1. Analysis and Challenges of the African Energy Sector and Potential for Sustainable Bio-Energy Options by Stephen Karekezi, Waeni Kithyoma & Ken Muzee AFREPREN/FWD, Nairobi,Kenya www.afrepren.org

2. Outline Key messages Brief overview of African Energy sector Key challenges facing the energy sector in Africa Biofuels – key drivers & benefits Brief discussion of key problems/trade-offs Brief review of key biofuel options –Biogas –Bio-ethanol –Biodiesel –Biomass gasification –Biomass cogeneration Selected case example –Biomass cogeneration – Mauritius

3. Key Messages For Africa, especially sub-Saharan Africa: Special challenge of addressing trade-offs in context of high poverty levels and inadequate food supply and limited access to modern energy services as well as large number of land-locked oil-importers. For Africa, especially sub-Saharan Africa: GHG mitigation a lower level concern with greater interest in adaptation capacity. Food security – switching of land from food production to energy crops: Fewer problems with existing plantations (e.g. sugar cane) that use agro-waste or by-products. Bigger problem is reliance of Africa on food imports. Environmental risks – water use, mono-crops thus reducing bio-diversity, displacing subsistence agriculture into marginal and forest lands: Continues to be a problem particularly water but greater difficulties with respect to green-field new investments. Benefit sharing – who benefits? Agro-industries, farmers: Large and small scale), oil industry which is increasingly interested in biofuels? Revenue sharing combined with an open political system and sound government institutions has allowed benefits to be widely shared. These pre-requisites are not found in many sub-Saharan African countries Technological development – can local industry develop autonomous and independent biofuels know-how or would it simply entrench existing unequal relationships in technology know-how and access? Technological transfer and development appears to have taken place, important for strengthening capacity to adapt to climate change

4. Energy Consumption in Africa * Biomass refers to combustible renewables (mainly fuelwood, charcoal and agro-residues) and waste Source: IEA, 2008

5. Sub-regional Energy Consumption Africa Best Understood As Three Regions –North Africa (heavily reliant on oil and gas) –South Africa (heavily reliant on coal, oil and gas) –Sub-Saharan Africa (largely reliant on traditional biomass)

6. Key Energy Challenges Facing Africa Although very low, modern energy consumption on a per capita basis is declining Electricity supplies failing to keep pace with growth in demand Low electrification level & very slow increase in number of connections – lower than population growth in most sub-Saharan African countries Oil prices doubled in 1 year increasing transport cost. High & volatile oil prices = balance of payments problems for oil importing African countries. High oil prices combined with decreasing share of hydro in power supply of sub-Saharan Africa (partly a result of privatization) has spread oil crises to power sector. In 2007 alone, energy crisis in 2/3rd of Africa - frequent and extended electricity outages partly due to drought & inadequate power generation (power available 2-3 days a week) $

7. Modern Energy Consumption Per Capita Declining in most of Africa A few successes Botswana, Senegal, Kenya, Ghana, Mauritius, Ghana, Seychelles, Namibia, Tunisia, Morocco, Egypt & S. Africa

8. Generation Capacity Shortfall Reported Power Crises in Africa Ongoing: Uganda, Tanzania, Rwanda, Ethiopia, Ghana, Zimbabwe, Sierra Leone, Nigeria, Liberia, Burundi, South Africa Close to 30 countries facing major power problems Some countries' power sector in relative good shape: Mauritius, Kenya, Tunisia, Egypt, Algeria, Libya & Morocco

9. Most African Countries Import Oil In 2005, there were 39 net oil importers and 10 net oil- exporters Growing share of exports used to import oil Significant oil exporters rely on imported refined oil products Shrinking oil reserves in oil exporting countries

10. Biofuels – Key Drivers Oil Imports as a Percentage of Total Imports Oil Imports as a Percentage of Total Imports Category (in %) Number of African oil importing countries Less than 55 5 – 1014 10 – 1516 15 – 2010 20 – 251 More than 25%1 Source: AfDB,2006 - Computed using IEA data

11. Biofuels – Key Drivers Remaining Years of Oil Extraction Source: AfDB,2006 - Computed using African Development Bank data

12. Biofuels – Key Drivers/Benefits Rising oil costs (recently peaked to above $140/barrel – talk of $200 to $300/barrel). Even if high prices are transitory, impact on weak & vulnerable sub-Saharan African countries is huge Declining biofuels production costs – ethanol Export potential of biofuels (although increasingly questioned, European Commission biofuels targets appear to present lucrative export market but could entrench external export dependency which has contributed to food supply vulnerability)

