1. 1 Commitment of the African Development Bank in the Renewable Energy Sector The Role of the Private Sector Department of the AfDB Youssef Arfaoui Renewable Energy Expert Sustainable Biofuel Development in Africa – Opportunities and Challenges July 30 - 1 st August 2007 –Addis Ababa

2. 2. Introduction - Bio-Fuel Development. Focus Areas of OPSM - Renewable Energy. Rationale for interest in Renewable Energy. AfDB Commitment, Role and Intervention. Conclusion Outline:

3. Existing capacity end-2004Power generation Small hydropower61 GW Wind power turbines48 GW Biomass power39 GW Geothermal power8.9 GW Solar PV, off-grid2.2 GW Solar PV, grid-connected1.8 GW Solar thermal power0.4 GW Ocean (tidal) power0.3 GW Total renewable power capacity160 GW Hot water/space heating Biomass heating220 GWth Solar collectors for hot water / heating (glazed)77 GWth Geothermal direct heating13 GWth Geothermal heat pumps15 GWth Households with solar hot water40 million Buildings with geothermal heat pumps2 million Transport fuels Ethanol production31 billion litres/year Biodiesel production2.2 billion litres/year In 2004, the power generated by RE was around 160 GW.

4. 4 Ethanol and Bio-Diesel Production - Top12 Countries, 2004 (Billion liters) CountryEthanol (Billion liters)Bio-diesel (Billion Liters) Brazil15---- United State130.1 China2---- Germany0.021.1 France0.10.4 Italy---0.35 Canda0.2----- Thailand0.2----- Spain0.2----- Denmark---0.08 Czech Republic---0.07 Australia0.07----- World Total312.2

5. 5 Estimated Job creation by developing RE-projects

6. 6 OPSM Focus area: The Private Sector Department of the AfDB focuses mainly to develop (a) the wind energy area and (b) the small size hydropower – And (c) the bio-fuel, (d) Geothermal, (e) Co-generation The Middelgrund wind farm – Copenhagen - Denmark 30 MW hydropower - Tunisia

7. 7  RE addresses the needs and contributes to improve living standards of the rural poor  RE is in line with the Strategic Plan of the ADB for Infrastructure, that considers RE as one of the pillars of sustainable development  RE is an untapped natural resource in Africa  RE is Suitable for the Rural Areas and decentralised power supply  RE is Environmentally friendly  RE is affordable compared to other fossil fuel resources  Significant increase in employment opportunities, mainly in rural areas. The reasons, the AfDB has chosen to focus on RE:

8. 8 Commitment of the OPSM of the AFDB is to: “Develop and promote the Application of RE” Example: The wind energy application in Africa. OPSM has initiated the wind energy study for Africa, with the objectives to identify the main barriers, such as:  Legal and regulatory  Economic and Financial  Technical  Limited local capacity

9. 9 If the biofuel market is to be developed as Bankable projects and exploited efficiently, the following has to be developed: The legal frame / policy has to be prepared and approved Off-taker agreements has to be negotiated (probably standard version) Concession has to be clarified Feed-stock agreements and security has to be negotiated Environment policy related to the bio-fuel production and application has to be prepared / developed

10. 10 The Current ADB Interventions in promoting the use of Renewable Energy  Morocco: Solar/Gas Thermal Power Station (250 MW, 30 MW Solar) (EUR 200 Mio)  Egypt: Solar/Gas Thermal Power Station (120 to 150 MW)

11. 11 The Current ADB Investments in Renewable Energy (OPSM)  Madagascar: Small Hydro 15 MW – Euro14 M  Uganda: Bujagali Hydro 250 MW – Euro120 M

12. 12 Identified RE - Capacity Applied Technology and Capacity (MW) Country WindHydroCogenBio-FuelWaste to EnergyGeothermalTotal Djibouti 45 Eritrea 15 Ethiopia 64 50 114 Kenya6003077 280 987 Madagascar20220 NA 240 Malawi 8 8 Mali1,2 Namibia40 Rwanda 5 5 Senegal20 South Africa140 NA 140 Sudan 86 Swaziland 135 Tanzania 523 31 59 Tunisia100 Uganda 3525 60 100 Total 921,2283346003711921

13. 13 Raising the interest of private sponsors and other potential investors of the potential of RE and existing opportunities in Africa Mobilizing required funds for project preparation Performing feasibility studies and developing most promising RE projects Development and deployment of RET: Objectives – and Strategic Plan 2005 - 2010 of the OPSM:

14. 14 Therefore The OPSM’s objective is to Assist the investors to prepare all necessary documentation to qualify RE projects to benefit from the Carbon Trade Facility RET projects can benefit from the CDM- Carbon Trade facility. The present cost of tCO 2 is around Euro 12. (Emission Reduction)

15. As guidelines to investors planning investment in RET projects, the Power Generation Costs in 2002 and the projected for 2010 are as follows: Capital costs (US$/kW) Low-side generation costs (Cents/kWh) High-side generation costs (Cents/kWh) Low-side generation costs by 2010 (Cents/kWh) Small hydro power 1,000 - 5,000 2 - 39 - 152 Solar PV power4,500 - 7,000 18 - 2025 - 8010 - 15 Concentrating solar power 3,000- 6,000 10 - 1520 - 256 - 8 Bio- power 500 - 4,000 2 - 310 - 152 Geothermal power 1,200 - 5,000 2 - 56 - 122 - 3 Wind power 850 - 1,700 3 - 510 - 122 - 4 Source: IEA 2003

16. 16 In order to allow the OPSM of the AfDB to support and participate in financing RE projects, the following conditions have to be fulfilled:  The contractual arrangements are in place  The project has to be developmental oriented  The project is technically feasible  The sponsors have the required financial and technical capacity to run the project  The project is financially and economically viable  The regulatory framework is favourable for Renewable Energy projects  The project has a reasonable size

17. 17 Conclusions Renewable energy is an appropriate response to the needs of the poor / grassroots in Africa The major areas of focus are: Cogeneration Geothermal Hydro power Wind energy The New area of consideration is: The Bio-fuel development/investment The Bank (OPSM) offers: Flexible and tailor made instruments Support to sustainable projects, through financial and technical assistance and institutional capacity building programs

18. 18 For further information: Youssef Arfaoui Renewable Energy Expert Private sector Department y.arfaoui@afdb.org

19. 19 Thank you