1. African Union/Brazil/UNIDO Bio-Fuels Seminar in Africa 30th July – 1st August 2007 Addis Ababa, Ethiopia The Promise of Biofuels in Africa Status, Challenges and Opportunities Stephen Karekezi, Waeni Kithyoma & Samwel Leyian AFREPREN/FWD Nairobi, Kenya

2. Quick background brief on energy sector Overview of Biofuels in Africa –Key Drivers –Principal Stakeholders –Status & Prospects –Challenges Options for addressing challenges Outline

3. African Energy Sector – 3 distinct regions

4. Bio-energy in Africa Three Categories Traditional Biomass Energy Technologies (TBTs ) –Inefficient use of wood, charcoal, leaves, agricultural residues, animal/human waste & urban waste Improved Biomass Energy Technologies (IBTs) –Improved and efficient technologies for direct combustion of biomass such as improved cooking/heating stoves and improved biofuel kilns Modern Biomass Energy Technologies (MBTs) –Conversion of biomass energy to advanced fuels/forms namely liquid fuels, gas and electricity TBTs IBTs MBTs

5. Bio-fuels in Africa – Key drivers 1.Energy security & diversification: Reduced dependence on imported fossil fuels and increasing energy security 2.Higher convertible currency revenue: Potential lucrative biofuel export market particularly to EU 3.New revenue stream for agro-industries & farmers: Can realize a new & substantial revenue stream to agro-industries & farmers especially if using by- products of existing crops + strengthen backward linkages to agriculture. 4.Carbon finance: Cleaner options that reduce fossil fuels use & reduce greenhouse gas emissions thus attract carbon concessional finance 5.Jobs: Energy crops for bio-fuels production can create job opportunities for rural communities in Africa arising from labor-intensive biofuels agriculture 6.Local rural energy needs: Can assist in providing modern energy services (motive power & lighting)

6. 1. Energy Security & Diversification

7. On average, oil-importing developing countries use more than twice as much oil to produce a unit of economic output as do OECD countries In 26 African countries, oil imports account for 10-20% of merchandized imports (growing portion of oil imports used for power generation) Global prices recently peaked again to $75 per barrel According to African Development Bank, at such high prices, debt relief to 14 of 19 African HIPC oil-importing countries smaller than increase in oil import bill 39 Net oil importers in Africa 13 Net oil exporters (expected to increase by 2)

8. 1. Energy Security & Diversification Source: AfDB, 2006 - Computed using IEA data

9. Recent Trends in Ethanol Production Ethanol production has almost doubled in 5 years, with the bulk of the increase coming form Brazil & the United States 95% growth 0 4 8 12 16 20 200020012002200320042005 Mtoe BrazilUnited StatesEuropean UnionChinaIndiaOther 2. Higher Convertible Currency Exports

10. Recent Trends in Biodiesel Production Biodiesel production has almost quadrupled since 2000, with European countries – notably Germany – contributing most of the growth 295% growth 0 0.5 1.0 1.5 2.0 2.5 200020012002200320042005 Mtoe GermanyFranceItalyRest of EuropeUnited StatesOther 2. Higher Convertible Currency Exports

11. Global biodiesel production projected to increase to more than 20 billion litres by 2020 mainly in EU Over the next 15-20 years, biofuels could meet close to 25% of world energy needs Key driver is the EU biofuels target

12. 3. Increased Revenue to Agro- Industries and Farmers In Kenya, close to 20% of population directly or indirectly dependent on sugar industry Mauritian sugar companies’ revenue from biofuel-based electricity sales national grid higher than sugar sales Significant benefits from optimizing revenues from sugar, electricity sales and ethanol In Mauritius, sugar farmers (even small scale farmers) share in revenue from sale of biofuel-based electricity sales to power utility

13. 4. Carbon Finance

14. 5. Jobs Job creation potential of bio-fuels compared to other conventional fuels FuelJobs per TWh Biodiesel16,318 Bioethanol3,770 Biogas1,341 Gas130 Nuclear80 Coal700 Source: Earthlife Africa/SECCP report 2003

