Power play: Growing consumption and economic expansion prompting an overhaul of electricity generation infrastructure and capacity

Economic growth of 8.8% in 2013, an estimate of around 9% for 2014 and a forecast of nearly 8% for 2015 are all testaments to the robust recovery under way in Côte d’Ivoire. However, this success has also brought deficiencies in energy supplies to the fore. Rising household consumption and industrial activity has seen demand for power grow by an average of 10% in recent years, and with the mining sector going through a gradual revitalisation and requiring an estimated 500 MW by 2020, forecasts for the next few years will be considerably higher. The country is better developed than most and has in the past been a significant exporter, particularly within the framework of the West African Power Pool. However, net electricity production has grown at only 2% annually, according to figures from the African Development Bank.

In a bid to catch up on demand and optimise regional opportunities, the country has allocated some $4bn for investment in energy infrastructure over the next six years, including the power, oil and gas segments, according to the Ministry of Petroleum and Energy. The bulk of the new investment in generation is expected to come from the private sector. While the government is encouraging private operators to ramp up electricity production in line with its ambition to increase capacity to 4000 MW by 2020, up from around 1600 MW in 2013, it is faced with a challenge of securing a conducive investment climate while maintaining tariffs at levels accessible to its population’s poorest.

Fiscal Challenges

Thus far, it has managed to subsidise generation costs, keeping rates at among the lowest in the region, but under pressure from international donors it has started to gradually withdraw these, starting with industrial rates that saw a rise of some 10% in 2012. In the years to come, the government aims to transfer more large household end-users from the social tariff of CFA36.05 (€0.05) for the first 80 KWh and CFA73.99 (€0.1109) after that to the general tariff of CFA74.54 (€0.1118) per KWh. Another challenge is the financial capacity to afford rising natural gas prices – the hydrocarbon is the country’s primary source for power generation – bought from offshore oil and gas producers. With the pricing mechanism for natural gas indexed to crude oil and the US dollar, the government has faced unsustainably high tariffs in recent years. Tariffs rose by 161% between 2003 and 2010, with prices reaching €6 per million British thermal units (mBtu) in 2011. As a result, the burden of energy subsidies on the national budget increased from 0.4% of GDP in 2009 to 1.2% in 2011. The government’s deficit of CFA150bn (€225m) in arrears was set to climb to CFA170bn (€255m) in 2012 until it renegotiated supply contracts with the main natural gas providers.

As such, oil and gas company Foxtrot, which is partly owned by the French group Bouygues and is the country’s biggest natural gas supplier, lowered contractual prices from €7 per mBtu in 2011 to €4 per mBtu in 2012, while guaranteeing a minimal off-take of 140m standard cu feet (scf) per day until 2025, up from 80m scf per day previously. Canadian Natural Resources, the country’s second-largest supplier, went through a similar exercise with a guaranteed off-take of 40m scf per day. This saved the government CFA91bn (€136.5m) in 2012 and means future savings of CFA100bn (€150m) in the medium term, according to its own calculations. At the same time, policymakers have sought to introduce new incentives to encourage upstream activity with hopes of increasing domestic gas supplies that are much needed to feed the expanding capacity of the nation’s power plants (see analysis).

More Options

Mindful that this strategy might be a long shot, the government is developing a number of alternatives to reduce reliance on domestic gas. One such example is a liquefied natural gas (LNG) deal with Qatar Petroleum. Starting in 2015, the company is set to start supplies of up to 240m scf per day – which would double current production – from a floating LNG storage and regasification unit located 12 km offshore of Grand-Bassam, in the country’s south-east. Delivery would cover the current deficit, as well as secure the future needs of a new power plant in Bingerville, which is also financed by the Qatari company.

Another option being considered is an Ivorian connection to the West African Gas Pipeline, which currently connects Nigerian gas to Ghana, Benin and Togo. While supplies have been marred by delays and shortfalls – something that has caused problems in Ghana, which had to find alternative source at high cost in 2013 and 2014 – the West African Pipeline Company ( WAPCO), which manages the link, has plans to double its current capacity of 170m scf per day, raising Côte d’Ivoire’s interest. “Although gas volumes currently received from Nigeria are significantly below expectation, we envision increased utilisation of the pipeline going forward with potential new sources here in Ghana and likely new sources in Nigeria,” Walter Perez, WAPCO’s managing director, told local media in May 2014.

Hydro

In addition to thermal capacities, the country is also in the advanced stages of increasing its hydroelectric capacities. A total of six state-run facilities, including Ayame (20 MW), Ayame 2 (30 MW), Kossou (174 MW), Taabo (210 MW), Buyo (165 MW) and Faye (5 MW). With only one-quarter of the nation’s hydroelectric potential used at the moment, the country is rolling out new projects to increase their share to 60% of the nation’s total installed capacity by 2020.

The largest of these plans concerns the 275-MW Soubré hydropower plant located on Naoua Falls on the Sassandra river, north of the city of San Pedro. Financed with a concessional loan of CFA239bn (€358.5m) from China’s Eximbank and CFA92bn (€138m) from the Ivorian government, the total cost of this five-year project is an estimated CFA331bn (€496.5m). Construction on the dam began in February 2013 by China’s SinoHydro and is scheduled to be completed in late 2017 or 2018. The project will also include a 225-MW power line to connect Soubré and Yopougon 2, an industrial area of Abidjan located 365 km to its south-east.

In January 2014 Adama Toungara, the minister of petroleum and energy, announced the addition of 1150 MW of hydroelectric capacity before 2019. The plan comprises seven dams, three of which will be constructed downstream from the Soubré dam, contributing a combined capacity of 548 MW. In the south-east two dams will be built on the Comoé River with a capacity of 200 MW each, and two other dams, totalling a capacity of 206 MW, in the country’s north-west.

Renewables

New plans also exist for alternative renewable sources such as solar, wind and biomass. While their current contribution is limited to off-grid or retail applications, various industrial initiatives are being considered. One such example is a $500m investment in a plant to produce photovoltaic panels announced by Chinese firm Hanergy Group at the start of 2014. Also on the agenda is a biomass plant to be built in Aboisso, on the eastern flank of the capital. The facility will have a capacity of 42 MW, fuelled by palm oil waste, including trunks, branches and leaves from village plantations. Ivorian diversified agricultural commodities firm Sifca’s subsidiary, Biokala, is in charge of the project, which has an estimated value of €31m.