The AfDB's E-Consultation on its Energy Sector Policy -Have your Say!

Alstom’s comment to the African Development Bank’s E-consultation on its Energy Sector Policy

2 September 2011

We welcome the opportunity to comment on your draft of a revised Energy Sector Policy. We see this Policy paper as closely tied to the Bank’s development of an Energy Strategy for Africa. Hence the comments below have also been submitted on the Energy Strategy blog and to your colleagues working on the African Development Bank’s future Energy Strategy.

Your draft policy paper holds a number of very important elements to pursue in the future work of the Bank and we largely agree to the points highlighted in the draft Policy.

With this submission we wish in particular to provide comments on the following issues:

• The policy paper’s comments on page 4 (2.1.2.) and p 11 (4.2.5.) about financing. We fully agree with the need for providing an instrument that can take off some of the down side risk of investments in Africa. Towards the end of this submission we elaborate further on our ideas of a risk-sharing instrument which can leverage private financing. Furthermore we fully agree with the need to support local African governments’ development of policy frameworks in order to promote the entire portfolio of power generating technologies which Africa will need. Below we outline specific recommendations for the African Development Bank, explaining how we as a technology provider believes the Bank can enhance the enabling policy framework needed to incentivise these investments.
• The policy paper’s comments on pp 9 (4.2.2.), 11 (4.2.8.) and 13 (4.3.4.) in particular with regard to coal fired power generation. We recommend that this part of the energy sector policy is expanded to underline the potential of energy-efficiency on the supply side of power generation and the need to require CCS readiness for new build coal or gas fired power generation. We elaborate further on these issues in the text below.
• The policy paper’s comments on page 10 (4.2.2.) and 12 (4.2.9.) about IPR and capacity building. We fully agree with what is stated in the policy and encourage the Bank to expand these sections of the policy to reflect what we see as the critical barriers to technology transfer. In the section below we elaborate further on what are the main drivers for incentivising clean power investments. Clearly from our experience, IPR protection is a convener and not a barrier for technology transfer. But we see lack of capacity etc. as main barriers for technology transfer, and encourage the Bank to support an enabling policy framework for investments in this respect, too.

Executive Summary

We would encourage the African Development Bank to consider using its considerable influence to accelerate emissions reductions and capacity building in Africa by:

• Doing more to support and encourage clients to adopt the cleanest, highest efficiency plant and to upgrade existing plant to these standards where feasible. The potential for supply-side energy efficiency is significant within coal-fired power generation as well as hydro power generation;
• Being ready to support the deployment of continuous coal-fired power generation, including CCS as well as supporting renewable energy technologies where the potential exists or will be available in the future, but the latter will only happen when and if the right financial, policy, planning and capacity building support is provided to the clients of the African Development Bank;

We believe that helping African economies to prepare early for the adoption of key decarbonisation technologies such as hydro, wind, ocean, solar, geothermal, biomass and CCS technologies will enable a faster and more effective international response to climate change. We also believe this will act as an important enabler of development within those countries as a source of investment, jobs and low carbon infrastructure.

How support from the African Development Bank can be applied to leverage private financing is in itself a very important issue where Alstom Power favours the development of a Public-Private-Partnership ensuring risk-sharing through a financing mechanism and supporting further development of carbon markets, incl. CDM. We address this issue in more detail towards the end of this submission.

Access to electricity –paving the way for economic development

From the experience we have within power generation and transmission grid and with our presence in 70 countries across the globe, including many emerging economies and developing countries, we are fully aware of the need for affordable and reliable electricity as a key driver for economic development. Hence we support the African Development Banks’ general approach putting much emphasis on the development of African economy in a social and environmentally sound way.

We believe that all sources of power generation – at least in the longer term - will be important to provide access to electricity for all in Africa, this includes biomass, hydro, ocean, solar, geothermal and wind technologies in combination with the cleanest use of fossil fuels.

For many parts of Africa hydro power or other renewable technologies could be a key driver for economic development through local community electrification, provided that further market integration is ensured and provided that appropriate grid connections are put in place.

In order for renewable technologies to be able to fully contribute to especially the base-load electricity generation, it is important to assess the resources, storage and grid aspects of significant increases of renewable energies in the overall energy mix of Africa as well as the relative cost implications. Renewable energies requires a strategy for the overall energy mix and robust planning to ensure that networks are properly balanced.

In South Africa and Morocco, hydro power pumped storage development could provide solutions to this challenge. In East-Africa geothermal power could make a significant contribution. Most coastal regions of Africa, eastern highlands, Mediterranean North Africa and southern Africa offer a huge wind power potential. Solar power (CSP) could play a role in South Africa and Northern Africa, while large wave energy resources can be found in Southern Africa (estimates at 8 – 10 GW).

The storage requirements of many renewable technologies could be managed by careful integration of these technologies with use of biomass, geo-thermal power or hydro power, provided that the necessary investments are made in transmission capacity so as to enable the fluctuation of various renewable technologies’ energy supply to be balanced against fluctuations in energy demand.

For less mature renewable energies, support is needed for research, development and demonstration in Africa as well as precise resource assessment. This will speed up the rate at which these technologies will be able to demonstrate their potential of providing the baseload needed, if not sooner then on the longer term

Fossil fuels offer abundant, often locally available, relatively cheap base-load power supply, and are a very convenient route to extending electrification. In order to ensure access for all to affordable electricity and provide the cleanest power possible, Alstom Power encourages the African Development Bank to have a strong focus in the energy strategy on the role fossil-fuelled power generation will continue to play especially in southern Africa. This must be supported under conditions requiring:
- greater energy efficiency on the supply-side and
- CCS readiness

Power plants built today will expect a generating lifetime of around forty years. Planning ahead now to ensure these plants can be retrofitted with CCS technology avoids locking in a source of CO2 emissions over a forty-year period or more. This principle, however, applies as much to gas-fired plant as to coal-fired. This is particularly important in emerging economies which are building large capacity utilising both coal and gas to support their fast-paced economic growth.

At the same time there is a crucial need to support all renewable technologies in regions of Africa where these have a potential, in order to pave the way for their wider use and integration in the energy provision, in the future. Only if barriers are removed and if financial, policy, planning and capacity support, with support for demonstration projects, is given today, can the share of the renewable energies in the energy equation of Africa be scaled-up to the appropriate level.

Since many regions of Africa have no or little power generation, the infrastructure implications will be significant for both renewable and fossil fuel based new power capacity. Decentralised power generation such as small hydro power plants may be a better solution in some of these regions in order to limit the infrastructure investments; in other regions investment in grid will be an important co-benefit.

Before addressing issues specific to individual renewable energy technologies, supply side efficiency and CCS (with particular reference to CCS readiness and the importance of retrofitting the installed base of thermal generation plant with CCS in order to contribute to tackling climate change), we set out the Alstom portfolio which provides the foundation for our analysis.

Introducing Alstom Thermal and Renewable Power and Alstom Grid

As the supplier of major equipment in nearly 25% of the world’s installed power generation capacity, Alstom Thermal and Renewable Power has wide experience of offering an integrated approach to power plant design and construction. Alstom Grid delivers major equipment solutions within transmission technologies (disconnectors, GIS, HVDC etc.). We are present in 70 countries, and possess expertise in project management; engineering procurement and construction; and component design and manufacture. This allows us to offer a wide range of clean power solutions tailored to our individual customers’ needs, including hydropower, nuclear, geothermal and wind as well as combustion plant (coal, gas, oil, biomass) and energy management systems.

We are present in many emerging economies and developing countries in Africa and elsewhere, not only through our work on power projects (in South Africa, Algeria, Tunisia) but also through our global network of workshops, service centres, manufacturing facilities and R&D centres. This experience and expertise informs our advise on technology options, the pros and cons of different generation types and technologies, and broader implications of these choices (e.g. for infrastructure or industrial development).

Our commitment to providing solutions to address climate change is based on three basic principles:

1. Developing a clean technology mix, making the best use of low carbon and renewable technologies. With the most comprehensive and balanced portfolio of generation equipment in the market, including the removal of traditional pollutants, Alstom Thermal and Renewable Power is well positioned to assist plant operators apply the most appropriate technology mix to meet their market conditions.

2. Boosting production efficiency and energy management. Efficiency is key to emissions reduction. Today, Alstom Thermal Power is working toward innovations that aim to achieve the goal of 50% plant efficiency for steam plants and 60% for combined cycle gas fired plant - a significant improvement in comparison to technologies available today. Upgrades of existing plants (not just fossil fuelled plants, but large hydro power too) offer a certain, predictable and early opportunity for significant emissions reduction.

