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DIFFUSION STRATEGY OF GREEN TECHNOLOGY AND GREEN INDUSTRY IN AFRICA A Pilot Study of Renewable Energy Technology Market, and Energy Efficiency Adoption in Cassava and Maize Processing Industry in Kenya and Nigeria. Prof. Rene Kemp & Jacinta Ndichu UNU-MERIT Dakar, Nov 25, 2013. - PowerPoint PPT Presentation
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DIFFUSION STRATEGY OF GREEN TECHNOLOGY AND GREEN INDUSTRY IN AFRICA
A Pilot Study of Renewable Energy Technology Market, and Energy Efficiency Adoption in Cassava and Maize Processing Industry in Kenya and Nigeria
Prof. Rene Kemp & Jacinta NdichuUNU-MERIT
Dakar, Nov 25, 2013
What the study is about
• The market for modern renewable energy technologies (RET) in Sub-Saharan Africa, and
• The uptake of energy efficiency (EE) measures in two agro-industrial sectors (cassava processing and maize milling) in two African countries (Nigeria and Kenya)
Why RE & EE tecs for SS Africa?
i) Important role of energy in SSA’s social economic development
ii) Low access to grid electricity 600 million have no access most of whom in the rural This proportion expected to grow in the future
iii) High reliance on traditional biomass resources for energy 700 Mio rely on biomass (EAI, 2012) biomass resources are diminishing as a result of
population growth and climate change Scarcity of trational biomass fuels has resulted in high
costs and grerater energy poverty
Why RE & EE tecs for SS Africa?
iv) Energy use is known to be inefficient in SSA, but not much is known about drivers/challenges of EE technologies
v) Current trends will aggravate the situation in future Economic growth Population growth Rural-urban migration into Climate change
SSA Energy supply challenges• Infrastructural systems: Inefficient grids, long distance transmission,
efficient generation, transmission & distribution result in energy losses. SSA Av. Losses 11% against a global av. of 9%, Some countries its as high as 41%.
• Human capacity: poorly qualified personnel, unprofitable management of energy agencies & poor maintenance of grid systems.
• High costs: Average cost of electricity is USD 0.18 per kilowatt-hour (about twice as expensive as elsewhere). back-up generators that cost USD 0.40 per kilowatt/hour Economic losses of power outages 2% of GDP, and 6 16% in lost ‐
turnover for enterprises (WB 2009) Losses are higher for SMEs
• Electricity grids unable to meet current demand• Grid expansion efforts equally unable to match growing demand from
current economic and population growth
Energy efficiency problems• Manufacturing sector characterised by old inefficient
machinery• Reliance on inefficient, energy intensive production
methods, resulting in high production costs• EE not widely recognised as a manufacturing principle
(54% & 57% of firms Nig &Ke considered it important)
• High costs neccessary for replacing old machinery• Lack of financial access for adoption EE technologies• Low technological base & weak innovation systems
High potential of SSA’s RE resources underutilisedHydro - Currently provides 70% of SSA electricity BUT only from 5% of exisiting resource.
Countries with the highest potential include D. R. Congo with 40,000MW, Angola, Cameroon, Gabon, Mozambique, Niger, Egypt, Zambia, Ethiopia & Madagascar
Hydro resource is subject to climate variabilityExploitation in some areas needs international
cooperation due to the cross-boarder nature of resources
High potential of SSA RE resources underutilisedGeothermal - Combined capacity of 14,000MW most of which is in Ethiopia & Kenya, others are Tanzania, Eritrea
Biomass - Provides 80% of SSA’s energy needs. There is need to shift from traditional biomasss (wood, charcoal) to
more sustainable energy sources
Agro industry has large potential: waste and by products can be used as biofeeds. Co-generation potential exists in sugar, coffee, palm oil, fruits, vegetable, meat & dairy sectors.
Wind - Estimated capacity of 93,900MW
Solar –high solar radiation in most of SSA
RE & EE tecs as solutions to access & sustanable energy supply
• RETs whether adopted for national grids or for private use, are low cost in the longterm
• RETs offer low cost energy infrustructure (Small Grids) where scattered settlement patterns imply expensive grid development costs.
• RETs offer environmental returns as they have no emmisions, minimise use of biomass
• In agro-industry use of waste and by products as feedstocks results in material reuse & efficiency
• REs plant generate employment and incomes• Energy efficiency can offer economic savings
RETs Adoption: Findings from Kenya
Kenya’s RET market more diversified and larger...
