A typical village in the Nile Basin area of Egypt, where efforts are taking place to bring electricity to a greater percentage of the rural population
A growing number of experts believe that the Nile Basin’s governments are moving toward a consensus view of their common future: where rivers cross or form national borders and river flows are extremely variable, international cooperation is essential for the sharing of a wide range of benefits for riparian states.
This kind of cooperation will enable better management of ecosystems, providing benefits to the river that underpin all other benefits. The efficient, cooperative management and development of shared rivers can yield major benefits, such as increased food and energy production. Cooperation on an international river will result in the reduction of transaction costs because of the river; that is, tensions between riparian states will always be present, to a greater or lesser extent, and those tensions generate transaction cost, and cooperation inevitably reduces this cost.
International rivers can be catalytic agents, because cooperation that yields benefits from the river and reduces transaction cost because the river can pave the way to much greater cooperation between states, even economic integration among states, generating benefits beyond the river. The Nile Basin Initiative (NBI), in which all riparian states are seeking to generate and share the benefits of cooperation at all of these levels, is a forerunner in Africa, a continent where more than 60 river basins are shared by two or more nations.
WORLD BANK KEEN ON COOPERATION
Realizing gains for all parties from cooperation and regional integration has become an important aspect of the development strategy for the Africa Region of the World Bank.
A regional integration and cooperation unit has been established in the chief economist’s office. The World Bank and the New Partnership for Africa’s Development (NEPAD) have entered into close partnerships – as have other regional organizations, such as the East African Community (EAC), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA).
The Shared Vision Program has played a role in the recent trend of cross-sectoral and multi-country initiatives. The overall development goal is to build trust and the capacity for regional cooperation, as well as an enabling investment environment for the equitable use of and benefit from common Nile Basin water resources.
Each of the countries belonging to the NBI has progressively increased their support for modernizing the power sector. Each country recognizes that there are strong linkages between power sector development and poverty reduction. An efficient and clean energy supply is central to poverty reduction through many and varied linkages, as well as being important for economic growth. Modern sources of energy improve living standards by helping to create jobs and by boosting productivity, and improve the delivery of social services (i.e. health, education, etc).
Within the Nile Basin’s riparian countries 160 million people depend on the river and its tributaries for their livelihoods. Demand for water is expected to increase in coming decades. Population increases alone will double water demand over the next quarter century, and to this will be added demand from new investments, particularly for hydropower and agriculture.
Given the increased pressure on regional water resources, it is in the interest of all riparian states to manage shared water in a more sustainable and equitable manner.
Recognizing the importance of cooperation, in 1999 nine Nile riparian states1 established the NBI as a partnership to “achieve sustainable socio-economic development through equitable utilization of, and benefit from, the common Nile Basin water resources.”
SHARING POWER RESOURCES
NBI and the Nile Equatorial Lakes Subsidiary Action Programe (NELSAP) have been instrumental in facilitating power trade in the region. The NBI, through its Shared Vision Program’s Regional Power Trade Project (RPTP), and the NELSAP Power Trade Program have played a role in promoting and facilitating power trade between the NEL countries. NELSAP’s Coordination Unit (NELSAP-CU) has supported the development of a number of key strategic assessments and feasibility studies for power sector projects that have played a key role in defining a roadmap for regional power development and integration.
In 2007, a strategic/sectoral, social and environmental assessment (SSEA) of power development options developed an Indicative Power Master Plan for the six upstream NELSAP countries that has guided the prioritization of key transmission and generation projects in the region. A study of the interconnection of the electricity networks of five Nile Equatorial Lakes countries was completed in 2008, and now the implementation of most of the projects will start soon or are at advanced levels of preparation.
Funds have been mobilized for the preparation of the Regional Rusumo Falls hydroelectric and multipurpose project shared by Tanzania, Rwanda and Burundi, and the identification of new cooperative projects that NELSAP can promote on behalf of the countries was completed in 2007, in line with the NELSAP Scaling Up Strategy2. The proposed technical assistance responds to the priorities identified in the Scaling up Strategy in the area of power trade.
Access to electricity is a priority for the Nile Equatorial Lakes (NEL) countries’ economies because it is a prerequisite to poverty reduction and economic growth. The majority of these countries have very low rates of access to electricity and the quality of supply is poor with industrial and domestic consumers often experience erratic service. Electricity access in the countries in the sub-region range from 2-18 per cent: Burundi (2 per cent), DR Congo (Eastern) (2 per cent), Ethiopia3 (15 per cent), Kenya (18 per cent), Rwanda (5 per cent), Tanzania (11 per cent) and Uganda (6 per cent).
