DIFFUSION STRATEGY OF GREEN TECHNOLOGY
AND GREEN INDUSTRY IN AFRICA
A Pilot Study of Renewable Energy Technology Market, and Energy Efficiency
Adoption in Cassava and Maize Processing Industry in Kenya and Nigeria
Prof. Rene Kemp & Jacinta Ndichu
UNU-MERIT
Dakar, Nov 25, 2013
What the study is about
• The market for modern renewable energy
technologies (RET) in Sub-Saharan Africa, and
• The uptake of energy efficiency (EE) measures
in two agro-industrial sectors (cassava
processing and maize milling) in two African
countries (Nigeria and Kenya)
Why RE & EE tecs for SS Africa?
i) Important role of energy in SSA’s social economic
development
ii) Low access to grid electricity
 600 million have no access
 most of whom in the rural
 This proportion expected to grow in the future
iii) High reliance on traditional biomass resources for energy
700 Mio rely on biomass (EAI, 2012)
 biomass resources are diminishing as a result of
population growth and climate change
 Scarcity of trational biomass fuels has resulted in high
costs and grerater energy poverty
Why RE & EE tecs for SS Africa?
iv) Energy use is known to be inefficient in SSA, but
not much is known about drivers/challenges of
EE technologies
v) Current trends will aggravate the situation in
future
 Economic growth
 Population growth
 Rural-urban migration into
 Climate change
SSA Energy supply challenges
• Infrastructural systems: Inefficient grids, long distance
transmission, efficient generation, transmission & distribution result
in energy losses.
SSA Av. Losses 11% against a global av. of 9%, Some countries its
as high as 41%.
• Human capacity: poorly qualified personnel, unprofitable
management of energy agencies & poor maintenance of grid
systems.
• High costs: Average cost of electricity is USD 0.18 per kilowatt-hour
(about twice as expensive as elsewhere).
 back-up generators that cost USD 0.40 per kilowatt/hour
 Economic losses of power outages 2% of GDP, and 6‐16% in lost
turnover for enterprises (WB 2009)
 Losses are higher for SMEs
• Electricity grids unable to meet current demand
• Grid expansion efforts equally unable to match growing demand
from current economic and population growth
Energy efficiency problems
• Manufacturing sector characterised by old
inefficient machinery
• Reliance on inefficient, energy intensive
production methods, resulting in high production
costs
• EE not widely recognised as a manufacturing
principle (54% & 57% of firms Nig &Ke
considered it important)
• High costs neccessary for replacing old machinery
• Lack of financial access for adoption EE
technologies
• Low technological base & weak innovation
systems
High potential of SSA’s RE resources underutilised
Hydro - Currently provides 70% of SSA electricity
BUT only from 5% of exisiting resource.
 Countries with the highest potential include D.
R. Congo with 40,000MW, Angola, Cameroon,
Gabon, Mozambique, Niger, Egypt, Zambia,
Ethiopia & Madagascar
 Hydro resource is subject to climate variability
 Exploitation in some areas needs international
cooperation due to the cross-boarder nature of
resources
High potential of SSA RE resources underutilised
Geothermal - Combined capacity of 14,000MW most of
which is in Ethiopia & Kenya, others are Tanzania, Eritrea
Biomass - Provides 80% of SSA’s energy needs.
There is need to shift from traditional biomasss (wood,
charcoal) to more sustainable energy sources
Agro industry has large potential: waste and by products
can be used as biofeeds. Co-generation potential exists in
sugar, coffee, palm oil, fruits, vegetable, meat & dairy
sectors.
Wind - Estimated capacity of 93,900MW
Solar –high solar radiation in most of SSA
RE & EE tecs as solutions to access
& sustanable energy supply
• RETs whether adopted for national grids or for
private use, are low cost in the longterm
• RETs offer low cost energy infrustructure (Small
Grids) where scattered settlement patterns
imply expensive grid development costs.
• RETs offer environmental returns as they have
no emmisions, minimise use of biomass
• In agro-industry use of waste and by products as
feedstocks results in material reuse & efficiency
• REs plant generate employment and incomes
• Energy efficiency can offer economic savings
RETs Adoption: Findings from Kenya
Kenya’s RET market more diversified and larger...
3%
3%
biomass
9%
34%
7%
solar
generators of
electricity from
RET
wind power
7%
37%
multi
Both markets are.....
small, young & vibrant: 56% in Kenya established after 2008 &
68% in Nigeria between 2000-2012, 14% after 2010
promising: In Kenya beginnings of innovation in technology
adaptation and business strategies for RETs are evident
RE Adoption: Findings from Nigeria
• In Nigeria, solar is the main technology
marketed
• Other RETs distributed by firms dealing in
solar, but to a less extent
120
100
100
Percentage
80
60
36.4
40
20
4.5
4.5
0
Solar system
Biomass
Wind Power
Mini-hydro
Origins of RETs adopted in Ke & Nig
• China and India are the main sourcing countries
**role of similar developmental contexts between countries important for
transfer & diffusion)
• EU and other developed countries to a lesser extent, mostly for large RE projects.
