is striking. By imple-menting the Accelerated Energy Program, Mauritius has the opportunity to moveaway from an almost exclusively oil-based energy system to one where nearly halfof national energy supply is from other sources. Even this degree of dependenceon an increasingly costly imported resource is undesirable and it will needto be reduced further in the 1990s. However, it will represent a substantialimprovement over the situation that will prevail if no action is taken. TheBase Case scenario will result in an end of decade oil import bill of $140million in 1980 dollars and over $280 million in current dollars. 1/ Thiswould represent 20 percent of projected 1990 export earnings and 9 percent ofGDP.

1/ Based on the escalation at 3 percent p.a. in real terms of the 1980f.o.b. price of the reconstituted barrel of $40/bbl; no real increase inunit transport costs and conversion to current dollars assuming a 7 per-cent p.a. rate of general price inflation.

- 34 -

3.26 By way of contrast, the projected 1990 oil import bill under theAccelerated Energy Program is $82 million (in 1980 $) and $164 million incurrent dollars respectively. Although the total energy import bill underthis scenario will be higher because of coal imports for power generation --an additional $12 million (current) -- it will still be nearly 40 percentlower than the projected costs of oil imports under the BC forecasts. Theseprojected savings of $104 million per year on energy imports are of coursegross savings which would be offset to some extent by the foreign exchangeelement of the capital costs for setting up a coal-fired power plant, importingequipment to improve the efficiency of bagasse use and some foregone export ofmolasses. The cost of these projects still needs to be worked out in greaterdetail but the preliminary estimates which have been made suggest.that thecosts of the first are likely to be in the range of $45-50 million, and thatof the second in the range of $45-70 million (all in 1980 $). Some additionalinvestment will also be required in connection with the implementation of anenhanced energy conservation program and an initial small project for ethanolproduction but these have yet to be quantified and they are in any eventunlikely to be substantial. Even allowing a conservative figure of $15million for them and assuming the upper end of the range for the two majorprojects results in a total investment cost for the Accelerated Energy Programof $135 million (in 1980 dollars) which compares quite favourably with theprojected annual savings figure of $52 million (in 1980 dollars) cited above.Naturally, all of these figures need to be worked out in greater detail thanis possible in the scope of this report. These are, however, the type ofissues which should be examined when preparing the national energy plan. Infact, this is a principal recommendation of this report. These figures doshow that the net benefits associated with an Accelerated Energy Program arelikely to be large and particularly important to Mauritius since the tightexternal payments situation is expected to continue.

Energy Institutions and Planning

3.27 Moving towards the rapid implementation of the Accelerated EnergyProgram will require that the institutional and policy framework of the energysector be strengthened considerably. This framework is currently weak andfragmented. The Ministry of Fuel, Power and Energy -- which is actuallyresnonRihle for wntpr and Pelrtric nnpr -- fiinttinn 1aroelv nR nn ndminiR-trative body with virtually no staff available for policy work. The Ministryof EconTomir Planning and Development has recently been takinga more activeinterest in energy policy but its staff have other competing responsibilitiesand need reinforcement on the toehnical side. Several quasi-autonomousagen-

cies, such as the CEB and the University, are also involved in the discussionof vanrioiu snpecific- policy issues but their work is hampered by the absen.ceof an integrated national energy strategy which would spell out sector objec-tives and priorities.

3.28 The C-overrment i8 raware of this problem oand a-c^epts thn e need toformulate an integrated energy policy. An important and welcome step in thisdirect-i-on is the recent decision to estab,lish, wt h iin th".e VMir,istry of Economic

Planning and Development, a small energy planning unit whose immediate responsi-biliti-es wil be to coordinate the wor' be[ng done on variLous energy issues by

- 35 -

different Government, private and international agencies. The unit will alsoconsolidate and expand the existing energy data base and prepare, over thenext two years, a long term national energy plan and an associated investmentprogram for projects in the energy sector. The location of this unit in theMinistry of Economic Planning and Development is a sensible decision becausesome work is already being done there and because it will facilitate theinteraction with staff working on other sectors of the economy - industry,sugar, transport, etc. - which have strong linkages with the energy sector.However, it is essential that the work of the unit be closely coordinated withthe work of other agencies involved in energy. The Ministry of Fuel, Powerand Energy is the most important of these agencies, but there is also the CEB,the University and the private oil marketing companies, each of-whom will havean important contribution to make in the formulation of energy policy and thepreparation of an energy plan. The unit will also need to be supported at theCabinet level if its efforts are to bear fruit in national decision making.