3. Applying Carbon Capture and Storage (CCS) technologies. The IEA projects global power demand may rise by around 70% by 2030. Over 80% of that growth will be in non-OECD countries, where fossil fuels remain a very significant source of power generation. This means we have to reduce CO2 emissions from fossil fuel generation to stay within the 2C target agreed in Copenhagen and at COP16 in Cancun and that means CCS. Currently, Alstom has developed several capture technologies and has completed or is involved in the operation of 7 pilot CCS plants of which the biggest is in the US (AEP Mountaineer, 58 MWth, capturing about 100,000 tons of CO2 per year). Additional CCS projects will soon be in operation. Furthermore, we are involved in six pre-commercial CCS projects which potentially will demonstrate CCS on large scale (250MWe and more).

Local Development

Alstom’s business activities in South Africa are examples of how we pave the way for local development while building clean power generation facilities:
• Our activities in South Africa focus on Project Management: Engineering, Procurement and Construction
• Current projects will be finalized in 2016 or 2017
• Approximately 50% of the production needed is sourced from South African suppliers
• While we have no manufacturing facilities in the country, we participate in the development of South African industrial capacity through the Department of Public Enterprise’s Competitive Supplier Development Program (CSDP)
• We have strong partnerships in place with local industry for the manufacture and supply of components
• We contribute to local skills development through our different projects and we are training more than 650 Artisans and 176 Professionals, including Engineers

Around 80% of all turbines in operation in South Africa are Alstom-designed and the company currently employs over 5,000 people to meet new power projects commitments. At its peak the Medupi project alone will, according to Eskom’s estimates, employ 9,000 people on site, most of whom will be local.

The conditions for investments have to be put in place in African countries to enhance local development through local sourcing and job creation.

We have experienced first hand the benefits and difficulties associated with investment in clean technology in the developing world. We often observe that governments in developing countries find IPR to be a barrier to technology transfer. From our experience the opposite is the case. Lack of protection of intellectual property, either by lack of an appropriate legal framework or by failures in enforcement, can prevent us from transferring technologies and hence will be a barrier to local development. Exactly because Republic of South Africa has IPR regulation in place, and well enforced, we can operate as outlined above in Republic of South Africa.

We encourage the African Development Bank to support private company engagement in local development and in building power generation by investing in education and development of Small and Medium sized Enterprises which can further attract private investments.

Specifically, we encourage the African Development Bank to address the main barriers to technology transfer and hence local development. These are:
• Lack of understanding of what technologies might be needed in individual country/regional circumstances
• Lack of absorptive capacity in developing countries
• Absence of free markets in some developing countries (including imposition of perverse subsidies or trade tariffs) and
• Lack of IPR protection.

Promoting renewable energies

Africa has vast and untapped renewable resources. These could be used for electrification of remote areas and for production of clean and affordable power. However, market conditions do not exist today to realize this potential. Below we briefly outline:
• the potential of the various renewable energy technologies in Africa, incl. Alstom’s involvement so far, and
• the barriers we see to specific renewable energy technologies and in general to their further implementation in Africa, incl. recommendations regarding the African Development Bank’s future activities


Hydro Power
Hydro is the most developed renewable energy technology in the region but only a fraction of the total potential is already used today. Taking into account technically and economically feasible resources, production could be multiplied by nearly 7. Total potential Hydro production is 1,173,945 GWh per year, of which currently only 8.3% is in operation, while 57.2% of it is technically and economically feasible, and 34.5% is only technically feasible . The potential could be exploited through installing power stations on existing dams, building new dams and retrofitting existing power stations which are often old.

Pumped storage plants should also be promoted where it is possible, in order to support integration of other renewable energy technologies. This can be one of the most effective ways of dealing with intermittency issues.

An important element of hydro is to recognize the overall potential for economic and social development. Dams and resulting reservoirs, apart from providing power, also have other functions, such as irrigation, flood control, potable water infrastructure, fishing development, etc.

Hydro power plants have a very long lifetime. Economic evaluation of hydro project should take this into account and should be based on a longer period (typically more than 50 years).

Small Hydro is an excellent way to electrify remote areas without requiring massive grid costs.

Alstom is a global leader within hydro and has delivered equipment to the worlds biggest hydro power plants (Three Gorges in China and Itaipu in Brazil), and we also have an offer of small hydro power plants. In Africa we have provided and recently retrofitted the Gariep hydro power plant in Republic of South Africa (4x112 MW). In 2009, we received orders for new turbines and generators for the Gove project in Angola (3x21MW) and for the Bui project in Ghana (3x133 MW). Both projects are expected to be commissioned in 2012.

To enhance the exploitation of hydro power on the African continent investments need to be incentivized through regulatory measures and financial reward, incl. long term guarantees. In Africa there is a clear need for additional funding, where support from carbon markets incl. CDM could potentially be an important element. The African Development Bank has a role to play in providing support for hydro, for example by:

• providing finance for retrofit projects, retrofitted capacity often increases generation output. These projects are rarely launched due to lack of financing (even if they are highly profitable)
• supporting financing for large projects
• financing resource assessments, for large and small hydro plants
• putting a price on the value of having back-up storage, which pumped-storage hydro can deliver
• prioritising RD&D support within a) pumped storage solutions, b) technologies relating to variable speed, operating range etc. and c) means to standardise small hydro plants

Marine Technologies
Marine technologies are under development and resources (wave, tidal, current, etc.) are not yet very precisely assessed for Africa but such as they are, they are close to large populated areas and good potential exists. For example, on the coasts of the Republic of South Africa 8 to 10 GW of wave power could be hosted.

Geothermal Power
Geothermal resources are available in large parts of East Africa. If this resource is exploited in a sustainable way, it can provide an important, sustainable contribution to the energy supply. Over-exploitation must be avoided by carefully assessing the resources, and using resources efficiently, incl. through closed-loop technologies and re-cycling waste heat into industrial processes etc. The amount of geo-thermal resources available in Africa depends on the outcome of drilling and exploration programs and it may amount to 2.5 GW by 2020 . Today the available resources are only exploited in Kenya (150 MW) and to a much smaller extent in Ethiopia.

Alstom operates as a partner with local companies, e.g. in Kenya, to further develop this source of power in Africa.

The African Development Bank could enhance geothermal energy in Africa by encouraging and supporting local governments to:
o Influence geo-thermal reservoir management, avoiding over-exploitation
o Mitigate some of the down-side risk of investors when drilling new wells without knowing how many MW it may provide. Clearly the drilling risk is still a hurdle for exploitation. Developers cannot afford to spend USD 5-10 million or more to get the drilling off ground with no return on investments due to lack of energy resources. The Geothermal Development Corporation owned by the government of Kenya may serve as a model for risk mitigation and rapid exploitation. We encourage the bank to provide direct support to such corporations and to promote fairness, transparency and funding of exploration activities. This would be an efficient and effective vehicle paving the way for developers to become involved.
o Co-operate internationally to pool and expand information about geological resources.
o Improve the permitting procedures and other regulatory requirements, making sure these are as non-bureaucratic and efficient as possible. Geothermal plants often have small capacity (50-100MW) and are often in remote locations. The environmental assessment is therefore quite extensive before permission is given. Having an efficient and responsive permitting system in place is therefore crucial.

Wind
Wind power, because of its scalability, can play a key role in both decentralized and in centralized systems. Africa’s wind resource is best around the coasts, in the eastern highlands, and in Mediterranean North Africa. South Africa, Morocco, Egypt and East African countries are example of high wind speed countries, but other areas with lower wind speed like in Senegal, Mauritania, and Ghana could also develop wind capacity as wind turbine manufacturers develop highly productive turbines for lower wind sites.

Only in North Africa has wind power been developed at significant scale to date, and there it is because of national policies which encourage the industry. At the end of 2009, about 96% of the continent’s total wind installations of 763 MW were to be found in Egypt (430 MW), Morocco (253 MW) and Tunisia (54 MW). Beyond the fact that it brings security of supply, the main driver for wind energy development in Africa is its relatively low cost, particularly in areas where the wind resource is strong. It is also a catalyst for job creation (component manufacturing, transport and installation, and operation and maintenance of the wind farms).

Alstom has been awarded an order for a 100MW wind project in Morocco, and is working on several other project opportunities in Africa, using its long standing presence in the power generation industry in several countries of the continent.

Wind turbines for Africa are not standard packages and must be designed specifically for the customer plant and site, including features such as desert kits, specific transport and installation equipment and processes, local maintenance strategies, and remote control tools.

We encourage the African Development Bank to support wind power in the following areas of priority:
• financing of wind resource assessment: high level mapping, installation of meteorological masts that developers can use to extrapolate their long term power production
• financing of studies developed by external consultant helping local governments to establish a regulatory support system
• financing studies developed by external consultants helping local governments to establish their wind capacity planning and related grid development approach
• financing of pilot wind farms
• financing of transmission assets.