20
18
18
16
F
r
e
q
u
e
n
c
y
15
14
12
11
10
8
8
7
Nigeria
Kenya
6
4
4
3
3
3
2
2
1
2
1
0
1
0
2
1
0
0
1
0
0
0
1
0
1
0
0
0
0
This could change in the future as awareness of RET & quality appreciation
grows.
EE Adoption in Kenya & Nigeria
• In both countries low levels of EE tec adoption
was observed
Driving factors of RE & EE adoption
Key drivers: Nigeria - unreliable power supply; Kenya - volatility in foreign
exchange
Other drivers influential in both countries : Access to finance, VAT & duty
exemptions, presence of a national RE strategy, packaging RETs with finance &
suportive services, presence of a regulation framework
Regulations and licensing procedure in place for:
 Renewable Energy Auditors
 Energy Audit Firms
 Solar Water Heating Technicians
 Solar PV Technicians
Packaging of biomass & solar RETs more developed with training, maintenance, and
financial services included
Drivers of EE Tecs:
 high energy costs
 in-house knowledge about energy management
 availability of local technical expertise
Barriers of RE & EE adoption in Nig & Ke
Important barriers for RETs:
• Unfavourable business climate
• high tariffs
• lack of technical competence
• Access to finance
Major barriers for EE Tecs:
initial set-up costs of EE technology
high cost of maintaining the EE measures
Barriers of RE & EE adoption in Nig & Ke
Common barriers for RE and EE Tecs in both countries:
i) Low technological base as reflected in proportion of local
technology content for both technology types
Sources of EE Technology used
Barriers of RE & EE adoption in Nig & Ke
• Limited RET innovations observed in both countries.
• RETs are largely foreign with limited local content noted in biogas
Foreign-domestic composition of RETs in percentage (Inner circle Nig, outer Kenya)
Based on foreign
technology only
7.3
9.8
31.8
13.6
0
24.4
54.5
Involves domestic
technology to a small
degree
Involves domestic
technology to a large
degree
Primarily based on
domestic technology
29.3
29.3
No response
beginnings of growth in domestic content observed in Kenya
both countries reported anticipated future growth for the same
Barriers of RE & EE adoption in Nig & Ke
ii)
Weak systems of innovations – Reflected by poor interaction between
various actors.
** In Kenya the situation is worse than in Nigeria that has a slightly better
technological base for agro-processing
Types of organization involved in successful EE projects
Interactions of drivers and barriers
• Drivers such as unstable exchange rate, high oil prices,
power outages, access to finance are also an integral
part of unfavourable biz environment, a leading barrier
observed in both countries.
• Tariff reductions act as both a driver for imports and a
barrier for locally made RETs (Kenya)
• Presence of FiTs is a driver but prices are still cited as
being low hindering adoption commercial investments.
• Lack of technical info on RETs is a barrier that
undermines effects of credit availability(hesitation to
lend), policy makers understanding of profitability of
large RE plants
SMEs Learning, knowhow & innovation
Innovative approaches were being adopted by RET distributors
 Adaptation of foreign RETs using local materials (biomass), In Nigeria
development of solar products was noted though not suitable for
commercialised
 Innovative financing arrangements
 Climate Innovation Centre in Nairobi was noted an important platform for
knowledge sharing & learning, policy lobbying, access to green finance
 Strong cooperation among biogas suppliers is enabling resource &
knowhow pooling necessary for larger projects, cooperation for
importation of goods
 Business strategies such as targeting cooperative groups, and agricultural
sectors
 RET sourcing methods used by small distributors e.g. combined imports,
African networks based in China
 Clustering was observed amongst RET suppliers in Lagos
 Focus on a single RET allowed better understanding and more innovative
capabilities particularly in:
 RET improvement
 Understanding market needs
Technical cooperation
Findings highlight the need for technical collaboration
especially between 1st & 2nd line actors in sectoral
innovation systems.
Traditional cooperation frameworks (development aid,
CDM) are less effective especially for SMEs as they fail
to provide an effective conduit for intellectual property
rights & protection
Ineffectiveness of cooperation frameworks has resulted
in an emergent trends where both government &
business try to address these short comings
Models of Technical cooperation
• Development aid - large RE projects
• Development finance institutions-often
participating DFI bring its own RET
• South-South cooperation
• Intra Africa cooperation – Africa Power
pools
• Going- out-Model – as used by China and
now other countries as well
• Enterprises' initiatives e.g. Barclays club in
Ghana, Nigeria & Kenya
Case study:
RET Adoption in Kenya’s Tea Sector
General Context of Kenya’s Tea Sector
• Kenya is 3rd tea producer & 1st exporter of tea in
the world; contributed 26% of Kenya’s Forex in
2012
• Production is by 565,000 small holder farmers,
supports livelihoods of 3 million persons
• Processing takes place in 65 tea factories, factory
energy needs range between 0.3-0.7 MW
• Tea sector has a well organized and functioning
governance structure
Energy & Technological context in the Tea Sector
• High costs of production 30% as at June 2013 most of which
is energy
 On average a factory spends approximately 46,000 USD
per month
• Oil price and exchange rate fluctuations have a direct
effect on electricity costs during low hydrology
 Can cause prices to increase by a margin of 28-80%
 Production costs rose by 79.4% between 2001-2010
• Over 70% of boilers in factories designed to use furnace oil
and wood fuel
Energy & Technological context in the Tea Sector
• Heavy reliance of wood fuel as a source of energy.
