Role of renewables in Côte d'Ivoire's energy mix

 

Although Côte d’Ivoire has traditionally based its energy supply on a combination of gas-fired generation and hydropower, the need to fulfil rising demand and make up for years of underinvestment in the 2000s is driving the diversification of the country’s energy mix. Strong economic growth since 2011 has increased residential electricity consumption, particularly in urban areas. However, as the country attempts to diversify its economy away from commodity exports, ensuring there is an adequate energy supply to fuel industrial development and processing capabilities will be vital.

Improving the energy sector’s infrastructure to accommodate the increase in capacity is also expected to require significant private investment. As the first country in sub-Saharan Africa to leverage the use of independent power producers (IPPs) for its electricity generation needs, Côte d’Ivoire now aims to build on its accumulated experience and apply it to the development of renewable energy sources such as biomass and solar.

Size & Capacity

Côte d’Ivoire has an installed generation capacity of 2200 MW. Most of this comes from gas-fired plants, which account for 1320 MW of the total, followed by hydropower, which provides the remaining 880 MW. In terms of production, gasfired plants generated 7028 GWh of the 9990 GWh of total electricity produced in 2018, according to Société des Energies de Côte d’Ivoire (CI-Energies), the government-owned company responsible for managing public assets in the electricity sector and much of the generation, distribution and transmission of power. The amount of electricity produced from hydropower that year was 2962 GWh.

While peak electricity demand between 2011 and 2017 rose at an average of 6.9% per year, gross domestic electricity consumption grew by just 2.3% in 2018 to reach 8913 GWh. The figure was well below the projected rise of 6%, which was the result of lower-than-expected residential consumption. According to CI-Energies’ 2018 annual report, this was driven mainly by more efficient electrical appliances, favourable temperatures and government efforts to combat fraud. CI-Energies also pointed to the cessation of consumption at the Tongon gold mine due to an internal strike between July and September 2018 as a key factor, alongside energy rationing for customers on several networks due to damage sustained by some electrical infrastructure.

Sector Policy

The Ministry of Petroleum, Energy and Renewable Energies (Ministère du Pétrole, de l’Energie et des Energies Renouvelables, MPEER) is responsible for sector policy, and the return of political stability in 2011 allowed the government to make the development of the energy sector a national priority. As part of this, several important steps were taken, such as the establishment in 2011 of CI-Energies, which was charged with planning and executing sector-related investment. This was backed by a regulatory overhaul, which saw the government approve a new electricity code in 2014.The new law included an article for the creation of an independent regulatory body, endowed with legal independence and financial autonomy.

On the back of this, in October 2016 a decree saw the creation of the National Electricity Sector Regulatory Authority (Autorité Nationale de Ré gulation du Secteur de l’Electricité de Côte d’Ivoire, ANARE-CI), which replaced its predecessor Anaré. The law also helped to pave the way for the liberalisation of electricity generation, transmission and distribution, partly by phasing out the monopoly on transmission and distribution held by Compagnie Ivoirienne d’Electricité (CIE) since 1990.

As part of CI-Energies, CIE continues to handle some generation, transmission and distribution of electricity, but private sector operators are now heavily involved in the energy sector as well, participating both through power purchase agreements that the country’s three IPPs have with the government, and through gas supply arrangements between the government and hydrocarbons companies operating in the upstream segment.

Planning Ahead

Much of the country’s energy policy is focused on the expansion of generation capacity to fulfil growing demand and make up for a decade of underinvestment during the political and military crisis, which saw generation capacity rise by only 181 MW between 2000 and 2010. Net demand increased by more than 11% per year on average between 2011 and 2017 – higher than GDP growth rates, which averaged 9% over the same period and 8.5% between 2012 and 2019.

To meet growing demand, the government is undertaking a $20bn plan to nearly triple generation capacity to 6000 MW by 2030, with an intermediate target of boosting capacity to 4000 MW by 2020. The programme also seeks to bring the contribution of renewable energy to the mix to 42% by 2030 and to improve the distribution network.