3.29 To discharge these responsibilities. the energv planning unit willrequire considerable technical assistance in the initial stages and a com-mensurate strengthening of its staff capabilities on the technical side.Draft recommendations on the scope and nature of this technical assistance areincluded in Annex III of this report. The most imnortant element in thi8package is the provision of the services of an experienced energy planner whofor a period of 18 - 24 months would help establish the unit, define its sconeof work and staffing requirements and provide on the job training to the twoor three local staff working in the unit. The energy advisor would also heresponsible for coordinating the preparation of the national energy plan andfor identifying and arranaing for the nrovision of such short term technicalexpertise as may be required to formulate this plan. This expertise wouldcome either from the subsector aaencies most closely involved with the issuesconcerned (such as the CEB for the preparation of a feasibility study for acoal fired power plant); or from local or foreign consultant experts. Therole of the energy planning unit in this context would be to identify whichstudies need to be carried out, prepare suitable terms of reference, identifyappropriate agencies to execute the work and finally to review and analyze theoutput produced.

3.30 Many of these studies could be funded from the existIng budgets ofthe concerned agencies but where foreign consultants are required this arrange-ment mav nrove inadenuate. It is important therefore, that the energy planningunit have access to sufficient funds to finance these studies without delayingthe nreparation of the long term energy plan. One possibility for doing thiswould be for the Government to approach the UNDP, which has already indicatedits willingness to help finance the seaV

4ic,, of the energy advisor as part of

its ongoing program of assistance in Mauritius, to see if this assistancecould be rendered in the fo. of a teclnlcal assistance prolJect Lwhose maiLncomponent would still be the cost of providing the energy advisor but whichwould also include a smaill budget to carry out additional short term studies~ a suAa.LJ. IJUUU6=L LU .aLL UU LUJI.L±ULS IOLLLI ~aeas required. The size of this budget needs to be worked out in detail but aninitial provision of $200,000 should be adequate in view of the small numberof studies required and the potential for using local experts to carry out

- 36 -

IV. ENERGY SECTOR INVESTMENT PROGRAM

4.01 The Government has recently revised its investment program for the1980's to take account of the changed macroeconomic framework. Energyinvestments continue to be a large part of the Government's total investmentprogram, accounting for 15 percent of the projected investments for 1981-85.

The Public Investment Program

4.02 The revised investment program for the electric power sector ispresented below:

FISCAL YEARS

80-81 81-82 82-83 83-84 84-85 Total

Projects Rs. Million

St. Louis Staae III 46 32 - - - 78

Champagne 30 174 158 64 - 426

Power Transmission /1 20 65 70 40 37 232Rodrigues Electricity - 10 10 10 10 40Other CEB Capital

Investment 35 14 14 16 15 94

Total 131 295 252 130 62 870

/1 The foreign rest of t-his nroiec-t is beina financed by the Bank under loan1548 - MAS.

The Bank 1,nh., t -1hi -a rn ~nA ipnraldoAq-- t-hat- it- ic qnnrnnviqte,

To.eBankhas -evieed this prg an rd considers that it is aproriate---with the possible exception that the cost for the Champagne Scheme is probablyunderstated. CEB is currently reviewing the original cost estimates.