Biomass
Biomass is already used extensively in Africa, but large areas of sub-Saharan Africa still offer under-utilized biomass resources. The most effective way of using biomass is through co-generation producing electricity as well as process heat. Biomass waste from bagasse (sugar cane waste), waste from paper and pulp, solid waste from palm oil production and timber and woods provide the best suitable basis for large-scale co-generation. Bagasse alone may provide 1GW per year , with Kenya, Mauritius, Sudan and Zimbabwe providing the largest share of this capacity.

Current biomass power generation is about 700 MW. The growth perspectives are expected to be significant, as much as five times higher or more over the next 5 to 10 years. A total biomass power generation of 5 GW is possible.

Alstom has provided many small steam turbines for the African market, used for fossil fuelled power generation, amounting to a total of 200 MW. Globally, we have also provided small steam turbines for biomass power generation, e.g. the 50MW steam turbine for the steam turbine unit in a biomass power project in Virginia, USA. From our experience more support is needed to harvest the benefits of biomass power generation in Africa. Furthermore, Alstom sees a significant potential for reducing CO2 emissions through bio-mass co-firing. We have a strong competence within cost-effective co-generation and bio-mass plants.

To enhance the use of biomass the African Development Bank is encouraged:
o To continue the support for co-generation and biomass in line with the Clean Energy Investment Framework. Preference should be given to projects of approximately 15 MW or above.
o To support local biomass power generation and co-generation because it has huge benefits for the local population in terms of providing electricity to individuals and creating jobs by attracting other local industries.
o To promote bio-mass co-firing in clean and high efficiency coal-firing power plants as a highly effective use of biomass resources to enhance the environmental foot print of planned or operating coal fired assets. Co-firing installations are also available for retrofit onto existing power plants and its potential should be assessed in every new or retrofit coal-based project.
o To support and promote the substitution of diesel generators with biomass fired process steam boilers with co-generation in sugar mills and other agro processing and forestry related industries. This would enhance the economics of such operations, and would also reduce heavy air pollution created by the mostly outdated diesel generators and boilers, in service today


Solar Power
Africa and most particularly northern and southern African regions benefit from rich solar energy sources with high daily global radiation of above 5.5 kWh/m2 and thus offer very attractive locations suitable for large scale solar productions. Solar power at affordable prices and reliable availability can play a significant role in the production of electricity to Africa in a not so distant future.

Concentrated Solar Power as an emission free technology offers significant potential to mitigate the African continent’s severe exposure to the effects of climate change. Furthermore when deployed for solar thermal solutions, a significant portion of the value chain could be localized creating substantial number of local jobs. Depending on the type of solar technology, the potential amount for localisation could vary. E.g. in the case of PV most of the value chain / suppliers will remain where the high value components (modules, inverters) are produced, while in the case of CSP and more especially the Tower technology, the solar field itself often comprises components that can be locally sourced and manufactured. The heliostats use flat mirrors (60’000 mirror for a typical 130MW configuration), with most of the materials locally available.

Tower based technology is most advanced in terms of fully despatchable generation with highest performance due to the highest temperature reached, topographical flexibility and ease of localisation.

Another key feature of the CSP technology is the possibility to extend production beyond daylight operations through the incorporation of storage. This step becomes particularly necessary with an increasing share of intermittency (mainly wind, PV) generation which becomes destabilizing to the grid.

In hybrid configurations, solar can be combined with fossil plant contributing to further green house gas reductions. A big part of the power block investment already exists and grid access constraints and permitting issues will also be removed to a very large extent. Therefore, the capital costs for solar thermal solutions can be significantly lowered if hybrid solutions are considered.

We appreciate that the African Development Bank has been instrumental in demonstrating the viability and suitability of solar technologies for Africa, e.g. by supporting large-scale projects such as Ain Beni Mathar and Quarzazate. The African Development Bank is encouraged to continue facilitating both advanced hybrid configurations and large CSP projects with solar technologies.

To enhance further the use of solar power the African Development Bank is encouraged to support projects which are testing the solar technologies for certain requirements such as:
o Suitability for maximum local contribution
o Fully despatchable power
o Simplicity and robustness
o Low initial cost and operating cost
o Low demands on topography and
o Suitability in scaling-up to big unit sizes and even larger plant clusters that require significant investments in transmission infrastructure capable of supporting long term visions such as exporting solar power to Europe

General barriers to be removed to promote renewable energy technologies
Challenges remain for renewable energy development in Africa. Outlined below are a number of measures which could incentivise renewable energy investments in Africa. We encourage the African Development Bank to support the implementation of these measures.

Firstly, market conditions providing the right incentives need to be put into place. These include target-setting, other policy measures such as Feed-in Tariffs and tax incentives, etc. Such measures will support renewable energy development but are often not present.

Secondly, grid integration is very important and requires significant investments. Planning and development of the grid is key.

Thirdly, Public-Private-Partnership collaboration and support for research, development and demonstration of RE technologies in the pilot phase as well as in the larger scale demonstration is important.

Fourthly, building capacity to ensure that the skills are available to construct, operate and maintain power generation facilities, including supply-chain capacity. While governments need to provide basic skills, further capacity building can be developed through public-private partnerships.

Finally, financing is a crucial element. Both up-front investment financing (CAPEX) and operational expenditure (OPEX) need to be dealt with in order for renewable energy investments in more risky environments to become profitable. This implies supporting a risk-sharing mechanism which reduces some of the down-side risk of investments in Africa and making sure there is the right balance between risk and reward. We address this issue in more detail in a separate section of this submission below.

From many publications and our own experience we are convinced that efforts to enhance renewable energy development in Africa will not only bring power generation to African countries but, along side these investments, enhance local development through skills development, job creation and a better environment for economic development in general.

We suggest that the African Development Bank - as part of its energy strategy - encourages governments and its clients to implement policies supporting renewable energy development through the necessary assessment of their potential and the implementation of the relevant market conditions. We refer to the general recommendations and the individual technology specific recommendations outlined above.

In addition, as for other technologies, the African Development Bank should ensure best technologies are used in projects.


Supply-side efficiency – with particular focus on fossil-fuelled fired power generation

The efficient extraction of energy from primary fuels is an important and often-neglected aspect of energy efficiency. This applies not only for fossil-fuels but is true also for hydro plants in many regions. The use of the cleanest, most efficient technologies, either in new build plant or retrofitted to existing fossil-fuelled plant, can be a powerful tool for increasing power production while reducing CO2 emissions.

For example, considering coal-fired power plants a supercritical unit will produce up to 16% more electric energy for the same fuel energy input when compared to a sub-critical unit and yet emit 13.7% less CO2. For a power plant of 600 MWnet this would correspond to a reduction of 440,000 tons of CO2 emitted per year.

Generation efficiency increases significantly when using super critical steam cycles. Thus replacing existing coal-fired plants by plants with super critical steam cycles can increase generation efficiency from the current average of 30-35% to 40-45% as the fleet is gradually replaced. According to the International Energy Agency, each one percentage point increase in efficiency delivers between 2 and 2.5 percentage point reduction in CO2 emissions.

There are also other reasons that this is a good option. A highly efficient plant:
• lowers operation and maintenance costs and helps to make the best use of the operational lifetime of the asset – this in turn helps to lower the cost of electricity to the consumer; and
• saves fuel, helping to reinforce energy security and enhance access to electricity by maximising output from the primary fuel (coal or gas).

Retrofits would also create jobs in engineering (analysis of plant and design modifications), in manufacturing (fabricating equipment) and in construction. A single project could create 45-55 full time jobs, for the duration of that project.

The relative efficiency gains are of course mainly dependant on the baseline used for comparison. Alstom is delivering major equipment to the Medupi plant in South Africa where the existing fleet was build in the 1970s and '80s. Compared with the existing subcritical fleet, the efficiency levels of supercritical plants like Medupi are significantly higher, resulting in lower CO2 emissions per unit of power generated, while the use of dry-cooling technology also reduces the amount of water used compared with the existing fleet.

The shortage of water in many parts of Africa makes the use of air-cooled condensers (ACC, also called dry-cooling) an important option. Many existing power plants in South Africa (Matimba, Kendal etc.) are using ACC technology. And Medupi and Kusile will also be using ACC. The ACC condenses exhaust steam from the steam turbine and returns condensate to the boilers. ACC is an important technology to apply in regions of water scarcity thereby adapting to climate change but with a small increase in CO2-emissions.

We suggest that the African Development Bank - as part of its energy strategy - encourages its clients to adopt the cleanest, highest efficiency plant and to upgrade existing plant to these standards where feasible.


Carbon Capture and Storage (CCS)

CCS will be essential to decarbonising global power supplies if we are to make the necessary emissions reductions over the longer term (especially beyond 2020). Without CCS, the IEA estimates that power decarbonisation would cost 70% more. This makes accelerating the roll-out of CCS, especially in regions like Africa with cheap and abundant coal resources, all the more urgent not only to help provide clean power for development but also as a direct boost to capacity building, by creating jobs, building skills and expertise and establishing infrastructure.

