All articles in the ENERGY TRANSITION Section:


TOTALEren Looks for Green Hydrogen in the Gulf of Suez

TOTALEren has joined the growing queue of energy companies looking to play in the green hydrogen market in Egypt.

The French firm, a subsidiary of TOTALEnergies, has teamed up with portfolio manager Enara Capital to ink agreements with the General Authority of the Suez Canal Economic Zone (SCZone), the Sovereign Wealth Fund of Egypt (TSFE), the Egyptian Electricity Transmission Company (EETC) and the New and Renewable Energy Authority (NREA).

The partners will conduct preliminary studies for a green hydrogen project in the Gulf of Suez, capable of producing 30,000Tonnes of green hydrogen per year. The capacity is much lower than those negotiated by other companies, especially EDF Renouvelables, another French energy company, aiming to produce 350,000Tonnes per year; the UAE based Masdar is looking to deliver 480,000Tonnes per year by 2030 and Amea Power, another UAE firm, wants to install a green hydrogen project with capacity of 240,000 tonnes per year by 2026 and ramp it up to 390,000Tonnes per year in the second phase, all in the Suez Canal economic zone.

In any case, TOTALEren hopes to grow its capacity to 1.5Million tonnes per year according to SCZone. “The Egyptian state is working diligently to support the transformation to a green economy based on clean energy, especially by providing facilities and incentives to attract green investments and exploit green financing opportunities,” according to a statement by the authorities.

The long list of companies who have signaled an interest in producing green hydrogen in Egypt includes Scatec, the Norwegian firm which is also Africa’s biggest renewable energy developer. Scatec is working in concert with h Orascom Construction and Fertiglobe.


Egypt’s Nat Gas/Gasoline Dual Fueled Vehicles to Cost More

Companies participating in the Egyptian Government’s natural gas vehicle swap programme will increase their prices by up to 45% in response to rising inflation.

A price list published by the influential daily Al Masry Al Youm indicates that sticker prices on all participating brands will now rise 19-45% from where they were when the scheme launched in March 2021.

Participating brands include Nissan’s Sentra and Sunny, Chevrolet’s Optra, Hyundai’s Accent and Elantra, among a few others, including brands from Lada. Depending on the model, applicants will be paying up to $4,000 (or EGP 75,000) more for their vehicles.

Applications submitted after April 24, 2022 will incur these new prices.

The clearest interpretation is that the government has caved in to pressure  and permitted companies to raise prices far above the 10% it previously allowed, year on year, under the rules of the scheme.

 

 


In Search of a Rainmaker: the case of Shell

By Gerard Kreeft

 

 

 

 

 

When Shell shareholders meet later this month they will be faced with awkward choices: a depreciating share price, a muddled energy transition plan, and an uninspired vision whether the company is an oil company or becoming an energy company.

 The Present Situation

The Shell share has no good news. Of the major oil companies—BP, Chevron, Eni, ExxonMobil, Equinor, Shell, Repsol, and TOTALEnergies—Shell has been one of the industry laggards between 2018 and 2022.

 Table 1: Stock market prices of majors 2018-2022(NYSE)

 

Year Repsol       BP       Shell ENI TOTALEnergies Chevron ExxonMobil Equinor
2018 $17 $43 $69 $35 $58 $128 $87 $23
2022 $15 $29 $53 $28 $49 $157 $85 $34

Note: Values based on 5 January 2018 and 29 April 2022

During these five years, Repsol’s stock is down 12%,  BP’s stock is down 33%, Shell is down 23%, Eni down 20%, TOTALEnergies down by 16%, and ExxonMobil remained flat,  whereas Chevron’s stock rose by 23%, and Equinor up 48%.

Annual capital expenditures in the near term, according to Shell, could be in the range of $21-23Billion. The company has stated that its renewables and energy solutions will be $2-3Billion compared with previous targets of $1-2Billion. This pales in comparison to the $3Billion earmarked for marketing, $4Billion in integrated gas, $4-5Billion in chemicals and products as well as $8Billion in upstream investments.

How will Shell reallocate its resources—both financial and technical—and maintain an image of being in control of its energy transition scenarios?

Upstream, with its huge exploration and development costs is perhaps Shell’s largest impediment to becoming a greener company.

While its competitors—BP and TOTALEnergies—are busy buying and creating gigawatts of new energy, Shell maintains that it wants to focus on the value it generates for shareholders across the entire value chain. While the company is eager to proclaim value generation there is little indication to shareholders what this means. For the period 2025-2030 Shell lumps together the capital budgets devoted to three categories:

Growth which entails renewables and marketing, will receive 30% of Shell’s capital budget;

 Transition which entails Integrated gas and chemical & products will receive 30-35% of Shell’s capital outlay; and

Upstream will get 30-35%.

Predicted IRRs (Internal Rates of Return) per category vary between 10-25%.[1]

Will this strategy placate shareholder unrest?

Shell has a target to become a net-zero-emissions energy business by 2050. The company plans to transform its refinery footprint to five core energy and chemical parks, reducing the production of traditional fuels by 55% by 2030.

Does Shell’s goal for its energy and chemical parks fit within the verdict brought down by the Dutch courts that ordered Shell to cut its CO2 emissions by 45% by 2030 compared to 2019 levels? Is Shell still in charge of its energy transition scenarios or is it desperately playing catch-up to ensure that its influence and strategy has an impact on the swiftly changing energy landscape?

In Shell’s latest energy scenario update, four conclusions are stated:

  • Energy needs will grow.
  • Energy systems will be transformed; speed is the issue.
  • Transformation will have costs and benefits.
  • Action accelerators are necessary to meet climate aspirations.

In its Sky 1.5 Scenario, Shell anticipates a rapid and deep electrification of the global economy, with growth dominated by renewable resources. Global demand for coal and oil will peak in the 2020s and natural gas in the 2030s. In the sectors that are more difficult to electrify, liquid and gaseous fuels will be progressively decarbonized through biofuels and hydrogen.

Shell’s energy prognosis is certainly in line with other sources who are sounding the alarm about global warming and the need for rapid decarbonization. But how will this affect Shell? Is the company nimble and dextrous enough to ensure it will be a force for good in the next phase of the energy transition? The signs are not encouraging.

In 2020 the IEEFA (Institute for Energy Economics and Financial Analysis) evaluated Shell’s green progress. According to Clark Butler, the author of the report, Shell must shift at least $10Billion per annum or 50% of its total capital expenditures from oil and gas and invest it in renewable energy if they are to reduce their carbon intensity in line with their stated goals.[2]

According to Client Earth, Shell is still committed to exploring for new sources of oil and gas and does not have any plans to reduce the overall amount of oil and gas it produces by 2030, the date by which IPCC (Intergovernmental Panel on Climate Change) scenarios say emissions from oil, gas, and coal will need to have substantially reduced.

Client Earth maintains that “Shell mentions ‘­using lower-carbon energy products to reduce GHG emissions’, but the company’s plans include growing its fossil gas business by 20% in the coming years. Whilst the UK major believes its oil production peaked in 2019 and will decline slightly by 1-2% per year until 2030, the company wants to grow its fossil gas operations until this occupies over half of Shell’s energy business by 2030.”

“The Climate Action 100+ Net Zero Company Benchmark finds that Shell only meets some of the Benchmark’s targets criteria – the company does not have both an ambition to reach ‘net-zero’ and net zero-aligned short, medium and long-term GHG reduction targets, which cover all its relevant emissions.”[3]

Re-inventing Shell

How will Shell’s rebranding affect the company’s three major divisions—upstream, integrated gas, and downstream?

Shell indicated that it will reduce its upstream division to nine core hubs—Permian, the Gulf of Mexico, United Kingdom, Kazakhstan, Nigeria, Oman, Malaysia, Brunei and Brazil– and it will do no frontier exploration after 2025. If the rush to the global exploration exit continues to pick up speed, Shell may well have to reconsider its upstream strategy, perhaps going so far as to spin off the upstream division as a separate entity or do a joint venture with other partners.


