Report No. 5073-CV Cape Verde Issues and Options in the Energy Sector August 1984 Report of the Joint UNDP/Wrld Bank Energy Sector Assessment Program This document has a restricted distribution. Its contents may not be disclosed without authorization from the Government, the UNDP or the World Bank. JOINT UNDPIWORLD BANK ENELRGY SECTOR ASSESSMENT PROGRAM REPORTS ALREADY ISSUED Country Date Numbers Indonesia November 1981 3543-IND Mauritius December 1981 3510-MAS Kenya May 1982 3800-KE Sri Lanka May 1982 3792-CE Zimbabwe June 1982 3765-ZIM Haiti June 1982 3672-HA Papua New Guinea June 1982 3882-PNG Burundi June 1982 3773-BU Rwanda June 1982 377°-RW Malawi August 1982 3903-MAL Bangladesh October 1982 3873-BD Zambia January 1983 4113-ZA Turkey February 1983 3877-TU Bolivia April 1983 42- -BO Fiji June 1983 44/0PFIJ Solomon Islands June 1983 440t':-SOL Senegal July 1983 4182-SE Sudan July 1983 4511-SU Uganda July 1983 4453-UG Nigeria August 1983 444 -UNI Nepal August 1983 447. -N EP Gambia November 1933 4743-GM Peru January 1984 4677-PE Costa Rica January 1984 4655-CR Lesotho January 1984 467S-LSO Seychelles January 1984 4693-SEY Niger March 1984 4642-NIR Ethiopia July 1984 4741-ET FOR OFFICIAL USE ONLY Report No. 5073-CV CAPE VERDE ISSUES AND OPTIONS IN THE ENERGY SECTOR AUGUST 1984 This is one of a series of reports of the UNDP/World Bank Energy Sector Assessment Program. Funding for this work has been provided, in part, under the supplementary "Small-Country Assessment Program" financed by the Swedish Government through the UNDP, and the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosed without the authorization from the Govern- ment, the UNDP or the World Bank. I I~~~~~~~~~ ABSTRACT The energy situation of Cape Verde is characterized by a total reliance on imported petroleum fuels for meeting the needs of transport, industrv, and a third of the households, and the gradual destruction of the nat-rally sparse plant cover which provides fuel for two-thirds of the households. An unrelenting drought, which has lasted since 1967, has contributed to an extremely high level of external dependence and has accelerated the process of desertification. Faced with these difficult conditions, the Government's overall development objectives are to reduce external dependence and combat desertification, and the energy sector's objectives are to minimize the economic cost of energy and increase the reliability of its supply. On the demand side, this can be done by in- creasing the efficiency of energy use, through improvements in the power plants and distribution networks, reducing the losses of desalinated water and popularizing the use of fuel efficient woodstoves. On the supply side, efforts need to concentrate on the development of the country's own energy resources, the most important of which is fire- wood. Finally, the achievement of these objectives requires that energy prices reflect their full economic costs, and the consumption of energy intensive goods, such as desalinated water, not be subsidized. I I ACRONYMS CILSE International Commission to Combat the Desertification of the Sahel DGE Directorate General of Energy (Planned) ENAC.L National Enterprise for Fuels and Lubricants INIT National Institute of Technological Research MDR Ministry of Rural Development SEINE State Secretariat of Industry and Energy, Ministry of Economy and Finance USAID United States Agency for International Development ABBREVIATIONS PREFIXES cap capita kilo - 1,000 c.i.f. cost, insurance, frieght mega - 1,000,000 f.o.b. free on board giga - 1,000,000,000 GWh Gigawatt hour ha hectare hp horsepower kgoe kilogram of oil equivalent km' square kilometer kWh kilowatt hour 1 liter LV low voltage m meter mn - million cubic meter MW Megawatt MV medium voltage n.a. not available ton metric ton toe metric ton of oil equivalent tpy tons per year CURREMICY EQUIVALENTS Currency Unit: Escudo de Cabo Verde (ECV) Exchange Rate: 77.00 ECV/US$ 1/ Fuel Conversion Factors (Net calorific content expressed in tons of oil equivalent of 10.2 mi:lLion kilocalories) Product Conversion Factor Density Electric Power 86.00 toe/GWh a/ - Butane 1.05 toe/ton 0.53 Gasoline 1.03 toe/ton 0.74 Kerosene 1.01 toe/ton 0.83 Jet Fuel 1.02 toe/ton 0.83 Gas Oil 1.00 toe/ton 0.84 Fuel Oil 0.94 toe/ton 0.96 Firewood 0.33 toe/ton 0.70 Other Biomass b/ 0.25 toe/ton a/ This reflects the energy content of electricity. The amount of fuel that is required t:o generate electricity in Cape Verde is about 250 toe/GWh, whic:h implies a. conversion efficiency of 34%. b/ Includes bean stalks, corn stalks, shrubs, agave leaves, palm leaves, coconut husks, dung, and grasses. This report is based on the findings of an energy assessment mission which visited Cape Verde in November, 1983. Its members were Andres Liebenthal (mission leader), Franciscus Bertrums (power engineer, con- sultant), Geoffrey Gray (forester, consultant) and Jean-Rene Leidner (wind energy expert, consultant). A draft of the report was discussed with the Government in July 1984. 1/ This was the exchange rate in November, 1983. TABLE OF CONTENTS Page SUJMMARY ..................................................... i I. INTRODUCTION: THE ECONOMIC AND INSTITUTIONAL CONTEXT . . 1 Energy in the Economy .. 1 Institutional Framework .. 2 II. ENERGY CONSUMPTION: CURRENT STATUS AND CONSERVATION OPPORTUNITIES .. 5 Introduction .. 5 The Data Base .. 5 The Consumption of Firewood and Other Biomass Fuels . . 6 The Consumption of Petroleum Products . . 9 The Consumption of Electricity ............................ 10 The Consumption of Desalinated Water . . 12 III. ENERGY RESOURCES: DEVELOPMENT POTENTIAL AND CONSTRAINTS .... 13 Introduction .. 13 The Development of Firewood Resources . . 13 The Development of Wind Energy . . 19 The Development of Geothermal Resources .. 23 IV. ENERGY PRICING . . ............................................ 24 Petroleum Products Prices .... 24 Power Tariffs ............................................. 25 The Price of Desalinated Water .... 26 Firewood Prices . . .. 27 V. INVESTMENT AND TECHNICAL ASSISTANCE PRIORITIES . . 30 Sectoral Development Priorities . . 30 Power Subsector Investments . . 30 Petroleum Subsector Investments . . 32 New and Renewable Energy Investments . . 32 Afforestation Investments ..... . .33 Technical Assistance Requirements .............. 33 Energy Planning ... 33 Power Subsector .. 34 Afforestation . ......... ....... 35 ANNEXES 1. Bibliography . . ................................. 36 2. Energy Balance, 1982 ........................ ................ 38 3. Tree Species for Afforestation ..................39 TABLES 1.1 Major Economic Indicators. ........ . ..... . ........ 2 2.1 Summary Energy Balance. ......... .... .. . .. 6 2.2 Petroleum Products Consumptions u m p t i on......... 10 3.1 Afforestation Areas ...... ..... o ....... .... ....... 15 3.2 Firewood Production Potential ........16 3.3 Firewood Production and Consumption Potential . .19 4.1 Petroleum Products Prices ........ .... .o.. .......... 25 4.2 Electric Power Tariffs.a.r.... ... ...... .. ........ . 26 5.1 Planned Energy Investments.... 31 MAPS 18132: Petroleum Products Consumption 18133: Power Supply System 18134: Forest Resources SUMMARY Energy Situation and Prioritie- 1. The energy situation of Cape Verde is ch_racterized by a total reliance on imported petroleum fuels for meeting t-e needs of transport, industry and a third of the households, and the gradual destruction of the naturally sparse plant cover to provide fuel `or the remaining two thirds of the households. In 1982, commercial energy consumption was 116 kgoe per capita, and firewood and other biomass use was tentatively estimated at 163 kgoe per capita. Imports of petroLeum fuels have gradu- ally increased from about 29.5 thousand tons in 1979 to 35.1 thousand tons in 1982, equivalent to about 9% of total imports and one-third of export earnings in 1982. In addition, Cape Verde services an important international bunker market (at the port of Mindelo and Sal Airport), which consumed 149 thousand tons of petroleum fuels in 1982 (down from 174 thousand tons in 1979) and contributed about half of total export earnings. The consumption of firewood and other biomass fuels has been estimated at 49 thousand toe per year, but this consumption rate is asso- ciated with a very severe shortage of firewood. People burn wood and twigs when they can, but dried stalks, leaves and dung appear to be equally important sources of fuel. Excessive trimming of trees and up- rooting of shrubs and grasses for fuel and forage have been a major cause of erosion, but have been virtually impossible to control in the absence of affordable substitutes. 2. Faced with these difficult conditions, the Government's overall development objectives are to reduce the country's dependence on foreign aid and to combat desertification, and the objectives for the energy sector are to minimize the economic cost of energy and increase the reli- ability of its supply. Based on these objectives and a review of the energy situation, the mission concluded that the first priority for the sector is to increase the efficiency of energy supply and utilization, and to continue developing the country's single major energy resource, firewood. Principal Issues and Recommendations Energy Pricing 3. The Government understands the importance of encouraging the rational use of energy and the development of domestic energy resources by setting the prices of the various energy forms used in Cape Verde at levels that reflect their full economic cost. However, the pricing methodology currently used is based on unrealistic amortization schedules and returns on capital that are not sufficient to allow the companies to replace their fixed assets when they wear out and finance their future - 11 - expansion. In view of the need to strengthen t~ze financial foundation of the enterprises, it is recommended that the Gc-vernment request separate cost accounting for power and water, realisti= amortization scheduling based on revalued assets and explicitly rec:gnize the capital costs associated with energy supply (paras. 4.1-3). With regard to firewood prices, the mission recommends that the Government develop a strategy to ensure that the entire producible output is so'l, even though a portion of it may have to be priced at a level below replacement cost, as a way to reduce the pressure on the country's sparse vegetative cover (para. 4.7). In addition, in view of the fact that water desalination uses more energy than any other industry, the current subsidy of the price of de- salinated water is equivalent to a subsidy on energy consumption. Here again, the mission recommends that its price -e raised to reflect its full economic cost and encourage its more rational utilization (para. 4.4). Power Investments 4. The most economical way to increase the supply, and at the same time reduce the cost of electricity, is by improving the efficiency of power generation (paras. 2.12 and 5.10) and reducing the losses between generation and sales from the current level of 38% to about 12-15% (para. 2.13). Electra is already preparing the replacement and rehab- ilitation of its major distribution systems for which the budget estimate of 81 million ECV (US$1.1 million) appears to be inadequate. Further preparation is needed to determine the scope and financial requirements of the projects that will be required to bring down losses to an accept- able level. These projects, plus a few minor ones that involve the over- haul of equipment and improvement of working conditions, deserve the highest priority (para 5.2). Afforestation Investments 5. Firewood from forest plantations is the lowest cost fuel available to the country and the lowest cost fuel that can be supplied to the rural population to reduce the pressure on the remaining vegetative cover (para. 3.5). The current budgeted funding leveL of about 125 million ECV (1.6 million US$) per year appears to be sufficient for the afforestation of 3,000-3,500 ha. per year. This rate of afforestation needs to be sustained to plant. all the lands suitable for tree planting by the end of the century (para. 5.5). In addition, to balance fuelwood supply with demand and reduce the use of shrubs, grasses and other organic materials that are needed to protect the soil, it is absolutely crucial that the afforestation effort be complemented by a program to introduce efficient woodstoves (paras. 2.7-8). Wind Energy Development 6. Given the favorable wind regime in Cape Verde, the utilization of wind energy for power generation, water desalination and water pumping appears to have a significant potential for economic development. Based - iii - on the technical and economic characteristics of the system, which remain to be verified in pilot tests, hybrid wind/diesel power generation systems have the potential for substituting about 390 toe of gasoil per year (para 3.8) and wind water pumps could -bviate the need for 200-400 toe of gasoil per year (para. 3.12). There-ore, the projects to demon- strate and develop these applications, budgeted at 70 million ECV (0.9 million US$) for 1984/85, deserve high prior:-y. Technical Assistance Requirements 7. On the basis of the discussions in the report, the following recommendations would benefit from appropriate technical assistance projects: (a) the consolidation of the recently created Directorate General of Energy to formulate energy development strategies, coor- dinate sectorwide planning and prepare the energy sector in- vestment program (paras. 