We have welcomed moves made by the EU and US to establish commercial-scale demonstration programmes and to set regulatory frameworks to support adoption of CCS. These regions have also recognised the industrial development potential of CCS, not least its job-creation potential. A 2009 US study conducted by BBC Research and Consulting estimated that retrofitting CCS to 65GW of capacity in the US could represent 1.7 million job-years over the construction period; 31,000 jobs in operation and maintenance; and tens of thousands of engineering jobs. We believe that CCS could create job opportunities and be the source of capacity building unique for Africa if more support for CCS was provided

What is important to understand is that CCS technologies exist today: industry has devoted significant R&D funding to its development and to a number of pilot, demonstration, and validation facilities. Alstom is working on fifteen pilot and pre-commercial CCS projects, to move the next stage beyond the largest fully integrated CCS project currently in operation. This is the AEP Mountaineer project in West Virginia (USA). Using Alstom chilled ammonia capture technology, it has successfully completed its testing phase, injecting approximately 100,000 tons of CO2 per year – equivalent to the effect of taking 17,000 cars off the road. The other projects cover new and retrofit application with coal and gas as the input fuel and vary in size from smaller scale pilots, costing tens of millions of dollars (which are mostly financed by industry R&D budgets) to larger validation projects that rely on an element of government funding and are more ambitious in scale and scope.

Alstom Thermal Power is focussing on two main categories of CCS: Oxy Combustion and Post Combustion Capture. These technologies can be retrofitted to CCS ready plant and this will be essential if the world is to meet progressively tighter emissions targets from 2020 onwards. To achieve these targets, emissions from all fossil fuels will have to be reduced. Alstom Thermal Power develops technologies to capture CO2 on coal and gas. We aim to offer post-combustion capture technologies commercially from 2015 but, like other early-mover commercial scale projects, an appropriate regulatory and financial framework will be needed to ensure there is a market for this technology.

There is practical action that can be taken today, both in developing countries and especially in emerging economies, to lay the foundations for CCS. That is to ensure that all new combustion plant, using any fossil fuel, is built to enable efficient retrofit of capture and transport equipment and that a suitable storage site has been identified. The IEA has developed the following definition of CCS Readiness:

“a CO2 capture-ready power plant is a plant which can include CO2 capture when the necessary regulatory or economic drivers are in place. The aim of building plants that are capture–ready is to avoid the risk of stranded assets or carbon lock-in. The developers of capture ready plants should take responsibility for ensuring that all known factors in their control that would prevent installation and operation of CO2 capture have been eliminated.”

CCS readiness is more than simply space allocation. It involves planning ahead at the design and construction stages of the plant to ensure efficient integration and operation of capture equipment, maximising the efficiency of the power plant, and providing for the option of non-disruptive and more cost-effective retrofit. Work to design a plant to be CCS ready is encapsulated in a feasibility study and recommendations for design and construction of the plant as well as an economic analysis of the proposals. Typically, the engineering factors to be considered will include:

• for the plant: the type and size of plant; fuel characteristics; operating regime; load curves over the year; start-up and shut-down requirements; expected life-time; expected date for conversion and outage duration; and power and steam supply specifications; and
• for the site: location; climatic conditions; area availability; distance to potential storage sites; cooling medium availability.

A CCS Ready design will provide for the specific conversion needs of the plant, whilst also optimising plant layout to place specific elements of the capture trains, compression module and conventional plant in proximity to allow maximum heat integration. In addition, encouraging the early mapping of potential CO2 storage basins and injection sites are important steps towards enabling projects to become established.

CCS readiness studies are not standard packages. To be effective they must be designed specifically for the customer, plant and site in question. As a result they can be tailored closely to the customer’s requirements (including their budget). We would be happy to provide more details of the handling and content of CCS readiness studies if the African Development Bank would find that helpful.

We suggest that the African Development Bank consider requiring that new proposals for combustion plant take the future retrofit of CCS equipment into account at the design stage, basing this requirement on the IEA’s definition (or another similarly authoritative source).

We suggest that the African Development Bank should adopt a pragmatic policy to CCS that recognises that fossil fuels – especially coal in some developing countries - will continue to play a significant part in providing large scale capacity additions for growing economies and to supply rapid and efficient electrification. Beyond encouraging developing countries to adopt the cleanest technologies already available (e.g. supercritical boilers and flue gas desulphurization), the African Development Bank should also be ready to support the deployment of CCS when commercially feasible not only financially but with policy, planning and capacity building support to its clients.

In the current situation South Africa has taken some first steps towards CCS and Alstom is involved in the South African Centre for CCS. From our experience here we encourage the African Development Bank to provide funding and capacity building (people development) to support CCS in South Africa and southern Africa in particular.

South Africa released an Atlas on CO2 storage sites last year. It outlines existing, known drillings. There is a need to explore new and better located opportunities for storage of CO2 in South Africa and elsewhere in Africa.

Capacity building is also needed for speeding up the plans on test injections and capturing CO2 from local pilot plants in South Africa and elsewhere in Africa. What is important for Africa is that engagement in CCS also provides a platform for local capacity building and job creation.

We would be happy to help the African Development Bank to stay informed of developments in this technology as it moves towards commercialisation, to support you in providing the most up-to-date advice and financial support to your clients. We are also urging the World Bank to take a similar approach in its Energy Strategy which is still under development.

Funding and leveraging private financing
Cross-cutting all of the above mentioned needs for support and investment in pushing forward power generation and economic development in Africa, it is obvious that the African Development Bank and other sources of public funding will not suffice. Hence, it is important to stress that public funding needs to be spent in a way which leverages private financing. Reducing the risk of operating in African markets is of huge importance.

The African Development Bank is encouraged to reduce the risks of operating in Africa by following the recommendations already outlined in this submission and which will be instrumental in reducing risks and hence reduce the cost of capital.

As mentioned above, the development of a risk-sharing mechanism is extremely important in order to secure up-front financing. We believe that public private partnerships (PPP) are essential to attract sufficient private investment in major public infrastructure projects. PPP offers flexibility of securing diverse sources of up-front financing and funding as well as risk-mitigation where levels of risk are too high.

Securing up-front financing (CAPEX) is essential, as well clearly as the longer-term financial viability.

The African Development Bank is encouraged to provide support to lower the cost of financing projects by lowering the risk profile, such as:

• Subordinated debt – by which a public funder would offer finance but with a lower priority than other creditors for repayment
• Guarantees from IFIs for project bonds (another form of subordinated debt) along the lines of the EU's proposal for a Europe 2020 Project Bond Initiative
• Concessional long-term debt financing that deferred interest payments for the first few years to support highly capital-intensive projects
• Government loan guarantees to provide confidence to private sector investors
• Export credit guarantees, as already offered by many national governments to support exports. Their use could be expanded regionally, e.g. offered on a European basis by the EIB.

The African Development Bank’s ability to provide directly, or pave the way indirectly for such types of funding would be a significant help to enhance investments in African energy provision.

Furthermore, the African Development Bank is encouraged to support governments that will reward low carbon investments and thereby secure sufficient OPEX.

Policies that can help enhance the profitability of low carbon projects include:

• Pricing carbon, to create a long term incentive for low carbon investment and to generate value from the sale of credits and offsets or from their use as collateral to raise finance.
• Building power markets across regions based on transparent, harmonized regulation and standards, to develop a broad consumer retail market
• Advance market commitments to guarantee a viable market for products requiring high capital investment
• Establishing feed-in tariffs (where grid-connected power is supplied through a market) to accelerate investment in low carbon technologies and offer preferential access to the grid.
• Introducing tax incentives or similar measures.

In finalizing this submission, we realize that this submission is a comprehensive set of information and recommendations which we are sharing with the African Development Bank.
We would welcome the opportunity to answer any questions you may have after reading this, either by phone or at a face-to-face meeting.

We are also more than ready to contribute with our views and insights to any workshop, meeting or other event which the Bank plans to host.




Joan MacNaughton CB Helle Juhler-Verdoner
Senior Vice President Vice President Global Affairs
Power & Environmental Policies Power & Environmental Policies

Alstom’s comment to the African Development Bank’s E-consultation on its Energy Sector Policy

2 September 2011

We welcome the opportunity to comment on your draft of a revised Energy Sector Policy. We see this Policy paper as closely tied to the Bank’s development of an Energy Strategy for Africa. Hence the comments below have also been submitted on the Energy Strategy blog and to your colleagues working on the African Development Bank’s future Energy Strategy.

Your draft policy paper holds a number of very important elements to pursue in the future work of the Bank and we largely agree to the points highlighted in the draft Policy.