[1] Shell Strategy Day 1, 2021, February 11, 2021

[2] Clark Butler. “ Despite the talk, Shell and Total are still investing much more money in fossil fuels than renewables”, Institute Energy Economics and Financial Analysis, July 23, 2020. https://ieefa.org/ieefa-despite-the-talk-shell-and-total-are-still-investing-much-more-in-fossil-fuels-than-renewables/

Shell’s integrated gas division could prove to be its star asset. For example, Wood Mackenzie’s AET-2 Scenario (Accelerated Energy Transition Scenario) predicts that in the following decades, market power will shift from OPEC to the giant gas producers, such as the USA, Russia, and Qatar.

According to AET-2, the “Era of carbon-neutral gas is born. AET-2 would require $300Billion to support Liquified Natural Gas growth globally and $700Billion to support dry gas development in North America.”  Given that Shell is the global leader of LNG (liquid natural gas) this is certainly a sweet sound for Shell’s LNG business.

Downstream could also prove to be a key energy transition asset. Shell’s REFHYNE Project, the Rhineland Refinery in Germany, could well become the precedent that the company needs to ensure it becomes the leading supplier of green hydrogen, where hydrogen production is powered by renewable energy for industrial and transport customers. Could the REFHYNE Project be duplicated many times over to ensure that green technology becomes a key ingredient in the energy transition?

A key remaining issue is how Shell can reallocate its resources—both financial and technical—and maintain an image of being in control of its energy transition scenarios. Upstream with its huge exploration and development costs is perhaps Shell’s largest impediment to becoming a greener company. Do not be surprised to see Shell’s upstream division find a new home, thus freeing up funding needed for Shell’s energy transition. Also expect Shell’s integrated gas and downstream and renewables divisions to get a serious makeover, vastly increasing their budgets to ensure market share and a green future.

Under pressure from its shareholders and public opinion, Shell may be forced to move its zero emissions deadline forward to 2030 instead of 2050. At the AGM( Annual General Meeting) scheduled later in May 2022, shareholder climate resolutions could provoke a backlash.  Dutch Shareholder Activist Mark van Baal’s Follow This campaign to support climate resolutions for the Paris-alignment could  well carry the day.

A final comment: Shell’s inability to convince shareholders of its added value is not so much a climate issue. Rather the inability of the board to proclaim a clear message—be that wanting to be an oil company or an energy company.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis).

 

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Nigeria’s Noteworthy Renewable Energy Providers-An Update

By Bunmi Aduloju

Grid-scale renewable energy plants are being installed everywhere.

Not in Nigeria.

There is not a single wind or solar energy plant of higher than 15MW that is installed in the country.

But a poorly electrified economy worth over $400Billion of Gross Domestic Product with 200Million people living on close to 1Million square kilometres of land and water masses should have absorptive capacity large enough for thousands of enterprises supplying off grid power to thrive, right?

The renewable energy market potential is huge in the country, with the suboptimal grid situation providing opportunity for innovative electricity solutions. Nigerian (mostly) solar power market is taking off from a low base and while the space is still slowly evolving, some players are proving noteworthy.

SOLAR PANEL ASSEMBLERS

Because we are so keen on the growth of the industrial economy, we start here at Solar Panel Assembly.

The closer a company is to being called a manufacturing enterprise, the higher it is on our consciousness

Auxano Solar, founded in 2014, is the first privately-owned solar PV assembler of solar systems in Nigeria. In 2020, it signed a $1.5Million expansion deal with All On, an investment company created by Shell, the European hydrocarbon major. The company has an installed capacity of 10MW and intends to increase its capacity to 100MW by 2022.

MINI-GRIDS SUPPLIERS

Greenvillage Electricity (GVE), is a widely referenced firm in the supply of mini-grids, To some, it is the biggest supplier in the country. Founded in 2009, it claims a cumulative installed capacity of 4.54MWp with 6,35GWhrs energy generated till date. It launched its flagship project, a 6kW solar mini-grid in Ebgeke, Rivers State in 2013. In 2019, the company signed a tripartite agreement with the Abuja Electricity Distribution Company Plc (AEDC) and Wuse Market Association, to develop a 1MW PV Solar Hybrid system for Wuse Market, Abuja.  GVE says it has installed about 13 mini-grid projects across the country.By 2022, GVE plans to have installed 20MW of solar power to supply electricity to over 500 communities.

 Rubitec came on board in 2005, specializing in solar and inverter, small hydro power, waste to energy plant, biomass energy systems, backup systems and land-fill gas plants and wind energy. In 2018, Rubitec commissioned the Gbamu Gbamu solar mini grid plant, an off-grid installation in the Gbamu Gbamu community, Ogun State. The 85kw solar hybrid mini grid project was funded by USAID and GIZ, a German development agency under the Nigerian Energy Support Programme (NESP). Rubitec recently won the bid for the Interconnected Mini-Grid Acceleration Programme, an initiative of Nigeria’s Ministry of Power (FMC), and implemented by Rural Electrification Authority REA, with financial support from the European Union (EU) and the German Government through Nigerian Energy Support Programme (NEP). With this new status, Rubitec Solar was granted partial financial support to work with the Benin Disco in deploying their proposed interconnected mini-grid projects with an in-kind partial capital grant.

Husk Power Systems was founded in the United States, but heavily Indian owned. It’s a mini-grid developer with offices in Nigeria, Tanzania, USA as well as its home country. The company serves the rural energy economy, with mini-grids at the centre of the company’s business model. It serves both completely rural off-grid areas, which have in the past only been able to use diesel generation to power their businesses and livelihoods, as well as weak grid areas where the main grid (distribution companies or power utilities often referred to as “Discoms” in India, and “Discos” in Nigeria) provide unreliable and poor quality connections, Husk launched its first six mini-grids in Nigeria in November 2021, and is looking to have 100 operational within two years..Husk Power has raised around $40Million in equity from investors. In 2018, it raised a Series C totaling $20Million[5] from Shell Technology Ventures, Swedfund International and Engie Rassembleurs d’Energies, with FMO coming in later with an additional $5Million. Other investors have included The Rockefeller Foundation, Acumen, US International Development Finance Corp. and First Solar.

PowerGen-Formed by Ameicans and headquartered in Nairobi, Kenya, has contributed to mitigating Nigeria’s universal electrification challenges by deploying seven local solar networks in the African country. Work is going on to quadruple the number of networks to 28 systems with a total generation capacity of 2.1 MW and an average figure of around 70 kW per set-up, and with around 4.5 MWh of total battery storage at a typical mini-network volume of around 160 kWh. The project is funded by equity investors who will recoup their money when all 28 systems are sold to CrossBoundary Energy Access.

Havenhill Synergy was established in 2010. In 2017, it commissioned a 20kW Solar Mini-Grid in Kigbe Community, Abuja. It followed up with a 100kWp solar hybrid mini-grid in Budo-Are Community, Itesiwaju Local Government Area, Oyo State in 2020. It has received funding from the U.S Trade and Development Agency (USTDA) and United States African Development Foundation (USADF). The company has also secured a $4.6Million debt funding from Chapel Hill Denham’s Nigeria Infrastructure Debt Fund (NIDF), an infrastructure debt fund in Nigeria and Africa, for the construction of 22 mini-grids being developed by Havenhill Synergy Limited under the Nigeria Electrification Project (NEP), according to Havenhill Synergy Limited.

SOLAR HOME SYSTEMS

Beebeejump comes highy recommended from one of Africa Oil+Gas Report’s more esteemed energy analysts.  It claims a sales and after-sales team of more than 200 in its Lagos headquarters alone. Beebeejump says it “not only has the world’s top solar battery digital control, light power generation, and other areas of technical experts for research and development but also the industry’s experienced product team with more user-friendly products and services”. The company’s core competency is in power products used in homes, farms, and corporate businesses. She provides a range of solar power products such as DC power solutions, AC/DC power solutions

Arnergy, founded in 2014, says it has an installed capacity of over 3MW and a storage capacity of over 9MWh.  In 2019, the company raised $9Million through an investment drive championed by Breakthrough Energy Solutions with support from All On, ElectriFi (EDFI Management Company), and Norwegian Investment Fund for Developing Countries (Norfund), in its Series A round of funding. This funding would deploy about 14MW of PV solar panels and 35MWh storage, with an annual capacity of 13,500MWh/y from 2019 to 2022. In the fourth quarter of 2020, the Federal Government of Nigeria, through the Rural Electrification Agency (REA), signed an official grant agreement with seven firms including Arnergy Solar. Under the Nigerian Electrification Project (NEP), the Output Based Fund (OBF) grant would deploy stand-alone Solar Home Systems (SHS) to Nigerian Small and Medium Enterprises in rural communities. In 2021, the company was listed by Bill Gates and his Friends among the top five leading Cleantech firms changing the narrative by saving the planet. One of its long-term goals is to power 35,000 businesses and homes

Lumos Nigeria, a subsidiary of Lumos Global, is an off-grid solar service provider, incorporated in 2013 with the aim of providing reliable, clean and affordable electricity in Nigeria. Through a strategic partnership with MTN, a multinational mobile telecommunications company, Lumos has installed over 100,000 solar systems in homes around Nigeria.

