NEFAS New Energy For African Societies

Wind Energy Development in EthiopiaStatus quo, the Wind Energy PPP and Experiences from Aysha Wind Farm

Development

NEFAS New Energy For African Societies

Ethio-German Konnect presentation

Addis Ababa, November 09, 2011

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NEFASAgenda

Status quo: Energy supply and demand situation in Ethiopia

Accessing funds and benefiting from public policy initiatives: PPP case study

Experiences from Ethiopian wind farm development: Aysha wind farm

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NEFASEthiopia will need to add ~ 33 GW electricity over the next 20 years to enable economic growth prospects

GDP projection(2009-2030, in bln. PPP$)

Historical growth rate of 11.1% (CAGR)

Projected growth based on growth scenarios from IMF (9.5%), MOFED (11.0%), Ernst&Young (13.6%) and GTZ-ecbp (10.0%)

Electricity demand(2009-2030, in GWh)

Cumulative investment for power generation(2009-2030, in mil. US$)

79.0

178.6

560.4

CAGR 10.0 % p.a.

2009 2018 2030

1) Actual supply from EEPCo (EEPCo: Ethiopian Electric Power Corporation, national energy supplying agency) in 2009, which was 43% below demand; 2) Based on an average capacity factor of 33.4%, derived from EEPCo planning; 3) Based on an average capacity factor of 47.0%; Source: EEPCo Strategic Plan Summary (December 2009); IMF World Economic Outlook Database (April 2010); MOFED according to Fortune: “Gov’t: Economy to take off” (August 8, 2010); Ernst&Young Ethiopia: “Investing in Ethiopia” (September 2009); GTZ-ecbp: Human Capital and Economic Growth Evaluation Study of Ethiopia 2009-2030 (April 2009), based on Lisbon Council methodology and statistics from Central Statistics Agency (2008); IEA World Energy Outlook (2009); Own calculations

Based on comparable countries’ electricity consumption of 250 Wh per 1 PPP$: 68Wh (2009), 158Wh (2018) and 250Wh (2030)

Demand projection is in line with utility demand planning

International reference of investment costs of 2.0 mil. US$ per MW of installed capacity

Excluding costs for transmission/ grid and logistics

GDP and electricity projection for Ethiopia(2009-2030)

34,035 MW

3,728

28,859

140,131

1,500 MW

8,336 MW

1)

2009 2018 2030

3)

2)

~33 GW

2018 20302009

68,070

16,672

3,000

~65 bln. US$

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NEFASOver the next 10 years, potential supply gaps could open up from uncertain hydro projects

[GWh]

Gibe IV1,472 MW

Gibe III1,870 MW

Electricity supply vs. domestic demand(2009- 2018, in GWh, in mil. US$)

Demand increases to 28,9 TWh until 2018

Average capacity factor improves from 28% today to 43% in 2018 with

Additional capacity requirement until 2018 is 6,836 MW

Supply assumptions

~ 50% of supply increase depends on only two projects in Gibe which have experienced delays in the past

Supply planning

Delayed supply scenario2)

Demand projection

Opportunity costs:8,823 mil. US$1)

Opportunity costs:236 mil. US$1)

1) Cost of foregone economic income at a price of ~ 52 US$ cents per kWh2) Gibe III and Gibe IV delayed by 3 yrs. eachSource: EEPCo Strategic Plan Summary (December 2009); EEPCo: Ethiopian Power System Expansion Master Plan update (June 2006); NEFAS calculations

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NEFAS

Cumulative capacity costs, effects of financing levers1)

(2009-2030, in mil. US$)

Characteristics of wind energy in Ethiopia

Wind energy could play an important role to master this challenge and set the example for energy projects with a private institutional set-up

65,071

53,354

35,824

25,077

1. Complementary to hydro power

2. Pipeline to fill supply gaps and serve energy demand growth already exists

3. Potential to achieve long term growth prospects

4. Local value addition possible to finance immense capacity costs

5. Can trigger Ethiopian metal sector and offer high export potential

[mil. US$]

1) Capacity costs based on EEPCo planning for the period 2009 – 2018 and capacity needed to supply projected demand in following years; cost per MW for the period 2019 – 2030 of 2 mil. US$ Source: EEPCo Strategic Plan Summary (December 2009); IEA World Energy Outlook (2009); NEFAS calculations