With its long-standing reliance on gas-fired and hydropower plants, Côte d’Ivoire has not had to manage the intermittent supply that comes with incorporating renewables, so diversifying the energy mix to include these sources will likely bring new challenges. “Most people in the energy sector are not used to structuring renewable energy projects, so renewables and their intermittency will be harder to manage than traditional segments like gas and hydropower. This can generate a degree of reticence from the government in advancing these projects,” Cheikhou Badio, director-general of the African Society of Financial Engineering, told OBG.

Gas-Based Generation

By attracting IPPs to create generation capacity and leveraging its natural gas resources, Côte d’Ivoire has been able to build efficient gas-fired thermal energy infrastructure. Currently, there are three IPPs operating in the country: Compagnie Ivoirienne de Production d’Electricité (CIPREL), which has 556 MW of installed capacity; Azito Energie, which runs a 440-MW power plant; and Aggreko, which has 210 MW of installed capacity. “Côte d’Ivoire was fortunate to establish IPPs at an early stage, much earlier than many other African countries, so we have had years of practice in the field, with human resources that are well equipped for these types of agreements,” Badio told OBG.

CIPREL, located in the Vridi Industrial Zone in Abidjan, began producing electricity in 1995, and is majority-owned by France-based Eranove. After starting its operations with three gas turbines and a total installed capacity of 99 MW, consecutive extensions have added to this: a 111-MW gas turbine in 1997 and a 111-MW gas turbine in 2009 brought total production capacity to 321 MW. Further expansions and the adoption of combined-cycle technology boosted the company’s generation capacity to 556 MW. CIPREL is now working on its next extension, CIPREL 5, which involves the construction of a new CFA247.9bn ($426m) combined-cycle power plant with a total installed capacity of 390 MW in Jacqueville, 60 km west of Abidjan. The plant will consist of a gas turbine, which is to be commissioned in the third quarter of 2020, and a steam turbine, which is expected to start running around one year later.

The second-largest IPP, Azito Energie, began operations in 1999 in Yopougon, a suburb in west Abidjan. UK firm Globeleq has a 77% share in the power plant after acquiring stakes from founding firms EBB and EDF in 2010. In 2015 the plant was switched to a combined-cycle facility, raising its generation capacity to 440 MW, and another extension is currently under way and aims to boost capacity by 253 MW.

The third IPP is Scotland-based Aggreko, which set up a 70-MW gas-fired plant in Vridi in 2010, and two extension projects undertaken since have allowed it to increase its capacity to 200 MW.

Although 80-90% of all gas used for electricity production comes from Ivorian reserves, the contribution of domestic gas to the generation system is expected to fall significantly after 2024, as reserves are depleted. Reversing the situation will depend on the discovery of new resources, something the authorities have been pushing for through new hydrocarbons exploration.

Imports are also likely to help secure the longterm supply of gas, and the governments of Côte d’Ivoire and Ghana have been working on a deal to ease the transport of gas between the two countries. Furthermore, a plan to build a new liquefied natural gas (LNG) regasification terminal will also provide an alternative import route. The contract to build and operate the terminal was awarded in 2016 to a consortium made up of Total, Royal Dutch Shell, Golar, Endeavour Energy, the State Oil Company of the Azerbaijan Republic, and the Ivorian companies Petroci and CI-Energies. The terminal will process up to 3m tonnes of LNG per year.

Hydropower

While gas-fired power stations account for the majority of generation, a significant amount of capacity comes from the hydroelectric segment, which began to develop in the 1950s. Hydropower currently accounts for 880 MW of installed capacity across seven dams. The most recent addition is the CFA331bn ($569m) Soubré dam, which was commissioned in 2017 and added an extra 275 MW of generation capacity. Two other major hydroelectric assets are the Taabo power plant, located in the centre of the country, which accounts for 210 MW of generation capacity, and the Kossou dam, which has 174 MW of installed capacity.