It has received several funding from international investment firms and the Federal Government of Nigeria. The Federal Government of Nigeria, jointly funded through its Rural Electrification Agency (REA) and the Nigeria Electrification Project (NEP) by the World Bank, awarded a share of the $75Million grant to electrify over a million households by 2025.

 

 

 

 

 

 

 

 


BP in Transition: An Open Letter to BP Shareholders

By Gerard Kreeft

Dear Shareholder;

BP’s announcement on February 27 that it was withdrawing from Russia was welcomed in Western circles, but has a nasty side effect: the loss of 50% of its global oil reserves. While the company has put on a brave face, there is strong need to demonstrate how BP will maintain its golden dividend and continue its transformation from oil giant to a new green energy giant. Of the oil majors operating in Russia, BP’s departure of its 19.75% of Rosneft was the most severe. Yet according to the company….” BP’s financial frame and distribution guidance remains unchanged”. Can shareholders simply assume that BP’s strategy is sound? Must shareholders just go ahead and accept everything that BP tells them?

BP’s share price in the period 2018-2022 has, with the exception of Repsol, been the biggest laggard of the oil majors. Chevron, ENI, ExxonMobil, Equinor and Shell have all fared better. Regardless of one’s perspective of the ongoing energy transition, a company’s share price and accompanying dividend policy are holy items. Europe’s new energy companies—Engie, ENEL, Iberdrola, Ørsted and RWE– have also have shown diverse results ranging from being laggards to first-in-class. The key message from the investor community is clarity of message, regardless of whether a company is only pursuing hydrocarbons or low carbon solutions.

Lessons learned from TOTALEnergies

BP could well take a page from the TOTALEnergies’ playbook to learn how a loss of oil reserves can be compensated by new energy sources, helping the company to become greener, sooner rather than later. Perhaps even ensuring shareholders that it will become CO2 free in 2030 instead of 2050 as is now the case.

In the summer of 2020, the French oil and gas giant announced a $7Billion impairment charge for two Canadian oil sands projects. This might have seemed like an innocuous move, merely an acknowledgement that the projects hadn’t worked out as planned. However, it opened a Pandora’s box that could change the way the industry thinks about its core business model—and point the way toward a new path to financial success in the energy sector.

While it wrote off some weak assets, it also did something else: TOTALEnergies began to sketch a blueprint for how to transition an oil company into an energy company.

Patrick Pouyanné, the company’s chairman and CEO, now says that by 2030 the company “will grow by one third, roughly from 3Million BOE/D (Barrels of Oil Equivalent per Day) to 4Million BOE/D, half from LNG, half from electricity, mainly from renewables.”[1] This was the first time that any major energy company translated its renewable energy portfolio into barrels of oil equivalent. So, while the company was slashing down proven oil and gas from its books, it was adding renewable power as a new form of reserves.

Each of the oil and gas majors spilled red ink in 2020, and most took significant write-downs, but TOTALEnergies’ oil sands impairments were different. The company wrote off reserves of oil and gas that the company had previously deemed all but certain to be produced.

Proven reserves long stood as the holy of holies for the oil industry’s finances—the key indicator of whether a company was prepared for the future. For decades, investors equated proven reserves with wealth and a harbinger of long-term profits.

Because reserves were so important, the reserve replacement ratio (RRR), the share of a company’s production that it replaced each year with new reserves, became a bellwether for oil company performance. The RRR metric was adopted by both the Society of Petroleum Engineers and the US Securities and Exchange Commission. An annual RRR of 100% became the norm.

But TOTALEnergies’ write-offs showed that even proven reserves are no sure thing and that adding reserves doesn’t necessarily mean adding value. The implications are devastating, upending the oil industry’s entire reserve classification system as well as decades of financial analysis.

How did TOTALEnergies reach the conclusion that reserves had no economic value? Simply put, reserves are only reserves if they’re profitable. The prices paid by customers must exceed the cost of production. TOTALEnergies’ financial team decided those resources could never be developed at a profit.

The company hasn’t abandoned oil and gas, and its hydrocarbon investments may prove problematic over the long term. However, its renewable investments will add ballast to the company’s balance sheet, keeping it afloat as it carefully chooses investments, including oil and gas projects, with a high economic return.

Meanwhile, competitors that stick to the old business model will have no choice but to continue to develop hydrocarbons—even if their proven reserves ultimately prove to be financial duds.

 BP’s Outlook

BP maintains, that in spite of losing 50% of its reserves, the company can maintain its green goals:

  • An underlying EBIDA (earnings before interest, depreciation, and amortization) of between 5–6% per year through to 2025 with returns in the range of 12–14% in 2025, up from around 9% today.
  • After allowing for the impact of divestments and reflecting the expected share buyback commitment, EBIDA per share is expected to grow by 7–9% per year through to 2025.
  • From 2025 onwards, when its low-carbon projects start to kick in, expect growth of between 12–14% to be maintained.
  • Reducing its oil production by 40% by 2030.
  • Its $25Billion divestment will provide the basis for up-scaling its low-carbon business. A pipeline of twenty-five oil and gas projects and an additional eighteen projects in the pipeline are also key factors.
  • Spending $5Billion per year to green itself and by 2030 will have 50 GW of net generating capacity. To date the company has a planned pipeline of 20 GW of green generating capacity.
  • Partnering with 10-15 cities and 3 core industries in decarbonization efforts and doubling customer interactions to 20 million per day, all by 2030.

A key component of BP’s strategy is building an investment structure, which requires only a few skilled accountants. The company has either sacked employees or will be delegating BP’s headcount to its joint ventures. The goal is to become lean and mean, reducing costs and, hopefully, increasing margins. In short becoming an investment vehicle.

To date the company has initiated a series of joint ventures to speed up its transition.

  • BP and Ørsted have partnered to develop zero-carbon ‘green hydrogen’ at BP’s Lingen Refinery in north-‎west Germany, BP’s first full-scale project in a sector that is expected to grow rapidly. The 50 MW electrolyser project is expected to produce 1 ton of ‎hydrogen per hour – almost 9,000 tonnes a year – starting in 2024. The project could be expanded to up to 500 MW at a later stage to replace all of Lingen’s fossil fuel-based hydrogen. Final investment decision is due later this year.
  • BP and Equinor revealed that BP will become a 50% partner of the non-operated assets Empire Wind (offshore New York State) and Beacon Wind (offshore Massachusetts). BP and Equinor will jointly develop four assets in two existing offshore wind leases located offshore of New York and Massachusetts that together have the potential to generate power for more than two million homes.
  • BP joined Statkraft and Aker Offshore Wind in a consortium bidding to develop offshore wind energy in Norway. The partnership—in which BP, Statkraft, and Aker Offshore Wind will each hold a 33.3% share—will pursue a bid to develop offshore wind power in the Sørlige Nordsjø II (SN2) licence area.
  • In Angola, BP has merged its upstream activities with ENI to form Azule Energy, which could become a model for other African countries.