1.4 and 5.7); (b) the creation of an Energy Information Center to collect, pro- cess and publish energy sector data, operate a technical library, and run a public information program (paras. 2.2 and 5.7); (c) the organization of an Improved Woodstoves Commercialization Program, as a critical component of a strategy to balance firewood supply with demand (paras. 2.8 and 5.8); (d) the implementation of a Management Information System (MIS) to enable Electra's management to separate power-related from water-related costs and thus provide a solid basis for setting tariffs. The MIS would also allow management to set technical and financial performance targets and monitor their achievement (para. 4 and 5.9); (e) the design of a Power System Loss Reduction Program to evaluate the introduction of modern power plant control systems and load management techniques, the redesign of system standards, and the improvement of maintenance and operational practices and procedures (para. 5.10); (f) a review of the desalinated water supply system, to develop a long term expansion program to meet anticipated requirements, and to analyze the possibilities for reducing the losses and improving the reliability of water distribution (para 2.15 and 5.11); (g) the establishment of a forestry data recording and collection system that would gather information on planted areas, survival rates, growth rates, standing volumes, planting costs, produc- tion, rainfall, etc. (para. 3.5a); - iv - (h) the formulation and implementa-ion of a forest management pro- gram that would seek t:o maximize the economic value of existing plantations (para. 3.5c); (i) an expanded training program fc- Forest Service staff to ensure that sufficient staff will be a-:ailable to execute the national afforestation program as it is :anned (para. 3.5e). / I. THE ECONOMIC AND INSTITUTIONAL CONTEXT Energy in the Economy 1.1 Cape Verde is a small country of approximately 300,000 inhabi- tants, with a GDP of about US$260 per capita, scattered over nine semi- arid, volcanic islands with a total area of 4,033 km2. The country's natural resource base is poor and has been rapidly deteriorating as a result of the severe drought which has afflicted it since 1967. The overwhelming characteristic of Cape Verde which conditions its political, economic and social development is its extreme dependence on foreign aid. In recent years, close to 40% of basic food needs have had to be met by international donations, and more than 80% of investment needs have been met through foreign grants and credits. This high degree of external dependence is expected to be a feature of the country's economy in the foreseeable future. Faced with these difficult conditions, the Government's development strategy, as described in the First National De- velopment Plan (1982-85), is aimed at reducing the country's external financial and economic dependence and combatting desertification. 1.2 The energy situation of Cape Verde is characterized by a total reliance on imported petroleum fuels for meeting the needs of transport, industry, and a third of the households, and the gradual destruction of the naturally sparse plant cover which is the only source of fuel for two thirds of the households. As of 1982, commercial energy consumption amounted to 116 Kgoe per capita, and firewood and other biomass use was tentatively estimated at about 163 kgoe per capita. Imports of petroleum fuels have gradually increased from about 29.5 thousand tons in 1979 to 35.1 thousand tons in 1982, which was equivalent to about 9% of total imports and about one-third the value of export earnings. In addition, Cape Verde services an important international bunker market (at the Port of Mindelo and Sal Airport), which consumed 148 thousand tons of petro- leum fuels in 1982 (down from 174 thousand tons in 1979) and contributed about half of total export earnings. Thus, the country's traditional role as a fueling station for international traffic continues to provide a quarter of its GDP. Table 1.1 illustrates the recent trend of these variables in relation to major economic indicators. The consumption of firewood and other biomass fuels has been estimated at 49 thousand toe per year, but this consumption rate is associated with a very severe shortage of firewood. People burn wood and twigs when they can, but dried stalks, leaves and dung appear to be equally important sources of fuel. Excessive trimming of trees and uprooting of shrubs and grasses for fuel and forage have been a major cause of erosion, but have been virtually impossible to control in the absence of affordable substi- tutes. Given the importance of energy to the country's future develop- ment, the Government has planned to invest about 420 million ECV (5.5 million US$) per year during the 1984-85 period, equivalent to 6% of the total public investment budget, and 5% of GDP, in the energy sector including afforestation investments. -2- Table 1.1: tAJOR ECONOMIC INDICATORS 1979 1980 1981 1982 Population (thousands) 293 296 298 300 GDP/cap (constant US$ of 1982) 249 244 207 260 (millions of constant US$ of 1982) Gross Domestic Product 73 72 62 78 Gross Domestic Investment 56 41 58 63 of which: Energy a/ 1 4 4 7 Exports of G and NFS 16 21 24 31 of which: Services to Transportation b/ 8 9 15 21 Imports of G and NFS 98 98 105 101 of which: Petroleum Product:s c/ 5 5 8 9 a/ Including desalination and not including afforestation. v/ Includes services, fees and sales of fuels and other goods to international transportation, net of import costs. c/ Does not include reexports. Source: Cape Verde: Country Economic Memorandum (in preparation). Institutional Framework 1.3 The management of the energy sector is centered around the fol- lowing Government agencies: (a) the State Secretariat of Industry and Energy (SEINE) of the Ministry of Economy and Finance is charged with the planning and regulation of supply and distribution systems for petroleum products, electric power, water desalination, new and renewable energy sources, energy conservation and energy pricing; (b) the Forestry Service of the Ministry of Rural Development (MDR) is in charge of afforestation, forest protection, forest man- agement, and the exploitation and sale of forest products; (c) the Division of Renewable Energies (DER) of the MDR is in charge of promoting the use of renewable energies in rural areas. It is primarily active in the testing, installation and manufacture of windmills for water pumping, desalination and small scale electricity generation; (d) the National Institute for Technology Research (INIT) is in charge of the transfer and adaptation of available technologies to meet the country's requirements. It is studying the poten- tial for wind power generation, geothermal energy, biogas and solar ponds. In addition, the actual supply of commercial energy is handled by the following companies, which are regulated by the SEINE: (e) the National Enterprise for Fuels and Lubricants (ENACOL), a government owned company created in 1979, which supplies about 38% of the domestic market and 7% of the reexport market for petroleum fuels; (f) Shell Cabo Verde, a private company established in 1977, which supplies the rest of the petroleum fuels market; (g) Electra, a government-owned utility created in 1982 with the merger of the Praia, MindeLo and Sal power utilities, is in charge of the major generation and water desalination systems. It operates a 2822 kW power plant in Praia, a 6560 kW power plant plus a 2400 m3/day multi-stage flash desalination plant in Mindelo, and a 1000 kW power plant plus a 660 m3/day reverse osmosis desalination plant in Sal; (h) ten rural power plants, owned and operated by the local coun- cils and supervised by the Ministry of Interior, with a total capacity of 1692 kW; (i) two rural power plants owned and operated by the MDR, with a total capacity of 360 kW; (j) two captive power plants are operated on Sal by the airport and a hotel. Their total capacity is 1740 kW. 1.4 These institutions have now reached the size and stage of de- velopment that makes it necessary to establish a sectorwide project plan- ning and coordination capability that would optimize the sector's invest- ments in the light of the country's development priorities and overall financial constraints. Coordination is needed to organize the gradual takeover of the rural utilities by Electra, and the integration of INIT's wind energy devices into the Praia power network. Planning is needed to steer the public enterprises of the sector away from dependence on grants and subsidies towards financial independence and least cost expansion. Analysis is needed to understand the structure of energy demand, estimate the requirements for the future, and the associated investment needs. Thus, the mission supports the Government's initiative to create the Directorate General of Energy (DGE) out of the Directorate General of Industry and Energy within the SEINE as a center of expertise to formu- late energy policy, coordinate and screen energy investments and regulate energy prices. In the mission's view, the following could constitute the main tasks of the recently created DGE: -4- (a) the formulation of alternative energy development strategies and policy measures; (b) the analysis of energy resources, supply and consumption and the preparation of forecasts of energy supply and demand; (c) the formulation and implementation of an energy pricing policy consistent with the need to encourage the development of domes- tic energy resources and maintaining the financial health of the sector enterprises; (d) the preparation of an energy sector investment program consis- tent with national development objectives and the country's financial capabilities and the review of the budgets of the public enterprises in the sector; (e) the coordination of international technical assistance projects in the energy area. DOE should participate in the definition of the projects and the selection of qualified Cape Verdean in- stitutions to implement them. (f) the establishment oE an energy information center with three components: an energy statistics collection, processing and publication system, a technical library, and a program to pro- mote and inform the public about energy policies and techno- logies. The need for a statistical system will be discussed in greater detail in para. 2.2. The promotional function of the center could play a major role in the energy conservation stra- tegy (see para. 2.8); For these tasks to receive suEficient attention, the DOE staff will have to be supported initially by technical assistance to develop the capabi- lities, procedures and technical instruments necessary to perform their functions. In view of the immediate need to prepare the energy part of the Second (1986-89) National Development Plan, it is recommended that this opportunity be used as a catalyst to consolidate the DOE and prepare it to fulfill its role (see para. 5.7). II. ENERGY CONSUMPTION: CURRENT STATUS AND CONSERVATION OPPORTUNITIES Introduction 2.1 Two facts stand out regarding the overall level of energy con- sumption in Cape Verde: the value of petroleum product imports in 198- amounted to about a third of the value of export earnings, and only about half of the firewood requirements of the population is met by firewood. The rest are met by other biomass fuels such as stalks, shrubs, leaves and dung, whose continued use contributes to the erosion and degradation of the soil. While the trends in firewood and other biomass consumption are not known, the domestic consumption of petroleum products increased at 6.0%/year over 1979-1982. This was almost three times the growth rate of real GDP, which averaged 2.2%/year during the period. The average commercial energy consumption of 116 kgoe per capita appears to be high in relation to the estimated GDP of $260 per capita in 1982, probably a result of the heavy reliance of the economy on such energy-intensive activities as water desalination, interisland transport, fisheries and irrigation pumping. The overall structure of energy consumption and several important conservation opportunities are discussed below. The Data Base 2.2 The energy sector and statistical services of the country are still being organized and have not yet developed a comprehensive energy information collection and processing system. In their current stage of development, the oil companies report their imports and sales, but not yet the changes in stocks or the type of consumer (e.g., industrial, commercial, household, etc.). Electra reports its production and sales of electricity and water but almost nothing is known about the rural utilities, as they are operated by the local councils who report only financial data to the Ministry of the Interior. Only limited information is available about the production and consumption of firewood; as the official saLes by the Ministry of Rural Development (MRD) constitute only a fraction of the total supply, the remaining sales are largely illegal, and the amounts collected by the users themselves have not been surveyed in detail. To obtain a better overview of the pattern of energy use in the country for the planning and evaluation of energy projects, it is recommended that the Government establish an energy statistics collec- tion, processing and publication system, as proposed in para. 1.4. Under such a system, the oil companies and their wholesale agents, Electra and the rural utilities, the MDR and other firewood producers would report their imports, production, consumption and sales of energy products on a regular basis, with due consideration of the need to avoid duplication with existing reporting networks. These reports need to be complemented by periodic surveys of energy users, particuLarly those about whom no - 6 - information is available from the energy suppliers, including users of commercial fuels and firewood. 