13. Biofuels- Key Drivers & Benefits Can be reliable, local and sustainable source of energy, important for continent with young and growing population Can reduce greenhouse gas emissions Can be an important source of jobs Existing agro/forestry industries have skills and capital to produce biofuels at competitive costs FuelJobs per TWh Biodiesel16,318 Bioethanol3,770 Gas130 Nuclear80 Coal700 Biogas1,341 Source: Earthlife Africa/SECCP report 2003 Job creation potential of biofuels

14. Key Problems/Trade-Offs Food security – switching of land from food production to energy crops Environmental risks – water use, mono-crops thus reducing bio-diversity, displacing subsistence agriculture into marginal and forest lands Benefit sharing – who benefits? Agro-industries, farmers (large and small scale), oil industry which is increasingly interested in biofuels? Technological development – can local industry develop autonomous and independent biofuels know-how or would it simply entrench existing unequal relationships in technology know-how and access?

15. Biogas – Status and Trends Some experience in the region with mixed results Institutional digesters more successful than domestic units Tanzania has registered good progress - more than 4,000 domestic-size biogas plants have been in Tanzania during the past 20 years Pilot biogas projects implemented in Kenya, Uganda, Ethiopia and Sudan Biogas in prisons initiative in Rwanda awarded Ashden Award in 2005

16. Bioethanol – Status and Trends Widely developed in the region Linked mainly to sugar industry and cogeneration Ethanol produced in Kenya, Uganda and Ethiopia Plans to produce ethanol in Sudan. Kenana has target of 70 million litres by 2014 Finchaa in Ethiopia produces 8 million litres annually Ethanol blending practiced in Kenya in the past Ethiopian government signed agreement with petroleum importers for minimum blending target of 5%

17. Biodiesel – Status and Trends Significant interest in bio- diesel Lots of pilot schemes with land allocation to interested investors accelerating Technology still to be proven on a wide scale A number of crops already grown in the region suited for biodiesel production i.e. palm oil, sunflower, soyabean, maize and Jatropha Pilot biodiesel projects in numerous African countries

18. Biomass Gasification Status and Trends Largely embryonic- no large-scale bio- gasification projects running in the region A few donor funded demonstration projects implemented Demonstration projects implemented in Tanzania (Tanzania Wood Industry Corporation) Biomass gasifiers implemented in Ethiopia, Sudan – faced operational challenges Muzizi tea estate in Uganda has had some success. Replaced fossil fuel generator with gasifier generating 200kW. First application of more than 10kW in East Africa

19. Biomass Cogeneration Status and Trends Widely developed in the region - Most sugar industries in eastern Africa currently practicing co- generation for own use Important option as agriculture and agro-industries account for close to 50% of sub-Saharan Africa’s GDP and over 70% of employment Sugar industry directly or indirectly impact on 4-7 million people in Western parts of Kenya Could be replicated across all agro- industries –Wood/timber, pulp and paper –Coffee, sisal, palm oil, tea, cocoa, tobacco, etc

20. Key Problems/Trade-Offs Food security – switching of land from food production to energy crops: Bio- ethanol & co-generation using by-products but switching of land affecting food production appears to have occurred in many sugar growing areas but mitigated by increased revenues from sugar cane sales and employment in sugar industry. Environmental risks – water use, mono-crops thus reducing bio-diversity, displacing subsistence agriculture into marginal and forest lands: Continues to be a problem for most agro-industrial crops such as sugar cane. Benefit sharing – who benefits? Agro-industries, farmers (large and small scale), oil industry which is increasingly interested in biofuels? Primarily agro-industries and to some extent farmers particularly in countries that practise out- growers schemes with sound revenue sharing schemes. Technological development – can local industry develop autonomous and independent biofuels know-how or would it simply entrench existing unequal relationships in technology know-how and access? Agro-industries have developed substantial indigenous know-how but still very dependent on external technology suppliers. Relatively better placed to deal with climate adaptation needs.