With this submission we wish in particular to provide comments to the following issues:

• The Policy paper’s comments on page 4 (2.1.2.) and p 11 (4.2.5.) about financing. We fully agree to the need for providing an instrument that can take off some of the down side risk of investments in Africa. Towards the end of this submission we elaborate further on our ideas of a risk-sharing instrument which can leverage private financing. Furthermore we fully agree to the need of supporting local African governments’ development of policy frameworks in order to promote the entire portfolio of power generating technologies which Africa will need. Below we outline specific recommendations for the African Development Bank, explaining how we as a technology provider believes the Bank can enhance the enabling policy framework needed to incentivise these investments.
• The Policy paper’s comments on pp 9 (4.2.2.), 11 (4.2.8.) and 13 (4.3.4.) in particular with regard to coal fired power generation. We recommend that this part of the energy sector policy is expanded to underline the potential of energy-efficiency on the supply side of power generation and the need to require CCS readiness for new build coal og gas fired power generation. We elaborate further on these issues in the text below.
• The Policy paper’s comments on page 10 (4.2.2.) and 12 (4.2.9.) about IPR and capacity building. We fully agree to what is stated in the policy and encourage the bank to expand these sections of the Policy to reflect what we see as the critical barriers to technology transfer. In the section below be elaborate further on what are the main drivers for incentivising clean power investments. Clearly from our experience, IPR protection is a convener and not a barrier for technology transfer. But we see lack of capacity etc. as main barriers for technology transfer, and encourage the Bank to support an enabling policy framework for investments in this respect, too.

Executive Summary

We would encourage the African Development Bank to consider using its considerable influence to accelerate emissions reductions and capacity building in Africa by:

• Doing more to support and encourage clients to adopt the cleanest, highest efficiency plant and to upgrade existing plant to these standards where feasible. The potential for supply-side energy efficiency is significant within coal-fired power generation as well as hydro power generation;
• Being ready to support the deployment of continuous coal-fired power generation, including CCS as well as supporting renewable energy technologies where the potential exists or will be available in the future, but the latter will only happen when and if the right financial, policy, planning and capacity building support is provided to the clients of the African Development Bank;

We believe that helping African economies to prepare early for the adoption of key decarbonisation technologies such as hydro, wind, ocean, solar, geothermal, biomass and CCS technologies will enable a faster and more effective international response to climate change. We also believe this will act as an important enabler of development within those countries as a source of investment, jobs and low carbon infrastructure.

How support from the African Development Bank can be applied to leverage private financing is in itself a very important issue where Alstom Power favours the development of a Public-Private-Partnership ensuring risk-sharing through a financing mechanism and supporting further development of carbon markets, incl. CDM. We address this issue in more detail towards the end of this submission.

Access to electricity –paving the way for economic development

From the experience we have within power generation and transmission grid and with our presence in 70 countries across the globe, including many emerging economies and developing countries, we are fully aware of the need for affordable and reliable electricity as a key driver for economic development. Hence we support the African Development Banks’ general approach putting much emphasis on the development of African economy in a social and environmentally sound way.

We believe that all sources of power generation – at least in the longer term - will be important to provide access to electricity for all in Africa, this includes biomass, hydro, ocean, solar, geothermal and wind technologies in combination with the cleanest use of fossil fuels.

For many parts of Africa hydro power or other renewable energy technologies could be a key driver for economic development through local community electrification, provided that further market integration is ensured and provided that appropriate grid connections are put in place.

In order for renewable energy technologies to be able to fully contribute to especially the base-load electricity generation, it is important to assess the resources, storage and grid aspects of significant increases of renewable energies in the overall energy mix of Africa as well as the relative cost implications. Renewable energies requires a strategy for the overall energy mix and robust planning to ensure that networks are properly balanced.

In South Africa and Morocco, hydro power pumped storage development could provide solutions to this challenge. In East-Africa geothermal power could make a significant contribution. Most coastal regions of Africa, eastern highlands, Mediterranean North Africa and southern Africa offer a huge wind power potential. Solar power (CSP) could play a role in South Africa and Northern Africa, while large wave energy resources can be found in Southern Africa (estimates at 8 – 10 GW).

The storage requirements of many renewable energy technologies could be managed by careful integration of these technologies with use of biomass, geo-thermal power or hydro power, provided that the necessary investments are made in transmission capacity so as to enable the fluctuation of various renewable energy technologies’ energy supply to be balanced against fluctuations in energy demand.

For less mature renewable energies, support is needed for research, development and demonstration in Africa as well as precise resource assessment. This will speed up the rate at which these technologies will be able to demonstrate their potential of providing the baseload needed, if not sooner then on the longer term

Fossil fuels offer abundant, often locally available, relatively cheap base-load power supply, and are a very convenient route to extending electrification. In order to ensure access for all to affordable electricity and provide the cleanest power possible, Alstom Power encourages the African Development Bank to have a strong focus in the energy strategy on the role fossil-fuelled power generation will continue to play especially in southern Africa. This must be supported under conditions requiring:
- greater energy efficiency on the supply-side and
- CCS readiness

Power plants built today will expect a generating lifetime of around forty years. Planning ahead now to ensure these plants can be retrofitted with CCS technology avoids locking in a source of CO2 emissions over a forty-year period or more. This principle, however, applies as much to gas-fired plant as to coal-fired. This is particularly important in emerging economies which are building large capacity utilising both coal and gas to support their fast-paced economic growth.

At the same time there is a crucial need to support all renewable energy technologies in regions of Africa where these have a potential, in order to pave the way for their wider use and integration in the energy provision, in the future. Only if barriers are removed and if financial, policy, planning and capacity support, with support for demonstration projects, is given today, can the share of the renewable in the energy equation in Africa can be scaled-up to the appropriate level.

Since many regions of Africa have no or little power generation, the infrastructure implications will be significant for both renewable and fossil fuel based new power capacity. Decentralised power generation such as small hydro power plants may be a better solution in some of these regions in order to limit the infrastructure investments; in other regions investment in grid will be an important co-benefit in return.

Before addressing issues specific to individual renewable energy technologies, supply side efficiency and CCS (with particular reference to CCS readiness and the importance of retrofitting the installed base of thermal generation plant with CCS in order to contribute to tackling climate change), we set out the Alstom portfolio which provides the foundation for our analysis.

Introducing Alstom Thermal and Renewable Power and Alstom Grid

As the supplier of major equipment in nearly 25% of the world’s installed power generation capacity, Alstom Thermal and Renewable Power has wide experience of offering an integrated approach to power plant design and construction. Alstom Grid delivers major equipment solutions within transmission technologies (disconnectors, GIS, HVDC etc.). We are present in 70 countries, and possess expertise in project management; engineering procurement and construction; and component design and manufacture. This allows us to offer a wide range of clean power solutions tailored to our individual customers’ needs, including hydropower, nuclear, geothermal and wind as well as combustion plant (coal, gas, oil, biomass) and energy management systems.

We are present in many emerging economies and developing countries in Africa and elsewhere, not only through our work on power projects (in South Africa, Algeria, Tunisia) but also through our global network of workshops, service centres, manufacturing facilities and R&D centres. This experience and expertise informs our advise on technology options, the pros and cons of different generation types and technologies, and broader implications of these choices (e.g. for infrastructure or industrial development).

Our commitment to providing solutions to address climate change is based on three basic principles:

1. Developing a clean technology mix, making the best use of low carbon and renewable technologies. With the most comprehensive and balanced portfolio of generation equipment in the market, including the removal of traditional pollutants, Alstom Thermal and Renewable Power is well positioned to assist plant operators apply the most appropriate technology mix to meet their market conditions.

2. Boosting production efficiency and energy management. Efficiency is key to emissions reduction. Today, Alstom Thermal Power is working toward innovations that aim to achieve the goal of 50% plant efficiency for steam plants and 60% for combined cycle gas fired plant - a significant improvement in comparison to technologies available today. Upgrades of existing plants (not just fossil fuelled plants, but large hydro power too) offer a certain, predictable and early opportunity for significant emissions reduction.

3. Applying Carbon Capture and Storage (CCS) technologies. The IEA projects global power demand may rise by around 70% by 2030. Over 80% of that growth will be in non-OECD countries, where fossil fuels remain a very significant source of power generation. This means we have to reduce CO2 emissions from fossil fuel generation to stay within the 2C target agreed in Copenhagen and at COP16 in Cancun and that means CCS. Currently, Alstom has developed several capture technologies and has completed or is involved in the operation of 7 pilot CCS plants of which the biggest is in the US (AEP Mountaineer, 58 MWth, capturing about 100,000 tons of CO2 per year). Additional CCS projects will soon be in operation. Furthermore, we are involved in six pre-commercial CCS projects which potentially will demonstrate CCS on large scale (250MWe and more).