2.3 As a provisional step, the mission has produced a tenta:ive energy balance for 1982 based on the available information. This er^rgy balance is shown in Annex 2 and summarized below. Table 2.1: SUMMARY ENERGY BALANCE (1982) (toe) Other Electri- Petroleum Firewood Biomass city Products Total Production 28,000 21,000 49,000 Imports 184,014 184,014 Reexports (149,068) (149,068) Gross Consumption 28,000 21,000 34,946 83,946 Power Generation 1,521 (4,922) (3,401) a' Trans. & Dist. Losses (585) (585) Net Consumption, 28,000 21,000 936 30,024 79,960 of which: Industry 218 n.a. n.a. Transport n.a. n.a. Household/Commerce 28,000 21,000 718 6,260 55,978 a/ Conversion losses (waste heat). Source: Annex II The Consumption of Firewood and Other Biomass Fuels 2.4 As shown in Table 2.1, about 60% of the energy consumed in the country is met by firewood and other biomass, but this constitutes one of the aspects of the energy situation about which not enough is known. Recent estimates of firewood consumption (variously defi.ned) range from 29,000 tons (9,700 toe) 1/ to 108,000 tons (36,000 toe). 2/ The mission's estimate is drawn from De Gier 3/ who in 1981 surveyed the energy use of 133 families (0.9% of the population) in the rural areas of Santiago. De Gier's main findings were: 1/ Freeman e.a. (1978). 2/ Soares e.a. (1982). 3/ De Gier (1982). (a) the average energy requirement for cooking is about 2.0 kg of firewood (0.66 kgoe) per person per day; and (b) when firewood is not sufficiently available, the difference is made up with other biomass fuels and kerosene. Th_s, the energy needs of the rural areas of Santiago were net as follows: 18% by firewood sticks greater than 2 cm in diameter 32% by firewood sticks between 0.5-2 cm in diameter 13% by congo bean stalks 12% by scrubs 9% by agave leaves 8% by corn stalks, palm leaves and coconut husks 4% by dung and 4% by kerosene; (c) a separate survey in Praia (Santiago) indicated the cooking fuel needs of the urban population were met as follows: 22% by firewood 60% by kerosene 18% by butane. These survey results extrapolated to the entire population lead to a tentative estimate of 84,600 tons per year (28,000 toe) of firewood and 83,000 tons per year (21,000 toe) of other biomass fuels being consumed by about 70% of the households. 2.5 In addition to the firewood and other biomass fuels consumed by households for cooking purposes, some firewood is also consumed by bak- eries, lime kilns, ceramic kilns, rum (aguardente) distilleries and other rural industries about which no statistics are available. The bakeries are of particular interest, as they prefer to use firewood even though gasoil would be cheaper, because of the better flavor it imparts to the bread. There are even reports of occasional firewood imports (from Guinea Bissau and Portugal) to meet the needs of the bakeries, which is another indication of the stringency of the firewood shortage and of the price that some users are willing to pay to obtain this fuel. A recent report 4/ has estimated the firewood consumption by the bakeries in Praia and Mindelo at 800 tons per year (266 toe). 2.6 Given the shortage of firewood which has led some households that depend on it to burn leaves and shrubs and bakeries to resort to occasional imports, it is evident that better information on site-speci- fic firewood consumption and production patterns would be useful for planning future afforestation and forest management programs. To provide 4/ Soares, e.a. (1982). - 8 - a better basis for judgement, it is recommended that the Government undertake a nationwide survey cf energy use patterns in the households. To improve the reliability of the survey, it is recommended that the actual consumption of a small stratified sample of survey res-ondents be measured daily (over one-two weeks) to compare actual with s:ated con- sumption of all types of fuel. This survey could be one of the first technical assistance projects organized or coordinated by -ne energy information center proposed in para. 1.4. 2.7 In addition to measures related to the supply of firewood, which will be discussed in para 3.2-3.4, th,e imbalance between supply and demand could be greatly reduced through the use of improved stoves. The relatively high use rate of 2 kg per person per day (0.24 toe per person- year) is twice the consumption level estimated for other Sahelian coun- tries and considerably above the minimum requirement of 0.02 toe per person-year of useful energy to meet basic cooking needs. On the one hand this is due to the popularity of cachupa, a maize-and-bean dish that requires three to four hours cooking time. Any reduction in the popu- larity of this dish would reduce the pressure on firewood supplies. On the other hand the high firewood use rate is due to the prevalence of the traditional three-stone fires, whose end-use efficiency is only about 10- 15%. If the three-stone fires were replaced by fuel-efficient portable metal stoves with efficiencies of 20-30% (and supplemented by hayboxes), firewood requirements could be reduced by one-half. All that is required is the sale of a stove to each of the approximately 50,000 households in the country. 2.8 The possibility of introducing improved woodstoves has already been discussed at a seminar organized in Cape Verde by CILSS-Club de Sahel, with participants from the MDR, the Organization of Women (OMCV), INIT, the Fogo-Brava Integrated Development Project (FBIDP) and other organizations. Woodstove components are also included in the work pro- gram of the FBIDP and the FAO/Belgian Forestry Project. Nevertheless, while there is a considerable amount of interest in this subject, the woodstove program that is evoLving out of the CILSS seminar aims at reaching only half the households by the year 2000. Given the critical contribution that efficient wocdstoves can make to balancing the suppLy and demand for firewood and thus reducing the pressure on the islands' scant vegetative cover see para. 3.6), it is recommended that the wood- stove program be aimed to cover all firewood users (about 70% of house- holds) within ten years. The recommended program would contain the fol- lowing steps: (a) select a technically sound stove (and hay box) design adapted to local requirements and purchasing power; (b) establish a large scale production capability based on local metalworking shops; (c) launch a commercialization effort using modern marketing tech- niques with the objective of selling 5-10,000 stoves in the - 9 - first year. Only by designing this effort on a large scale can one hope to achieve an improvement in the country's battered ecological balance. As a supplement to energy saving woodstoves, this program should also consider the possibility of popularizing more efficient coc,ing utensils such as pressure cookers, and less energy consuming ingred:ents such as precooked grains. The Consumption of Petroleum Products 2.9 Outside of the traditional fuels, Cape Verde's energy require- ments are met entirely by imported petroleum products. As shown in Table 2.2, the country's petroleum products market is characterized by an unusually large share of reexports, which in recent years nave amounted to between four and six times the level of domestic consumption. Thus, in 1982, reexports of 148,600 tons of fuels were equivalent to 4.2 times the total domestic consumption of 35,100 tons of petroleum products. This high level of sales to foreign airlines and ships is one of the major dividends of the country's location, but the future level of these sales and the net revenue that can be derived from them largely depend on factors that are beyond Cape Verde's influence: the volume of interna- tional traffic, the refuelling range of planes and ships, the pricing policies of competing ports (mainly Dakar and Las Palmas), and inter- national political developments. Thus, while fuel reexports and ancil- lary services currently constitute an attractive market, which has con- tributed over half of the country's export earnings, the future of this market is associated with competitive and political risks whose evalu- ation is beyond the scope of this report. 2.10 As shown in Table 2.2, the domestic consumption of petroleum products has grown at an average rate of 6% over the 1979-1982 period, and this growth has been led by the consumption of gasoil and jet fuel. The structure of final consumption is not known in detail. However, the major fuel users (in 1982) are water desalination plants (about 4,900 toe of fuel oil), power plants (about 4,922 toe of gasoil), national shipping - interisland and overseas (5,135 toe of gasoil), national aviation (2,415 toe of jet fuel and 148 toe of gasoline), national fisheries (681 toe of gasoil and 201 toe of gasoline), household and commerce (4,641 toe of kerosene and 1,619 toe of butane), road transport (about 6,000 toe of gasoil and 2,033 toe of gasoline) and irrigation pumping (about 200-400 toe of gasoil). Thus, on a very tentative basis, the domestic consump- tion of petroleum products can be attributed to the following activities: 44% to transportation, 10% to industry (including agriculture and fisheries), 18% to the residential/commercial sector, 14% to water desalination, and 14% to power generation. - 10 - This pattern of consumption and the burden it imposes on the country's balance of payments make it woirthwhile to evaluate closely the opportun- ities for reducing petroleum product imports through increases in effi- ciency and substitution of other fuels. While transport and industry constitute the major petroleum using sectors, their consumption is highly dispersed and less amenable to concentrated policy attention. On the other hand, the potential for energy conservation in the public utilities (water desalination and power distribution) appears to be very high and will be discussed in the following sections. In addition, this report will briefly discuss the potential for wind energy use in power genera- tion (see para. 3.8), water desalination (see para. 3.11) and irrigation pumping (see para. 3.12). The inter-island pattern of petroleum products consumption is shown in Map 18132. Table 2.2: PETROLEUM PRODUCTS CONSUMPTION, 1979-1982 (metric tons) Avg. Growth Rate (1979-82) (toe) 1979 1980 1981 1982 (Z) 1982 Domestic Consumption Fuel Oil 5,983 5,695 5,833 6,880 4.8 6,467 Gas Oil 12,641 16,020 18,628 17,420 11.3 17,420 Jet Fuel 1,800 1,879 1,988 2,368 9.6 2,415 Kerosene 5,479 5,314 4,512 4,595 -5.7 4,641 Gasoline 2,019 2,139 2,244 2,313 4.6 2,382 Butane 1,600 1,137 1,420 1,542 -1.2 1,619 Total Domestic Consumption 29,522 32,184 34,625 35,118 6.0 34,944 Reexports Fuel Oil 76,746 48,732 51,069 29,429 -27.3 27,663 Gas Oil 10,456 7,246 6,411 7,847 -9.1 7,847 Jet Fuel 86,683 99,540 110,063 111,331 8.7 113,558 Avgas -_ _ 7 11 1 - 1 Total Reexports 173,885 155,525 167,554 148,608 -5.0 149,069 The Consumption of Electricity 2.11 The consumption of electricity is growing rapidly and repre- sents a large share of petroleum use in the country. At the major con- sumption centers (Mindelo, Praia and Sal), electricity sales amounted to 8.8 GWh (754 toe) in 1982, up 28% from 1981. Power sales of the rural utilities are not known, but based on total sales of gasoil for power generation and assumed distribution losses of 30%, they may be estimated at 2.1 GWh. The capacity distribution of the power supply system is shown in Map 18133. About 76% of total electricity use in the country may be attributed to the residential-commercial sector and the rest to industry. The potential conservation savings that could be achieved at the generation plant and distribution system level are of particular interest because of the simplicity of implementation. - 11 - 2.12 The size of the fuel savings that can be obtained at the power plant cannot be estimated without a detailed evaluation of their opera- tions. Electra's gasoil consumption in 1982 was 3545 toe, and the re- mainder of the gaso l sales for power generation (i.e., 1,377 toe) was attributed to the r-:ral utilities and used as a basis to estimate their power generation. :n order to identify the scope for fuel savings, it is recommended that Electra and the rural utilities maintain a record of the fuel consumed and electricity produced by every unit. Such a record of the actual fuel' consumption by individual generating units would be in- valuable in the scheduling of units, making more efficient use of units, planning maintenance work, and planning an equipment replacement sche- dule. This record would also provide a valuable first step towards a power loss reduction program (see para. 5.11). In addition to reducing the consumption of fuel, the introduction of modern power plant control systems, the improvement of operational and maintenance procedures arid other innovations that could introduced by a loss reduction program would also improve the reliability of the system and discourage the duplication of capacity. 