21. Case Study 1: Cogeneration in Mauritius Successful in sale of power to grid Accounts for close to 40% of national generation capacity (of which 25% bagasse) Began with smaller installations (1.5MW - 5MW, now installing 82MW plants) Grid connected cogeneration operational in Uganda, Kenya, Tanzania, Zimbabwe, and plans underway in Malawi, Ethiopia, Swaziland and South Africa

22. Energy Pricing Based on informal consultation Power modePower Plant Price – Rs (us ¢)/kWh YearCharacteristics Intermittent -0.16 (0.6)1982Price frozen since 1982 Continuous Medine0.55 (1.9)1982No change in price since 1982 –no changes brought to the plant Continuous 6 PPs1.05 (3.7)199744% of kWh price indexed to changes in oil price and the other 56% is fixed 1.40 (4.9)2000 Firm FUELcoal - 1.63 (5.7) bag. - 1.56 (5.5) 1985Invested in new equipment Indexed to coal price FirmDRBCcoal - 1.53 (5.4) bag. - 1.46 (5.1) 1998Invested in second hand equipment Indexed to coal price FirmCTBVboth - 1.72 (6.0)2000Indexed to coal price, cost of living in Mauritius, foreign exchange rate fluctuations Cogeneration in Mauritius

23. Sugar Sector Reform initiatives & Bagasse Energy YearPolicy initiatives Emphasis on 1985 Sugar Sector Action Plan Bagasse energy policy evoked 1988 Sugar Industry Efficiency Act -Tax free revenue from sales of bagasse and electricity -Export duty rebate on bagasse savings for firm power production -Capital allowance on investment in bagasse energy 1991 Bagasse Energy Development Programme -Diversify energy base -Reduce reliance on imported fuel -Modernise sugar factories -Enhanced environmental benefits Cogeneration in Mauritius

24. Sugar Sector Reform initiatives & Bagasse Energy YearPolicy initiatives Emphasis on 1997 Blue Print on the Centralisation of Cane Milling Activities Facilitate closure of small mills with concurrent increase in capacities and investment in bagasse energy 2001 Sugar Sector Strategic Plan -Enhance energy efficiency in milling -Decrease number and increase capacity of mills -Favour investment in cogeneration units 2005 Roadmap for the Mauritius Sugarcane Industry for the 21 st Century -Reduction in the number of mills to 6 with a cogeneration plant annexed to each plant Cogeneration in Mauritius

25. Land Area Under Cane in Mauritius vs. Electricity Output from Sugar Industry Source: MSIRI, 2006

26. Key Problems/Trade-Offs Mauritius Case Example Food security – switching of land from food production to energy crops: Increased incomes from agriculture and bio-energy has allowed higher food imports resulting in higher food security. Reduced land requirements arising from higher efficiency has opened land for other food crops. Environmental risks – water use, mono-crops thus reducing bio-diversity, displacing subsistence agriculture into marginal and forest lands: Continues to be a problem particularly water but higher incomes from agriculture and bio-energy has allowed Mauritius to invest in conservation which in turn, promotes tourism and development of other economic sectors such as textiles, IT and financial services. Benefit sharing – who benefits? Agro-industries, farmers: Large and small scale), oil industry which is increasingly interested in biofuels? Revenue sharing combined with an open political system and sound government institutions has allowed benefits to be widely shared. These pre-requisites are not found in many sub-Saharan African countries. Technological development – can local industry develop autonomous and independent biofuels know-how or would it simply entrench existing unequal relationships in technology know-how and access? Technological transfer and development appears to have taken place with Mauritius selling its know-how to other African countries and investing in agro-industry and bio-energy in mainland Africa. Substantial increase in its climate adaptation capability.

27. Key Policy Recommendations Greenfield vs Existing Agro-Investments: Focus on existing agro-industries, encouraging use of by-products & waste products. Be more careful with greenfield new investments. Existing crops vs new crops: Better to lean towards to existing proven crops such as sugar cane and be more careful with new crops such as Jathropha. Revenue sharing/land issue: Land ownership is key to revenue sharing. In near term, best to lean towards outgrowers scheme where land remains in hands of small scale farmers.

28. Key Policy Recommendations Standard Power Purchase Agreements (PPAs): contributed to success of bagasse cogeneration in Mauritius Predetermined feed-in tariffs for biomass electricity: Kenya and Uganda recently introduced feed- in tariffs for electricity generated from renewable energy sources Mandatory Blending ratios: Best restricted to by- products and waste products to avoid any food-fuel conflicts Targets: should be realistic, home-grown and local, and promote incremental contribution of biofuels to energy supply (e.g. 10% - 20% blending targets using by- products and waste products)