OBG talks to Dominique Kakou, Director-General, Compagnie Ivoirienne d’Electricité (CIE)

Interview: Dominique Kakou

How have electricity tariff hikes for industry and a reduction in gas prices affected the sector?

DOMINIQUE KAKOU: The tariff adjustments and the renegotiation of the buying price for gas are part of a raft of measures taken by the government to absorb the electricity segment’s structural financial deficit. The tariff increase was necessary despite a reduction in the cost of producing electricity, which was induced by lowering the gas price. This accounted for the increasing weight in the energy mix of thermal generation relative to hydraulic generation and investments needed in the sector. Restoring the desired financial equilibrium creates a favourable environment for investments in generation, and in the transmission and distribution networks. Given the outlook of strong economic growth, these investments are an assurance for the Ivoirian economy and its industry that it will have access to an electricity supply that is both continuous and of high quality, as well as at a price that will remain one of the most competitive in the region.

To what extent are investments in generation in line with short- and medium-term demand?

KAKOU: In order to absorb the significant generation deficit accumulated over the past decade, the government has launched a programme to reinforce generation capacity that should bring installed power from 1520 MW at present to slightly over 3000 MW by 2020. This programme is designed to sate the annual growth of internal demand of around 6% since 2004, as well as the needs of neighbouring countries that have based their electricity supply policies on low-cost energy imports from Côte d’Ivoire’s system.

This capacity increase will be achieved by optimising thermal gas generation via the development of combined cycles; by promoting renewable energy, primarily from biomass power stations; and by rebalancing the energy mix with the development of unexploited hydroelectric potential, which is estimated to be 1900 MW. Prioritising the expansion of hydraulic potential does not reduce the importance of thermal generation but is designed to rebalance the generation mix, which comprises 27% hydraulic and 73% thermal.

Thermal generation brings flexibility in managing the balance of demand and supply, and also makes for secure generation in times of drought if the proportion of hydraulic is high. Thermal generation must continue to increase in the short term, as it is currently the only way to bridge the deficit in a reasonable timeframe. However, investments in developing new gas fields have certainly been delayed. More positively, like in hydraulic generation, Côte d’Ivoire has significant gas reserves, namely the Manta and Mahi fields, and block CI 01, all of which offer huge potential.

To what extent are electricity export tariffs appropriate? How are these tariffs structured?

KAKOU: It is clear that developing electricity exports from Côte d’Ivoire should be realised in conditions reflecting the economic reality of generation and transmission cost, in order to be a supportive factor for the electricity sector. However, this has not always been the case, for instance at the end of the 1990s and throughout the first decade of the 2000s.

With electricity exports already under way to Ghana, Benin, Togo, Burkina Faso and Mali, transborder energy exchanges ought to intensify in the coming years as the ECOWAS Regional Electricity Market is put into place. It is expected that Côte d’Ivoire will play a leading role in this. These exchanges, which used to be less structured from an economic and legal perspective, are subject to import and export contracts elaborated according to the usual norms and include guarantee clauses for power supply, as well as payment guarantees. They also feature escrow accounts and a tariff structure based on costs for energy generation, fuel, transmission, power guarantee and a margin for the electricity sector. Lastly, export prices are periodically revised using formulas that are indexed to parameters pertinent to the costs of Côte d’Ivoire’s electrical system.