4.03 Irn addition to the power sector, the government has allocated fundsfor an ethanol project and an "energy" project. Disbursements will be contin-gent on further studies but the current schedule is as follows:

FISCAL YEAR

82-83 83-84 84-85 Total

~~~~~~~~~~~~~~~~A . M -LL. A L qr

Ethanol Project 1U u UEnergy Project - 90 160 250

Total 10 120 180 310

- 37 -

For the ethanol project, EIB financing totalling Rs. 50 million would beavailable under General Agreement 25. As there is considerable uncertaintyabout the implementation and final timing of these projects, the aboveallocations are considered by the Government to be tentative and subject torevision as further studies are undertaken. In the final analysis some or allof these funds may need to be reallocated to either the coal fired power plantor the bagasse based electricity scheme both of which are likely to be requiredduring this decade. Thus far, however, no funds have been allocated forthese projects.

Additional Investment Requirements

4.04 The two major energy projects for which additional financing islikely to be required during the 1980's are the bagasse based electricityscheme and the coal-fired power plant. Investments may also be required forimplementing an energy conservation program but these have yet to be estimatedand in any event they are unlikely to involve large sums of public funds. Oneproject which the Government is considering but whose economic and financialviability is questionable is a petroleum refinery. These projects are dis-cussed below.

The Bagasse - Electricity Scheme

4.05 Improving the efficiency with which bagasse is used so as to gen-erate a large proportion of the country s electricity supply has been referredto as perhaps the single most important supply side option. The investmentcosts associated with this proiect are being worked out in detail as part ofthe feasibility study now being done for the Government by consultants.However, certain preliminary estimates have been made for individual factoriesand these can be used to develop the orders of magnitude of investment thatwill be required for a national program. The most comprehensive estimatesavailable relate to a project for the proposed supply of 52 GWh/ annum fromthe FUEL sugar estate. This proiect includes the installation of a 110 tonboiler, two 10 MW turbo alternators and a complete pelletizing plant with acapacity of 25 tons of raw bagasse per hour. Its cost has been estimated in

1980 prices at RsllO million ($14 million) about 25 percent of which would belocal exnenditure for Installation and civil works. These figures would implya total investment requirement of about $70 million for a program to supply250 r.Wh/annium of bagasse generated electricity. However, it is unlikely thatall the factories involved will either be able to or will require the instal-lation nf nplleitiation enuinment. Some of the smaller factories- in narticular.may well be used to supply electricity only during the cropping season, withthe lnraer factories whirh have npllptizationri facilities supnn1ving the bulk oftheir output in the inter-crop period. Without the pelletization equipment,t-he cpnital cosrts nf the 1FTT T. nrnipect wolidi dropn hv ahout a third; ancd

on that basis the costs of a 250 GWh/annum program would be about $46 millionin 1980 dollars. These figures are broadly consistent with nther Petimatpemade by the sugar industry, the CEB and other informed local sources. In thefina. -n1-is, the bagasse program will robabily re-sult in a mix nf eniiinpnt

types for different factories and the investment costs will lie somewherebelween $45 = 70 mil1lion.

- 38 -

4.06 Not all of these funds will come from public sources, however. Thesugar industry could supply a large share of them from its own resources andfrom commercial borrowing and in turn the CEB would purchase the resultingelectrical output at a commercially determined price. In many ways this wouldbe a preferred option but the Government may have to provide a share of theinvestment requirements partly because some of the sugar estates are in thepublic sector and partly because some of the private estates may have diff4-culty in raising adequate resources from the commercial market because oftheir overall financial condition.