Several new hydropower stations are expected to come on-line in the coming years, including the 112-MW Gribo-Popoli dam, which broke ground when the Soubré dam was inaugurated 15 km upstream. Building work at Gribo-Popoli is being led by China’s Sinohydro, which was also behind Soubré, and the new plant is set to become operational in 2020, according to CI-Energies. Financing of the $572m plant was provided by the Export-Import Bank of China, which contributed 85% of the total, while the remaining 15% was funded by the government.

Construction has also started at the 44-MW Singrobo-Ahouaty dam on the Bandama River. The $123m design-build contract was awarded in 2018 to France’s Eiffage and is expected to be completed in 2022. Two other hydropower projects in the offing are the 156-MW Boutoubré dam and the 283-MW Louga dam. Feasibility studies were undertaken in 2017 for the projects to examine their potential impact on the local environment and rural populations, and the facilities are expected to come on-line in 2021 and 2022, respectively.

Besides these large-scale dams, smaller hydropower facilities are set to become part of the generation infrastructure in the coming decade, with the MPEER planning the construction of at least 81 MW of small hydropower projects by 2030. “There is a lot of potential to build small hydro plants with capacities ranging from 20 MW to 30 MW,” Badio told OBG. “However, these projects are likely to take time to implement because they have not been a priority in the past.” The EU is also looking to channel investment into small hydropower plants, having identified 20 locations that could potentially support plants with generation capacities of 1 MW to 12.5 MW.

Biomass

In addition to its waterways, Côte d’Ivoire is relying on other natural resources to establish new electricity production, and biomass has become the flagship segment of its renewable energy expansion plans. With large-scale production of cocoa, cotton, palm oil, sugar and coffee, the country has several feedstock options to choose from and estimated biomass potential of 12m tonnes per year, according to local agro-industrial group SIFCA.

Although several agro-industrial companies operating in Côte d’Ivoire have been using small-scale biomass electricity generation for their operations, none have yet contributed to on-grid electricity generation. The concept is now being rolled out on a much wider scale to create large-scale plants that can contribute to total generation capacity. By 2030 the MPEER expects to have roughly 424 MW of generation capacity fuelled by agricultural biomass.

One of the projects that will contribute to this will be a 46-MW biomass facility using palm oil waste. The €200m Biokala plant is being developed in Aboisso, in the south-east, through a concession contract signed in December 2019 between the government and joint-venture company BIOVEA Energie, which comprises a subsidiary of SIFCA and the French firms EDF and Meridiam. The new plant will sell its output at CFA62 ($0.10) per KWh to the Ivorian electricity grid and construction is scheduled to start in mid-2020, while commissioning is due by mid-2023. The facility is expected to transform 400,000 tonnes of palm oil waste into 288 GWh of electricity per year, according to a report by the World Bank’s International Finance Corporation (IFC), and will be the largest of its type in West Africa. However, some observers have noted that since the biomass segment is still in its infancy, this could lead to inconsistent contracts between the government and private investors. “Because there is not a stable contract structure in place, each deal is negotiated individually,” Kassim Cisse, business developer at EDF Côte d’Ivoire, told OBG. “This could bring about situations in which similar generation projects have differing conditions.”

Other biomass projects are also in the offing, including a 25-MW plant fuelled by cotton waste. The facility is being built in Boundiali by US-based Ecostar Energy and is expected to be operational in 2020. Another plant is planned for the south-central town of Gagnoa, which will have a 20-MW capacity and use cocoa pods as feedstock. Côte d’Ivoire is the world’s leading cocoa producer, handling roughly 40% of global supply. Feasibility studies are under way for the construction of another cocoa pod biomass plant with 60 to 70 MW of capacity in the southern town of Divo. The US Trade and Development Agency approved a grant for the project in 2019.