Local Development

Alstom’s business activities in South Africa are examples of how we pave the way for local development while building clean power generation facilities:
• Our activities in South Africa focus on Project Management: Engineering, Procurement and Construction
• Current projects will be finalized in 2016 or 2017
• Approximately 50% of the production needed is sourced from South African suppliers
• While we have no manufacturing facilities in the country, we participate in the development of South African industrial capacity through the Department of Public Enterprise’s Competitive Supplier Development Program (CSDP)
• We have strong partnerships in place with local industry for the manufacture and supply of components
• We contribute to local skills development through our different projects and we are training more than 650 Artisans and 176 Professionals, including Engineers

Around 80% of all turbines in operation in South Africa are Alstom-designed and the company currently employs over 5,000 people to meet new power projects commitments. At its peak the Medupi project alone will according to Eskom’s estimates, employ 9,000 people on site, most of whom will be local.

The conditions for investments have to be put in place in African countries to enhance local development through local sourcing and job creation.

We have experienced first hand the benefits and difficulties associated with investment in clean technology in the developing world. We often observe that governments in developing countries find IPR to be a barrier to technology transfer. From our experience the opposite is the case. Lack of protection of intellectual property, either by lack of an appropriate legal framework or by failures in enforcement, can prevent us from transferring technologies and hence will be a barrier to local development. Exactly because Republic of South Africa has IPR regulation in place, and well enforced, we can operate as outlined above in Republic of South Africa.

We encourage the African Development Bank to support private company engagement in local development and in building power generation by investing in education and development of Small and Medium sized Enterprises which can further attract private investments.

Specifically, we encourage the African Development Bank to address the main barriers to technology transfer and hence local development. These are:
• Lack of understanding of what technologies might be needed in individual country/regional circumstances
• Lack of absorptive capacity in developing countries
• Absence of free markets in some developing countries (including imposition of perverse subsidies or trade tariffs) and
• Lack of IPR protection.

Promoting renewable energies

Africa has vast and untapped renewable resources. These could be used for electrification of remote areas and for production of clean and affordable power. However, market conditions do not exist today to realize this potential. Below we briefly outline:
• the potential of the various renewable energy technologies in Africa, incl. Alstom’s involvement so far, and
• the barriers we see to specific renewable energy technologies and in general to their further implementation in Africa, incl. recommendations regarding the African Development Bank’s future activities


Hydro Power
Hydro is the most developed renewable energy technology in the region but only a fraction of the total potential is already used today. Taking into account technically and economically feasible resources, production could be multiplied by nearly 7. Total potential Hydro production is 1,173,945 GWh per year, of which currently only 8.3% is in operation, while 57.2% of it is technically and economically feasible, and 34.5% is only technically feasible . The potential could be exploited through installing power stations on existing dams, building new dams and retrofitting existing power stations which are often old.

Pumped storage plants should also be promoted where it is possible, in order to support integration of other renewable energy technologies. This can be one of the most effective ways of dealing with intermittency issues.

An important element of hydro is to recognize the overall potential for economic and social development. Dams and resulting reservoirs, apart from providing power, also have other functions, such as irrigation, flood control, potable water infrastructure, fishing development, etc.

Hydro power plants have a very long lifetime. Economic evaluation of hydro project should take this into account and should be based on a longer period (typically more than 50 years).

Small Hydro is an excellent way to electrify remote areas without requiring massive grid costs.

Alstom is a global leader within hydro and has delivered equipment to the worlds biggest hydro power plants (Three Gorges in China and Itaipu in Brazil), and we also have an offer of small hydro power plants. In Africa we have provided and recently retrofitted the Gariep hydro power plant in Republic of South Africa (4x112 MW). In 2009, we received orders for new turbines and generators for the Gove project in Angola (3x21MW) and for the Bui project in Ghana (3x133 MW). Both projects are expected to be commissioned in 2012.

To enhance the exploitation of hydro power on the African continent investments need to be incentivized through regulatory measures and financial reward, incl. long term guarantees. In Africa there is a clear need for additional funding, where support from carbon markets incl. CDM could potentially be an important element. The African Development Bank has a role to play in providing support for hydro, for example by:

• providing finance for retrofit projects, retrofitted capacity often increases generation output. These projects are rarely launched due to lack of financing (even if they are highly profitable)
• supporting financing for large projects
• financing resource assessments, for large and small hydro plants
• putting a price on the value of having back-up storage, which pumped-storage hydro can deliver
• prioritising RD&D support within a) pumped storage solutions, b) technologies relating to variable speed, operating range etc. and c) means to standardise small hydro plants

Marine Technologies
Marine technologies are under development and resources (wave, tidal, current, etc.) are not yet very precisely assessed for Africa but such as they are, they are close to large populated areas and good potential exists. For example, on the coasts of the Republic of South Africa 8 to 10 GW of wave power could be hosted.

Geothermal Power
Geothermal resources are available in large parts of East Africa. If this resource is exploited in a sustainable way, it can provide an important, sustainable contribution to the energy supply. Over-exploitation must be avoided by carefully assessing the resources and using resources efficiently, incl. through closed-loop technologies and re-cycling waste heat into industrial processes etc. The amount of geo-thermal resources available in Africa depends on the outcome of drilling and exploration programs and it may amount to 2.5 GW by 2020 . Today the available resources are only exploited in Kenya (150 MW) and to a much smaller extent in Ethiopia.

Alstom operates as a partner with local companies, e.g. in Kenya, to further develop this source of power in Africa.

The African Development Bank could enhance geothermal energy in Africa by encouraging and supporting local governments to:
o Influence geo-thermal reservoir management, avoiding over-exploitation
o Mitigate some of the down-side risk of investors when drilling new wells without knowing how many MW it may provide. Clearly the drilling risk is still a hurdle for exploitation. Developers cannot afford to spend USD 5-10 million or more to get the drilling off ground with no return on investments due to lack of energy resources. The Geothermal Development Corporation owned by the government of Kenya may serve as a model for risk mitigation and rapid exploitation. We encourage the bank to provide direct support to such corporations and to promote fairness, transparency and funding of exploration activities. This would be an efficient and effective vehicle paving the way for developers to become involved.
o Co-operate internationally to pool and expand information about geological resources.
o Improve the permitting procedures and other regulatory requirements, making sure these are as non-bureaucratic and efficient as possible. Geothermal plants often have small capacity (50-100MW) and are often in remote locations. The environmental assessment is therefore quite extensive before permission is given. Having an efficient and responsive permitting system in place is therefore crucial.


Wind
Wind power, because of its scalability, can play a key role in both decentralized and in centralized systems. Africa’s wind resource is best around the coasts, in the eastern highlands, and in Mediterranean North Africa. South Africa, Morocco, Egypt and East African countries are example of high wind speed countries, but other areas with lower wind speed like in Senegal, Mauritania, and Ghana could also develop wind capacity as wind turbine manufacturers develop highly productive turbines for lower wind sites.

Only in North Africa has wind power been developed at significant scale to date, and there it is because of national policies which encourage the industry. At the end of 2009, about 96% of the continent’s total wind installations of 763 MW were to be found in Egypt (430 MW), Morocco (253 MW) and Tunisia (54 MW). Beyond the fact that it brings security of supply, the main driver for wind energy development in Africa is its relatively low cost, particularly in areas where the wind resource is strong. It is also a catalyst for job creation (component manufacturing, transport and installation, and operation and maintenance of the wind farms).

Alstom has been awarded an order for a 100MW wind project in Morocco, and is working on several other project opportunities in Africa, using its long standing presence in the power generation industry in several countries of the continent.

Wind turbines for Africa are not standard packages and must be designed specifically for the customer plant and site, including features such as desert kits, specific transport and installation equipment and processes, local maintenance strategies, and remote control tools.

We encourage the African Development Bank to support wind power in the following areas of priority:
• financing of wind resource assessment: high level mapping, installation of meteorological masts that developers can use to extrapolate their long term power production
• financing of studies developed by external consultant helping local governments to establish a regulatory support system
• financing studies developed by external consultants helping local governments to establish their wind capacity planning and related grid development approach
• financing of pilot wind farms
• financing of transmission assets.

Biomass
Biomass is already used extensively in Africa, but large areas of sub-Saharan Africa still offer under-utilized biomass resources. The most effective way of using biomass is through co-generation producing electricity as well as process heat. Biomass waste from bagasse (sugar cane waste), waste from paper and pulp, solid waste from palm oil production and timber and woods provide the best suitable basis for large-scale co-generation. Bagasse alone may provide 1GW per year , with Kenya, Mauritius, Sudan and Zimbabwe providing the largest share of this capacity.

Current biomass power generation is about 700 MW. The growth perspectives are expected to be significant, as much as five times higher or more over the next 5 to 10 years. A total biomass power generation of 5 GW is possible.

