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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 Outline • Quick background brief on energy sector • Overview of Biofuels in Africa – – – – Key Drivers Principal Stakeholders Status & Prospects Challenges • Options for addressing challenges African Energy Sector – 3 distinct regions Energy Consumption - North Africa Gas 18% Coal 1% Biomass 4% Electricity 15% Petroleum 62% Energy consumption - Sub-Saharan Africa Electricity 3% Gas 1% Coal 0% Energy Consumption - South Africa Petroleum 15% Biomass 16% Coal 27% Biomass 81% Gas 2% Coal-based Electricity 26% Petroleum 29% 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 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 byproducts 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) 1. Energy Security & Diversification Percentage Share of Export Earnings Spent on Petroleum Products, 2000 25 % of export earnings 20 15 10 5 0 Rwanda Uganda Kenya Tanzania Zimbabwe 1. Energy Security & Diversification • 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) Sudan Ghana Côte d'Ivoire Eq. Guinea Sao Tomé Tunisia Egypt Angola Cameroon Congo DRC Chad 70 Algeria Gabon Mauritania Nigeria Libya Number of years 1. Energy Security & Diversification 80 2004 OIL EXTRACTION RATE Source: AfDB, 2006 - Computed using IEA data 60 50 40 30 20 10 0 2. Higher Convertible Currency Exports Recent Trends in Ethanol Production 20 16 95% growth Mtoe 12 8 4 0 2000 Brazil 2001 United States 2002 2003 European Union 2004 China 2005 India Other Ethanol production has almost doubled in 5 years, with the bulk of the increase coming form Brazil & the United States 2.5 2. Higher Convertible Currency Exports Recent Trends in Biodiesel Production 2.0 Mtoe 1.5 295% growth 1.0 0.5 0 2000 Germany 2001 France 2002 Italy 2003 Rest of Europe 2004 United States 2005 Other Biodiesel production has almost quadrupled since 2000, with European countries – notably Germany – contributing most of the growth 2. Higher Convertible Currency Exports • 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 3. Increased Revenue to AgroIndustries 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 4. Carbon Finance 5. Jobs Job creation potential of bio-fuels compared to other conventional fuels Fuel Jobs per TWh Biodiesel 16,318 Bioethanol 3,770 Biogas 1,341 Gas 130 Nuclear 80 Coal 700 Source: Earthlife Africa/SECCP report 2003 6. Local Rural Energy Needs Access to electricity – bottom 40% (mainly rural) 0% Zimbabwe 0% 0% 0% 0% 0% Zimbabwe Senegal 0% Zambia Nigeria 0% Zambia Namibia 6% Uganda 0% Uganda 1% Tanzania 0% Tanzania 0% South Africa 0% Kenya 0% Ethiopia 5% Cote d'ivore 0% Cameroon 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ghana 1st Quintile - Poorest Population 2nd Quintile - 2nd Poorest Population 35% 33% Kenya Namibia 1% South Africa 2% Senegal 0% Nigeria 0% Ghana Cote d'ivore Source: Estache, 2005 0% Ethiopia 15% 8% Cameroon 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Bio-fuels in Africa - Key Stakeholders 1. Energy security & diversification 2. Higher convertible currency exports 3. New revenue stream for agroindustries & 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 Biofuels in Africa Focus on – Biomass Cogeneration – Bio-ethanol – Biogas – Bio-diesel – Biomass Gasification Biomass Cogeneration – Status and Trends • 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 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) Power Generation – Mauritius 2004 Others Sugar Industry Cogeneration potential in the sugar industry in selected African countries Country Installed national power generation capacity from all sources, 2004 (MW) Cogen potential Cogen potential as using high pressure percentage of total systems (MW) installed national power generation – capacity from all sources (%) Ethiopia Kenya Malawi Sudan Swaziland 726 1143 238 755 128 30.9 159.2 56.5 156.9 185 4.30% 13.90% 23.70% 20.80% 144.50% Tanzania Uganda Total 881 303 4174 97.8 46 732.4 11.10% 15.20% 17.50% Biomass Cogeneration Key Challenges • Feed-in-tariff (or price paid to cogenerators by utilities) not predetermined 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 Cogen for Africa Initiative • 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 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 Cogen for Africa 40 MW additional installed capacity of cogeneration promotion projects 200+ MW additional cogeneration capacity 20 MW pipeline projects 6 year project period Beyond 6 years Bio-ethanol – Status &Trends Bio-ethanol – Status &Trends • 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 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 Ethanol Production in Selected African Countries 2005 Country Millions of gallons, all grades South Africa Zimbabwe Kenya Swaziland Egypt Nigeria Others Source: Renewable Fuels Association, Industry Statistics, http://www.ethanolrfa.org/industry/statistics/#E 103 5 4 3 30 30 92 Bio-ethanol – Key Challenges • Need predetermined price for bioethanol • 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 Biogas – Status and Trends Source The Republic of Uganda,2007 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 Biogas – estimated no. of installed units in selected African countries Country Units Eritrea 5 Ethiopia 1,000 Kenya 500 Tanzania > 1,000 Burkina Faso 20 Botswana 215 Burundi 279 Lesotho 40 Uganda 600 Zimbabwe 200 Source The Republic of Uganda,2007 Source: AFREPREN/FWD Source: Winrock, 2007 Countries Nigeria Tanzania Sudan Kenya Uganda Egypt Mali Burkina Faso South Africa Madagascar Senegal Cameroon Angola Zambia Algeria Ghana Niger Benin Guinea Rwanda Chad Mauritania Biogas Units (thousands) Potential of Biogas digesters in Africa 2007 2500 2000 1500 1000 500 0 Biogas - Challenges • 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 Source The Republic of Uganda,2007 Bio-diesel - Status and Trends Bio-diesel - Status and Trends • 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 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 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 longterm 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 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 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 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 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 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 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 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) 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 Thanks for your attention www.afrepren.org & www.unido.org