1. Ten Things Journalists Need to Know About Africa’s Energy Sector

3. Africa Infrastructure Country Diagnostic: a multi-stakeholder effort

4. Key Message #1 Africa is starved of power

5. Generation capacity inadequate and has been stagnant for 20 years –48 countries have combined capacity equal to Spain Only one in four Africans has access to power –Most countries will fail to have universal access by 2050 Power consumption pitifully low and falling –Enough to power one light bulb per person for 3 hrs/day

6. Huge gap with respect to Asia Generation capacity (MW /mln population) Electricity consumption (kWh/capita/yr) Access (% of households)

7. Anatomy of Africa’s power supply crisis

8. Key Message #2 Africa is increasingly dependent on expensive emergency generation

9. Immediate response has been to lease emergency power generation capacity Emergency Generation Capacity Emergency Generation Capacity as % of Total Cost of Emergency Generation as % GDP Angola15018.1%1.0% Gabon143.4%0.5% Ghana805.4%1.9% Kenya1008.3%1.5% Madagascar5035.7%2.8% Rwanda1548.4%1.8% Senegal4016.5%1.4% Sierra Leone20133.3%4.3% Tanzania404.5%1.0% Uganda10041.7%3.3%

10. Key Message #3 Power shortages are a brake on economic growth and competitiveness

11. Changes in growth per capita due to changes in infrastructure

12. Power outages represent a heavy burden on the economy

13. Contribution of infrastructure to total factor productivity of firms

14. Key Message #4 Africa faces a huge power sector financing gap

15. Huge power investment backlog To remedy this situation Africa needs to build –7,000 MW of generation capacity per year –More than five million new power connections per year –An extensive transmission network The annual financing requirements are staggering –Spending needs: US$40.6 bn/yr –Existing spending: US$11.6 bn/yr –Efficiency gap: US$5.9 bn/yr –Financing gap: US$23.6 bn/yr

16. Power sector spending needs equal 6.4% of total SSA GDP US$ billion per yearShare of GDP, % Capital expenditure Operation & maintenance Total spending Capital expenditure Operation & maintenance Total spending SSA 26.7214.0840.804.162.196.35 LIC Fragile 4.490.715.211.71.8413.54 LIC Non Fragile 7.562.159.706.851.958.79 MIC 6.297.914.192.322.925.24 Resource Rich 8.423.3511.33.771.795.29

17. Key Message #5 Africa’s power is very expensive

18. Africa’s power much more expensive than elsewhere: effective tariffs Typical level of power tariffs in other developing countries

19. Power prices increased substantially in recent years, but not on par with costs Average operating cost Average revenue

20. High power cost driven by small scale of production and inefficient technology

21. Historical and long-run marginal costs of power US/kWh Historical Long-run marginal Trade expansion Trade stagnation SAPP13.9 0.06 0.07 EAPP19.0 0.14 0.13 WAPP21.4 0.18 0.19 CAPP48.5 0.07 0.09 Island states 0.17 LIC21.6 0.12 0.13 MIC14.8 0.11 0.12

22. Key Message #6 Most of Africa’s power is currently generated from coal, with less than 10% of hydro-potential exploited

23. Coal is Africa’s largest single source of power, but will lose ground to hydro

24. Africa is behind all other regions in developing its hydro-potential

25. Key Message #7 Power trade would help to reduce costs and facilitate a shift to cleaner hydro

26. The promise of regional power trade By achieving economies of scale in production regional power trade would save Africa US$2bn/yr Exports: dominated by DRC, Ethiopia and Guinea Earnings could amount to 2-6% of GDP Huge investments needed to become exporters Imports: cover >50% of needs in 16 countries Savings >US$ 0.03 per kWh or over 1% of GDP IRR on inter-connections >100% pays back in <1 year

27. Numerous missing transmission links needed to facilitate regional trade

28. 17 countries could save more than one cent per kWh by importing power

29. 16 countries would meet more than 50 percent of demand from imports

30. Power sector evolution in DRC and Ethiopia critical for continent Exports (TWh pa) (US$m pa) (% GDP) (US$m pa) (% GDP) DRC51.95196.17498.8 Ethiopia26.32632.01,0037.5 Guinea17.41745.278623.7 Sudan13.11310.31,0322.7 Cameroon6.8680.42671.5 Mozambique5.9590.82162.8 Net Revenues Required Investment Note: net revenue based on illustrative profit margin of US$0.01 per kWh

31. Trade flows with trade expansion in the East Africa Power Pool (TWh in 2015)

32. Trade flows with trade expansion in the Southern Africa Power Pool (TWh in 2015)

33. Trade flows with trade expansion in the West Africa Power Pool (TWh in 2015)

34. Trade flows with trade expansion in the Central Africa Power Pool (TWh in 2015)

35. Key Message #8 Africa’s power sector contributes little CO 2, and even less with trade

36. Role of power sector in carbon emissions Bulk of Africa’s power emissions come from deforestation and land-use changes Power accounts for only 10% of Africa’s emissions, and (excluding RSA) <1% of global emissions By pursuing trade to its fullest extent, Africa would reduce carbon emissions by 70 mn tons/yr A recent study estimates a further 740 mn tons/yr could be saved through low carbon energy projects Under CDM with carbon priced at US$15/ton could increase viable hydro share by 50 percent

37. Key Message #9 Africa’s power utilities are highly inefficient

38. Improving utility performance through institutional reform Cost of SSA power utility operational inefficiencies US$3.2 billion per year or 0.5% of GDP Evidence that institutional reforms have an impact on reducing inefficiencies Private sector has a role to play, but expectations should be kept realistic

39. Inefficiencies average 0.5% of GDP

40. Reform measures have a material impact on hidden costs

41. To what extent can the private sector contribute? Extent of PPIExperienceProspects Generation 34 IPPs invest US$2.5bn to install 3,000MW of capacity Frequent renegotiations, costly to utilities Likely to continue given huge capacity needs Distribution 16 concessions and 17 mgt or lease contracts One quarter of contracts prematurely cancelled Likely to continue given significant improvements in performance that have resulted

42. Key Message #10 Subsidies to the power sector are massive and favor the better-off

43. The challenge of cost recovery Most utilities recover only operating costs, leading to power subsidies worth more than US$2.2bn/yr Access to power is almost non-existent among poor households, hence subsidies pro-rich Existing high cost power unaffordable, but situation will improve in the long term

44. Under-pricing average 0.36% of GDP or US$ 2.2 billion per year

45. Access to electricity highly inequitable across households Source: Preliminary results AICD 2008

46. Affordability of monthly bill at cost recovery prices: US$ per month, consumption 50 kWh/month Historic costs LRMC Trade expansion Trade stagnation CAPP 24.33.54.5 EAPP 9.57.06.5 SAPP 7.03.03.5 WAPP 10.79.09.5 Green – affordable to all but poorest 25% Red – unaffordable Yellow – affordable to existing customers only