The New Energy Players

The speed with which BP has unveiled its strategy indicates that it wants a seat at the green table occupied by the new energy elite—ENGIE, ENEL, E-on, Iberdrola, Ørsted, RWE, and Vattenfall—who have pole position in determining the direction of the global renewables market. Is BP’s $5Billion per year investment to green itself and its goal of 50 GW net generating capacity by 2030 enough to warrant it a place at the green table? Perhaps a starting position but hardly enough to be classified as a heavyweight! Consider the competition:

  • ENGIE: In 2021 the company spent more than $11Billion on investments across a broad swath of sectors, including solar, wind (on and offshore), hydro plants, biogas, and developing gas and power lines, and it will have 50 GW of global renewable capacity installed by 2025.
  • Enel: The company’s strategic plan outlines total investments of $231Billion by 2030 and tripling renewable capacity to 154 GW.
  • Ørsted: By 2030, the company will have an installed capacity of 50 GW.
  • Iberdrola: From 2020–2025, the company will be spending $165Billion on renewable energy and has a pending target of 95 GW of installed wind capacity.
  • RWE: By 2030, RWE will have 50 GW of installed wind and solar capacity.
  • Vattenfall: In the Nordic countries, Vattenfall has low emissions, with practically 100% of the electricity produced by renewable hydroelectric power and low-emitting nuclear energy.

Food for thought

Originally BP’s Net Zero Scenario was to reduce fossil fuels to 20% of today’s share of primary energy by 2050. Given its reserve losses and the urgency to become greener more quickly, 2030 could become the new deadline for BP to become CO2 neutral.

BP’s board has recommended investors vote against a shareholder resolution filed by Dutch activist group Follow This urging the British energy company to accelerate its energy transition strategy. In a report ahead of its May 12, 2022 annual general meeting, BP said that the resolution was “unclear, generic, disruptive and would create confusion as to board and shareholder accountabilities”.

Shareholder revolts–across the entire oil and gas spectrum– have increasingly voted against recommendations of oil & gas companies concerning environmental resolutions. Consider the shareholders’ revolts in 2021 concerning Chevron and ExxonMobil! Shareholders of both companies voted for stricter environmental measures, contrary to recommendations of their boards.  This does not bode well for BP in 2022.

The board, if it is to preserve its hide, should be prepared to discuss the following options:

BP’s West Nile Project in Egypt: “Whether a company is an oil company or an energy company seems to matter little to investors. Instead, they demand clarity”.

How will the company exit its remaining 20% of primary energy? Perhaps putting it in a joint venture much like its Angolan assets which have been merged with that of ENI?

What mega-investments can BP make so that it can become, very quickly, a giant of new energy? Some examples:

Hyphen Hydrogen

The Hyphen Hydrogen project in Namibia will invest $9.4 billion over a period of nine years. The project sponsors aim to produce 5 GW of power by 2030 and 3 GW of electrolysis capacity.

Hyphen is a Windhoek-based joint venture between British Virgin Islands-registered investment holding company Nicholas Holdings and German renewables developer Enertrag. The Namibian Government says that a large focus would be on exporting hydrogen to Europe and to sell some of the output to neighbouring countries, to “take advantage of the vision that our leaders have for the African Continental Free Trade Area”.

Morocco-UK Power Project 

A second project which has received much media attention is the Morocco-UK Power Project which will produce 10.5 GW of power. The solar and wind farm will be built in Morocco’s Guelmim-Oued Noun region, and it will supply the UK with clean energy via subsea cables. The twin 1.8 GW high voltage direct current (HVDC) subsea cables will be the world’s longest.

The Xlinks Morocco-UK Power Project will cover an area of around 1,500 square kilometres in Morocco and will be connected exclusively to the UK via 2,361 miles (3,800 km) of HVDC subsea cables.

The project will cost $21.9Billion. Xlinks will construct 7 GW of solar and 3.5 GW of wind, along with onsite 20GWh/5GW battery storage, in Morocco. The transmission cable will consist of four cables. The first cable will be active in early 2027, and the other three are slated to launch in 2029.

The Morocco-UK Power Project will be capable of powering a whopping 7Million UK homes by 2030. Once complete, the project will be capable of supplying 8% of Britain’s electricity needs.

While this energy divergence for Europe will be welcomed, it sends a double message to Africa. Providing Europe with potential renewable energy is only part of the equation; it is  also important that Africa’s energy transition is geared for its own domestic use.

 Finally, the investor outlook

BP’s profile has been discussed, but what is the verdict of the investor community? Of the seven majors—BP, Chevron, Eni, ExxonMobil, Equinor, Shell, Repsol and TOTALEnergies—BP aside from Repsol, has been the industry laggard between 2018 and 2022.

 Table 1: Stock market prices of  majors 2018-2022(NYSE)

 

Year Repsol       BP       Shell Eni TotalEnergies Chevron ExxonMobil Equinor
2018 $19 $43 $69 $35 $57 $128 $57 $23
2022 $13 $30 $56 $30 $52 $164 $83 $38

Note: Values based on 5 January 2018 and 1 April 2022

In comparison, during these five years, Repsol’s stock is down 32%, BP’s stock is down 30%, Shell 19%, ENI 14%, and TOTALEnergies down by 10%, whereas Chevron’s stock rose by 28%, ExxonMobil was up by 46% and Equinor more than doubled to 65%.

 Regardless of how one views the energy transition, the messaging and the guaranteeing of the golden dividend have been key factors in maintaining the price levels of the stock market prices of the majors. Even the current spike of oil prices has contributed only marginally to the BP share price.

Yet the recent oil crisis demonstrated how far the oil majors will go to defend their sacred oil dividend. According to an IEEFA(The Institute of Energy Economics and Financial Analysis) report of March 2021 the oil supermajors combined to spend almost $50bn on payouts to their investors in 2020 to prop up their dividend policies: $20.5billion from their core business, the remaining $29.4 billion borrowed.[2]

Whether a company is an oil company or an energy company seems to matter little to investors. Instead, they demand clarity. That is why Chevron, which is on track to make 2022 the 35th consecutive year with an increase in annual dividend payout per share, has maintained its value. The same reasoning applies to ExxonMobil. And why Equinor’s message of spending more than one-half of its capital spending on low carbon energy by 2030 is a leader in offshore wind technology, which has caught the fancy of its investor community.

The compromise of straddling both sides of the divide—hydrocarbons and low carbon solutions—has failed to spark  investor confidence in ENI, TOTALEnergies, Shell and Repsol.

 On a similar note, there is good news and bad news for Europe’s new energy companies. Engie, the large French energy giant, has seen its share price  decrease by 19%. ENEL, the Italian power company, has seen its share price increase 40%. Iberdrola, the Spanish power company, has had an increase of 38%. The two big winners are Ørsted, the Danish power company which has seen its stock soar by 142% and RWE, the German utility giant, has seen a stock price increase of 60%. Ørsted’s constant low carbon energy news has resonated with investors. Again, like the oil majors, the messaging is key.

 Table 2: Stock market prices of new energy companies 2018-2022

Year ENEL Engie Iberdrola Ørsted RWE  
2018 $5 $16 $8 $50 $20
2022 $7 $13 $11 $121 $32

Finally, the BP message for the investor community is  ambiguous.  BP has always portrayed itself as the greenest of the major oil & gas companies changing their corporate logo to the sun-burst green and yellow logo.  They promoted themselves as “Beyond Petroleum”.  But BP’s diminished stock price and market capitalization is very disappointing.   BP must re-examine its future roadmap and decide whether it can continue being an oil company and an energy company.  Bernard Looney became CEO of BP in February 2020 and was tasked by BP’s board to navigate the energy transition.   Understandably BP’s shareholders are upset and are questioning the wisdom and strategies carried out by Mr. Looney and his executive management team.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA (Institute for Energy Economics and Financial Analysis).

[1] TotalEnergies Strategy and Outlook Presentation, 9/30/2020, Totalenergies.com/media/news

[2] James Murray, ‘Super majors spending more on investors  than earnings from business”, Institute for Energy Economics and Financial Analysis, March 8, 2021 https://ieefa.org/supermajors-spending-more-on-investors-than-earning-from-business

 


Okwok Field: Oriental Hopes for First Oil by Early 2024

Oriental Energy Resources is working up the programme to commence crude oil production from the Okwok field, in south eastern offshore Nigeria, by March 2024.

It would be close to 10 years since the field’s wellhead jacket had been installed, permitting the drilling of Okwok-13, the first development well, which flowed at a rate over 5,000 barrels per day of crude.

Okwok is located in 31metre water depth, in shallow water Oil Mining Lease (OML) 67 in southeast offshore Nigeria.

The ongoing field development anticipates peak production be around …

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Africa’s Biggest Renewable Energy Developers: A 2022 Update

By Toyin Akinosho

French owned EDF Renewables was absent from our list of the biggest developers of renewable energy projects in Africa, in our first time out in March 2021.