Solar Generation

Emphasis is also being put on the development of solar energy, which has been earmarked as a segment with significant untapped potential. Through its local subsidiary Korhogo Solaire, Moroccan firm Nova Power is currently building a $40m 25-MW solar photovoltaic power plant in Benguébougou, in the north. The concession agreement between the company and the government was signed in 2016, and sector authorities have said that the output from the plant will be sold to CIE at a maximum price of CFA70 ($0.12) per KWh. In late 2018 state officials announced that a second solar power plant, with 66 MW of generation capacity, would be built in the Korhogo region of northern Côte d’Ivoire at a cost of $81.5m. Furthermore, the EU and German development bank KfW are partnering to construct a 38-MW photovoltaic plant in Boundiali, which will be operated by CI-Energies. KfW has allocated €27m in financing for the project, while around €10m will come from the EU. More broadly, the EU is helping strengthen Côte d’Ivoire’s institutional ability to handle upcoming solar energy projects through its Energos 2 programme, which is assisting energy authorities in selecting renewable energy IPPs, establishing tendering procedures and structuring power purchase agreements with private producers. Another scheme under discussion is the construction of floating solar energy capacity at some of the country’s dams. Some €80m in financing from the French Development Agency was set aside in late 2018 to help develop the projects, although further details, including their locations, had not been specified as of April 2020.

Electricity

An early bet on gas-fired IPPs and hydropower has allowed Côte d’Ivoire to maintain significant generation capacity, even in the years of political and social conflict. However, the transmission and distribution of this output have at times proven difficult. Underinvestment and a lack of lastmile electricity links mean that even in some urban areas a significant number of citizens lack electricity. While an estimated 1.8m households were not connected to the grid as of December 2017, according to figures from the US Agency for International Development, the authorities have been putting several policies in place to achieve universal electricity access by 2025. Among these are the Rural Electrification Master Plan, launched in 2013 with the aim of connecting all villages with over 500 people to electricity, and the Electricity for All programme, which was rolled out in 2014 and provides low-income households with funding to help them connect to the grid (see analysis).

More broadly, Côte d’Ivoire launched an $824m grid renovation programme in mid-2018, which will involve the overhaul of 15 high-voltage substations, and the construction of an additional 11 high-voltage substations and 1685 km of high-voltage power lines. The project is being financed by the Export-Import Bank of China, following a deal struck with the government in mid-2018, and construction will be undertaken by Chinese contractor Sinomach.

The early development of Côte d’Ivoire’s electricity generation infrastructure has allowed it to become an electricity exporter to its neighbours. In 2018 Liberia, Ghana, Burkina Faso and Mali bought a combined 1156 GWh of electricity from Côte d’Ivoire, a 7.3% decrease on 2017 figures, according to CI-Energies’ most recent annual report. Revenue from electricity exports totalled CFA70.4bn ($121m) in 2018. The rise in generation capacity, coupled with ongoing infrastructure development, bodes well for continued export activity. “There is emphasis placed on electricity exports, as well as investment in local distribution,” Mahamane Sow, director-general of EDF Côte d’Ivoire, told OBG. “Countries such as Liberia, Sierra Leone and Guinea benefit from electricity exports, which they need to make their cities and enterprises work.” However, growing competition is likely as countries like Ghana increase their generation and transmission capabilities.

In recent consumer activity, on March 31, 2020 the government stated that the payment of electricity and water bills would be postponed for three months to help mitigate the negative economic pressures of the Covid-19 pandemic on individuals and businesses. For poor households, which account for a large portion of customers, nearly CFA10bn ($17.2m) will be paid by the state to meet their bills.

Upstream

The discovery of new hydrocarbons reserves might also play a role in the country’s medium-term energy prospects. Although it has not garnered the same level of attention as other countries bordering the Gulf of Guinea, Côte d’Ivoire’s hydrocarbons sector has a strategic role to play in the economy. Domestically sourced natural gas has been essential to supply the country’s thermal plants, and gas generation accounts for 1320 MW of total installed capacity and is expected to reach 2728 MW by 2030. This underlines the need to accelerate exploration for new gas reserves and stave off future dependence on international gas markets.