5/ 2.13 A second area where major conservation savings can be achieved is through the reduction of distribution losses. These are reported to be about 36% in Praia and 39% in Mindelo, much higher than the 12-15% level that may be expected in a system of that size and fuel cost. 6/ A review of the system layout suggests that the technical portion of these losses may be due to the design of the system: factors such as inade- quate cross-section in the medium- and low-voltage conductors, excessive transformer capacity and excessive length of low-voltage lines. The re- placement of the medium- and low-voltage distribution system is already contemplated under the 1982-85 National Development Plan, and its cost has been tentatively estimated by Electra at 81 million ECV (1.1 million US$). This estimate appears to be inadequate and further preparation is needed to determine the scope and financial requirements of the projects that will be needed to reduce distribution losses to 12-15% of genera- tion. At this reduced loss level an additional 3.2-3.7 CWh of electri- city (i.e. a 40% increase over 1982 sales) could be sold at no increase in fuel expenses (or generating capacity). Considering the fuel cost saving of 24-28 million ECV/year (1,192-1,378 toe of gasoil), the prepa- ration and implementation of these projects deserve the highest priority. 5/ Such as the 3 x 55 kW recently installed at the new grain silos in Praia. 6/ These losses include technical losses, unbilled and unpaid electri- city, and theft. The relative shares of these categories is not known, but Electra believes that they are mostly due to technical reasons. - 12 - The Consumption of Desalinated Water 2.14 Because of the shortage of sweet water resources on Sao Vicente and Sal, these two islands depetnd on desalination of seawater for almost all of their requirements. In 1982, Sao Vicente produced 510,000 m3 and Sal 10,000 m3 of desalinated water. An estimated 4,900 toe of fuel oil were used to produced this water, equivalent to 14% of the country's pe- troleum consumption. Thus, water desalination uses more energy than any other industry in the country, and the consumption of desalinated water is of major interest from an energy planning perspective. 2.15 Of particular concern is that only 58% or 18 liters/cap/day of the total amount of water produced was sold to the end-users, while the remaining 42% (equivalent to 2,058 toe of fuel oil) was lost in the dis- tribution system, because of frequent ruptures and excessive leaks. This level of leakage appears excessive in the lI3ght of the high cost of de- salinated water (estimated at 310-460 ECV/m ) and suggests that a com- prehensive review of the desalinated water supply system is urgently needed. This review should consider not only the replacement or rehabi- litation of the existing water distribution network but also the possibi- lity of installing a two-tier delivery system with separate systems for drinking water - of which only 2 to 4 liters/cap daily are needed - and secondary uses, for which lower water quality standards may be accept- able. To minimize investments, the drinking water distribution system could rely more on tankers and bottles, and the secondary water distribu- tion system could use the existing pipes, which would reduce the cost of the distribution losses. Because of the important cost and fuel savings that could be achieved through an improvement in the existing desalinated water distribution systems, it is recommended that this review be under- taken as soon as possible (see para. 5.12). - 13 - III. ENERGY RESOURCES: DEVELOPMENT POTENTIAL AND CONSTRAINTS Introduction 3.1 To meet its growing energy requirements, Cape Verde is faced with the need to develop its domestic energy resources to the full extent that is justified by the high cost of imported energy and the current state of technology. While the available natural resources are not abun-' dant, they can make a substantial contribution to the country's energy balance and their development needs to be planned in coordination with power and petroleum related investments that depend on imported fuel. The most important of the domestic energy resources is firewood, which already meets about a third of the country's energy consumption. Its further development to the extent technically and economically feasible is an urgent priority not only because it is an economic substitute for petroleum products but also because it can help to reduce the consumption of grasses, leaves and shrubs which is aggravating desertification. The second most important available resource is wind, which is already being harnessed for water pumping and can also be used as a direct substitute for imported petroleum in power generation. The third resource that needs to be considered for the future is geothermal energy; it is avail- able on Fogo but its economic development potential remains to be proven. 7/ The development of these resources is discussed below. The Development of Firewood Resources 3.2 For the 70% of the population that cannot afford kerosene or butane, there is a severe firewood shortage, which has led to the exten- sive use of other organic fuels, putting pressure on the islands' sparse vegetative cover. The excessive trimming of trees and uprooting of shrubs and grasses for fuel and forage has been a major contribution to erosion but has been impossible to control in the absence of affordable substitutes. The effects of erosion, continued over centuries, have been staggering. While in the 16th century, the higher islands were reported to be well forested and the lower islands were covered with grasses, it is now estimated that about 69% of the total area of the country (i.e., 279,300 ha) is wasteland caused by periodic droughts, uncontrolled graz- ing by goats, removal of plant cover for fuel and forage and the erosive action of wind and water. Of the original natural forest only individual trees are left. The situation is aggravated by the length of the current 7/ Of the remaining resources being considered, biogas has a very limited scope because of the lack of large quantities of waste materials, and solar ponds have not reached a state of development that would permit a judgement of their economic potential. - 14 - drought, which has lasted since 1967 and which suggests that present con- ditions may be part of a longer term shif- of the climate. Given the risk that, with the continuation of present trends, Cape Verde might become a desert, afforestation has a vital role to play in the restora- tion of the vegetative cover to reduce erosion, improve water infiltra- tion and retention, and to produce fuelwood and forage. 3.3 The conditions for afforestation are particularly difficult for the following reasons: (a) the number of species that can tolerate the arid and semi-arid conditions is very limited. The results of four years of trials under the FAO/Belgium project have identified a few species able to produce fuelwood and forage (see Annex III). It is particularly important in the current period of prolonged drought that the most drought-resistant species be emphasized; (b) the short duration of the August-October "rainy season", which in 1983 allowed 4-7 days of planting in the low areas and 20-30 days in the high areas, requires mobilization of the work force for planting at a day's notice. The Government has responded to this constraint with careful planning of preparations and a massive mobilization program of volunteer workers drawn from government departments, the political party (PAICV), rural organizations and the general public; (c) the lack of rain in some years makes planting impossible unless water can be obtained and transported to the planting sites. In addition, water i.s also needed in the mid to late stage of the dry season following planting which is the most critical period for plant survival. Irrigation at this stage produces a much higher survival rate but unfortunately, water is rarely available for this purpose. The lack of water, in the form of rainfall or irrigation, is the most important limitation faced by the afforestation program; and (d) trees planted in arid zones must be mulched to retain moisture. In Cape Verde, plant: material for mulching is rarely available since such material is used for fuel or fodder. In spite of these difficult conditions, the Government's afforestation program has achieved impressive progress. The total reforested area has increased from about 3,000 ha at independence in 1975 to about 11,500 ha in 1981 and perhaps 16,500 ha today. The location of existing forest plantations is indicated in Map 18134. Table 3.1 summarizes the status of afforestation in each of the islands. These projects are highly labor - 15 - intensive 8/ and are being financed by the National Fund from the pro- ceeds of the domestic sale of international food aid. The cost of soil preparation and planting has been estima:ed at about 18,000 ECV/ha (about US$230) in the low areas and 40,000 EC7/ha (about US$520) in the high areas. Thus, considering that about 9,6O ha remain to be planted in the high areas and 45,600 ha in the low areas, the additional investment required to afforest all the land suitabce for trees may be estimated at 1,200 million ECV (about US$16 million). or about 67 million ECV (US$1 million) per year. To this should be added the cost of management, pro-- tection, harvesting, and replanting of harvested areas to arrive at the full cost of the forestry program. Table 3.1: AFFORESTATION AREAS Areas Planted to 1981 (ha) Areas to be Planted by 2000 (ha) High Areas Low Areas Total High Areas Low Areas Total Boa Vista - 1,409 1,409 - 2,520 2,520 Brava 27 81 108 250 480 730 Fogo 1,037 640 1,677 2,450 7,340 9,790 Maio - 963 963 - 1,850 1,850 Sal - 28 28 - 170 170 Santiago 2,025 2,913 4,938 3,815 24,760 28,575 Santo Antao 1,208 202 1,410 3,225 8,830 12,055 Sao Nicolau 252 412 664 480 2,880 3,360 Sao Vicente - 325 325 - 950 950 Total 4,549 6,973 11,522 10,220 49,780 60,000 Source: Soares, et al (1982). 3.4 While the benefits of afforestation will lie primarily in the slowdown or reversal of the desertification process, the reforestation program can also make an important and valuable contribution towards meeting the country's energy requirements. Table 3.2 shows estimates of the potential for firewood production from the islands, based on a de- tailed evaluation of the available soil types and land use potential. The postulated annual yields are based on recent experience obtained in Cape Verde with the named species, i.e. they were observed after the start of the recent drought. If the rainfall were to improve, the yields could be substantially higher. On the other hand, if current (post-1967) rainfall patterns were to continue indefinitely, the estimate suggests that the long term sustainable firewood production would amount to about 80,000 tons per year, equivalent to 9,720 tons of kerosene, with a retail 8/ About 2,500 laborers are employed year-round, plus many more volun- teers at planting time. - 16 - value of 275 million ECV (US$5 million). St/ If the use of improved wood- stoves becomes widespread, as recommended in para. 2.8, the quantity of avoided kerosene consumption could double. To this could be added the value of 15,000 tons per year (21,500 m3) of timber and 24,000 tons per year of forage that would also be provided from the same trees. Table 3.2: FIREWOOD PRODUCTION POTENTIAL Plantation Type Production Sylvo- Sylvo- Actual d/ vs. Potential Timber a/ pastoral b/ agricultural c/ Total Potential Timber Firewood (%) (tons/year) Boa Vista - 2,565 - 2,565 55 - 6,840 Brava - 325 630 955 8 - 1,585 Fogo 1,195 2,095 5,020 8,310 8 3,346 11,695 Maio - 1,750 - 1,750 55 - 4,565 Sal - 385 - 385 7 - 1,040 Santiago 1,580 17,250 7,800 26,630 11 6,104 34,920 Santo Antao 1,225 4,800 2,570 8,595 2 5,145 12,695 Sao Nicolau 115 2,440 660 3,215 13 420 4,100 Sao Vicente - 920 - 920 35 - 2,365 Total 4,115 32,530 16,680 53,295 22 15,015 79,805 a/ Assumed that the entire available! highland (above 800 m) area that is humid enough for afforestation will be planted with pine and eucaliptus, with annual yields of 3-4 tons/ha of timber and 1.5-2.5 tons/ha of firewood. b/ Assumed to be planted with prosopis and parkinsonia, with annual yields of 1 ton/ha of firewood. c/ Assumed to be planted with acacia with annucl yields of 1.2 tons/ha of firewood, interspersed with congo beans, with annual yields of 0.8 ton/ha of stalks usable for fuel. d/ Areas planted in 1981. Source: SCETAGRI (1979) and Soares, et. al (1982). 