Alstom has provided many small steam turbines for the African market, used for fossil fuelled power generation, amounting to a total of 200 MW. Globally, we have also provided small steam turbines for biomass power generation, e.g. the 50MW steam turbine for the steam turbine unit in a biomass power project in Virginia, USA. From our experience more support is needed to harvest the benefits of biomass power generation in Africa. Furthermore, Alstom sees a significant potential for reducing CO2 emissions through bio-mass co-firing. We have a strong competence within cost-effective co-generation and bio-mass plants.

To enhance the use of biomass the African Development Bank is encouraged:
o To continue the support for co-generation and biomass in line with the Clean Energy Investment Framework. Preference should be given to projects of approximately 15 MW or above.
o To support local biomass power generation and co-generation because it has huge benefits for the local population in terms of providing electricity to individuals and creating jobs by attracting other local industries.
o To promote bio-mass co-firing in clean and high efficiency coal-firing power plants as the best use of available bio-mass resources. Co-firing installations are also available for retrofit onto existing power plants and its potential should be assessed in every new or retrofit coal-based project.
o To support and promote substitution of diesel generators with biomass co-generation to be used in African sugar mills and other agro processing industries. This would reduce fuel costs significantly, and would also reduce heavy air pollution created by diesel generators and/or created by out-dated biomass boilers in service today

Solar Power
Africa and most particularly northern and southern African regions benefit from rich solar energy sources with high daily global radiation of above 5.5 kWh/m2 and thus offer very attractive locations suitable for large scale solar productions. Solar power at affordable prices and reliable availability can play a significant role in the production of electricity to Africa in a not so distant future.

Concentrated Solar Power as an emission free technology offers significant potential to mitigate the African continent’s severe exposure to the effects of climate change. Furthermore when deployed for solar thermal solutions, a significant portion of the value chain could be localized creating substantial number of local jobs. Depending on the type of solar technology, the potential amount for localisation could vary. E.g. in the case of PV most of the value chain / suppliers will remain where the high value components (modules, inverters) are produced, while in the case of CSP and more especially the Tower technology, the solar field itself often comprises components that can be locally sourced and manufactured. The heliostats use flat mirrors (60’000 mirror for a typical 130MW configuration), with most of the materials locally available.

Tower based technology is most advanced in terms of fully despatchable generation with highest performance due to the highest temperature reached, topographical flexibility and ease of localisation.

Another key feature of the CSP technology is the possibility to extend production beyond daylight operations through the incorporation of storage. This step becomes particularly necessary with increasing share of intermittency (mainly wind, PV) generation which becomes destabilizing to the grid.

In hybrid configurations, solar can be combined with fossil plant contributing to further green house gas reductions. A big part of the power block investment already exists and grid access constraints and permitting issues will also be removed to a very large extent. Therefore, the capital costs for solar thermal solutions can be significantly lowered if hybrid solutions are considered.

We appreciate that the African Development Bank has been instrumental in demonstrating the viability and suitability of solar technologies for Africa, e.g. by supporting large-scale projects such as Ain Beni Mathar and Quarzazate. The African Development Bank is encouraged to continue facilitating both advanced hybrid configurations and large CSP projects with solar technologies.

To enhance further the use of solar power the African Development Bank is encouraged to support projects which are testing the solar technologies for certain requirements such as:
o Suitability for maximum local contribution
o Fully despatchable power
o Simplicity and robustness
o Low initial cost and operating cost
o Low demands on topography and
o Suitability in scaling-up to big unit sizes and even larger plant clusters that require significant investments in transmission infrastructure capable of supporting long term visions such as exporting solar power to Europe

General barriers to be removed to promote renewable energy technologies
Challenges remain for renewable energy development in Africa. Outlined below is a number of measures which could incentivise renewable energy investments in Africa. We encourage the African Development Bank to support the implementation of these measures.

Firstly, market conditions providing the right incentives need to be put into place. These include target-setting, other policy measures such as Feed-in Tariffs and tax incentives, etc. Such measures will support renewable energy development but are often not present.

Secondly, grid integration is very important and requires significant investments. Planning and development of the grid is key.

Thirdly, Public-Private-Partnership collaboration and support for research, development and demonstration of RE technologies in the pilot phase as well as in the larger scale demonstration is important.

Fourthly, building capacity to ensure that the skills are available to construct, operate and maintain power generation facilities, including supply-chain capacity. While governments need to provide basic skills, further capacity building can be developed through public-private partnerships.

Finally, financing is a crucial element. Both up-front investment financing (CAPEX) and operational expenditure (OPEX) need to be dealt with in order for renewable energy investments in more risky environments to become profitable. From an Alstom view, this implies supporting a risk-sharing mechanism taking some of the down-side risk of investments in Africa and making sure there is the right balance between risk and reward. We address this issue in more detail in a separate section of this submission below.

From many publications and our own experience we are convinced that efforts to enhance renewable energy development in Africa will not only bring power generation to African countries but, along side these investments, enhance local development through skills development, job creation and a better environment for economic development in general.

We suggest that the African Development Bank - as part of its energy strategy - encourages governments and its clients to implement policies supporting renewable energy development through the necessary assessment of their potential and the implementation of the relevant market conditions. We refer to the general RE recommendations and the individual technology specific recommendations outlined above.

In addition, as for other technologies, the African Development Bank should ensure best technologies are used in projects.


Supply-side efficiency – with particular focus on fossil-fuelled fired power generation

The efficient extraction of energy from primary fuels is an important and often-neglected aspect of energy efficiency. This applies not only for fossil-fuels but is true also for hydro plants in many regions. The use of the cleanest, most efficient technologies, either in new build plant or retrofitted to existing fossil-fuelled plant, can be a powerful tool for increasing power production while reducing CO2 emissions.

For example, considering coal-fired power plants a supercritical unit will produce up to 16% more electric energy for the same fuel energy input when compared to a sub-critical unit and yet emit 13.7% less CO2. For a power plant of 600 MWnet this would correspond to a reduction of 440,000 tons of CO2 emitted per year.

Generation efficiency increases significantly when using super critical steam cycles. Thus replacing existing coal-fired plants by plants with super critical steam cycles can increase generation efficiency from the current average of 30-35% to 40-45% as the fleet is gradually replaced. According to the International Energy Agency, each one percentage point increase in efficiency delivers between 2 and 2.5 percentage point reduction in CO2 emissions.

There are also other reasons that this is a good option. A highly efficient plant:
• lowers operation and maintenance costs and helps to make the best use of the operational lifetime of the asset – this in turn helps to lower the cost of electricity to the consumer; and
• saves fuel, helping to reinforce energy security and enhance access to electricity by maximising output from the primary fuel (coal or gas).

Retrofits would also create jobs in engineering (analysis of plant and design modifications), in manufacturing (fabricating equipment) and in construction. A single project could create 45-55 full time jobs, for the duration of that project.

The relative efficiency gains will of course vary from site to site. Alstom is delivering major equipment to the Medupi plant in South Africa where the existing fleet was build in the 1970’s. Compared to the existing fleet, the efficiency levels of supercritical plants like Medupi are much higher and also results in lower water use per unit of power generated.

The shortage of water in many parts of Africa makes the use of air-cooled condensers (ACC, also called dry-cooling) an important option. Many existing power plants in South Africa (Matimba, Kendal etc.) are using ACC technology. And Medupi and Kusile will also be using ACC. The ACC condenses exhaust steam from the steam turbine and returns condensate to the boilers. ACC is an important technology to apply in regions of water scarcity thereby adapting to climate change but with a small increase in CO2-emissions.

We suggest that the African Development Bank - as part of its energy strategy - encourages its clients to adopt the cleanest, highest efficiency plant and to upgrade existing plant to these standards where feasible.


Carbon Capture and Storage (CCS)

CCS will be essential to decarbonising global power supplies if we are to make the necessary emissions reductions over the longer term (especially beyond 2020). Without CCS, the IEA estimates that power decarbonisation would cost 70% more. This makes accelerating the roll-out of CCS, especially in regions like Africa with cheap and abundant coal resources, all the more urgent not only to help provide clean power for development but also as a direct boost to capacity building, by creating jobs, building skills and expertise and establishing infrastructure.

We have welcomed moves made by the EU and US to establish commercial-scale demonstration programmes and to set regulatory frameworks to support adoption of CCS. These regions have also recognised the industrial development potential of CCS, not least its job-creation potential. A 2009 US study conducted by BBC Research and Consulting estimated that retrofitting CCS to 65GW of capacity in the US could represent 1.7 million job-years over the construction period; 31,000 jobs in operation and maintenance; and tens of thousands of engineering jobs. We believe that CCS could create job opportunities and be the source of capacity building unique for Africa if more support for CCS was provided

What is important to understand is that CCS technologies exist today: industry has devoted significant R&D funding to its development and to a number of pilot, demonstration, and validation facilities. Alstom is working on fifteen pilot and pre-commercial CCS projects, to move the next stage beyond the largest fully integrated CCS project currently in operation. This is the AEP Mountaineer project in West Virginia (USA). Using Alstom chilled ammonia capture technology, it has successfully completed its testing phase, injecting approximately 100,000 tons of CO2 per year – equivalent to the effect of taking 17,000 cars off the road. The other projects cover new and retrofit application with coal and gas as the input fuel and vary in size from smaller scale pilots, costing tens of millions of dollars (which are mostly financed by industry R&D budgets) to larger validation projects that rely on an element of government funding and are more ambitious in scale and scope.