4.07 It is also important to emphasize that the bagasse electricityscheme will not be implemented all at once. Some of the larger svgar estateswhose role as energy suppliers is already well determined can nrobahlv installthe necessary equipment fairly soon. A number of the smaller estates, however,will nrobablv have to await the resultq of the work of the proposed sganrcommission which will examine the whole organization of the sugar industry,including the ouestions of cnnsolotit-ion and centr214izt40n= Tt is for this

reason that in the AEP projections in this report we have assumed that only150 GWh from the bagasse electririty scheme will be available by 1985 with theremainder becoming available in the second half of the decade.

4.08 These factors will affect the size and timing of the investmentreniiirpmpnts and finanrng arrangements for this project and as mentioned inparas. 3.10-13 above, they are the subject of an ongoing detailed feasibilitystudy whose ruiilts are expected shortly. However, for indicative planningpurposes, the Government should be prepared to allocate between a third and ahal f of nprojet fC costs s :9$2 - 3q million over a five year period These

r-_J --- y -- - -- JL sS_x V

estimates would be revised as further information is made available on thesize, timina and financing of t-hi -roa,'1-

Tho Coal-Fivred Pwowe Stantion

4.09 As noted in paras. 3.14 - 316 CEB is studying the feasibility ofinstalling a 29 MW coal-fired power station and the Accelerated Energy Programproposed i-n this repor.t envisages t implementatUion of suchtL a project in thisdecade. The final costs of this project will depend upon the decision takenwith regard to size and timing, and they still LU-t be worked ou in de-.ti1 1/

However, certain provisional estimates have been made by the CEB. These estimatesindicate a capital costL Lfor thLe plar, incILusive oU associated 'infrastructurefor coal unloading and storage of about 400-450 million (US$50-56 million), ifIthe plant were buUIi'LUt ding 1984.Lc' * 111This traaslates into a unit cost figure

of $1,700 - 1,950 per kW of installed capacity which appears to be somewhathigh in relation to thle cost oi similar plants being proposed in other coun-tries, but can probably be explained by the fact that the CEB estimates for

1/ The CEB should explore in particular the option of investing in a largerplant (with a lower unit cost per KW) to meet both future demand and tosubstitute for existing oil fired plant.

- 39 -

civil works include the plans for future expansion. This figure can be usedas a basis for planning purposes but we need to allow for the fact that thecoal-fired plant is probably unlikely to be built until the middle of thedecade. If construction were to be carried out in the period 1984-86, theunit costs would average around $2,250 - 2,600 per kW and a 30 MW plant wouldcost around $67 - 78 million in current dollars. While a provisional alloca-tion of this sum should be made for the mid 1980s, the next and more importantstep is to define in greater detail the size, timing and cost of the project.This would be part of the least cost power investment program which should bedeveloped as soon as possible.

Petroleum Refinery

4.10 As noted in Section 2, Equipetrol, a French consulting firm, hasconducted a feasibility study of the possibility of constructing a 20,000barrel/day refinery in Mauritius. The investment required for the proposedrefinery has not been included in the budget because no decision has been madeyet. The estimated cost of the refinery would be US$187 million (December1979) broken down as follows:

US$ Millions

Fixed Assets $155.0Management and Commitment Fees 2.8Interest during Construction 29.2

$187.0

4.11 The study claimed that, after accounting for recurring imports ofcrude oil, the project would save (earn) enough foreign exchange to repay theentire investment. The internal rate of return was reported to be 54 Dercentin current prices and 22 percent in constant prices. This analysis was basedon the consumption in 1983 of 40 percent of the refinery output in Mauritius.an additional 20 percent in Reunion, and the sale of the remaining 40 percentto Japan and Australia.