So was TOTALEren.

True, we were spot on for listing Scatec, the Norwegian firm; ACWA, the aggressive Saudi government owned developer; Lekela Power, the British vehicle; ENEL, the Italian player and ENGIE the French company, among the continent’s top 10.

It would seem, however, that our 2022 list should include EDF Renewables, if only as a nod to its recently signed Memorandum of Understanding (MoU) with the mining giant Anglo American, geared towards developing 3,000-5,000 MW of renewable electricity (solar and wind) and storage in Anglo American’s facility in South Africa over the next decade. This (proposed) massive project, aiming to construct a regional renewable energy ecosystem (RREE) in the country, is the type that increases total grid supply resilience.

TOTALEren also looks a good candidate for Africa’s top 10 renewable developers. It has recently been named the key partner in a proposed 432MW wind/solar project on First Quantum Minerals (FQM)’s mining operations in Zambia.

But these projects have only just shown up on the drawing board. They are neither in advanced state of development, let alone under heavy construction. So let us turn our gaze to actual operations and determine who still merits our distinguished list.

When we conceived this listing, we were content with highlighting those companies who have been involved in solar or wind projects in excess of 75MW capacity, either singly or collectively, in Africa.

True, 75MW is a high number for a renewable power project. But despite the fact that grid sized single projects in Africa remain largely between 50MW and 100MW, several of the active developers in the region are increasingly having total portfolio in excess of 1,500MW under their belts, for Africa alone.

Scatec has doubled its power output worldwide since our last ranking, but its core market consists of six countries which include two African nations: Egypt and South Africa. “The common denominators for these markets”, Scatec says, “are a strong and growing demand for power to support economic development, a carbon-intensive power sector that is ripe for low-carbon alternatives, and a regulatory framework that seeks international capital for the renewables targets to be achieved”.

In terms of Plants- in- operations, Scatec has a total of 448MW Solar renewable energy plant capacity in South Africa, of which its economic interest is 45%; 380MW (Solar) in Egypt’s Benban solar park, with 51% equity and 225MW (Solar) output capacity in Uganda, where it holds 28% economic interest. Mozambique surprisingly shows up on the Scatec’s plants-in-operations list, with 40MW solar powered generation capacity, of which 53% is Scatec’s share. In Rwanda, Scatec built a 9MW capacity plant in which 54% is its own economic interest.

Scatec has a backlog of projects totaling 813MW generation capacity in South Africa, with economic interest of 51%, on average; in Tunisia, the backlog is 360MW and the company’s share is 55%. Scatec also has backlogs of 33MW solar power project in Mali and 20MW solar power project in Lesotho, of which its economic interests are 64 % and 48% respectively.

Scatec has announced partnership with Fertiglobe, Orascom and Sovereign Fund of Egypt to develop a 100 MW green hydrogen facility in that country. The hydrogen will be used as feedstock for green ammonia production and sold under a long-term contract to EBIC, a subsidiary of Fertiglobe. It is also developing a large-scale green ammonia production facility with Suez Canal Zone and the Ministry of Electricity and Renewable Energy.

Lekela Power, created by the British investor Actis, commenced commercial operation at its 252MW West Bakr Wind farm, a Build Own Operate (BOO) project located in the Gulf of Suez in Egypt, in November 2021. The company developed the 158MW Wind Farm, Taiba N’Diaye, Senegal’s first utility-scale wind farm, which it commissioned from 2019 to 2020. Lekela says it is investing up to $20Million in community development efforts over the plant’s projected 20-year lifespan. Lekela had earlier delivered the 140MW Loeriesfontein 2 in the Hantam Municipality in South Africa’s Northern Cape in 2015; commissioned the 80MW Noupoort Wind Farm in the same country in 2016 and completed the Khobab Wind Farm in December 2017, also in South Africa. These projects were contracted under the Renewable Energy Independent Power Producer Procurement Programme (REIPP). Since 2018, Lekela has completed the 110 MW Perdekraal East Wind Farm in South Africa’s Western Cape and the 140MW Kangnas Wind Farm in the Nama Khoi Local Municipality in the country’s Northern Cape.

Coming along is Lekela’s Ayitepa wind project, located on the south eastern coastal region of Ghana. It is in an advanced stage of development and working towards financial close, after which construction is expected to take about 18 months. The project will begin with 150 MW, with the potential to add a further 75 MW.

ACWA POWER (Arabian Company for Water and Power Development) came to international prominence in 2012, when it was announced in both Morocco and South Africa as preferred bidder in a key solar project in each country. Morocco is clearly the heartland of the company’s African operations.  In 2014, ACWA acquired a controlling stake in the Khalladi 120 MW Wind Farm in the north of the Kingdom. It’s an Independent Power Project IPP that had been developed by UPC Renewables.  In 2016, ACWA commissioned the 160 MW NOORo I Concentrated Solar Power (IPP) Plant, with 73.1% interest in the kingdom. In 2018, ACWA completed the 200 MW NOORo II CSP Project, developed as the second project for Morocco’s Energy Agency (MASEN) in the series of planned developments at the Ouarzazate Solar Complex, a 500 MW solar park incorporating several utility-scale solar power plants using various solar technologies. ACWA has since completed NOORo III CSP , the 150 MW capacity third solar facility on the Quarzite complex.

ACWA inaugurated its first South African project in 2016. It was the 50MW Bokpoort CSP Independent Power Project, located in the Northern Cape Province.

In Egypt in 2022, ACWA expects to complete and inaugurate the 200MW Kom Ombo photovoltaic (PV) plant (officially titled 1 x 200 MW KOM OMBO Solar PV Power Project) for which it signed a Power Purchase Agreement with the government in 2019. And ACWA is about to grow bigger in Egypt. The second largest of the five projects under “advance development” in ACWA’s global portfolio is a 1,1500MW wind IPP in North Africa’s largest economy.

In South Africa, ACWA announced, on May 10, 2021, the achievement of financial close for Redstone 100 CSP IPP, which it won, with Solar Reserve, as part of the country’s 2015 tenders for renewable projects. Commercial operations are expected to commence in Q4 2023.

SOUTH AFRICA CONTINUES TO be both the breeding ground of startup renewable energy firms and the playground of large, multinational developers.

The ENEL group, an outgrowth of the Italian energy utility, operates in the renewable energy space as ENEL GREEN POWER (EGP). The company has 15 plants, both wind and solar, on the African continent. “Our installed renewable capacity (in Africa) is around 1.2 GW”, it says. Most of EGP’s renewable generating plants are in South Africa.

The 140MW Nxuba Wind Farm in South Africa’s Eastern Cape province, completed in December 2020, is one of the latest.

The company’s other completed projects include the 88 MW Nojoli Wind Power plant in the Eastern Cape province (2016) and the 111 MW Gibson Bay Wind Farm also in the Eastern Cape. It is operating the 147MW Oyster Bay Wind Farm; the 145MW Garob Wind Farm and the 82.5MW Adams Aurora Solar plant. ENEL has constructed the 82.5 MW Pulida solar power plant in the country’s Free State, the 66 MW Tom Burke Solar Power plant in Limpopo Province and the 82.5 MW Paleishuewel Solar Plant in the Western Cape. EGP has announced a joint-venture partnership with the Qatar Investment Authority (QIA), aimed at financing, building and operating renewable energy projects in sub-Saharan Africa. In a first phase, QIA will acquire 50% of EGP’s stake in 800MW of projects in operation and under construction in South Africa and Zambia. ENEL said the JV would combine its industrial expertise with QIA’s long-term investment strategy, in line with the two companies’ sustainability and decarbonisation targets. ENEL is developing the Karusa and Soetwater Wind Farms, each with an installed capacity of 140MW, in the Karoo Hoogland District, Northern Cape province, yet to be completed. In Morocco, the 210MW Midelt wind farm, also under development, is the first power plant of the 850 MW Projet Éolien Intégré, a joint venture between EGP and Nareva, secured after the award of an international tender.