3.5 While the overall economic viability of the afforestation program cannot be demonstrated because oE the difficulty of quantifying the value of its environmental benefits, the economic value of its measurable outputs (firewood, timber, forage) appears to be (after the 9/ Based on DeGier's (1982) observation that, as used by the rural households of Santiago, 0.3 liter of kerosene is equivalent to 2 kg of firewood. This is consistent with the postulate of an end-use efficiency of 15% of firewood and 40% for kerosene. - 17 - first rotation, about seven years for firewood species and 30 years for timber) sufficient to cover the costs of the program, particularly so if the efficiency of the operation can be improved. 10/ With this in mind, it is recommended that the following avenues for increasing the economic returns of the program be explored: (a) the systematic recording and collection of basic information, on a country wide basis, on planted areas, survival rates, growth rates, standing volumes, planting costs, firewood pro- duction, forage production, rainfall, etc. Among other bene- fits, this would help to verify the applicability of the fire- wood yield data (used in this report), which is based on limited sample measurements, and identify the type of planta- tions that yield the best returns; (b) the revision and updating of the existing Forest Legislation in order to delimit clearly the forest domain, define a forest management and exploitation policy, strengthen forest protec- tion measures and strengthen the financial base of the Forest Service; (c) the formulation and implementation of a forest management pro- gram that would seek to maximize the economic vaLue of existing plantations. Thus, a modest timber production program using portable sawmills could possibly be established in some of the older plantations. The commercialization of fuelwood also needs to be put on a more systematic basis - current production by the Forest Service is only a few hundred tons, but could be 3,000-4,000 tpy, based on areas planted by 1975; (d) the extension services need to be strengthened to increase the cooperation and participation of the rural population in the afforestation programs. Particular aspects that need to be popularized are the basic concepts of land protection, agro- forestry and silvipasture and the techniques of tree planting, protection (from goats) and harvesting to encourage afforesta- tion on private lands, and the protection of existing trees. This would ensure that the existing stock of trees (which pro- duced about 84,000 tons of firewood in 1982) will not continue to be damaged through excessive trimming and browsing; 10/ E.g., even in the sylvopastoral areas, which cost 18,000 ECV/ha to afforest, and are expected to yield 1 ton/ha/year, with a seven year rotation, the 7 tons of firewood that will be produced from each cycle could be sold at 21,000 ECV (at the MDR's current roadside price of 3 ECV/kg) and will be equivalent to 0.86 tons of kerosene, with a retail value of 25,800 ECV. - 18 - (e) the Forestry Service needs to increase its professional and technical staff, not only to implement the recommendations dis- cussed above, but also to improve the quality and efficiency of the ongoing planting, research and extension programs, and to obtain the maximum benefit from the ongoing technical assis- tance projects. 11/ The most effective way to reduce the shortage of trained staff is to expand the training components of the existing tecinical assistance projects. Such an ex- panded training program is necessary to ensure that sufficient staff will be available to implement the national afforestation program as it is planned. With the implementation of these measures, the supply of firewood from the afforested areas should gradually increase to 17,000-20,000 tpy in 1990 (based on the areas plant:ed to date) and about 75,000 tpy in 2000 (based on the area to be planted by 1993). 3.6 In addition to the timely implementation of the national affor- estation program, a resolution of Cape Verde's firewood shortage will re- quire the careful management and protection of the existing trees, which already produce about 84,000 tons per year of firewood. This level of production is too high to be sustainable under current drought condi- tions, but it is possible that about half that level, about 42,000 tons per year, should be compatible with proper protection and harvesting techniques (such as would be popularized by an expanded extension service - (see para. 3.5(d)). If the .supply of firewood from the existing trees and shrubs (mostly located on private farms) is added to the expected production from the afforested areas, about 110-120,000 tons per year of firewood would be produced by the year 2000. 3.7 The country's maximum firewood production potential (by the year 2000) of 110,000-120,000 tpy will not be sufficient to meet current or future demands if the average firewood demand remains at its current level of 2 kg/person/day. Thus, unless a way is found to curb the demand for firewood, the imbalance between supply and demand will continue to be met by other organic materials, with the resulting damage to the vegeta- tive cover. In the mission's view, as discussed in para. 2.7, there is great potential for reducing t:he imbalance through the use of improved stoves which have an average efficiency about twice that of the tradi- tional three-stone fires. As suggested in Table 3.3, the universal adop- tion of improved stoves would reduce firewood demand to about 108,800 tpy in the 2000, which would just suffice to balance supply with demand. As pointed out in para. 2.8, in addition to the introduction of energy- saving woodstoves, there is a series of supplementary measures, like the 11/ The forest services current staff consists of 3 professionals (in- cluding the director), 1 technician, 6 foremen and 24 guards. The estimated requirements are about 23 professionals, 16 technicians, 30 foremen and 82 guards. - 19 - popularization of pressure cookers, hay boxes and pre-cooked grains for bringing firewood demand in iine with the projected supply. Table 3.3: FIREWOOD PRODUCTION AND CONSUMPTION POTENTIAL Production Demand by 2000 a! Potential from Current Without Efficient With Efficient Plantations Demand Woodstoves Woodstoves Boa Vista 6,840 1,800 2,600 1,300 Brava 1,585 3,900 5,800 2,900 Fogo 11,695 19,600 29,000 14,500 Maio 4,565 2,100 3,200 1,600 Sal 1,040 3,600 5,400 2,700 Santiago 34,920 73,700 109,000 54,500 Santo Antao 12,695 25,700 38,000 19,000 Sao Nicolav 4,100 7,800 11,600 5,800 Sao Vincente 2,365 8,800 13,000 6,500 Total 79,805 147,000 217,600 108,800 a/ Assumes population to increase at 2.2%/year, as suggested in the National Development Plan, and the percentage of firewood users to remain unchanged at 70%. Without efficient woodstoves, their average firewood consumption is assumed to remain at 2 kg/person- day. With the universal adoption of efficient woodstoves (such as portable metal woodstoves with an efficiency of 30%), average fuel- wood use is postulated to decrease to 1 kg/person-day. The Development of Wind Energy 3.8 As Cape Verde is subject to almost constant northeasterly tradewinds, the possibiLity of harnessing wind energy is of special interest for uses such as power generation, water pumping, water desali- nation and others where it would substitute for expensive imported fuels. The wind regime appears to fulfill most of the conditions necessary for the economic development of this resource in at least some applications. The wind is strong, with a yearly mean wind speed of 6.6 m/sec, 12/ steady, 13/ and largely from a single direction - the northeast. 12/ Measured at Praia Airport, with a height of mast of 8 m above ground. 13/ With a mean k value (of the Weibull distribution function) of 3.04. - 20 - Finally, the economic value of wind energy is high because competing imported petroleum products are expensive and the country has no hydro- electric resources. Nevertheless, the economic viability of substituting wind energy devices for imported fuels by cannot be taken for granted. 3.9 The greatest potential for the economic substitution of im- ported gasoil lies in the interconnection of wind energy conversion (WEC) devices with existing power grids (of at least 1 MW) in a fuel saving mode. The limit for this application lies at about 50% of the grid's minimum load in order to avoid increased operating costs on the diesel component. Up to this range, the wind component can be treated as a negative load bringing into the grid unexpected random load variations similar to those of a big customer but in the opposite direction. Large diesel engines perform efficiently in the 50-100% range without being un- duly affected by the resulting mechanical and thermal stresses, and the system's voltage and frequency control should be able to follow sudden changes in this range without too much voltage fluctuation. Considering the installed capacity of the existing power systems, the only locations where hybrid wind/diesel generation is possible are Praia, Sao Vicente and Sal. Based on the minimum demands of the systems, the current poten- tial for hybrid systems is limited to 480 kW, which could generate about 1.7 GWh/year (at an average wind speed of 8 m/s) 14/ and substitute about 390 toe of gas oil per year. The economic viability of this substitution will depend on a strict control of investment costs, careful site selec- tion and a verification of the operational characteristics of WEC systems under local conditions. 15/ 3.10 To test the operational characteristics of an interconnected WEC system under local conditions, the $1.7 million INIT/UNDP/DANIDA project is currently installing two 55 kW wind generators in a suburb of Praia, as well as providing training and instrumentation to operate and monitor the system. This project is scheduled to become operational in late 1984. To make this pilct project most effective in providing re- alistic parameters with which to evaluate the economic potential of this 14/ Which the mission believes can be found at selected sites, although the available data is not sufficient to predict this with confi- dence. 15/ A preliminary economic analysis suggests that this sort of invest- ment should have an internal rate of return of 6%, assuming that 55 kW wind generators can be bought and installed for US$120,000, an operational cost of $1,000 per year, a 20 year lifetime, an average wind speed of 8 m/s, a k value of 3, (i.e., 193 MWh/year of output) and an avoided fuel cost of 0.06$/kWh, based on the tax-exempt price of gasoil paid by the power plants. At the retail price of gasoil paid by other customers, the avoided fuel cost would be 0.075$/kWh and the internal rate of return would rise to 9%. - 21 - new technology, the following aspects need to be considered in the course of its implementation: (a) Project Management: As far as could be determined, there is no clear definition of responsibility for the success or failure of the project. To strengthen control of daily operations, such as delivery of equipment, installation, erection, inter- connection and operation, project accountability needs to be vested in a single organization. In view of the objectives of the project, it is recommended that INIT be made fully respons- ible for the project, and that plans be made to gradually transfer the project to Electra. (b) Performance recording and evaluation: To be abLe to evaluate the results of the project, performance evaluation procedures need to be carefully planned in which, for instance, INIT could assume the leading role with regard to wind data evaluation and Electra with regard to electricity production, interconnection and grid stability. These procedures should also assist econo- mic evaluation through recording of all project-related costs. (c) Maintenance Procedure: Plans should be made for the prepara-- tion of a standard maintenance and operations manual after two years of closely monitored operating experience. (d) Involvement of Electra: As the primary recipient of the gen-- erated electricity, Electra is expected to become the eventual owner and operator of the WEC system. Plans need to be made regarding Electra's participation in this project to clarify the necessary financial arrangements, and to transfer the operational know-how. 3.11 A second major potential application for WEC devices is in autonomous wind/diesel generating systems for rural electrification. In systems like these, which generally are limited to a few hundred kW capa- city, the diesel-powered generator must also be sized to cover the peak demand, but wind generation can be sized up to about half the capacity of the diesel generator. Thus, wind energy can cover full demand in periods of reduced load while the diesel turns idly, but when wind supplies more energy than the instantaneous load requirements, an additional load has to be connected either to dissipate this extra power (e.g., into heat) or use it on a time-independent application (e.g., pumping water into a storage tank). While autonomous wind/diesel systems represent a poten- tial for fuel saving, the technology is new and insufficient experience is available to make a confident estimate of costs and performance char- acteristics. Thus, a modest program of pilot installations - such as the one being planned by the INIT/UNDP/DANIDA project and the MDR/Dutch/USAID project - is all that is needed for the present to obtain more experience with this technology. To ensure the development of a standardized system design for rural electrification, it is recommended that Electra parti- cipate in project design, evaluation and equipment selection. - 22 - 3.12 One particular application for autonomous wind/diesel systems which could be of great interest to Cape Verde is in small reverse osmosis desalination plants. Present day reverse osmosis processes desalinate seawater by forcing it at high pressure through membranes that allow water to pass but retard the flow of dissolved salts. The mechani- cal energy required for pumping water from the well and through the mem- branes can be supplied by a wind-electric plant, using batteries or a diesel motor as backup for periods of insufficient wind. Such a desali- nation system can be combined with a power generation system to achieve economies of investment and operating costs. Here again, while the potential looks attractive, the technology is new and insufficient ex- perience is available to make a confident estimate of costs and perfor- mance. Yet because there are several villages on Santiago, Boa Vista and Maio that are desperately short of drinking water, it is recommended that the existing modest program of pilot installations be supported as necessary so that it can be carried out on schedule. The existing pro- grams are those of INIT which, with Italian assistance, is working on a wind-electric desalination project (using batteries) in Moia Moia (Santiago) and the MDR which, with Dutch assistance, is planning a wind/diesel power/desalination plant for Sal Rei (Boa Vista). 