15. 6. Local Rural Energy Needs Access to electricity – bottom 40% (mainly rural) Source: Estache, 2005

16. Bio-fuels in Africa - Key Stakeholders 1.Energy security & diversification 2.Higher convertible currency exports 3.New revenue stream for agro- industries & farmers 4.Carbon finance 5.Jobs 6.Local rural energy needs Private sector Commercial Banks NGOs Civil Society Gov Development Banks Development Partners Sub-regional, Regional. & International Institutions Research

17. Biofuels in Africa Focus on –Biomass Cogeneration –Bio-ethanol –Biogas –Bio-diesel –Biomass Gasification

18. Cogeneration: Simultaneous production of electricity and process heat from a single dynamic plant. Largely produced from sugarcane bagasse byproduct A number of countries in the Africa region have successfully deployed cogeneration e.g. Mauritius, South Africa, Kenya,Swaziland, Malawi and Uganda. Attractive potential for scale-up as most sugar factories already practice cogeneration using low pressure systems – require modest investment to generate excess power Biomass Cogeneration – Status and Trends

19. Cogeneration in Mauritius Lessons for Africa  Successful in sale of power to the grid  Accounts for close to 40% of a 725MW national generation capacity (of which 25% bagasse)  Began with smaller installations (1.5MW - 5MW, now installing 70MW plants) Others Sugar Industry Power Generation – Mauritius 2004

20. Cogeneration potential in the sugar industry in selected African countries

21. Feed-in-tariff (or price paid to cogenerators by utilities) not pre- determined and often set too low Negotiations of power purchase agreement (PPA) can be too lengthy (took over 10 years to negotiate cogeneration PPA in Uganda), Two key policy measures: Pre-defined Feed in tariff Standard PPA Biomass Cogeneration Key Challenges

22. UNEP/GEF (Global Environment Facility) and African Development Bank initiative. AFREPREN/FWD is Executing Agency Objective is to promote cogeneration (biomass-based mainly) in eastern and southern Africa Initial focus on biomass-based agro-industries – sugar sector Cogen for Africa Initiative

23. Cogen for Africa project To build on success of Mauritius & relevant elements of EC-supported Cogen Asia initiative Initial phase to cover 7 countries which have endorsed project (Kenya, Uganda, Tanzania, Sudan, Ethiopia, Malawi and Swaziland) – later phases could expand to other regions of Africa Partnership with African Development Bank likely to address key financial challenges of cogen investments Implementation begun in mid 2007. Implementation phase – 6years

24. 40 MW additional installed capacity of cogeneration promotion projects 20 MW pipeline projects 200+ MW additional cogeneration capacity 6 year project period Beyond 6 years Cogen for Africa

25. Bio-ethanol – Status &Trends

26. One of the most developed bio-fuel option in the region Ethanol production in Africa is mostly concentrated in Southern Africa Linked mainly to the sugar industry – molasses Other feedstock include maize, cassava and sweet sorghum

27. Bio-ethanol – Status &Trends Proven technology - Medium to large scale projects implemented in: –Swaziland ; South Africa; Uganda; Zimbabwe; Kenya; Egypt; Malawi ; Nigeria. Successful blending program in Malawi – has been in place for long. Also perceived as option for removing lead in transport fuel Growing interest from sugar factories to expand bio-ethanol production to generate extra revenue stream – generates some of the highest internal rates of return for sugar factories

28. Ethanol Production in Selected African Countries 2005 Source: Renewable Fuels Association, Industry Statistics, http://www.ethanolrfa.org/industry/statistics/#E http://www.ethanolrfa.org/industry/statistics/#E

29. Bio-ethanol – Key Challenges Need predetermined price for bio- ethanol Compulsory requirement for blending Key policy measures  Set attractive price for bio-ethanol  Establish requirement for blending  Protection and ring-fence away influence of fossil oil companies

30. Biogas – Status and Trends Source The Republic of Uganda,2007

31. Biogas – Status and Trends Fairly well developed in the region Proven technology - A number of nation-wide biogas projects implemented in a number of countries Significant potential in the region Encouraging biogas initiatives in Ghana, North Africa (landfill) and South Africa (landfill) Success appears to be most encouraging in institutional sector