.ENGIE, formed in 2008 through the merger of Gaz de France and Suez, is credited with construction and operation of Africa’s largest single wind farm to date: the 300MW Tarfaya Wind Farm in Morocco. ENGIE commissioned the 100MW Kathu Concentrated Solar Power (CSP) project, in South Africa’s Northern Cape Province on January 30, 2019. The ENGIE /Toyota Tusho/Orascom partnership developed the 262.5 MW Ras Ghareb Wind Farm project near the Gulf of Suez in Egypt, in December 2019. It was the country’s first project in wind energy to operationalize the Build-Own-Operate (BOO) model.

In Tunisia in 2020, ENGIE and (local operator) Nareva were jointly awarded a 120MW solar independent power producer (IPP) project. The Gafsa plant, a solar PV facility, will supply power to more than 100,000 homes in that North African country. In Senegal, ENGIE is starting construction of two 30 MW solar PV projects. The company has also signed an agreement with the government of Djibouti to build a 30 MW solar PV project there in partnership with Électricité de Djibouti.

African Infrastructure Investment Managers (AIIM) developed the 139MW Cookhouse Wind Farm in South Africa’s Eastern Cape Province. Commissioned in December 2014, it was the first project in the first round of the South Africa’s Renewable Independent Power Producer Programme (REIPPP). AIIM thereafter acquired, in 2018, majority stakes in nine renewable energy projects that were proposed to contribute 800 MW to the national grid. Through its IDEAS Managed Fund, AIIM acquired a 50.1%  stake in each of the following solar and wind projects:  Bokamoso – 67.9MW,  Waterloo – 75MW, Droogfontein II – 75MW, Zeerust – 75MW, Greefspan II – 55MW, De Wiltd – 50 MW, Roggeveld – 147MW, Perdekraal – 110MW,  Kangas – 140MW.

BioTherm Energy developed the 117.2 MW Golden Valley Wind Farm, commissioned in June 2019, in the Amathole Municipality in South Africa’s Eastern Cape province. In January 2021, the company finished constructing 100MW Kipeto Wind Farm in Kenya. Biotherm Energy was established in 2003 and in 2008, was supported with $150Million by the private equity firm Denham Capital. BioTherm has its sights on projects in 10 countries in Africa.

TOTALEren built and operates a 126MW solar plant in Egypt; a 15MW solar plant in Burkina Faso and 10MW solar plant in Uganda. A proposed 423MW solar plant in Zambia, for which it has been named as builder, is in discussion.

Siemens Gamesa Renewable Energy S.A. (formerly Gamesa Corporación Tecnológica S.A), a German/Spanish power company, is a large electricity provider, with 107,000MW capacity worldwide. It is known as a contractor (construction and maintenance) as well as a developer. It constructed the 262.5 MW Ras Ghareb Wind Farm project developed by the ENGIE /Toyota Tusho/Orascom partnership in Egypt’s Gulf of Suez. It is maintaining the farm, but not as an investor. Siemens Gamesa’s heartland in Africa is Egypt.  Before the Ras Ghareb project, the company had installed four wind farms counting 406 MW with a total of 478 turbines of G52 type with a nominal power capacity of 850KW each. This compound of wind farms was delivered to Egypt’s New and Renewable Energy Authority (NREA). Siemens Gamesa also delivered the 220MW Gulf El Zayt Wind Power Plant Project on the Red Sea coast, with funding from JICA (The Japan International Cooperation Agency). The company completed, in the same country, a 40 MW extension to an already installed wind farm in Gulf El Zayt for NREA funded by KFW (Kreditanstalt fuer Wiederaufbau). Hired by the Ethiopian Electric Power, Siemens Gamesa is constructing a 100MW Wind Farm in Assela in Ethiopia’s south western region. Siemens Gamesa did not construct the 110MW Perdekraal East and 140 MW Kangnas wind farms in South Africa, but it will run and maintain them.

Abengoa Solar International, a Spanish energy developer has, between 2015 and 2019, commissioned three 100MW solar power plants each on three locations in South Africa. The 100MW Kaxu Solar One (concentrated solar power (CSP)) Plant was commissioned in February 2015; the 100MW Khi Solar One was commissioned in March 2016 and the Xina Solar One was commissioned in August 2017. Although they are each jointly owned with other partners, they were all developed and constructed and now operated and maintained by Abengoa Solar International.

EDF Renewables currently operates four wind farms across South Africa (144 MW installed capacity), including the Wesley wind farm (33 MW) in the former Ciskei area of the Eastern Cape, commissioned in August 2021. But that’s all there is in operations. It however has added a number of backlogs. In March 2021, In March 2021, it won, in consortium with its partner Perpetua Holding, the Umoyilanga project in the Risk Mitigation IPP Procurement Programme (RMI4P), which combines solar, wind and battery storage technologies, comprising a 77 MW wind farm on the coast in the south of the country, a 138 MW solar power plant in the Northern Cape region. Both power plants will be equipped with a battery storage system totaling 75 MW of power. In September 2021, it won the contract to build and operate a 100 MW power plant at the Mogalakwena platinum mine, in the country’s Limpopo province.  It has Adding up the new projects won in 2021, EDF Renewables says it holds almost 880 MW in total in its portfolio of renewable energy in South Africa.

Mainstream Renewable doesn’t own any renewable plant in Africa. But it has constructed sizeable plants for “owners” like Lekela. The 110MW Perdekraal East and 140 MW Kangnas wind farms in South Africa were constructed for the Lekela consortium by Mainstream Renewable. Siemens Gamesa supplied the technology and it is running and maintaining the plants.

Solar Reserve commissioned a 75MW Jasper Solar Plant in South Africa’s Northern Cape province in 2014. Rainmaker Energy commissioned the 100MW Dorper Wind Farm in 2014. Acciona Energia commissioned the 138MW Gouda Wind Farm in the Western Cape Province of South Africa in 2015. The company operates and maintains the plant. Cennergi commissioned the 134MW Amakhala Emoyeni Wind Farm project in June 2016. The plant is 95% owned by Cennergi. Mulilo commissioned a 75MW Solar plant in Copperton, in South Africa’s Northern Cape Province in 2016. The Longyuan Mulilo consortium commissioned the 96.48 MW De Aar and the 138.96 MW De Aar 2 North wind projects in November 2017. Emvelo co-developed, with IDCSA the 100MW Karoshoek power plant, 30 km east of Upington. In the Northern Cape Province, commissioned in November 2018.

 

 

 


All On is ‘The’ Enabler

PARTNER CONTENT/ENERGY TRANSITION

Impact investing firm, All On is a name that now features recurringly in Nigeria’s renewable energy sector.

Stakeholders in renewable energy who have had dealings  with the company sometimes refer to All On  as Shell, as if the name  is interchangeable with that of the oldest operating oil major in.

Although All On is an independent, wholly Nigerian owned and operated entity, there is an affiliation to Shell: the company is seeded by Shell as part of the major’s commitment to closing the access to energy gap in Nigeria via  investments  in off-grid energy solutions.

It is one of the vehicles that Shell uses to  enable electricity access to the unserved and underserved in the country via renewable energy.

Africa Oil+Gas Report can confirm two things: (1) All On has a firm commitment from Shell of at least a few hundred million dollars, and (2) any gain from its investment does not go back to Shell. So, it  re-invests the gains.

This is how All On describes itself:

“All On is an independent Nigerian impact investing company that invests in businesses that increase access to commercial energy products and services for unserved and underserved off-grid energy markets in Nigeria, with a special focus on the Niger Delta”, the company says on its website. “All On invests in off-grid energy solutions spanning solar, wind, hydro, biomass and gas technologies deployed by both foreign and local access-to-energy companies that complement available grid power across Nigeria and help bridge its significant energy gap”.

As an impact investing vehicle, All On is closer in terms of raison d’être to say Norfund (the Norwegian Investment Fund for developing countries), or Finnfund (a Finnish development financier and professional impact investor), than the African Development Bank () which is a lender, even if for development projects.

“Shell started conceiving of interventionist companies like All On, as it began to divest from the oil and gas assets in Nigeria”, Africa Oil+Gas Report learns from sources. Excited by what it considers the relative success of Shell Nigeria Gas Limited, a downstream gas marketing subsidiary of the company, in delivering natural gas to grassroots business enterprise, Shell’s objective  was to  make even more impact in energy delivery. However, unlike Shell Nigeria Gas, All On was deliberately not set up as an operator, but rather as an investment company.