3.13 A fourth important opportunity for the economic substitution of gasoil by wind energy is in water pumping. Two private workshops have already manufactured and installed over a hundred windmills to pump water from shallow (less than 10 m) wells on SaLo Vicente, but their production has ceased because of declining ground water availability. As a comple- ment to this private initiative, the MDR has, with Dutch and USAID assis- tance, installed about 20 wind pumps for deeper (20-50 m) wells and with greater capacity on several islands. The MDR's objective is to support the Government's program to develop the island's ground water resources (by the year 2000) by installing about 400 windmills which represent the estimated potential market for this technology in Cape Verde. 16/ With this objective in mind, the MDR/Dutch/USAID project has constructed a local manufacturing facility with a production capacity of two windmills per month. Once it is in operation, this production capacity would be sufficient to meet the needs of the country because of the installation capacity of the project and also because it will represent the replace- ment rate for 400 windmills with a 20-year life span. Assuming that all these windmills will be installed as replacements for motor pumps, it has been estimated that about 200-400 toe per year of gasoil will be saved. 16/ The economic attractiveness of the use of windmills is highly sensitive to site specific factors that have to be estimated from case to case. Thus, while the estimate of 400 windmills is tenta- tive, there appears to be a sufficient number of economic sites to warrant the continued support of this program at the current level of operation. This economic evaluation also will have to consider that the water table may decline or the salinity of the water in- crease as a result of increased pumping. - 23 - The Development of Geothermal Resources 3.14 A second alternative source of energy for power generation and other uses being considered in Cape Verde is the exploitation of geother- mal resources. Recent (1951) volcanic activity and some fumaroles on Fogo are the principal indications of the existence of this resource. A preliminary geological reconnaissance by a group from Lund University, Sweden, suggests that there might be a reservoir with temperatures of 270-300'C, which would be usable for power generation, in a crescent- shaped zone inside the Fogo caldera. To follow up on this work, the Swedish group, in cooperation with INIT, is planning to undertake a dril- ling program of about 10 stratigraphic (200-400 m deep) wells to inves- tigate geothermal and groundwater properties. 3.15 A review of the economic development potential of this resource will have to await the results of the statigraphic wells. In addition to the geological uncertainty, an important question relates to the poten- tial size of the market for the power (and/or heat) that could eventually be produced, in relation to the costs of geothermal development. Fogo's current generation capacity is 600 kW, for a population of 31,000. The major potential use for electricity is for irrigation pumping. Thus, Fogo's groundwater resources (located at sea level) are believed to be sufficient to irrigate 650 ha (located at 200-500 m above sea level) with 40 Min of water per day, but the sustainability of this extraction rate would need to be confirmed, particularly in the light of the current shortage of rainfall. This extraction rate would require a supply of 2 MW of power if sufficiently high-valued crops can be found to justify the cost of the water. In view of the high costs of geothermal development, it is recommended that, after the conclusion of the ongoing stratigraphic drilling program, any future work on geothermal resources be placed with- in the context of the existing Fogo Integrated Development Plan and that the economic value of future work be evaluated in the light of its market potential. - 24 - IV. ENERGY PRIC:ING Petroleum Product Prices 4.1 The economic costs of petroleum products are unusually high in Cape Verde because of the high costs associated with transporting, handl- ing and packaging the small volumes that are consumed (gasoline is im- ported and distributed in drums and butane in bottles). Thus, it is important to encourage the rational use of energy and the development of domestic energy resources by setting the retail prices of petroleum products at a level that fully reflects their high economic costs. The SEINE understands the importance of economic pricing and has been regu- lating petroleum product prices on the basis of actual costs reported by the companies, with no explicit subsidies. As shown in Table 4.1, the retail price of every product (except "captive" gasoil - which is used for power generation) exceeds the economic cost and also reflects a 8% import duty, a 25% sales tax (on gasoline only), and a series of minor Government fees. 17/ However, while on the aggregate the companies cover their operating costs, the high debt/equity ratio (8:1 as of end of 1982) and low net earnings (0.9% on assets in 1982) reported by ENACOL suggest that its revenues are not suffiLcient to build up a capital reserve such as would be needed to finance the expansion and replacement of the com- panies' facilities and equipment. In addition, the foreign exchange risks and some financing costs are borne by the Banco de Cabo Verde. In view of the desirability of having prices reflect full economic costs including the capital costs associated with importing and distributing petroleum products, it is recommended that the Government request realis- tic amortization scheduling - including periodic revaluation of assets) and explicitly allow the compan:les to earn a reasonable return on assets. 17/ The sale price of petroleum fuels to international transportation is determined on the basis of competitiveness with neighboring ports, but is not known to the mission. The main direct source of revenue for the Government from these sales is a petroleum tax of 35% of the companies' profits. In 1.982, this tax yielded 179.6 million ECV (US$3 million), of which 2.9 million ECV was paid by ENACOL. - 25 - Table 4.1: PETROLEUM PRODUCT PRICES al (US$/ton) Rotterdam Mindelo Econom c Retail Percent of Product FOB CIF Cost d Price Economic Cost Butane b/ 280 448 470 1,164 248 Kerosene 286 298 322 391 121 Gasoline (Super) c/ 294 414 435 684 157 Gasoil 249 260 273 325 119 Gasoil (for power generation) 249 260 273 263 96 Fuel Oil 170 182 191 205 107 a/ As of September 1983. b/ The high cost of butane is due to the fact that it is imported and distributed in 12.5 kg and 50 kg bottles. c/ The high cost of gasoline is due to the fact that it is imported and distributed in drums. d/ Tentatively estimated on the basis of import cost plus an 8% allow- ance for distribution costs. Source: ENACOL Power Tariffs 4.2 Electra's tariffs are regulated by the SEINE on the same principles as petroleum product prices, i.e. on the basis of covering operating costs, with no explicit subsidies (except for desalinated water). 18/ As shown in Table 4.2, the resulting tariff level is high in relation to that of other countries 19/ as a direct result of the fuel cost, the small size of the system (requiring small units with high unit; costs), the high reserve requirements (installed capacity of 1.5-2 times demand), and the low load factor (about 4,000 hours/year). Nevertheless, the tariffs may still not be sufficient to cover Electra's operating costs and make no allowance for the need to accumulate capital for future investments. 20/ 18/ The rural utilities are supervised by the Ministry of Interior and their tariffs and regulatory framework are not known to the mission. 19/ Except for the capacity charges, which are relatively low. 20/ As of end-1982, Electra had a debt-equity ratio of 1.5:1 and ran an operating loss equivalent to 4% of assets in 1982. - 26 - Table 4.2: ELECTRIC POWER TARIFFS al Consumer Category Capacity Charge Energy Charge (US$/kW) (US$/kWh) Industries and Government High Voltage 1.56 US$/kW 0.099 US$/kWh Low Voltage 1.10 US$/kW 0.123 US$/kWh Residential and Commercial Upto 40 kWh/month - 0.136 US$/kWh Above 40 kWh/month 0.164 US$/kWh a/ As of November, 1983. 4.3 Electra's power generation costs elre not known because the com- pany did not, in its 1982 financial statement, separate power-related costs and desalination costs in its 1983 budget. A first step towards cost center identification was made by allocating consumables to either power or desalination, but without allocating salaries, services and other administrative costs (amounting to 33% of the budget). Thus, while projected 1983 power revenues exceed the budget for consumables (fuels and lubricants) by 30%, it is nol: certain that this margin will be suffi- cient to cover salaries, mainl:enance, materials, depreciation and a return on capital, particularly since the projected increase in power revenues of 100% (from 1982 to 1983) appears to be optimistic in relation to a 9% tariff increase. To resolve this uncertainty, the mission supports Electra's current efforts to upgrade its accounting system with the objectives of obtaining an accurate identification of costs by product, cost center and category of consumer and establishing a realis- tic amortization schedule based on the actual Life expectancies of the assets and an updated estimate oi- their replacement cost. In combination with upgrading the accounting system, it is recommended that Electra establish a management information system (see para. 5.9) and prepare a corporate development plan and financial strategy. The Price of Desalinated Water 4.4 While water is not itself a form of energy, the amount of energy required to desalinate waiter is so high that, in the Cape Verdean context, any subsidy on the price of water is equivalent to a subsidy on energy consumption. As Electra's water production costs cannot be accu- rately identified, the cost of desalinated water can only be tentatively estimated on the basis of the budgeted (1983) input cost (86.25 million ECV (US$1.1 million)) and a share of Electra's administrative budget (allocated in proportion to the cost of inputs), at about 140 million ECV - 27 - (US$1.8 million), or about 310-460 ECV per m3 (US$3.9-5.8/m3). 21/ This is over four times the expected 1983 revenue from water sales of 32 million ECV (about 70-110 ECV per m3), and the gap is only partially covered by the bugeted subsidy of 90 million ECV (about US$1.2 mil- lion). Here again, a closer reflection of economic costs in the pr:ce of the product may contribute to a greater appreciation of the valie of water and a rationalization of its use. This could be reflected in sig- nificant overall savings for the economy both on the supply side - where the value of rehabilitating and/or replacing the leaky distribution net- work would become more evident - and on the consumer side where to-e use of water flow control heads on faucets, showerheads, water closets, etc. needs to be promoted. 