Both markets are..... small, young & vibrant: 56% in Kenya established after 2008 &
68% in Nigeria between 2000-2012, 14% after 2010promising: In Kenya beginnings of innovation in technology
adaptation and business strategies for RETs are evident
34%
37%
7%
7%
9%
3% 3%
biomass
solar
generators of electricity from RET
wind power
multi
hydro
Finance
RE Adoption: Findings from Nigeria• In Nigeria, solar is the main technology
marketed• Other RETs distributed by firms dealing in
solar, but to a less extent
Solar system Biomass Wind Power Mini-hydro0
20
40
60
80
100
120
100
4.5
36.4
4.5
Perc
enta
ge
Origins of RETs adopted in Ke & Nig
• China and India are the main sourcing countries **role of similar developmental contexts between countries important for transfer
& diffusion)• EU and other developed countries to a lesser extent, mostly for large RE projects.
This could change in the future as awareness of RET & quality appreciation grows.
ChinaUAE
German
yIndia
Japan
Turke
yUSA UK
Canad
a
Australia
France
Nerherlands
Europe
Greece
No response
0
2
4
6
8
10
12
14
16
18
20
15
1 1
8
21
11
3
10 0 0 0 0 0
18
0
34
0 0
3
0 0
21 1
21
7NigeriaKenya
Frequency
EE Adoption in Kenya & Nigeria• In both countries low levels of EE tec adoption
was observed
Driving factors of RE & EE adoptionKey drivers: Nigeria - unreliable power supply; Kenya - volatility in foreign exchange
Other drivers influential in both countries : Access to finance, VAT & duty exemptions, presence of a national RE strategy, packaging RETs with finance & suportive services, presence of a regulation framework
Regulations and licensing procedure in place for: Renewable Energy Auditors Energy Audit Firms Solar Water Heating Technicians Solar PV Technicians
Packaging of biomass & solar RETs more developed with training, maintenance, and financial services included
Drivers of EE Tecs: high energy costs in-house knowledge about energy management availability of local technical expertise
Barriers of RE & EE adoption in Nig & KeImportant barriers for RETs:• Unfavourable business climate • high tariffs • lack of technical competence• Access to finance Major barriers for EE Tecs: initial set-up costs of EE technology high cost of maintaining the EE measures
Barriers of RE & EE adoption in Nig & Ke
Common barriers for RE and EE Tecs in both countries:i) Low technological base as reflected in proportion of local
technology content for both technology typesSources of EE Technology used
Barriers of RE & EE adoption in Nig & Ke
• Limited RET innovations observed in both countries. • RETs are largely foreign with limited local content noted in biogas
Foreign-domestic composition of RETs in percentage (Inner circle Nig, outer Kenya)
beginnings of growth in domestic content observed in Kenyaboth countries reported anticipated future growth for the same
54.531.8
13.6
24.4
29.3
29.3
9.8
7.3 Based on foreign technology only
Involves domestic tech-nology to a small degree
Involves domestic tech-nology to a large degree
Primarily based on domestic technology
No response
Barriers of RE & EE adoption in Nig & Keii) Weak systems of innovations – Reflected by poor interaction between
various actors.
** In Kenya the situation is worse than in Nigeria that has a slightly better technological base for agro-processing
Types of organization involved in successful EE projects
Interactions of drivers and barriers• Drivers such as unstable exchange rate, high oil prices, power
outages, access to finance are also an integral part of unfavourable biz environment, a leading barrier observed in both countries.
• Tariff reductions act as both a driver for imports and a barrier for locally made RETs (Kenya)
• Presence of FiTs is a driver but prices are still cited as being low hindering adoption commercial investments.
• Lack of technical info on RETs is a barrier that undermines effects of credit availability(hesitation to lend), policy makers understanding of profitability of large RE plants
SMEs Learning, knowhow & innovationInnovative approaches were being adopted by RET distributors
Adaptation of foreign RETs using local materials (biomass), In Nigeria development of solar products was noted though not suitable for commercialised
Innovative financing arrangements Climate Innovation Centre in Nairobi was noted an important platform for knowledge
sharing & learning, policy lobbying, access to green finance Strong cooperation among biogas suppliers is enabling resource & knowhow pooling
necessary for larger projects, cooperation for importation of goods Business strategies such as targeting cooperative groups, and agricultural sectors RET sourcing methods used by small distributors e.g. combined imports, African
networks based in China Clustering was observed amongst RET suppliers in Lagos
Focus on a single RET allowed better understanding and more innovative capabilities particularly in:
RET improvement Understanding market needs
Technical cooperation
Findings highlight the need for technical collaboration especially between 1st & 2nd line actors in sectoral innovation systems.