Instead, All On sees itself as supporting and investing in existing energy solution providers to help them grow and achieve scale. “All On provides debt and equity matched to the needs of energy enterprises at a range of sizes. The focus is on enterprises with proven off-grid energy technology solutions and businesses that are ready to scale”. That is its impact investing mantra. The company also leverages capital for the Nigerian off grid energy sector.

In addition to  direct funding as well as leveraging with partners to finance projects, All On sees itself as an enabler of a conducive environment. “All On helps to foster a supportive business and regulatory environment for off grid energy companies to thrive. It works with strategic partners on advocacy and policy issues to fast track the creation of an enabling environment for the renewable energy sector. All On promotes innovation and identification of promising business and deployment models, helps partners and entrepreneurs to obtain and share information effectively, commissions industry relevant research, contributes to capacity development, and other activities required to accelerate scaling of the off-grid energy sector in Nigeria.

Afolabi Akinrogunde, Investment Manager at All On, spoke passionately at a workshop organized by the Nigerian Association of Petroleum Explorationists (NAPE) in November 2021. “We engage in policy review and analysis, we’re keen on advocacy for the sector. We thrive on supporting agencies working in driving the growth of the adoption of off grid energy solutions in Nigeria”, he told the gathering of mostly petroleum geologists in Lagos. He particularly singled out Auxano Solar as one company in which All On was very proud to have invested in. Auxano Solar claims to the first privately-owned solar PV assembler of solar systems in Nigeria. In 2020, it signed a $1.5 million expansion deal with All On. “They delivered what they said they would do when they came in 2018”, Akinrogunde told the audience. “So, we invested more”.

All On supports between eight  and 10 offgrid energy solutions companies every year, with investments that could be described as Angel and Growth stage investing. It also helps companies  break into the market, as it were – providing them with both financing support via its investment team and non-financial support via the All On hub.

Africa Oil+Gas Report knows that All On invested in Green Village Electricity (GVE) Projects Limited, regarded by many as the biggest provider of mini grid energy solutions in the country. All On is probably the largest private sector investor in the Nigerian mini grid space.

Some of All On’s  other investees include:

ACOB LIGHTING TECHNOLOGY LIMITED, incorporated in 2016, “specifically targeted to provide clean, affordable and sustainable power through renewable energy power solutions to unserved and under-served communities”www.acoblighting.com

Ashdam Solar Co. Ltd, which “provides quality alternative energy solutions to the Nigerian community with exceptional client satisfaction”www.ashdamsolar.com.

Arnergy Solar which “provides reliable and sustainable energy services for small, medium and large businesses across our target markets”. www.arnergy.com.

Auxano Solar Limited is “Nigeria’s first privately owned Solar PV manufacturing company. Founded in 2014, the company also delivers high performance residential and commercial solar system solutions”. www.auxanosolar.com.

AllBase Energy, which provides “distributed renewable energy system for the middle class and small businesses in Nigeria”. www.allbase.energy.

Creeds Energy, which “addresses electricity and energy challenges by improving access to and promoting the adoption of clean and energy efficient technologies”. www.creedsenergy.com.

CovenantPlus Engineering, which “specializes in Engineering, Procurement and Construction on Electrical Power Generation, Transmission and Distribution (T&D), Telecommunication Infrastructures, Satellite Communications and Civil Engineering and covers the design, supply, installation and maintenance of projects in these fields of engineering”. www.covenantpluseng.com.ng.

Entric Energy, which “designs, deploys and operates small energy infrastructures (mini grids) across underserved and unserved communities in Nigeria utilizing small renewable solar mini-grids, solar-gas hybrid mini-grids, and solar home systems”. www.entric.energy

Greenage Technologies Power Systems Ltd, “an indigenous manufacturer of smart solar inverters and charge controllers.” www.greenagetech.com.

ICE Commercial Power, which is developing and implementing innovative solutions to tackle the major problem of 1 of every 2 Nigerians, constantly living without reliable electricity and people resorting to self-generation which is expensive and dangerous. www.icecommpower.com.

Oolu Solar: “one of the fastest-growing off-grid solar companies in West Africa”. A major distributor f solar home systems within Nigeria and the West African subregion. www.oolusolar.com.

Protergia, an “independent power producer (IPP) based in Nigeria providing world-class and cost-effective clean power solutions to energy consumers including residential estates, businesses, industries. www.protergiaenergy.com.

Renewvia , which is ”one of the largest builders and operators of standalone mini-grid systems throughout Africa, supplying remote and rural communities with precious power”. www.renewvia.com.

Sosai Renewable Energy. It “uses market-based strategies to address the issues of Poverty and Rural/Community development as regards access to Energy, Clean water and ensure positive livelihoods”. www.sosairen.org.

 

 

 

 

 

 


Nuclear Power: A Green Option?

By Gerard Kreeft

The search for energy diversification has taken a more frantic pace since the Russian invasion of the Ukraine. Nuclear energy, not exactly in high repute in many countries, is now being mulled as a possible energy alternative. Even as a green alternative. The key for Africa is Small Modular Reactors(SMR), which can generate up to 300 MW, easily transported and installed. What previously was unthinkable may become realistic as the Russian-Ukraine conflict continues and the need for clean energy mounts.

A Global Overview

Internationally nuclear energy has established itself as a fuel of choice by various countries:

Canada

Historically Canada’s CANDU, unique heavy-water reactor run on natural uranium, dominated the export market to developing countries. The reactor’s smaller size, ranging from 100 MW to 700 MW, made it a better fit for smaller grids. Canada exported reactors to India, Pakistan, Taiwan, Argentina, South Korea, Romania, and China from the 1950s to the 1990s. The decline of the nuclear industry is attributed to dwindling sales and the introduction of newer designs by competing companies.

Four Canadian provinces—Saskatchewan, Ontario, New Brunswick and Alberta—are currently working together to begin developing SMRs.

United States

Nuclear power in the United States is provided by 93 commercial reactors. With a net capacity of 95.5 GW In 2019, they produced a total of 809.41 TWh of electricity, which accounted for 20% of the nation’s total electric energy generation. In 2018, nuclear comprised nearly 50 percent of U.S. emission free energy.

As of September 2017, there were two new reactors under construction with a gross electrical capacity of 2,500 MW, while 39 reactors have been permanently shut down. The United States is the world’s largest producer of commercial nuclear power and in 2013 generated 33% of the world’s nuclear electricity.

China

China ranks third in the world both in total nuclear power capacity installed and electricity generated, accounting for around one tenth of global nuclear power generated. Nuclear power contributed 4.9% of the total Chinese electricity production in 2019, with 348.1 TWh. As of June 2021, China had a total nuclear power generation capacity of 49.6 GW from 50 reactors, with additional 17.1 GW under construction.

Nuclear power has been looked into as an alternative to coal due to increasing concerns about air quality, climate change and fossil fuel shortages.  More long-term plans for future capacity are 120–150 GW by 2030.

France

In October 2021 France announced plans to construct six new nuclear reactors so that by 2050 the country can maintain its 50 GW capacity to produce low-carbon nuclear power. France will now delay its planned reduction in the share of nuclear power in its electricity mix to 50% from the current 2025 target to 2035. Nuclear accounts for almost 75% of France’s power production.

Japan

Prior to the Fukushima nuclear power plant accident of 2011, 54 nuclear reactors were in operation in Japan, supplying 30% of the country’s electric power. As of March 2021, 10 years after the Fukushima accident, only five plants with a total of nine reactors have gained the agreement of local residents to resume operations. The country’s electrical shortage has been primarily offset by LNG imports.

Russia

Nuclear power in the Russian Federation is a driver for the development of other industries, and nuclear electricity production accounts for 20.7% of the national electricity mix. Currently, the country operates 38 nuclear power reactors and is steadily moving ahead with plans to expand the role of nuclear energy, including the development of new reactor technologies, in addition to the export of nuclear services. It seeks to close the fuel cycle, and fast reactors are considered a key component of this strategy.

South Africa

South Africa has two nuclear reactors generating 5% of its electricity. The country’s first commercial nuclear power reactor began operating in 1984. Over the years various strategic and development plans have been introduced and died on the drawing board. In October 2019, South Africa outlined plans to build 1 GW of new nuclear capacity by 2030, and to extend the operating lifetime of its existing plant by 20 years.