4.5 A second important consideration in relation to the desalina- tion subsidy is that the delays and uncertainties associated with its approval are inevitably reflected in the financial health of Electra and hence on its ability to reliably supply electricity and water. In view of the need for Electra to establish its financial autonomy so as to be able to seek financing for its growing investment program, it is recom- mended that the Government consider transferring the water distribution function to the public works departments of the local councils. Electra could then become a self sustaining, solvent public utility that could essentially cover its costs and earn a reasonable return on capital on the basis of adequate tariffs on power and bulk sales of desalinated water to the public works departments. Such a transfer also makes sense from a technical point of view, as it would concentrate the electrotech- nical, mechanical and chemical expertise applied to seawater desalina- tion, power generation and electricity distribution in Electra, and civil engineering and hydraulic expertise in the public works departments which are already charged with water line construction, sewers and streets. Firewood Prices 4.6 The pricing of firewood is of particular interest because it is the fuel of choice, or of last resort, for 70% of the population and because the Government has budgeted over 140 million ECV/year in affores- tation and will eventually become the dominant supplier. Currently the MDR sells only a few hundred tons a year at the plantation roadside at a 21/ The higher figure assumes that 1983 water sales were the same as in 1982; the lower figure assumes a 50% increase. - 28 - price of 3 ECV/kg. 22/ In Sao Vicente, the Asociacao dos Amigos da Natureza (AAN), which operates the afforestation program there, is deliv- ering firewood to the bakeries at 5 ECV/kg. In Praia the bakeries are purchasing firewood at 8-10 ECV/kg, and firewood is sold in the city mar- kets at 10 ECV/kg. Thus the fuel cost of cooking a meal with commercial- ly purchased firewood may be estimated at 20 ECV per person, while the equivalent amounts of kerosene and butane will cost 7.5 ECV and 8.3 ECV respectively. 23/ This estimat:e is consistent with the impression that most of the firewood passing through commercial channels goes to the bak- eries (which consume about 800 :py) and that most of the firewood that is being consumed by the households, including those in the urban areas, is self-collected or obtained through some non-monetary exchange. Even at the plantation roadside price of 3 ECV/kg (at which the cost of daily cooking would be only 6 ECV per person), most of the firewood appears to be purchased by bakeries and kilns. 4.7 The extent to which the supply of firewood from forest planta- tions compares with the requirements of bakeries and kilns is not known with accuracy, but based on the areas planted before 1975 and the re- ported yields of representative plantations, it should be possible with systematic management to produce an excess available for sale to the households (see para. 3.5). 24/ However, with an average laborer wage of 80-90 ECV/day, and an average rural family size of 6-7 persons, even a cash outlay of 3 ECV/kg of firewood may appear prohibitive to a large proportion of the population. In view of the substantial but non-asses- sable benefits of regulating the production of firewood, the Government needs to balance its desire to cover a portion of its afforestation costs through firewood sales with the need to supply firewood to those who can- not afford to buy it, and who would otherwise meet their firewood needs in an ecologically damaging way. Thus, it is recommended that the Gov- ernment not only increase the production of firewood through a more intensive management and exploitation of existing plantations (as dis- cussed in para. 3.5) but also develop a policy to ensure that the entire output of firewood is sold, even though a portion of it may have to be priced at a level that is below the replacement cost of firewood. This 22/ The 3 ECV/kg price can be regarded as the replacement cost of firewood. For example, if planting costs are 18,000 ECV/ha, the annual growth rate is 1 ton/ha, and the rotation period seven years, the eventual revenue of 21,000 ECV/ha will roughly cover the cost of havesting and replanting. The cost of second and third generation growth is likely to be much lower. 23/ Assuming cooking efficiencies of 15% for firewood, 40% for kerosene and 50% for butane. * 24/ Bakeries in Praia and Mindelo report a shortage of firewood, and the MDR reports that there is a surplus of unsold firewood at its plan- tation in Maio. - 29 - policy could be reflected in a lower price for firewood directed at household use (e.g. through the introduction of a graduated pricing sys- tem with lower prices for lower diameter and quality wood) and/or in the distribution of an eventual unsaleable balance as a wage supplement to laborers on rural development projects (including afforestation) financed by the National Fund. The latter would take advantage of an existing program to assist the neediest s-rata of the population. - 30 - V. INVESTMIET AND TECHNICAL ASSISTANCE PRIORITIES Sectorai Development Priority 5.1 The sector's priorities are determined by the Government's overall objectives to reduce external dependence and combat desertifica- tion, and by the sectoral objectives of minimizing the economic cost of energy and increasing the reliability of its supply. Based on these objectives and the discussion in the preceding chapters, the mission con- cluded that the highest priorities of the sector are to increase the efficiency of energy supply and utilization and to continue developing the country's single major energy resource, firewood. Power Subsector Investments 5.2 The demand for electricity still exceeds the available supply by a wide margin, as reflected in the long waiting lists for connections and the relatively low numbers of connections. 25/ The most economical way to increase the available supply, and at the same time reduce the cost of electricity, is through an improvement in the efficiency and re- liability of power generation (para 2.11) and a reduction of the losses between generation and sales i-rom the current level of about 38% to a level of 12-15% (see para. 2.12). As shown in Table 5.1, Electra is already preparing the replacement and rehabilitation of its distribution systems in Praia and Mindelo. The current budget for these projects of 81 million ECV (US$1.1 million) appears inadequate and further prepara- tion is needed to determine the scope and financial requirements of the program that will be needed to bring down losses to an acceptable level. These projects, plus a few minor ones that involve the overhaul of equip- ment and improvement of working conditions at the plant, deserve the highest priority and should be implemented as soon as possible. The projects to expand the generation capacity at Praia and Sal also deserve a high priority, but if the funds should not be available to carry them out as scheduled, a delay in their implementation may have to be con- sidered. In view of the fact that the productive sectors of the economy can be supported more effectively and at lower cost in Praia and Mindelo, the mission recommends that rural electrification be delayed if necessary until more resources become available. In the meantime, efforts in the rural areas could concentrate on improving the service in existing cen- ters by increasing the reliabiLity of power supply, increasing the effi- ciency of power generation, and reducing distribution losses. 25/ The number of connections is about I per 10 inhabitants in Praia and Mindelo, and I per 31 inhabitants on a country-wide basis. - 31 - Table 5.1: PLANNED ENERGY INVESTMENTS, 1984/85 Period Cost (10ECV) Electric Power Praia Capacity Expansion, 1.5 MW 1984 30.1 Praia M.V. System expansion 1984 23.4 Praia L.V. system rehabilitation 1984 10.5 Mindelo M.V. system replacement 1984 36.6 Mindelo L.V. system rehabilitation 1984 10.5 Sal Capacity & Transmission Expansion, 0.5 MW 1984 58.2 Other a/ 1984/85 34.5 Total Electra 1984/85 173.7 Rural Electrification 1984/85 120.9 Total Electric Power 294.6 Petroleum SuppIy (ENACOL) Butane bottling plant (total cost 165 x 106 ECV) 1984 17.0 Interisland Tanker 1984 52.7 Other b/ 1984 27.0 Total Petroleum Supply 96.7 New and Renewable Energy Sources Rural Wind Energy (MDR) 1984 27.4 Wind Energy Pilots (INIT) 1984/85 42.3 Fogo Geothermal (INIT) 1984/85 40.6 Wind Energy Center (INIT) 1984/85 7.9 Energy Conservation Center 1984/85 73.2 Biogas and Solar Pond Pilot Project (INIT) 1984/85 10.5 Total New and Renewable Sources 201.9 National Afforestation Program c/ Santiago 1984/85 119.6 Fogo/Brava 1984/85 74.6 Santo Antao 1984/85 57.0 Total Afforestation 251.2 Total Energy 1984/85 844.4 a/ Equipment overhaul, planning studies, vehicles, etc. b/ Building improvements, transport equipment, local pipelines, other equipment. c/ Includes only major projects. Source: Plano Nacional de Desenvolvimento 1982/85 - revised version, 1983. - 32 - Petroleum Subsector Investments 5.3 The most recent major- investment in the petroleum subsector was the construction of a 2,000 tpy butane bottling plant in Praia (with a planned expansion to 4,000 tpy) which is intended to reduce the high cost of importing butane in bottles and which will be shared by ENACOL and Shell. 26/ The largest investment that is being considered is the pur- chase of a 300-600 ton tanker for interisland and possibly also import use, for which 52.7 million ECVI (US$0.7 million) have been budgeted. The mission has no basis on which to judge the relative priority of this pro- posal. Another investment that could be of interest is the construction of a storage tank for gasoline to enable the country to import gasoline in bulk rather than in drums. On a very tentative basis, it would appear that the US$200,000 cost to bu-ild a 1,000 ton tank, of about 200 thousand US$, could be recovered in less than a year. 271 New and Renewable Energy Investments 5.4 A substantial portion of the energy investments included in the First National Development Plan are dedicated to new and renewable energy sources. However, as indicated in Chapter III, the development potential of these energy sources is limited by technical and economic constraints, and their relative priority has to be carefully evaluated in light of the country's limited financial resources. As discussed in Chapter III, the utilization of wind energy for power generation, water desalination, and water pumping appears to have a significant potential for economic devel- opment, and therefore the projects to develop these applications, 28/ budgeted at 69.7 million ECV (lJS$0.9 million) for 1984-89, deserve a high priority. The relative priority of the remaining projects cannot be reviewed using economic criteria as their output is too uncertain to be quantified. They therefore should be regarded as research projects and, given the country's financial constraints, it is recommended that their expenditures be kept to an essential minimum until more resources become available. 26/ The commissioning of this plant in 1984 should lower the economic cost of butane and allow its price to be adjusted to reflect the full costs. Any expansion of this plant should follow the growth of the market when butane is priced on a full-cost recovery basis. 27/ On the basis of freight cost savings of US$75.80/ton, drum amortiza- tion costs of US$30-40/ton per trip, and gasoline imports of 2,300- 2,500 tons per year. 28/ i.e. the INIT's Wind Energy Pilot Project and the MDR's Rural Wind Energy Project. - 33 - Afforestation Investments 5.5 Considering the Government's objectives of reducing dependence on imported fuels and combating desertification, the entire National Afforestation Program deserves the highest priority. Firewood from plan- tations is the lowest cost fuel available to the country, and whatever amounts can be produced should be supplied to the rural population to reduce the pressure on the remaining vegetative cover. The Government already has dedicated about 1.4% of its total investment budget to affor- estation, or about 125 million ECV (1.6 million US$) per year. These re- sources appear to be sufficient for the afforestation of 3,000-3,500 ha per year. While this rate will suffice to plant all of the lands suit- able for afforestation by the end of the century, several measures could be taken to increase the economic returns from the plantations by in- creasing the efficiency of the program (para 3.5). Technical Assistance Requirements 5.6 Technical assistance priorities revolve around the need to strengthen the institutions of the sector and increase the efficiency of energy supply and utilization. On this basis, the following recommen- dations of the report could benefit greatly by the support of foreign technical assistance. Energy Planning 5.7 Consolidation of the Directorate General of Energy (DGE). The energy sector has now reached the size and stage of development that made it necessary to establish a sector-wide project planning and coordination capability. Assistance will be required to develop the capabilities, procedures and technical instruments necessary for the DGE to perform its functions. One of the more important of its functions will be the prepa- ration of the energy sector investment program. Since preparations for the Second National Development Plan (1986-89) are due to begin in 1984 and the investment program will be needed as an input, this provides a good opportunity for defining an institution building project that would get DGE going and produce an identifiable output in the process. 