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NEFAS

MesoboAshegoda

Aysha

Debre Birhan

Adama

Asela

Mega

MW: 50 Financing structure: tbd Finalization: 2012 -2015 Status quo: Pending

MW: 50 - 100 Financing structure: tbd Finalization: 2018 -2020 Status quo: Under construction

MW: 300+ Financing structure: EPC, Partnership Finalization: 2011 -2014 Status quo: Feasibility study completed

MW: 100 Financing structure: tbd Finalization: 2013 -2014 Status quo: Pending

MW: 120 Financing structure: EPC + Financing Finalization: 2012 -2013 Status quo: Under construction

MW: tbd Financing structure: tbd Finalization: 2018 -2020 Status quo: Pending

MW: 100+ Financing structure: EPC + Financing Finalization: 2013 -2015 Status quo: Under pre-feasibility study

Development target: ~ 1,000 MW until 2014, ~ 5,000 MW until 2030

Identified wind farm sites - mean annual wind power density(at 50 m in m/s)

Promising wind sites have been identified …

Speed (m/s)Density (W/m2)

1.0 -3.5

3.5 -5.6

5.6 -6.4

6.4 -7.0

7.0 -7.5

7.5 -8.0

8.0 -8.8

1 -50

50 - 200

200 - 300

300 - 400

400 - 500

500 - 600

600 - 800

>8.8>800

Source: EEPCo; NEFAS

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NEFAS… but the wind sector currently is in an early development stage

Status quo of Ethiopian wind sector(in MW)

AshegodaAdama I

AyshaAdama IAshegoda

Debre BirhanAyshaAdama IAshegoda

AselaAdama IIMesseboDebre BirhanAyshaAdama IAshegoda

OthersAselaAdama IIMesseboDebre BirhanAyshaAdama IAshegoda

5,000 -3,780

1,220 -350870 -400

470 -300170

Overview: ~ 5,000 MW potential to be

developed < 5% with feasibility studies > 3% under construction

Source: EEPCo; NEFAS

CONSTRUCTIONSTUDYPRE-STUDYIDENTIFIEDTOTAL MW

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NEFASAgenda

Status quo: energy supply and demand situation in Ethiopia

Accessing funds and benefiting from public policy initiatives: PPP case study

Experiences from Ethiopian wind farm development: Aysha wind farm

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NEFASSuccess depends on overcoming inter-depending hurdles along the value chain and financing local activities

Success factors in the Ethiopian environment

1.

Collaboration of key players along the value chain

2.

Acquisition of funds to finance local activities

3.

Combination of suitable technical solutions with financial sources

Source: NEFAS

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NEFAS

Inter-depending hurdles in Ethiopia(Exemplifications)

“There is not enough MW installed yet”

“No local project development

capacity”

“No local S&M, Operations capacity”

“No FIT, longevity for tariffs, low level of

tariffs”

“Limited possibility for private sector involvement”

….

Interest in Ethiopian wind is high – common resistance predominantly found in the market

1. Collaboration of key players along the value chain

Source: NEFAS experiences

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NEFASCollaboration of key players along the value chain is needed to get things started

OperationsConstructionManufacturingService and Maintenance

Supply chain management

Operations

Construction

Manufacturing

Service and Maintenance

Supply chain management

Project development

Capacity building on ministerial, institutional and private sector level

Policy dialogue on Prime Minister, Ministerial, Regulatory Level

Gaps along the value chain to be addressed

Source: NEFAS

1. Collaboration of key players along the value chain

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NEFASThe PPP avails the financial means to develop local capacity, finalize the feasibility studies and educate local HR

MINISTERIAL LEVEL Capacity development for Ministries and decision makers to formulate policies that foster the development of Ethiopian wind energy sector

Training on wind park development Feasibility studies Enabling policy environment (energy directives, FIT proclamation, etc.)