 With its large debt, Eskom, South Africa’s dominant power player, is still the elephant in the room. Any definitive step to bolster the country’s nuclear capacity is highly dependent on the energy strategy that Eskom will decide on. In early 2022 Eskom stated that it was shutting down both units of its Koeberg nuclear power station for scheduled refuelling and maintenance, putting an already overburdened power system under additional strain.

 The case for Africa

One of the most compelling studies discoursing potential nuclear power in Sub-Sahara Africa is entitled ‘Atoms for Africa: Is there a Future for Civil Nuclear Energy in Sub-Saharan Africa?’. The authors–Abigail Sah, Omaro Maseli, and Aishwarya Saxena– are Breakthrough Generation Fellows and Jessica Lovering is the Director of Energy at the Breakthrough Institute located in Oakland, California, USA. The scholars explore the feasibility of commercial nuclear power in sub-Saharan Africa, especially in light of advanced nuclear technologies and their potential to overcome some of the challenges to deployment.

According to the study one of the most important issues to be addressed is the energy deficit of the continent. Most traditional nuclear power plants (NPP) follow the rule of thumb that no power plant in a country should have a capacity that exceeds 10% of that country’s grid capacity. Most traditional NPPs in western countries have a power capacity of 1000 MW or more.

The authors of the study argue that SMRs could become feasible in Africa and nominate the following countries as ideally suited:

Nigeria and South Africa  Development very likely

Ghana and Kenya                            Development possible with strong financing

Uganda                                             Development possible with stronger financing and infrastructure

Nuclear energy requires high capital costs, long lead times required to develop robust legal and regulatory frameworks and proliferation concerns of nuclear fuel serve as barriers to develop nuclear capacity on the continent.

Wood Mackenzie has aptly described Africa’s energy deficits:

“Nearly 800 Million people globally live without access to any electricity, three-quarters of them in Sub-Saharan Africa…the average Nigerian consumes less than a third of the electricity used every year by a moderately efficient American refrigerator… Sub-Saharan Africa has a persistent lack of electricity access in part due to massive underinvestment in electricity infrastructure. Most of its public electric utilities are loss-making, with limited ability to maintain existing assets or invest in new ones. This hampers top-down growth in power supply and improvements in the availability, reliability and affordability of power. Stalled or partially complete power-sector liberalisation efforts… have allowed investments in generation capacity to grow steadily but have left the transmission and distribution segments behind. This is a major bottleneck to further electrification and a constraint on off-taker bankability for future generation projects. In adversity lies opportunity.”

 Steps required to building a commercial nuclear industry

  1. Building of nuclear research reactors which can be used in a wide range of environmental, agricultural and medical fields. Presently the following countries have such facilities: Algeria, Democratic Republic of Congo, Egypt, Ghana, Libya, Morocco, Nigeria and South Africa.
  2. Establishment of Domestic Regulatory Framework. The International Atomic Energy Agency (IAEA) has created a framework for countries to follow.
  3. Signing of Nuclear Safety and Security Treaties. Almost all countries have signed the African Weapons Free Zone Treaty and a majority have ratified, which prohibits all activities related to nuclear weapons developed, transported and their use.

The road ahead

Traditional nuclear power plants are geared to providing power generation which can be over 1,000 MW, enough to power close to one million households in a typical Western country. Therefore, traditional large-scale plants may not be the best first-choice for newcomer African countries.

Instead, Small Modular Reactors (SMRs) which have capacities up to 300 MW, enough to power 300,000 homes. SMRs can be manufactured in a factory and easily transported to the power plant site are far more feasible for African countries. Various SMRs exist:

High-Temperature Gas Reactors (HTGR) Helium or carbon dioxide gas is used as the coolant for this technology, allowing it to operate at a much higher temperature of 1000oC, achieving greater thermal efficiency.

Floating Reactorsdesigns typically utilize the concept of a deep-water platform to host a nuclear reactor, usually a small modular light-water reactor.

Nuclear Batteries or Sealed Micro-Reactors Several companies are working on extremely small modular reactors, 10 MW or less, which can operate for up to ten years without refueling.

Currently, Russia and China dominate the nuclear export market.

Rosatom, a Russian state-owned company, has come to dominate nuclear exports to developing countries because of their generous financing and worker training. Rosatom is a forerunner in sub-Saharan Africa, having signed nuclear power agreements with Ghana, Kenya, Nigeria, and Uganda that cover a number of arrangements, including financing, skills development, and the actual development of nuclear power technology. Rosatom’s model of Build-Own-Operate and SMR technology has proven very popular.

China Nuclear Engineering Group and China’s State Nuclear Power Technology Corporation have signed partnerships with the Nuclear Energy Corporation of South Africa (NECSA). China General Nuclear owns and operates the world’s second largest uranium mine in Namibia and has also built research reactors in Algeria, Ghana, and Nigeria.

A key area to watch is whether China extends it Green Taxonomy policies to include the financing of nuclear plants in Africa, especially in support of its Belt and Road Initiative. According to a recent IEEFA(Institute for Energy Economics and Financial Analysis) report, authored by Norman Waite, the People’s Bank of China has been quietly greening its financial system.  A key measure is the introduction of a facility that would provide discounted central bank credit to banks lending to enterprises engaged in carbon emission reduction.

According to Waite, the People’s Bank of China has launched the Carbon Emissions Reduction Facility (CERF) which offers attractively priced funding to banks, conditional on loans extended to borrowers able to produce proven, audited, and consistent decarbonization results.

“By the end of 2021, within its first month of operation, the PBOC refinanced loans to 2,817 borrowers promising to cut 28.76M tons of annual carbon emissions. That is 0.8% of China’s annual carbon dioxide (CO2) emissions from coal power. If the PBOC keeps this pace every month for 2022, the CERF could add significant cuts to the country’s CO2 by year-end”.

The PBOC introduced the “five pillars” of green finance that it would build to support its climate efforts going forward. The pillars include green finance standardization, green financial information disclosure and supervision, green finance incentive mechanisms, green financial products and markets, and international green finance cooperation.

A final question is whether SMRs are financially feasible? Take the NuScale SMR being developed in Utah, USA. NuScale has optimistically targeted the cost of power from the new plant at $58 per megawatt-hour (MWh), although some estimates predict costs for the power from new SMRs could reach $200/MWh. According to a study by IEEFA the project is “too late, too expensive, too risky and too uncertain”.

It may be to early to judge how other SMR projects will cost but no doubt SMRs will have to be competitive with renewables.

 Some final thoughts

With the continued fallout of the Russian-Ukraine conflict and a rush to exit Russian natural gas exports nuclear power has gained a new and promising legitimacy. No doubt this impact will bring new questions. Nuclear safety, a fear of a new Fukushima, Chernobyl or Three Mile Island and how to manage nuclear wastes are key concerns. A fear that is global in scope.

Yet the global community and Africa can ill-afford to let fear drive its decision whether nuclear energy can be a game changer in the energy transition? Strategic decision-making and courage are needed to take bold steps to ensure that SMRs can be developed globally, especially in Africa.

 Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA.

 

 


Mozambique Commissions a 41MW Solar Power Plant, its Largest, in Gas Rich Province

Mozambique has inaugurated a solar power plant, the largest of its kind in the country, at Metoro, in the northern province of Cabo Delgado

Cabo Delgado is the region with the Rovuma Basin off its coast. The basin holds over 100Trillion cubic feet of gas (proven).

“The Metoro Solar Plant Project is part of the Government’s plan to increase production capacity and diversify energy sources in the country, in general, and in the northern region, in particular, with the aim of ensuring quality energy in Cabo Delgado province,” a government statement reads.

Work began in 2020 on building the plant, which consists of 125,000 panels manufactured in China. It has a capacity of 41 Megawatts and is to inject 69 gigawatt hours per year into the grid managed by state electricity company Electricidade de Moçambique (EDM).

The project has a budget equivalent to €47.3Million and is the result of a partnership between EDM, with a 25% stake, and France’s Neon, with 75%.

The project was financed by the French Development Agency (AFD), with a loan of $40Million (€34 Million), with the remainder coming from Mozambique’s government. After 25 years of operation, the infrastructure will pass into the hands of EDM.

 

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