Traditional cooperation frameworks (development aid, CDM) are less effective especially for SMEs as they fail to provide an effective conduit for intellectual property rights & protection
Ineffectiveness of cooperation frameworks has resulted in an emergent trends where both government & business try to address these short comings
Models of Technical cooperation• Development aid - large RE projects• Development finance institutions-often
participating DFI bring its own RET• South-South cooperation• Intra Africa cooperation – Africa Power
pools• Going- out-Model – as used by China and
now other countries as well• Enterprises' initiatives e.g. Barclays club in
Ghana, Nigeria & Kenya
Case study:RET Adoption in Kenya’s Tea Sector
General Context of Kenya’s Tea Sector
• Kenya is 3rd tea producer & 1st exporter of tea in the world; contributed 26% of Kenya’s Forex in 2012
• Production is by 565,000 small holder farmers, supports livelihoods of 3 million persons
• Processing takes place in 65 tea factories, factory energy needs range between 0.3-0.7 MW
• Tea sector has a well organized and functioning governance structure
Energy & Technological context in the Tea Sector
• High costs of production 30% as at June 2013 most of which is energy On average a factory spends approximately 46,000 USD
per month
• Oil price and exchange rate fluctuations have a direct effect on electricity costs during low hydrology Can cause prices to increase by a margin of 28-80% Production costs rose by 79.4% between 2001-2010
• Over 70% of boilers in factories designed to use furnace oil and wood fuel
Energy & Technological context in the Tea Sector
• Heavy reliance of wood fuel as a source of energy. • Factories are increasingly acquiring land for wood plantations
An estimated 3400 hectares of wood plantations Although attempts to use fuelwood sustainably are being
made, boilers used for wood combustion are not efficient
• The sector has resonably good vintage of processing machinery, usually imported from China and India
• The sector has low levels of technical expertise and experiences high turnover of scientists
Technical Cooperation for Energy solutions• Inter sectoral learning & knowledge sharing; factory owners learning from a
multinational in Kenya and from a trip to Sri-lanka
• Dev agencies (AfDB, UNEP-GEF, UNDP, & East Africa Tea Association collaborated on a project to green the Tea industry in E. Africa (Kenya, Malawi, Rwanda, Tanzania and Uganda)
• Numerous Feasibilities studies conducted for small hyro projects in all countries.
• Studies have resulted in development of 12 small hydro projects with a combined capacity of 34 MW in Kenya alone.
• In Kenya other studies have been conducted on viability of RE resources such as solar and wind.
• Technical cooperation has resulted in effective technical advisory support to recipient countries
• Project development is done by both local & foreign consultuancy engineering and electrical firms as well as foreign ones (India)
Technical Cooperation for Energy solutionsLocal Multinational
tea fatory
Sri lankan Tea Sector
Imenti Small Hydro project
Ke Gov, UNEP-GEF, UNDPKnowhow exchange
Learning by observation
-Technical Expertise- Policy framework
African Dev Bank
Local Bank50% $$$$
Ke GovRisk mitigation instruments for
$$$
Imenti Tea Factory Farmers
(owned by Imenti Farmers)
National Grid Operator
50% $$$ in equity
Electricty
excess electricity
$$$
Local & Foreign civil enginners, electrical firms
Technology, Expertise
Arranging Finance for Small Hydro Power Stations
• The first small hydro plant at Imenti Tea Factory with a capacity of 1 MW plant cost farmers USD 2.3 Million with a pay back period of 6-7 years
• Initial costs of small hydro project are quite high for small scale producers and initially faced resistance from farmers.
• Farmers set aside a portion of their monthly & annual payments to form raising 50% of total funds needed
• KTDA acted as credit guarantor and secured multilateral funding, Government offers risk mitigation instruments.
• Factory electricity needs of 0.4-0.5MW are now met at no cost, excess electricity exported to the grid
• Reliance on grid electricity, oil and wood fuel is drastically reduced
• Factory reduced energy costs by 60%, and is using incomes from energy sales to offset loan
Key findings• The RET sectors are young and growing. Solar and biomass are
the biggest RET markets with solar PV being based on foreign technology and biomass mostly based on domestic T and know how
• There is a need for foreign T to be more adapted to African needs and a need to upgrade African T. Technical cooperation should be based on this insight.
• Energy costs are a significant cost item for many agro-industrial sectors but few companies have adopted sophisticated energy efficiency measures. The main reason for this is that the system of innovation for energy efficiency is weakly developed
Policy Recommendations
• creation of special points for interaction with green innovators with focus placed on innovation systems and not on singular problems.
• Education should be integrated with national innovation systems with a framework to link private sector to education systems
• Fiscal reform and charges (including carbon pricing) – such as preferential tax treatment of green technology associated industries, removal of fossil fuel subsidies, or earmarking tax revenues to promote green technology objectives
Policy Recommendations• development of favorable legal frameworks &
policy environment to foster equal partnerships and collaboration between indigenous private sector actors and foreign investors is key
• Policies can aim to attain RET and EE technology adoption without undermining economic gains
The research team• The research teams involves development specialists,
innovation researchers and policy experts from Africa and Europe and is led by UNU-MERIT
Time lineSept 2012
Start of the project
Report about analytical framework
Workshop in Brussels
Dec 2012
Jan 2013
Policy makers workshop in Nairobi
Febr 2013
2nd workshop in Brussel
May – June 2013
Field-work
June 2013
Sept 2013
1st draft report
Vienna workshop
Aug 2013
Nov 2013
Final version of report