INSTITUTIONAL LEVEL Capacity development for universities and sector associations to integrate wind energy into existing curricula and service portfolios, to build up a future HR-Pool for an Ethiopian wind energy industry

Strategic partnerships between associations/ universities and the private sector Scholarships on wind energy topics in relevant areas Coaching by international specialists on curriculum enhancement

PRIVATE SECTOR LEVEL Setting the pace for the Ethiopian metal work sector to become future supplier for products and services

Strategic relationships of technology and management skills transfer Enhancement of private sector cooperation with universities Internships and placement programs in Ethiopia and in Europe

Total Budget for 3 Years: ~ 1.7 mil. EUR

Capacity development levels of the PPP 2. Acquisition of funds to finance local activities

Source: NEFAS

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NEFASThe PPP supports our local activities and helps us to build local capacity for the emerging industry

Oct. 2010Date

Key Activity

Private Goal

Public Goal

Aug. 2010 June. 2011 Nov. 2011Oct 2011Apr. 2011

Initiate the process of local capacity building

Identify the private opportunities of a PPP

Recruiting potential candidates for a PPP training program

Institutionalize another platform to enhance capacity building in general

Institutionalize a platform to support local activities

Initial training program for the wind energy fellowship

Transfer of knowledge and improved effectiveness of local capacity

Further refining process for the retaining of personnel

On-going trainings on personal effectiveness and project management

Upgrading opportunities for the facilities and tech-transfer

Setting up a production facility for the local components of WTG

Identification of a localization of components opportunity with local industries

Identifying parts to be localized and others to be imported – saving foreign currency

Capacity assessment of the local facilities

Support the education of local HR pool

Initiating the process of local production of the identified parts

Ongoing capacity assessment of the local facilities

Implementing Pre- evaluations

Commencing the program Progress made

Establishing a joint design team

Preliminary capacity assessment

Continued assessment

Continuous development of the process and

further identification of local partners

Time Line

Example 2: local capacity building

Source: NEFAS

2. Acquisition of funds to finance local activities

Build local capacity on local resource assessment process

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NEFASAgenda

Status quo: energy supply and demand situation in Ethiopia

Accessing funds and benefiting from public policy initiatives: PPP case study

Experiences from Ethiopian wind farm development: Aysha wind farm

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NEFASLocation for the wind farm with promising site characteristics – 120 MW MoU and studies showing feasibility

SITE CHARACTERISTICS

Biweekly wind speeds (67m), standardized year

0

2

4

6

8

10

12

14

1 2 3 4 5 6 7 8 9 101112131415161718192021222324Year in biweekly intervalls

Win

d v

elo

city

[m

/s]

Reliable, high average wind speeds during the year

Sandy gravel with strong load carrying capacity

Location close to grid and heavy duty all-weather road

Very flat terrain with some wind-bent vegetation

Source: Aysha feasibility studies

120 MW MoU

Site characteristics

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NEFASAysha 30 – 120 MW wind farm in Somali Regional State

Exclusive development rights for 120 MW installations at Aysha, Ethiopia; Aysha 30 is the initial 30 MW installation out of a projected total of 300 MW; the initial phase could be expanded up to 60 MW.

Favorable wind conditions have been confirmed for Aysha, in a location with easy access to 230 kV transmission line to Djibouti, as well as to overland road from Dire Dawa to Djibouti. Other feasibilities (environmental impact, grid assessment, transport study) are completed.

Ethio-German wind farm development joint venture in advanced discussions with three different turbine providers and two different construction companies for erection and local civil works joined by highly regarded and experienced operations and service companies, EnerVest and Renewco; local project office with staff of 5 (2 German, 3 Ethiopian).

Strong interest from African Development Bank and other multilateral institutions to fund the investment budget on the basis of a private sector governance regime.

Estimated time to "shovel-ready" status: 6-18 months.

Source: NEFAS

The wind farm and description of the status quo

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NEFAS

Capacity increase/ economic growth cycle

Source: NEFAS

Resulting from the institutional set-up, the financing structure is the key component in the cycle from capacity increase to economic growth

Tech transfer

Debt burden

Economic growth

Electricity demand

FDI

Local manufacturing

and value added

FinancingInstitutionalset-up

Capacity increase

Determines price per MW, FDI and potential for

technology transfer

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NEFAS

NEFAS – New Energy for African SocietiesProject OfficeZola Road, near Mozambique EmbassyAddis AbabaEthiopia

Mobile: +251 920 312 036

Email: sr.projectoffice@ethiopianwind.com

Webpage: www.ethiopianwind.com

NEFAS