5.8 Creation of an Energy Information Center (EIC). Assistance will be needed to create the proposed center, which could possibly be placed in the DGE. The center would have three principal functions: (a) to collect, process and publish energy statistics: this data would have to be gathered from existing reporting networks, additional regular reports by the institutions of the sector, and periodic surveys, especially of energy consumers. One survey that deserves high priority should cover the energy use pattern of the households. The result of this survey would be - 34 - quite useful for planning the afforestation and forest manage- ment programs and the proposed promotion of improved wood- stoves; (b) to operate a technical library; (c) to run a public information program: the main purpose of this program would be to promote energy (and water) conservation practices to all types of energy users (industry, commerce, public employees, cdrivers, housewives, school children, etc.) through the organization of educational compaigns, training courses, publicity and other means. One priority object of such a public information program would be to provide promo- tional support to the improved woodstoves program. 5.9 Improved Woodstoves Marketing Program. As discussed in paras. 2.8 and 3.6, improving the efficiency of firewood use for cooking is a critical component of a strategy to balance firewood supply with demand and restore the country's vegetation cover. The most immediate step available to reduce firewood demand is to organize a concerted effort to market improved woodstoves and hay boxes. For the longer term, this program should also consider the possibility of popularizing more efficient cooking utensils, such as metal pots and pans (to the extent that ceramic pots are still being used), pressure cookers and less energy consuming ingredients, such as precooked grains. Power Subsector 5.10 Implementation of a Management Information System (MIS). While Electra is already upgrading its accounting systems, expert assistance will be needed to establish a MIS that will produce regular performance indicators on a systematic basis for both technical and financial aspects of its operations. Such a system would allow management to separately identify power-related and water-related costs and thus provide a solid basis for setting tariffs at economic levels. The MIS would also allow management to set appropriate performance goals (e.g. on plant perfor- mance, reliability and maintenance, fuel consumption, accounts receiv- able, etc.), monitor their achievement on a weekly and monthly basis, and identify problems much sooner and with a greater degree of accuracy than under the current system. 5.11 Power System Loss Rleduction Program. In addition to the re- placement and rehabilitation of the Praia and Mindelo distribution net- works, a concerted effort needs to be made to reduce total system losses from their current level of 38% to 12% or lower. Technical assistance will be needed to evaluate the introduction of modern power plant control systems, the applicability of load management techniques, the redesign of system standards, and the improvement of maintenance and operational practices and procedures. - 35 - 5.12 Review of the Desalinated Water Supply System. This review would look at the long term demand for desalinated water for the country as a whole and develop a least cost program to meet the demand. The review would evaluate the commercially available desalination techno- logies and their relative merits for Cape Verde - this is particularly important because of the gradual depletion of natural drinking water wells at Praia and several villages on Santiago, Maio and Boa Vista. The review would also consider the possibility of reducing the losses and improving the reliability of wider distribution in Mindelo through imple- mentation of a two-tier distribution system (see para. 2.15), the addi- tion of storage and reserve capacity, and the utilization of waste heat from the power plant. Afforestation 5.13 As discussed in para. 3.5, various avenues for increasing the efficiency of the current afforestation effort need to be explored. Foremost among these are the establishment of a forestry data collection and recording system, the formulation and implementation of a forest man- agement program, and an expanded training program for Forest Service staff. All of these will require some expert input but appear to already be covered under existing technical assistance projects. - 36 - Annex 1 Page 1 of 2 SELECTED BIBLIOGRAPHY Aydemir, H., 1983, Essais d'Elimination d'Especes, Rome, FAO, Rapport du Projet GCP/CVI/002/BEL. Beurskens, H.J.M., 1981, Wind Energy for Water Pumping in Cape Verde, Amersfoort, Netherlands, Steering Committee for Wind Energy in De- veloping Countries (SWD). Bjelm, Leif and C. Swennson, 1982, Geophysical Investigation on Ilha do Fogo, including a Proposed Geothermal Drilling Program, Lund, Sweden, Lund Institute of Technology, School of Civil Engineering. Bucarey, J.R.E., 1982, Formacao e Vulgarizacao Forestal, Rome, FAO, Rapport du Projet GCPlCVI/002/BEL. de Bonte, J.A.N. and M. Dielmcn, 1984, Autonomous Wind Diesel Systems in Rural Areas in the RepubLic of Cape Verde, Amersfoort, Netherlands, Steering Committee for Wind Energy in Developing Countries (SWD). DeGier, A., 1982, Formation et Vulgarisation Forestiers, Rome, FAO, Rapport du Projet GCP/CVI/002/BEL. Food Strategy Study: The Republic of Cape Verde, Preliminary Report, 1982, Amsterdam, Netherlands Directorate of Foreign Affairs. Freeman, Peter H., et al, 1978, Cape Verde: Assessment of the Agricul- tural Sector, McLean, Virginia, General Research Corporation, Report CR-A-219A submitted to USAID. Hydbom, Bjorn, et al, 1980, Energia Geotermica nas Ilhas de Cabo Verde, Lund, Sweden, Lund Institute of Technology, School of Civil Engin- eering. Machado, F., 1965, Carta Geologica de Cabo Verde, Nota Explicativa da Folha da Ilha do Fogo - Estudos Petrograficos, Lisboa, Garcia de Orta, Vol. 13, No. 4., pp. 597-604. Machado, F., 1965, Mechanism of Fogo Volcano, Cape Verde Islands, Lisboa, Garcia de Orta, Vol. 13, No. 1, pp. 51-56. Machado, F., 1965, Vulcanismo das Ilhas de Cabo Verde e das Outras Ilhas Atlantidas, Lisboa, Junta de Investigacoes do Ultramar. Primeiro Plano Nacional de Desenvolvimento 1982/85, 1983, Praia, Secre- taria de Estado da Cooperacao e Planeamiento. - 37 - Annex 1 Page 2 of 2 Round Table of Development Partners, 1982, Praia, Secretaria de Estado da Cooperacao e Planeamiento. Sarles, Margaret, 1982, Watershed Management in Cape Verde - Interim Evaluation, Washington, D.C., USAID. Saussay, Charles du, 1982, Rapport provisoire sur la legislation forest- iere au Cap Vert, Rome, FAQ. SCETACRI, 1981, Esquisse du Schema directeur de developpement rural des iles du Cap Vert, Paris and Praia, Ministere de La cooperation et du developpement francais/Decretaria de Estado da cooperacao e Planeamiento. Soares, Horacio, et al, 1982, Analyse du Secteur Forestier et Proposi- tions: le Cap Vert, Paris, OECD/CILSS/CLUB DU SAHEL, Rapport SAHEL D/82) 179. Strasfogel, Sylvain, 1983, Programme Regional Foyers Ameliores, Repub- lique des Iles du Cap-Vert: Rapport de Mission d Appui Technique, Paris, CILSS. World Bank, 1980, The Republic of Cape Verde: Economic Development in a Small Archipelago, Washington, D.C. Annex 2 CAPE VERDE: ENERGY BALANCE FOR 1982 (toe) Other a' Electri- Pet. Prods. Line Firewood Biomass city Butane Gasoline -/ Kerosene Jet Fuel Gas Oil -/ Fuel Oil Total rotal Gross Supply Production 28,000 21,000 - - - - - - - - 49,000 Imports - - - 1,619 2,384 4,641 115,973 25,267 34,130 184,014 184,014 Change of Stock - - - n.a. n.a. n.a. n.a. n.a. - - - Total Available 28,000 21,000 - 1,619 2,384 4,641 115,973 25,267 34,130 184,014 233,014 Conversion Power Generation - - 1,521 - - - - (4,922) (4,922) (3,401) 0 Trans. & Dist. Losses - - (585) - - - - - - - (585) Net Supply Available 28,000 21,000 936 1,619 2,384 4,641 115,973 20,345 34,130 179,092 229,028 Reexports - - - - 1 - 113,557 7,847 27,663 149,068 149,068 Net Domestic Consumption 28,000 21,000 936 1,619 2,383 4,641 2,416 12,498 6,467 30,024 79,960 Consumption by Sector Industry d/ n.a. - 218 - 195 - - n.a. 413.00 417.00 n.a. Transport e/ - - - - 2,188 - 2,416 n.a. 4,604.00 4,609.00 n.a. Household/Commerce - 28,000 21,000 718 1,619 - 4,641 - - 6,978.00 '55,984.00 55,978 a/ Includes beanstalks, cornstalks, shrubs, agave leaves, palm leaves, grasses, coconut husks and dung. b/ Includes avgas and methanol mixture. c/ Includes diesel oil. d/ Includes agriculture and fisheries. e/ Includes national merchant navy. f/ Includes government. 9/ Conversion losses. Source: Mission estimates. - 39 - Annex 3 TREE SPECIES FOR AFFORESTATION Fuelwood Production Lower Elevation, Arid Zones Prosopis juliflora Prosopis chilensis Prosopis glandulosa Higher Elevation, Humid and Sub-humid Zones Eucalyptus camaldulensis Eucalyptus tereticornis Eucaluptus gomphocephala Acacia cyanophylla Forage Production Lower Elevation, Arid Zones Parkinsonia aculeata Acacia victoriae Atriplex nummularia IBRD 18132 2~~~~3O' ~~~~~~25.00 30 APRIL 1984 25'30' G->S-°°r d. 24'30' 24`00 23'30 23-00' 4000 1000 SANTO ANTAZ 17-00' Ost Noto / 17'00'- SANTO ANTAO Mind.lo SAC k o SANTA lUZIA SAL VICECT aE REPUBLIC OF CAPE VERDE 0 REPUCLICA DE CABO VERDE SAO NICOLAU PETROLEUM PRODUCTS CONSUMPTION COANSUAMO DE PRODU7OS DE rPoRASO 1000- i-M (1982 Tons - fioneo/adosJ A B ! o , ; PO SVS rA lk'00' 1BOA VISTA 16,00, 1VO Butane / Gas Butonoa Gosoline / Gosolina Super <- J f 7 fY .i Kerosene / Petro/eo Gasoil / Goso/eo 4- Ports / Portos 4 Airports / Aeroportos 5000 Internotional Boundaries Fronteiro Internocionol 4ooo- 15'30' 15-30'- 25-30 25'00' / S A N D °o FORMER W R A MAI SPANISI1_AH11RA MAIO -* ThN pWdp0orld b0an yoMekr C MAURITANIA |Torol TO - finyOrIdor REPURIt/Of IC 100- 000- -djh d jth knIon,ioTh"'IddeI nk CAPE VERFDE t 0 M A L I Va 20 Cooo rdbo The decnmi bbns St. Crur ued end Ih. b-ud.,ien ho.n THLSNGA -Vleo lonpoo do not 10,01, -n th. [ HE EGL .,t of Th. IOOdd Beck end lh. GAMBIA -- - o_ o' Assolodo F CO,OOi-t,on. UIPPER '~ 0 FOGO Wiy jdgn,ot -f 110/Oa wmmtro GUINEA-S1 YVOLTA BRAVA _ 1000- .enrdorywony- GINEA -1C ndnnoel r cecncen 15-001 flOMBO -~h b-od-reo SIERRA LE HAAI ECS(FOGO SIERRA LE )S o2°R tG^ANAt0 )POM X , _ _ PRAIA 0, 1P 20p 3 40 50 60 Kilo.trs \ RIA' BRA VA ,INn ' SANTIAGO 0 10 20 30 40 Mile 24-30' 24 00' 23-30' 23-00' 22-30' IBRD 18133 25-30' Ponr do 5Sa 25*00 0 24 30' 24-00' 23-30' 23 00' APRIL 1984 110,KVAU i. Grd. v 200 KVA DOl ,hA 100 K(VA CSANTO ANTAOC IV70 IV7,40~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~10 17K00V a 17-00'- Miodala *,50 rVA SAL SAC \C SANTA LUZIA 2 lp KVA VICEN TE 0 alrir k6 K VA 5RANCO SAC NICOIAU / RASO 0Rib a B /I YTVA Tarrfa 1Mi/ RVA 4 6-0 T. 4~~~~~~~~~~~~~~~~4 -16'30' /1630 REPUBLIC OF CAPE VERDE REPUBLICA DE CABO VERDE ELECTRIC POWER SUPPLY SYSTEM CAPAC/DADE INSTALADA A J / a n I / c ) aRVAe * Installed Capacity FA Copacidade Insto/ada VISTA * Plonned Capacity 16/00', -16-00' Copacidade a Instlofar 0 c e a n International Boundaries Fronteiro Internaciona/ 15-30' ,__ 25-30 25-00' 5 - A NV S FORMiER Thls rrp baa b-o pr.prad by SPANISH SAHARAJN Th. WoOd b,' f1 o6& FCRRhlER USS O >_ D VA MA/O thy o f f ,11 REP/IS//C Of MAURITANIA j Tarralal ?O KVA -d--d, ra.do,o -odineac;lany fr fe CAPE VEfDE tLI SANTh4GO F.- 0 f Tha 06010 0 O VA S . C - r= f00 f. aO Ira bo h.nd a 0 [II P ./00 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o,-t. Pd tkWy h L i~ ~~SEEA(- 125 OV U V/f 40l f40/ 00lUara &01 1yP.,, f TAHEI !GAL ''PR 1l250AK/AU Sra.Cafa-inr pa of Th. World B.,* Wo Ma THE c . KVAU Sna Jarg. of OnarnforP yg_ o JIK °2S 10 GUINEA-Bls' VOLTA bfooft.ir,.KAS.j,.f~ -tY~- GUINEAIBNS I A U/D 9VA eod-raoraf o 0001.00-f 15-000 A t lo I t, -GUINEA Sbo oor/ago 0001 b-od-fao SIRERA LEONE GO T HANA/f ZCKVA 0 10 20 30 40 50 60 Kil-r- '~~-( '~2°COAST 24-00' 2-0 paAIA 22-30' 0 c I LIBEIA' 8RA A K EV 4VA A *3515AK'VA_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 47O5fAl~V'laNOo M// O8fKVA 6l lb 20 30 40 WI/la 24d30' 24-000 23:30 23V00 22"30' IBRD 18134 25-00 2430 2400' 233 2300 APRIL 1984 17'00' k 70' 10 s3 "-SANTA LUZIA 'A NCOSA N/C_OLAU - .A RASO 4 4' ' ; ;It;b;*}rw§3rX 16'30' 16-30 0 REPUBLIC OF CAPE VERDE REPUBLICA DE CABO VERDE FOREST RESOURCES RECUR'SOS &LORESMT IS A ! /;6 a.. l / SACRa n 60'lt High Altitude Plantations P/an /aroes oSe Alti/ad El. tada I I ; -16-30' me Low Altitude Plantations 16-30'_ P/ano H oig de Al.Aitu'S Boixa - e a n Elevations in meters: El.vafao en metros: 1000 m + - 500 - 1000 m 0 - 500 m Internotional Boundaries Fronteitr /nternociona/ 15'30' 15-30'_ 25"30 25°00' 5 A N D S FORiER WR SPANISH SAHARAJ " ACTeSI 06 ofeesnt This e MS ep , h t Drep,pd by REPLIBLIC Of MAURITANIA ! A lerref le tsJII,eetFi CAPE VEDRE A e e Th. Wod ._-k eCrue 2~~~~~~~~ Co'-n-rhM. d..Sne,e,toe THE EGAL W O- rh.r ~ , : ' W G O w w W W B.,*eW ww GABIENEGAL Cp - WNWAFOGO e o M e e n d\ Sot . 55th I LO I T GAMBIA ~~~~~~~''Z~~~~ - ~~~~UPPER 40PRAA - 1-2*3--4 S,e,eMe Fenns KiS,pS,S -.1 '/~~~T FOGO enisNne 0 0 esst en0eeMplen - l-\ ~~~~~~~~~~~~2'3' 400 2e0S230,,2'0