Furthermore, electricity is often very expensive, even by international standards. There are many reasons for these shortcomings. Some are institutional (structural weaknesses and poor financial performance) but an underlying problem is inadequate and unreliable supplies.
Along with sectoral reforms, expansion of generating capacity and improved transmission infrastructure to deliver more energy to distribution networks is urgently required. Characteristics of the power sectors in the countries of the sub-region include:
- Energy shortfalls and suppressed demand. There is an urgent need to increase access, improve security and reliability of supply
- Heavy dependence on hydropower, and therefore vulnerability to regional droughts. Various countries (Ethiopia , Uganda and to a lesser extent, Kenya) are highly dependent on hydro power.
- Increasing dependence on emergency diesel generation to meet incremental market needs and to hedge the hydrological risks. Countries in the Eastern Africa Power Pool (EAPP) are becoming more reliant on diesel emergency plants, used as baseload, in the absence of other supply alternatives. The cost of those units is negatively affecting the finances of the utilities in Sub-Saharan Africa. The lack of supply options, modest use of demand side interventions, and climate have forced those countries to become totally dependent on diesel generation.
- Large untapped hydro resources, particularly in Ethiopia, Tanzania, Uganda with lesser resources in Kenya.
- Limited or more expensive other indigenous energy resources comprising coal and natural gas in Tanzania, geothermal in Kenya and Ethiopia, and methane in Rwanda.
- Weak transmission links among the systems.Except for a 50 MW link between Uganda and Kenya there is no significant energy trading in the region.
- The structure of the power industry differs from country to country. Ethiopia has a state-owned vertically integrated utility, whereas in the other countries restructuring is underway with the process most advanced in Kenya.
- Governance in the sector in the countries concerned is such that donors can consider support for large scale investment programmes. Governance risk identification and oversight mechanisms have been put in place in recent years in Kenya and Uganda.
- Electricity demand in the sub-region is projected to increase rapidly. Aggregate annual energy consumption for the next ten years is expected to more than double from 18.5 TWh to 46.3 TWh4. A similar growth is expected in terms of installed capacity projected; to increase form 3422 MW to 8126 MW.
- Supply can meet the expected demand if the hydropower resources are developed to serve regional needs. The region is blessed with abundant, yet undeveloped hydro resources.
In addition to Ethiopia, hydropower generation may be harnessed in Tanzania, Uganda, and Rwanda. It is estimated that 65 per cent of energy needs in the region may be provided by hydro.
Thermal generation will be necessary to ‘firm up’ hydropower in a region with variable hydrology, which may potentially become more volatile because of climate change impacts. Thermal generation will be developed in Kenya, Tanzania,and Rwanda, consisting of a combination of geothermal, coal, methane, and liquefied natural gas. Diesel generation plays a role in bridging supply demand gaps, but it is extremely expensive to operate.
|The Bujagali hydropower project in Uganda is a 250 MW facility sponsored by Bujagali Energy Limited, a company jointly owned by affiliates of Sithe Global Power and the Aga Khan Fund for Economic Development Source: Bujagali Energy|
Despite the potential for significant benefits through integration and trading, the NEL region has, to date, only a small-scale interconnectivity between Uganda and Kenya and between Kenya and Northern Tanzania, and small cross-border exchange between Tanzania and Uganda. The current situation is one where there are essentially independent systems, each unique but also sharing many characteristics with its neighbours.
COMMITTED TO INTEGRATE GRIDS
States in the sub-region are committed to integrating their electricity systems. An integrated NEL/East Africa power market holds the promise of increasing access, improving reliability, and reducing the costs of power supply to each member country. However, making this integration a reality will require substantial investment, long-term planning, cooperation, and collaboration among the member states. In that context, the World Bank prepared an Eastern Africa Power Market Strategy Note and is currently working on an associated lending programme to address the key infrastructure needs of the region.
Integration has numerous technical advantages that will translate into efficiency improvement of supply. Numerous sub-regional studies have enumerated the differences in generation type and mix between the different national power systems. These studies have demonstrated that these differences could be exploited for mutual benefit through the development of cross-border transmission interconnections, as well as developing the large power generating projects in the sub-region.
