Emergency Generation Options Mark Pickering Empower Regional Director: South Africa African Utility Week Cape Town, 20 May 2009
Overview Why consider emergency power? What type of emergency power plant? Economics of emergency power? Conclusion
Power Deficit in Sub-Saharan Africa Africa s firms report losing 5 percent of their sales as a result of frequent power outages; this rises to 20 percent for informal sector firms unable to afford backup generation facilities. International Monetary Fund, April 2008. Regional economic outlook : Sub-Saharan Africa.
Power Deficit in Sub-Saharan Africa In recent years more than 30 of the 48 countries in [SSA] have suffered acute energy crises The region s generating capacity has been stagnant for many years; its growth rates are barely half those in other developing regions. To make matters worse, as much as one-fourth of sub-saharan Africa s plant is currently not in operating condition. Normalizing for population, and subtracting South Africa, the installed capacity of sub-saharan Africa is only one-third of South Asia s, and about a tenth of that of other developing regions. IMF, 2008. Regional Economic Outlook: Sub-Saharan Africa
Power Deficit in Sub-Saharan Africa 350 300 250 200 150 100 50 0 Generation capacity (MW per million population) Other low income countries Sub-Saharan Africa low income countries 45 40 35 30 25 20 15 10 5 0 Electricity coverage (% population) Other low income countries Sub-Saharan Africa low income countries World Bank, 2008. Africa Infrastructure Country Diagnostic
Power Deficit in Sub-Saharan Africa Range of Utility Tariffs 0.50 0.40 0.46 US$/kWh 0.30 0.20 0.10 0.00 0.02 Sub-Saharan Africa 0.10 0.05 Other developing regions World Bank, 2008. Africa infrastructure country diagnostic
Infrastructure Spending Requirements in Sub-Saharan Africa US$ billion per year Capital expenditure Operations and Maintenance Total spending ICT 0.8 1.1 1.9 3% Irrigation 0.7-0.7 1% Power 23.2 19.4 42.6 56% Transport 10.7 9.6 20.3 27% Water & Sanitation 2.7 7.3 10 13% Total 38.1 37.4 75.5 World Bank, 2008. Africa Infrastructure Country Diagnostic
Power Deficit in Sub-Saharan Africa Sub-Saharan Africa has developed only a fraction of its power-generation potential. Key obstacles include: Primary energy resources are concentrated in countries that are remote from centres of demand, and too poor to raise the multi-billion dollar finance needed to develop these resources. For examples 60% of the region s hydroelectric potential is located in DRC and Ethiopia Diseconomies of scale. 21 of 48 Sub-Saharan countries have national power systems with under 200 MW generation capacity Only 16% of power production is traded (almost all of it between South Africa and its immediate neighbours), a level that can be substantially increased. World Bank - Africa Infrastructure Country Diagnostic
Power Deficit in Sub-Saharan Africa Cost of power shortages cost of unserved energy estimated between $1-$7/kWh Utility options Import power limited grid capacity Load shedding very unpopular and costly Emergency generation costly, but it works Over 1000MW of emergency generation running across Africa
400 350 300 250 Ugandan Example Supply / demand balance Demand Shortfall Other Aggreko 3 Aggreko 2 MW 200 Aggreko 1 150 HFO IPP 100 Luka Buljan, CEO 50 Ghana 0 12 November 2008 Supply 2004 2005 2006 2007 2008 2009 2010 2011 2012 Hydro-new Hydro-old
Uganda: Consequences Power pricing Average cost of generation: Old hydro @ 2c/kWh Emergency power @ 20-35 c/kwh Weighted average cost 18c/kWhP Average price to customer 18c/kWh Government subsidy of up to $100m/year Interim power is cheap to install, but expensive to operate
Impact of the Global Recession? Impact on Sub Saharan Africa Low or negative economic growth has relieved pressure on power utilities for now Lower earnings from commodities means lower government revenues and hence less ability to fund power projects Also lower growth means less appetite from foreign investors - including for power projects Once economic growth returns power demand will return. Will we be ready? Implications for utilities Much harder to source financing for large power projects Interim power likely to remain part of the solution IMF, Regional Economic Outlook Oct 2008
Power Solutions 30 Indicative all-in cost of new-build baseload Interim Power 25 Usc/kWh 20 15 10 New-build IPP 5 0 Hydro Gas (CCGT) Coal Fuel oil Fuel oil Diesel
Deployment time (Months) All-in Power cost (USc/kWh @ US$50-100 /bbl) Diesel 30 20 10 6 Cost vs. Deployment Time New Build / IPP 12 24 36 48 HFO
Plant Size and Contract Term Plant size (MW) 250 50 Diesel Fuel Oil New Build / IPP 5 1 5 10 Term of Power Purchase Agreement (Years) 20
Interim Generation Technologies Gas turbines Limited availability of gas Diesel generators Light Fuel Oil (LFO, or diesel) Heavy Fuel Oil (HFO, bunker fuel)
Diesel Generator MAN 18V28-32S genset: 4.2MW
12MW Fuel Oil Plant 55m 32m M3 Site Layout: Colchester Trial Assembly
Interim Power Cost Structure Cost comparison (USc/kWh @ $50/bbl, 85% load factor) 20 18 16 14 12 10 8 6 4 2 0 Fuel Oil Diesel Fuel Variable O&M Capacity
Liquid Fuel Generation Options US $/bbl 160 140 120 100 80 60 40 Crude Oil Fuel Oil Diesel Global Liquid Fuel Prices 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Liquid Fuel Generation Options Total cost of power (USc/kwh, @ 85% load factor) Power price (USc/kwh) 30 25 20 15 10 5 Fuel Oil Diesel 0 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Crude oil price (US$/bbl)
LFO vs. HFO at varying Plant Load Factors Crude oil: $60/bbl, 40% LFO-HFO price differential 30 25 LFO HFO All in US c/kwh 20 15 10 5 0 30% 40% 50% 60% 70% 80% 90% 100% Plant Load Factor
EMPOWER Solution Fuel Oil-fired generation Fully containerised mobile plant Deployed anywhere in approx. 6 months 60MW capacity presently available, in 12MW modules Stand-alone or grid synchronised Lease and operate (+2yr) Lease/Operate/Transfer option
Conclusions Power supply remains a serious challenge in SSA Permanent solutions must be found, but it will take many years to overcome the backlog Liquid fuel-based solutions are often the only practical solution in the short term In general fuel-oil based solutions will be cheaper than diesel solutions
Thank You