32. Biogas – estimated no. of installed units in selected African countries Source: AFREPREN/FWD Source The Republic of Uganda,2007

33. Potential of Biogas digesters in Africa - 2007 Source: Winrock, 2007

34. Biogas - Challenges Source The Republic of Uganda,2007 Substantial water requirements of biogas under-estimated High-up front costs that require credit system – principal reason for better performance at institutional level For small scale systems, important to limit scope of initial dissemination efforts to minimize maintenance cost

35. Bio-diesel - Status and Trends

36. Bio-diesel term here inclusive of Pure Plant Oil (PPO) Embryonic technology in the region but with significant potential Main interest in use of Jatropha as feedstock Pilot projects implemented in large number of African countries with Mali and Ghana recording some encouraging results

37. Bio-diesel - Challenges Well proven at small scale but jury still out on large scale trials being initiated in various countries At large scale, requires significant applied R&D to establishment of new agricultural system High costs associated with technology transfer & adaptation Possible competition for land between biodiesel feedstock and food crops but can grow in relatively arid areas where access to land is probably less contentious Local financiers still uncertain due to unfamiliarity with this option

38. Biomass Gasification Least developed option in the region Experimental and pilot projects implemented in some countries in the region but more encouraging results in other developing countries such as India Pilot initiatives underway in North Africa and Southern Africa Appears to be promising in medium to long- term

39. Gasification - Barriers Limited technical expertise on biomass gasification in the region High risk perception from potential project implementers and financiers due to unfamiliarity with option Need to increase awareness, enhance skills and initiate additional pilot test plants

40. Gasification - Barriers Limited technical expertise on biomass gasification in the region High risk perception from potential project implementers and financiers due to unfamiliarity with option Need to increase awareness, enhance skills and initiate additional pilot test plants

41. Key Sustainability Issues Equity: Will the poor benefit? –Mauritius revenue sharing mechanism –Case of West Kenya sugar factory where cane farmers get 51% of ex-factory sugar price Meet energy needs of the poor? –Primarily through increased incomes subject to existence of adequate revenue sharing mechanism –Modern biofuels cleaner with lower indoor emissions but cost still an issue Is there sufficient land? –Most land requirement projections for meeting internal biofuel demand in the near term appear to be manageable –Less certain if one takes account of biofuel export markets – need additional assessments

42. Key Sustainability Issues Adversely affect food security? –Experience in sugar growing areas indicate increased food security as a result of increased incomes – subject to regular payments for sugar cane delivery and adequate revenue sharing mechanism Biodiversity and natural resource management –Biofuels development tends to lead to mono-crop culture and intensive use of fertilzier and pesticides –Needs additional detailed assessments Key role for agencies such as UNIDO and/or UNEP/AU/ECA and sub-regional agencies to take lead on the sustainability issue

43. Priority Options Will Vary According to Country’s Specific Characteristics Drylands (Arid and Semi Arid Areas) –Short Term Options Biodiesel Bioethanol Cogeneration –Medium to Long Term options Biogas Biomass Gasification

44. Priority Options Will Vary According to Country’s Specific Characteristics Wetlands (Moist and rainland areas) –Short Term Options Bioethanol Cogeneration –Medium to Long Term options Biodiesel Biogas Biomass Gasification

45. Way Forward Short Term –Focus on proven options that build on existing agro-industries that use available agro-wastes (such as bioethanol in existing sugar industries) to minimize start-up costs and reduce risk –Undertake regularly updated detailed resource assessments

46. Way Forward Short Term –Set pre-determined prices for bioenergy options –Establish supportive regulatory and policy measures such as standard PPAs and blending requirements –Concentrate on investment analysis and preparation of “bankable” investment proposals –Encourage national, regional and international exchange of experience, skills and technologies (regional bioenergy network)

47. Way Forward Medium to Long Term –Finance resource assessments –Support R&D and local adaptation –Initiate pilot and demonstration investments –Strengthen national, regional and global technical exchange of skills, experience and information

48. Thanks for your attention www.afrepren.org & www.unido.org