Alstom Thermal Power is focussing on two main categories of CCS: Oxy Combustion and Post Combustion Capture. These technologies can be retrofitted to CCS ready plant and this will be essential if the world is to meet progressively tighter emissions targets from 2020 onwards. To achieve these targets, emissions from all fossil fuels will have to be reduced. Alstom Thermal Power develops technologies to capture CO2 on coal and gas. We aim to offer post-combustion capture technologies commercially from 2015 but, like other early-mover commercial scale projects, an appropriate regulatory and financial framework will be needed to ensure there is a market for this technology.

There is practical action that can be taken today, both in developing countries and especially in emerging economies, to lay the foundations for CCS. That is to ensure that all new combustion plant, using any fossil fuel, is built to enable efficient retrofit of capture and transport equipment and that a suitable storage site has been identified. The IEA has developed the following definition of CCS Readiness:

“a CO2 capture-ready power plant is a plant which can include CO2 capture when the necessary regulatory or economic drivers are in place. The aim of building plants that are capture–ready is to avoid the risk of stranded assets or carbon lock-in. The developers of capture ready plants should take responsibility for ensuring that all known factors in their control that would prevent installation and operation of CO2 capture have been eliminated.”

CCS readiness is more than simply space allocation. It involves planning ahead at the design and construction stages of the plant to ensure efficient integration and operation of capture equipment, maximising the efficiency of the power plant, and providing for the option of non-disruptive and more cost-effective retrofit. Work to design a plant to be CCS ready is encapsulated in a feasibility study and recommendations for design and construction of the plant as well as an economic analysis of the proposals. Typically, the engineering factors to be considered will include:

• for the plant: the type and size of plant; fuel characteristics; operating regime; load curves over the year; start-up and shut-down requirements; expected life-time; expected date for conversion and outage duration; and power and steam supply specifications; and
• for the site: location; climatic conditions; area availability; distance to potential storage sites; cooling medium availability.

A CCS Ready design will provide for the specific conversion needs of the plant, whilst also optimising plant layout to place specific elements of the capture trains, compression module and conventional plant in proximity to allow maximum heat integration. In addition, encouraging the early mapping of potential CO2 storage basins and injection sites are important steps towards enabling projects to become established.

CCS readiness studies are not standard packages. To be effective they must be designed specifically for the customer, plant and site in question. As a result they can be tailored closely to the customer’s requirements (including their budget). We would be happy to provide more details of the handling and content of CCS readiness studies if the African Development Bank would find that helpful.

We suggest that the African Development Bank consider requiring that new proposals for combustion plant take the future retrofit of CCS equipment into account at the design stage, basing this requirement on the IEA’s definition (or another similarly authoritative source).

We suggest that the African Development Bank should adopt a pragmatic policy to CCS that recognises that fossil fuels – especially coal in some developing countries - will continue to play a significant part in providing large scale capacity additions for growing economies and to supply rapid and efficient electrification. Beyond encouraging developing countries to adopt the cleanest technologies already available (e.g. supercritical boilers and flue gas desulphurization), the African Development Bank should also be ready to support the deployment of CCS when commercially feasible not only financially but with policy, planning and capacity building support to its clients.

In the current situation South Africa has taken some first steps towards CCS and Alstom is involved in the South African Centre for CCS. From our experience here we encourage the African Development Bank to provide funding and capacity building (people development) to support CCS in South Africa and southern Africa in particular.

South Africa released an Atlas on CO2 storage sites last year. It outlines existing, known drillings. There is a need to explore new and better located opportunities for storage of CO2 in South Africa and elsewhere in Africa.

Capacity building is also needed for speeding up the plans on test injections and capturing CO2 from local pilot plants in South Africa and elsewhere in Africa. What is important for Africa is that engagement in CCS also provides a platform for local capacity building and job creation.

We would be happy to help the African Development Bank to stay informed of developments in this technology as it moves towards commercialisation, to support you in providing the most up-to-date advice and financial support to your clients. We are also urging the World Bank to take a similar approach in its Energy Strategy which is still under development.

Funding and leveraging private financing
Cross-cutting all of the above mentioned needs for support and investment in pushing forward power generation and economic development in Africa, it is obvious that the African Development Bank and other sources of public funding will not suffice. Hence, it is important to stress that public funding needs to be spent in a way which leverages private financing. Reducing the risk of operating in African markets is of huge importance.

The African Development Bank is encouraged to reduce the risks of operating in Africa by following the recommendations already outlined in this submission and which will be instrumental in reducing risks and hence reduce the cost of capital.

As mentioned above, the development of a risk-sharing mechanism is extremely important in order to secure up-front financing. We believe that public private partnerships (PPP) are essential to attract sufficient private investment in major public infrastructure projects. PPP offers flexibility of securing diverse sources of up-front financing and funding as well as risk-mitigation where levels of risk are too high.

Securing up-front financing (CAPEX) is essential, as well clearly as the longer-term financial viability.

The African Development Bank is encouraged to provide support to lower the cost of financing projects by lowering the risk profile, such as:

• Subordinated debt – by which a public funder would offer finance but with a lower priority than other creditors for repayment
• Guarantees from IFIs for project bonds (another form of subordinated debt) along the lines of the EU's proposal for a Europe 2020 Project Bond Initiative
• Concessional long-term debt financing that deferred interest payments for the first few years to support highly capital-intensive projects
• Government loan guarantees to provide confidence to private sector investors
• Export credit guarantees, as already offered by many national governments to support exports. Their use could be expanded regionally, e.g. offered on a European basis by the EIB.

The African Development Bank’s ability to provide directly, or pave the way indirectly for such types of funding would be a significant help to enhance investments in African energy provision.

Furthermore, the African Development Bank is encouraged to support governments that will reward low carbon investments and thereby secure sufficient OPEX.

Policies that can help enhance the profitability of low carbon projects include:

• Pricing carbon, to create a long term incentive for low carbon investment and to generate value from the sale of credits and offsets or from their use as collateral to raise finance.
• Building power markets across regions based on transparent, harmonized regulation and standards, to develop a broad consumer retail market
• Advance market commitments to guarantee a viable market for products requiring high capital investment
• Establishing feed-in tariffs (where grid-connected power is supplied through a market) to accelerate investment in low carbon technologies and offer preferential access to the grid.
• Introducing tax incentives or similar measures.

In finalizing this submission, we realize that this submission is a comprehensive set of information and recommendations which we are sharing with the African Development Bank.
We would welcome the opportunity to answer any questions you may have after reading this, either by phone or at a face-to-face meeting.

We are also more than ready to contribute with our views and insights to any workshop, meeting or other event which the Bank plans to host.




Joan MacNaughton CB Helle Juhler-Verdoner
Senior Vice President Vice President Global Affairs
Power & Environmental Policies Power & Environmental Policies

Firstly, the AfDB is to be congratulated in this bold step to revise its 1994 Energy Policy that was largely unimplemented. having said that, the document for consultation lacks analytical basis to support many of the guidning principles and strategic actions. Perhaps these will be contained in the annexe that are not attched. Some refrences are too ols like the IEA from 2002. I suggest rely on more recent refrences from the OECD, IEA, other MFIs particularly the World Bank, etc. The draft lacks tables, charts, figures, past investment and future investment trends. soem figures quoted from the CEIF (March 2008) may be outdated. Suggset use more recent figures from the IEA. UNDP is amother excellent source of several energy policies. Much is left to be anticipated in form of the Strategy (under consultation) and future guidelines. Emaphsis on renewable energy and climate mitigation is not brough out. One can cite examples of the CTF supported wind and CSP projects, but needs a clear strategy to finance rural energy poverty. Some good examples can be found is an ongoing fee-for-service scheme in Botswana through setting up of rural franchising to help with Solar Home System and other solar based equipment. No mention is made regarding investyment in nuclear energy. While the developed world is cooling off, Russians are making a deal with Namibia for an offshore floating nuclear power plant! Finally lessons learned from past investment particularly the controversial Gibe III Hydrodam project, Egypt thermal power plant and Eskom coal power plant needs to be inluded. As articulated by the AfDB Senior Management at the recent CIF Partnership Forum, there is a need to set up a fund for rural electrification particularly the poor. Perahsp the Green Grwoth Strategy and the Africa Green Fund (folliwng the Copenhagen discussion) would make it happen.