4.12 These figures should be viewed with a 2reat deal of caution. In thefirst place, the revised projections of petroleum demand made in this reportand by other informed agencies suggest that the level of netroleum consumntionon the island is likely to be well below the 330,000 toe predicted for 1983in the refinery sttdv. Seeondnlv a domestic refinery would restrict thecountry's freedom to vary the consumption pattern for different petroleumnrodunf.q withnitt e-P,Rinc anv refinerv imhalanrP nroh1lmR. Thirdlv it iR

…--…~~~~~- ~S…o --- -- _ __ ___ _ _

highly unlikely that a small refinery in Mauritius would be able to competeeffpectierplv for evnorti markets wit-h the sonhist-icat-ed, lroerr morp establhihed

and efficient refineries operating in the Middle East and Singapore. Thecapital costs of the proposed refineryu wuld alone beA over TUS1C per barrel of

output. Besides, the proposed refinery is not likely to make a substantialcontribution to the GovernmentCs employment generatior. obJectives. Finally,

- 40 -

there is considerable uncertainty at present about the likely profitability ofany new refinery venture in view of the considerable increase in refinerycapacity that is currently underway in many oil exporting countries. Thesedemand uncertainties are reinforced by the fact that Mauritius has a goodworking relationship with the oil marketing companies and that these companieshave been able to maintain an uninterrupted supply of petroleum even in timesof international supply shortages. An alternative approach which the govern-ment could investigate would be to approach the operator of an underutilizedrefinery in the region - such as the one at Mombasa. Kenya -- and sign a"toll-refining" agreement. The government could contract for crude oildirectly from an exporting country and have it delivered to the refinery. Withsuch an arrangement the problem of selling 40 to 60 percent of the refineryoutput would be eliminated. We recommend that such an alternative be includedin the analysis and review of the refinery investment option.

- 41 -

ANNEX 1

CONVERSION FACTORS USED FOR ENERGY SOURCES AND PRODUCTS

The following factors were used for determining the tonnes of oil equivalent:

1 tonne of gasoline = 1.08 tonnes of oil equivalent

1 tonne of kerosene = 1.04

1 tonne of gasoil = 1.01 "

1 tonne of fuel oil = 0.96

1 tonne of LPG = 1.15 "

1 tonne of coal = 0.60 " 1/

4,500 kWh = 1

1 tonne of bagasse = 0.16

1/ While this conversion factor reflects the relative calorific contentof coal, the calculation of the toe equivalent of projected coalimports for electric power generation is based on a lower conversionfaLctor to reflect the lower efficiency of coalfjlreud generatiLon fLora small (30 MW) power generating plant in relation to oil-fireddiesel generation.

NAT'IONAL ENERGY BALANCE - 19I79 - ELECTRICITY DIST'RIBU'TED(Thousands of tonnes of Oil equiva'Lent) a/

SUPPLY DEMAND-$

b/ ~~~~~~~d/ eEnergy Sources Production Imports Conversion- Domestic Commercial- Industria:L Transport Others- Total

Losses Sector Sect-or Sector Sector DirectEnergy

.__________ _ ____________________________ . __- __ Use

LE'G 2.1 - 2.1 - - - - 2.1

GaLsoline -- 48.1 - - - 48,1 - 48.1

Kerosene -- 26.2 - 26.2 - - - - 26.2

Diesel -- 60.0 3.9 0.8 0.4 0.6 54.0 0.3 56.1

Fuel Oil -- 74.3 38.6 8.1 4.L 20.3 - 3.2 35.7

Coal - 0.9 - - 0.9 - - 0.9

Hydro 1:3.1 - 8.5 1.8 0.93 1.2 - 0.7 4.6

Bargasse 337.8 - 134.1 2.2 1.1 199.5 _ 0.9 203.7

Sub Total 350.9 41.2 6.5 174.5 102.1 5.1

Energy Imports 211.6 (211.6)

Conversion Losses (185.1) 185.1

Net EnergySupply/Demand 37 7 .4 3774

- 43 -

ANNEX II(a)

ASSUMPTIONS UNDERLYING THE ENERGY BALANCE

A. Consumption Patterns

1. Consumption statistics are for inland use only and exclude 55,000toe of let fuel reexports through refueling of international airlines.

2. The domestic sector consumed all kerosene and LPG.

3. Light transport consumed all gasoline.