The Nile Basin region covers an area that represents over 10 per cent of the African continent Source: World Bank
Integration (including the construction of a regional transmission backbone) will enable, for example, the development of large, low cost hydro resources in some NBI countries to be exported to countries that are heavily dependent on thermal generation and to countries that are currently facing pent-up demand and load shedding (e.g. Uganda, Rwanda, Burundi, Ethiopia) or soon will be energy constrained, such as Kenya. Benefits to all participating countries should arise from:
The subregion’s political environment is conducive to the integration of the power systems. Integration is an explicitly stated priority for East African governments, as confirmed at the 3rd meeting of the Standing Committee on Power of the East African Community in May 2007, at the energy ministers and development partners meeting on the NELSAP meeting in November 2007, and again at the ministerial meetings on the RPTP in Dar es Salaam in September 2008.
Regional cooperation remains key to unlocking the region’s potential and to providing transformational opportunities required for poverty alleviation and economic growth in one of the poorest regions of the world.
A new technical assistance project will be financed from the Nile Basin Trust Fund (NBTF). The project will support the following activities:
Component 1: Additional studies for the 220 kV Kenya-Uganda interconnection.
The proposed 256 km, 220 kV Jinja (Uganda)–Lessos (Kenya) interconnection project will be co-financed by JBIC/JICA (Uganda portion), the African Development Bank (AfDB) and the World Bank (Kenya portion).
The total cost of the project has been estimated at $140 million. The project has been studied up to the tender documents level as part of the AfDB-financed NELSAP Interconnection Feasibility Study, completed in 2008. This component will finance two additional studies, required by the World Bank as part of its project preparation process, namely (i) additional environmental and social studies to comply with the World Bank’s safeguard policies, and (ii) a review of the financial/economic viability of the proposed transmission line, considering new developments in the East Africa power market (especially the Ethiopia–Kenya transmission line).
Component 2: Environment and social impact assessment (EISA) for power projects.
The objective of this project component is to conduct ESIA studies of one or two power sector projects under preparation in the region. Potential projects that could benefit from this component are: the Ethiopia–Kenya interconnection project (this study could only be financed with World Bank´s management approval), the Kenya–Tanzania interconnection project or the Ruzizi III hydropower project.
Component 3: Feasibility study and/or detailed design for both generation and transmission projects.
This component will support a feasibility study or detailed design for a key regional generation or transmission project. Candidate projects for feasibility/detailed design are the Uganda–DR Congo transmission line (depending on the findings of the pre-feasibility study) and the Kabu 16 hydropower project in Burundi. Kenya has also requested NELSAP to finance the detailed design of the Ethiopia–Kenya transmission line because this project will serve to sell low-cost hydropower from Ethiopia to theother NEL countries. Co-financiers include World Bank and AfDB and European Investment Bank.
Component 4: Facilitation and coordination of the preparation of power purchase agreements (PPAs).
With the upcoming construction of the interconnections among the five NEL countries, the planned Ethiopia–Kenya interconnection and Kenya–Tanzania transmission line, bilateral power trade agreements need to be negotiated. The NELSAP-CU, the RPTP and the EAPP began a capacity building process on preparation and negotiation of PPAs for the NBI/EAPP countries, but were unable to continue due to limitation of funds. Through this component, NELSAP will support capacity building activities related to the negotiation of PPAs, as requested by the countries, including Uganda, Rwanda, Burundi, DR Congo, Kenya, Ethiopia and Tanzania. The activity will be carried out jointly with the EAPP.
Component 5: NELSAP participation in the Kenya–Tanzania interconnection feasibility study.
The NELSAP-CU has played an important role in promoting and mobilizing funds for the Kenya–Tanzania interconnection study, which forms one of important segment of the regional transmission backbone.
The study will be financed by Norway and the implementation arrangements will be set up by the two concerned countries.
NELSAP-CU will organize meetings and workshops for the different project stakeholders of the two countries to ensure the quality of the study and will facilitate the identification of funds for construction of the interconnection.
1 The NBI includes Burundi, DRC Congo, Egypt, Ethiopia, Kenya, Rwanda, Sudan, Tanzania and Uganda. Eritrea participates as an observer.
2 NELSAP Strategy for Scaling Up NELSAP Investments Projects, Endorsed by NEL-COM , March, 2005.
3 Although Ethiopia is not part of NEL, it has been included in the analysis because of its significant hydropower resources that can be supplied to the region.
4 This demand was estimated prior to the financial crisis therefore it should be adjusted downward taking into account the economic implications of the crisis in the NEL countries (EAPM Strategy Note).