Sustainable sources: Promoting investment in renewable energy to achieve a competitive and sustainable supply of electricity in the medium to long term

According to the African Development Bank (AfDB), Gabon has an urbanisation rate of 87% and a similarly high rate of access to electricity, ranging between 70% and 83%. Despite this, the country has experienced difficulty ensuring a stable supply of energy at an affordable cost. High electricity prices, coupled with a struggle to keep up with rising demand, have led the government to support the development of renewable energies in an effort to boost capacity, diversify the economy and power economic growth. This has stimulated related opportunities as the government continues to encourage the development of infrastructure projects in the segment.

GROWING DEMAND: Despite investments to increase electricity generation in recent years, production capacity has not kept up with the rapidly growing demand. A 1996 study conducted by the International Finance Corporation predicted demand would grow on average 2-3% over the next two decades. Yet, in reality, it has grown at about 7-9% and this rate is likely to continue as the country proceeds to implement the development plans set out in the Emerging Gabon Strategic Plan, a 2012 government document outlining a number of key policy priorities for development. The increase in demand has caused problems for the country’s electricity provider, Société d’Electricité et d'Eaux du Gabon, which has had to dramatically revise its investment plans.

SHIFTING ENERGY MIX: Gabon’s energy mix has changed significantly over the past three decades, going from roughly 78% of energy produced by hydroelectricity power plants in the mid-1980s to about 44% in 2010. The share of thermal power in the mix has increased in the meantime, as part of an effort to tackle the rapidly rising demand for electricity and address low levels of rainfall, which have been affecting the reliability of hydroelectricity.

According to the World Bank, conventional thermal power represented 56% of total electricity net generation in 2010. Gabon’s thermal power plants employ either diesel or gas, the latter of which is yet to be fully exploited due to limited gas distribution infrastructure. Consequently, as oil prices rose over the years, so did the cost of electricity.

Developing hydroelectricity production capacity in the medium to long run could help bring down prices. The estimated potential of between 5000 MW and 6000 MW remains largely untapped. According to the AfDB, in June 2012 hydroelectricity production capacity in Gabon stood at about 170 MW, representing approximately 3% of the country’s potential.

GOVERNMENT PRIORITY: Faced with rising residential and industrial power demand, along with high electricity prices, the government has decided to make it a priority to increase power generation capacity in the medium to long term. This is largely to be completed by seeking to exploit the potential of clean and renewable energies, such as hydroelectricity.

To this end, the government has developed a Strategic Plan for the Electricity Sector (2010-20) with four objectives: increase installed capacity from 390 MW to 1200 MW; reduce the KWh production cost from CFA53 (€0.08) down to CFA26 (€0.04); raise the share of clean energy in total production from 72% to 100% (of which 80% should be hydroelectricity); and increase the amount of exported energy, from the current 0% to 16%, the equivalent of 200 MW.

Key projects in this context include the construction of six hydroelectric power plants – Grand Poubara, Chutes de l’Impératrice, Fe 2, Dibwangui, Ngoulmendjim and Booué – for a total of 774 MW of new capacity. Of these, three are currently under way: Grand Poubara, Chutes de l’Impératrice and Fe 2.

GRAND POUBARA: Located near Franceville and over the biggest river in the country, the Ogooué, the Grand Poubara dam is the product of a public-private partnership involving the government and Chinabased Sinohydro. With an estimated cost of CFA200bn (€300m), the construction of the dam has been financed by the government (25%) and the China Exim Bank (75%), with Germany-based Gauff Engineering responsible for the supervision of its execution and France-based GEO assistance providing geo-technical assistance and monitoring. Spanning a period of almost four and half years since the project started in December 2008, the completed dam is expected to be delivered in August 2013.

Once on-line, the Grand Poubara dam will mainly power the ferro-manganese factory at Moanda, and also service the south-eastern provinces of HautOgooué and Ogooué-Lolo. Two transmission lines are planned, one of 62 km to Moanda, and another of 21 km to Franceville. During its first phase, the dam will have a capacity of 160 MW, which may be extended to 280 MW during a second phase. IMPÉRATRICE AND FE 2: Chutes de l’Impératrice, also called Impératrice, and Fe 2 are now under construction and should be ready by 2016. In November 2012, the project owner, Compagnie de Dé veloppement des Energies Renouvelables, signed the applicable construction contracts with Tahiti-based Société d’Etudes de Développemment Polynésienne (SEDEP), France-based Alstom and Spain-based Acciona.

Construction is expected to last about 36 months, with an estimated total cost of CFA130bn (€195m). The AfDB plays a key role in financing, with a 15-year senior loan of up to €50m and a subordinated loan of up to €7.5m. The regional bank is also helping arrange debt being offered by other development finance institutions (DFIs) such as that from the German investment and development corporation, DEG, and the Dutch development bank, FMO. Additional funding is also expected from the Central African Development Bank and other DFIs.

Impératrice will be built on the falls of the Ngounié river. The power plant will provide renewable energy to the central provinces of Moyen-Ogooué, Ngounié and Nyanga, and, in particular, the towns of Mouila and Mandji. It will also power the niobium and manganese industries of Mabounié and Ndjolé, and support the energy supply to the capital and the Nkok Special Economic Zone. During its first phase, Impé ratrice will be able to provide 56 MW, which may be expanded to 84 MW once the final stage is finished.

The Fe 2 dam will provide 52.5 MW of electricity to the central and north-eastern provinces of WoleuNtem and Moyen-Ogooué, in addition to reinforcing Libreville’s access to electricity. The power plant will be built on the Okano river and is being developed in parallel with a project to expand rural electrification in northern Gabon, namely the creation of an interconnected distribution network in Woleu-Ntem, to which the new dam will be linked.

DISTRIBUTION CONTRACTS: Bouygues Energy & Services, a division of French construction firm Bouygues Construction, has already signed three contracts with the Gabonese government for the improvement of the northern electricity distribution network: a first in February 2010, worth €32m; a second contract for €48m in July 2011; and a third worth €32m in March 2012. Together, these investments are meant to put in place a set of high-voltage transmission lines and provide electricity to rural villages up to the borders with Cameroon and Equatorial Guinea. The initiative is part of a broader push to help spur growth in local manufacturing industries, such as rubber production and wood transformation.

REGIONAL GOALS: Gabon is not the only country with untapped hydroelectricity potential in Central Africa. The region is estimated to have potential hydroelectric resources as high as 148,000 MW. However, according to former permanent secretary of the Central African Energetic Pool (Pool Energétique de l’Afrique Centrale, PEAC), Bruno Kapandji Kalala, only 2.5% of the potential was being exploited in 2011.

Like Gabon, many countries in the region are investing in renewable energies and building hydroelectric power plants to meet growing demand and reduce electricity prices. To facilitate the shared realisation of regional potential, the PEAC has a number of cross-border electrification projects planned, including the integration of the new Grand Poubara dam into the regional electricity network. The creation of a cross-border transmission network in the medium to long term is likely to have a positive effect, letting Gabon and its neighbours tap into each other’s hydroelectricity potential, thereby ensuring the availability of sufficient base-load energy at competitive prices.