4. Power generation consumed 82 percent of fuel oil in 1975 and1976 and 80 percent thereafter. It also consumed 7 percentof gasoil in 1975 and 1976, 15 percent in 1977 and 1978; and10 percent in 1979.

5. The remainder of the fuel oil was consumed by the industrialsector.

6. The remainder of the gasoil was rnnsiimpd hv heavy transport,including the amount used by the Government.

B. Energy Required For Cane Processing

(Based on the Electricite de France Study conducted for the Government.)Each tonne of cane requires:

- 270 kg. high pressure steam- 450 kg. low pressure steam- 10-15 kWh electricity

The low pressure steam is obtained by extracting steam from theturbine generators and from the high pressure steam exhaust. Therefore, thetotal needs are 450.kg. of steam plus 10-1-55 krl ThisL is approximately -q1al

to 1,000 pounds of steam per tonne of cane plus the electricity.

At 1000 Btu per pound of steam

Heat required = 1.0 million Btu.

Oil Equivalentat 80%.

efficiency = 1.25 million Btu.

ElectricityRequired 1 z2.5 kwh

-44 -

ANNEX II(a)Page 2

Oil Equivalentat 33%effiinry = 0.13 million Btu.

Total energyrequired = 1.38 million Btu per tonne of cane

Or = 0.033 toe/tonne cane.

For 6 million tonnes of cane the theoretica1 energy reauirement is 195,600

toe.

C. Footnotes to National Energy Balance

a. One barrel of oil equivalent is assumed to have a heating value of 6

million Btu, and one ton of oil assumed to be equivalent to 7.5 barrels

(regresenting widely traded Saudi Arabian light marker crude oil - 34.5

API ). For the purpose of consistency, all the data were converted to

the tonnes of oil equivalent reflecting the Btu content of each resource

and energy product using the conversion factors in Annex 1.

b. The conversion losses for the thermal electricity generation were based

on average efficiencies of 35 percent. Hydroelectricity and the portion

of bagasse used to generate electricity for CEB were converted on the

same basis. These losses could be distributed to the various sectors in

the same manner as electricity is distributed. The losses for bagasse

used in the sugar industry were based on theoretical requirements of

198,000 toe to process the entire crop.

c. Demand statistics are for consumption withir the islanrd; no bunkers

were included.

d. Although the commercial sector (hotels, hospitals, etc.) does use some

petroleum products directly for hot water heating, no statistics were

available.

e. "Others" includes electricity transmission and distribution losses and

CEB uses.

ANNEX III

E -R1.4AT M t17 TtfAT ACt'('TO AX.TO REP(%TT-D 'n'ALir, I 1ECHNICAL AU.ISIANCE REQU.LXIRE

BY THE ENERGY PLANNING UNIT

Tnis list is not intended to be exhaustive DUt it presents the projects anu

studies which are necessary early in this decade and for which the energy

planning unit will require technical assistance.

I. Data Collection

A. Surveys of energy consumption in industrial, residential, commercial

and transportation sectors including non-commercial fuels in the

residential sector -- possibly performed by Consultants or University

of Mauritius staff.

B. Establishment of an energy library and data bank containing inter-

national and regional data in addition to domestic -- possibly in

conjunction with the University of Mauritius.

II. Energy Resources Development and Utilization

- This work would probably involve consultants and university

researchers.

A. An evaluation of the contribution that can be made to the energy

sector by the sugar industry including bagasse use and ethanol

manufacture. This would involve a critical analysis of all existing

studies and would incorporate the results of the current study of

bagasse use.

B. Identification of mini-hydro sites and feasibility studies of theirpotential for development having regard for any existing claims on

the water for irrigation purposes (CEB, CWA and Ministry of Fuel,

Power and Energy with consultants).

III. Energy Conservation and Demand Management

- Consultants, in conjunction with the appropriate local Ministry

or organization, would perform these tasks.

A. Revise the Building Code to include energy performance standards

for energy consumption (with the Ministry of Housing).