The government is also looking to add to its existing oil reserves to develop the hydrocarbons sector further. According to figures from the MPEER, 12m barrels of oil were produced in 2018, down from 12.8m in 2017 and 15.4m in 2016. This 24% decrease since 2016 is linked to both maintenance shutdowns and natural depletion across the fields. However, figures from the first 11 months of 2019 show that production has bounced back somewhat, hitting 12.2m, up from 10.5m in the same period of 2018. Although this is promising, oil production is likely to decrease in the short term as a result of Covid-19, which significantly reduced energy demand as major projects around the world ground to a halt.

Most oil production comes from the Baobab and Espoir fields, both of which are operated by Canadian Natural Resources. Baobab contributes 66% to total production and is situated in block CI-40, roughly 25 km offshore. The field has been active since 2005, and in 2018 it recorded output of just under 7.9m barrels, down from 8m in 2017 and 9.8m in 2016. However, in the first 11 months of 2019 there was a year-on-year (y-o-y) increase of 27.5% in output, which together with a 47.1% y-o-y rise in production at the Lion et Panthère block in CI-11, helped drive 16.1% growth overall. Production at Espoir in block CI-26 began in 2002, and the oilfield saw its crude output fall from 3.4m barrels in 2017 to 3.1m barrels in 2018, as per the latest MPEER data.

Meanwhile, natural gas production fell from 81.4bn cu feet in 2017 to 73.9bn cu feet in 2018. According to the MPEER, the 9.2% reduction was caused by maintenance shutdowns and natural depletion at the Lion et Panthère field operated by Petroci. Most gas output comes from the Foxtrot field, located in block CI-27 and operated by the domestic company Foxtrot International. The field accounted for over half of national gas output in 2018, producing 48.5bn cu feet. As with oil, early indications suggest 2019 was a better year for gas output, which hit 67.1bn cu feet for the first 11 months of the year, up 6.1% y-o-y.

Exploration

While the signs from 2019 are positive, hydrocarbons production has been declining steadily due to maturing assets. Proven oil reserves stand at 100m barrels and there is an estimated 1trn cu feet of natural gas; however, the extent to which these reserves can be utilised will largely depend on the amount of private investment the sector can attract. To help incentivise this, the authorities revised the petroleum code in 2012, improving environmental protection and strengthening transparency for the sector and other extractive industries. Further efforts involved the redrawing of available blocks to increase their size and attractiveness to investors. This led to a reduction in the overall number of blocks from 61 to 48 by the end of 2017. Of these, seven are located onshore, 35 are shallow offshore, and the remaining six are in deep offshore areas. Another three shallow-water blocks were added in late 2019, bringing the total to 51.

The sector’s overall investment climate has also improved since the September 2017 ruling by the International Tribunal for the Law of the Sea on a maritime dispute regarding territorial waters between Côte d’Ivoire and Ghana, which has helped to reduce the uncertainty for investors in the areas between the two countries. This has served as further encouragement and new exploration has started to take shape up after the signing of several new production-sharing agreements between the government and international oil firms (see analysis).

Outlook

Côte d’Ivoire’s electricity infrastructure has helped to provide a solid platform for growth, and its installed generation capacity of 2200 MW remains the third largest in West Africa after Nigeria and Ghana. However, sustaining high levels of economic development in the medium to long term will rely on continued investment in the sector.

While natural gas and hydropower look likely to dominate the energy mix for the time being, the government recognises the importance of renewable sources such as solar and biomass, which is evidenced by its target of generating 42% of energy from renewables by 2030. Although there is strong potential for renewable energy investment, improving and simplifying the tender process could help attract greater interest. In terms of hydrocarbons, although international interest in exploration has not been as high as in nearby countries, Côte d’Ivoire still has a significant amount of unexplored territory in its waters; adequate investment incentives will play a major role in precipitating any future discoveries.

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The Report: Cote d'Ivoire 2020

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