• Factories are increasingly acquiring land for wood
plantations
 An estimated 3400 hectares of wood plantations
 Although attempts to use fuelwood sustainably are
being made, boilers used for wood combustion are not
efficient
• The sector has resonably good vintage of processing
machinery, usually imported from China and India
• The sector has low levels of technical expertise and
experiences high turnover of scientists
Technical Cooperation for Energy solutions
• Inter sectoral learning & knowledge sharing; factory owners learning from
a multinational in Kenya and from a trip to Sri-lanka
• Dev agencies (AfDB, UNEP-GEF, UNDP, & East Africa Tea Association
collaborated on a project to green the Tea industry in E. Africa (Kenya,
Malawi, Rwanda, Tanzania and Uganda)
• Numerous Feasibilities studies conducted for small hyro projects in all
countries.
• Studies have resulted in development of 12 small hydro projects with a
combined capacity of 34 MW in Kenya alone.
• In Kenya other studies have been conducted on viability of RE resources
such as solar and wind.
• Technical cooperation has resulted in effective technical advisory support
to recipient countries
• Project development is done by both local & foreign consultuancy
engineering and electrical firms as well as foreign ones (India)
Technical Cooperation for Energy solutions
Local Multinational
tea fatory
-Technical Expertise
- Policy framework
Knowhow exchange
Ke Gov, UNEPGEF, UNDP
Sri lankan Tea Sector
Learning by observation
African Dev Bank
50% $$$$
Imenti Small
Hydro project
50% $$$ in equity
Imenti Tea Factory
Farmers
(owned by Imenti
Farmers)
Risk mitigation instruments for
$$$
Electricty
Technology, Expertise
excess
electricity
$$$
Local Bank
National Grid Operator
Ke Gov
Local & Foreign
civil enginners,
electrical firms
Arranging Finance for Small Hydro Power Stations
• The first small hydro plant at Imenti Tea Factory with a capacity of 1 MW
plant cost farmers USD 2.3 Million with a pay back period of 6-7 years
• Initial costs of small hydro project are quite high for small scale producers
and initially faced resistance from farmers.
• Farmers set aside a portion of their monthly & annual payments to form
raising 50% of total funds needed
• KTDA acted as credit guarantor and secured multilateral funding,
Government offers risk mitigation instruments.
• Factory electricity needs of 0.4-0.5MW are now met at no cost, excess
electricity exported to the grid
• Reliance on grid electricity, oil and wood fuel is drastically reduced
• Factory reduced energy costs by 60%, and is using incomes from energy
sales to offset loan
Key findings
• The RET sectors are young and growing. Solar and biomass are
the biggest RET markets with solar PV being based on foreign
technology and biomass mostly based on domestic T and know
how
• There is a need for foreign T to be more adapted to African
needs and a need to upgrade African T. Technical cooperation
should be based on this insight.
• Energy costs are a significant cost item for many agro-industrial
sectors but few companies have adopted sophisticated energy
efficiency measures. The main reason for this is that the system
of innovation for energy efficiency is weakly developed
Policy Recommendations
• creation of special points for interaction with
green innovators with focus placed on innovation
systems and not on singular problems.
• Education should be integrated with national
innovation systems with a framework to link
private sector to education systems
• Fiscal reform and charges (including carbon
pricing) – such as preferential tax treatment of
green technology associated industries, removal
of fossil fuel subsidies, or earmarking tax
revenues to promote green technology objectives
Policy Recommendations
• development of favorable legal frameworks &
policy environment to foster equal
partnerships and collaboration between
indigenous private sector actors and foreign
investors is key
• Policies can aim to attain RET and EE
technology adoption without undermining
economic gains
The research team
• The research teams involves development specialists,
innovation researchers and policy experts from Africa and
Europe and is led by UNU-MERIT
Time line
Sept
2012
Start of
the
project
Dec
2012
Workshop
in Brussels
Jan
2013
Febr
2013
May –
June
2013
June
2013
Report
2nd
Field-work Policy
about
workshop
makers
analytical in Brussel
workshop
framework
in Nairobi
Aug
2013
Vienna
workshop
Sept
2013
1st draft
report
Nov
2013
Final
version of
report