- 46 -

ANNEX IIIPage 2

B. Evaluate the results of ongoing studies of urban transport withparticular emphasis on fuel consumption (with the Ministry ofTransportation).

C. Disseminate information on methods to obtain the same level ofenergy services while using less energy or develop an informationcampaign aimed particularly at the household sector.

D. Determine the need for an energy audit service for the industrialand commercial sectors and establish the service if required.

E. Establish a training program for energy managers and engineersin the industrial and commercial sectors covering such topicsas energv accounting and auditinga conservation nroniectsand energy system efficiency.

- 47 -

ANNEX IV

ELECTRICITY TARIFF GROWTH, 1975-80

AVERAGE ANNUAL GROWTH(Percentage)

Current Prices Constant Prices (1975)1975/78 1978/80 1975/78 1978/80

DOMESTIC

- Day tariff - add. units 28.4 46.2 23.1 17.1- Night tariff 16 48.3 11.2 18.7

COMMERCIAL

- Flat rate - running charge 18.3

- Maximum demand - runningcharge 19.8

INDUSTRIAL

- Flat rate - running charge 18 46.3 13.1 17.1

- Maximum demand - runningcharge 19.8 37.5 14.9 10.1

- Sugar factories 20.2 32.2 15.3 11.9

PUMPING

- Irrigation 18.5 41.4 13.6 13.1

- Any Purpose 20.2 35 15.3 8.0

STREET LIGHTING 19 44.3

- 48 -

ANNEX V

PETROLEUM PRODUCT PRICES AND RATES OF DUTY FORPETROLEUM PRODUCT IMPORTS

The followine general import duties are assessed on imDorts:

Aviation spirit 150 %

Spirit type jet fuel 150 %

Other light oils 150 %

Gasoline Rs. 10 per Imperial Gallon

Gasoil 20 %

Fuel Oil 24 %

Greases 20 %

LPG 40 %

Kerosene nil

Historical rates of duty for gasoline and diesel oil (gasoil)

were as follows:

Gasoline Diesel

1973 to June 1977 Rs. 4.19/litre Rs. 0.94/litre

June 1977 to April 1978 75 % 20 %

May 1978 to Jan. 1979 110 % 20 %

January 1979 to Nov. 1979 150 % 20 %

Nov. 1979 to present Rs. 10/Imp. Gal. 20 %

PETROLEUM P'RODUCT PRICES, RUPEES PER IMPERIAL GALLON

Premium Casoline Regular Gasoline Gasoil Kerosene Fuel 011

cif Retail cif Retail ciLf Retail cif Retail cif Retail

1975 2.85 5.916 2.48 5.67 2.32 3.79 2.54 3.51 NA 3.10

1976 3.39 6.75 3.05 6.40 2.87 4.49 3.10 4.05 NA 3.33

1977 3.79 7.73 3.42 7.15 3.27 5.00 3.48 4.47 NA 3.87

2/1978 3.94 9.07 3.56 8.29 3.s42 5.20 3.62 4.25 31.3 3- 3.87

1979 5.62 14.413 5.28 13.55 5.04 7.40 5.22 6.65 4.31 4.99

1980 10,.34 23.75 9.94 22.85 9.77 14.12 9.97 12.37 7.40 8.64

Averaige Annual.

Incro;-_e %

1975-78 11.3 15.0 12.8 13.4 13.83 11.1 12.5 6.5 - 7.6

1978-80 61.9 61.8 67.0 66.0 69.0D 64.7 65.9 70.6 49.0 49.4

1/ As of November 1980K!1 Esti ima ted I >:

" 0

- 50 -

ANNEX VI

OTHER PROJECTIONS OF ENERGY DEMAND

1. Over the npat few years several agencies have made prolections of

the demand for electricity and petroleum products. Because of the changingecoromic situation in Maurit-ius snme of the iunderlving assumptions in these

forecasts are no longer valid. A brief summary of those forecasts is

presented in this annex.

Electric Power Proxectinns

2. For its projections of energy and feipl requiremrents CEB has relied

on its Consultants Preece, Cardew and Rider (PCR) of the United Kingdom and

Electricite de France (EDF). PCR completed a power markt siurvuy in 1975

which was revised by the CEB and the Bank in 1978 when a transmission projectwas appraised. This study wa.s based on trenA analysis for each ratgorv of

consumer and the major assumption was that electricity demand growth wouldcontinue at falirlly hi-11gh, rates in the 1980's although these rates woildti eipclinp

gradually as tariffs increased and the market became saturated. The average-growth__1 rs over the 1980-85 period was proje-ed at- 8.e.

gi WLIL L O .UL FUI. p w t aL= JCa 0 - C - -tn. - JJt.L.JL-- -

3. nT 1979, anoth-er stuAdy was done for the CEB by EDF which proietPd

power sales over two periods, 1980-85 and 1986-95. EDF based its forecasts onthe relationship between electricity growth and GDP over the period 1970-1978(before electricity prices were revised to take account of higher fuel costs).or iLts fLorecasts lor tLe 1980=85 period, EDFI assume a GDP gr-wth rate of

5.5% p.a. and a continuation of the 1970-78 elasticity figure of 1.45 which

resuLtedu in eLectriciLty sales growLh of U/% per annum. For the second eriod,

EDF recognized the uncertainties and projected two cases, the first yielding a

groUWtLh rate oUL 9/% p.aa. anU Lhie secondU one of Apa.

4. Th -e growth which PCIR LaId Lorecast uU not materialize in thLe late

1970's and actual sales grew at just over 4 percent a year between 1977 and1980 because oL the SilowdowLn iLn economic CLivity andU the impacLtL higher

tariffs. These factors, combined with the revised expectations of economicgrowth in the 1980's also make it unlikely that the 8 percent p.a. growth in

electricity sales envisaged by EDF for the 1980-85 period will actuallymaterialize. Taking these factors into consideration, CEB has now revised its

projections of electricity sales in the 1980's and is currently working on the

basis of a 4% p.a. average growth rate for total sales in the I1OU-1985

period. These projections are broadly consistent with the overall energyconsumption growth envisaged under the BC scenario of this report. The

various projections discussed above can be summarized as follows:

- 51 -

ANNEX VIPage 2

TABLE 1

ACTUAL AND FORECAST ELECTRICITY SALES 1975-1990GWh

Year Actual PCR 1/ EDF Forecast CEB 1980 RevisedSales Forecast Assump. T Agumn. II Forecast

1975 184 257 - -

1977 257 274 - - -1980 292 330 327 327 2921985 - 491 480 480 354

1990 - 706 2/ 710 650 431

1/ As revised by the Bank and CEB in 1978.2/ Derived by e 1985 figure at the growth rate for 1984-85.

Petroleum Product Projections

5. The study which EDF performed for CEB included projections ofUeJaId[iU 1UL pr'lmaLy eiELegy sUUrceS. 1Te' UdaLc slcenariLU UseU was a grLWLII LrLa

of 5.5% per year for the economy and an energy/growth elasticity of 1.15 up toi985 and 1.0 thereafter. Low, medium and high cases were analyzed using ademand of 230,000 toe in 1978 as the base. By subtracting the oil equivalentof the energy provided from hydroelectricity and bagasse based electricity,the following forecasts for petroleum products were calculated.

TABLE 2

EDF'S IMPLIED FORECAST OF PETROLEUM PRODUCT CONSUMPTIONThousand TOE

Year Low Medium HighCase Case Case

1980 236 236 2361985 320 320 3201990 380 428 462

A projection by Equipetrole of France as part of its feasibility study fora proposed refinery showed a total demand of 330,500 toe for 1983 and 495,800toe for 1994. The forecasts prepared by EDF and Equipetrole were based on the

- 52 -

ANNEX VIPage 3

situation existing in 1978 and early 1979 and do not have the benefit of

recent data.

6. In 1980, Shell projected the demand for petroleum products basedon expected growth for malor consumers and on expected GDP growth. The total

demand and implied annual growth rate are shown below:

TABLE 3

SHELT'S FORECAST OF PETROLEUJM PRODUCT IMPORTS

Year Total Demand Growth Over

'000 TOE Previous Year, %

1981 210.8 13.41982 227.3 7.8

1983 238.5 4.91984 248.1 4.11985 257.6 3.8

Th ie forecast LU)'y Sh.e.ll is more curren.t t-han t..he others and has taken into

account the lower growth expectations and the increased prices. The growth

rate in Shell's forecast averages 5.1% from 1981 to 1985 which when combined

with expected GDP growth of 3.5% gives a coefficient of elasticity of 1.15.

if tne oi' equivalent of the expected increase in bagasse used for electricity

generation is subtracted from Shell's forecast, it is broadly in line with the

implied demand of 235,600 toe in 1985 as shown in Table 3.1.

- ,,i30~~~~S'2 57'-5'

MAURI TIUS

20'00 cSzZ I B.ilt op areas WrO

- Main roads 0airn oe2Secondory roads N //A A V CE CA F

p Mountainous areasZ7t'River nd lakes

i Major distribtin centers G* Mnor distrib-tion centers

{, t/Tridlet /PloinTd 6

0 5 4 IO 12rKILOMETERS

MILES j L 8UIIS

; 0;t ̂ , < V se>W..~~~~~~~~~~~~~~~~~~~~~~W.-

A' /A OCEANs -orl Rnv_ ,vrt C

12~ ~ ~ ~ ~B~~~~~~~~~~~~~~~~~~~~~~~~~~

tC-XkRO;BOURG~~~~~Q-t\ 4pPIoine <j~~~ilti'

(4t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'E,. D gIN1AN.LOCeFA

' N > _ < >a ; ,JE M IN F.~~~~~~~~E 2-1

HILLMoooe: oilur

/ zs' oY / .4 ,'V ~~~~~P O CEA ..,.** rNpo2iX7

VACOA zS --'' :7