MCB Talk S3E1 

Powering Mauritius 

There are few things more frustrating than an unscheduled power cut in the evening when it's boiling hot. You know exactly what I mean. It's happened to most of us in the recent past. 

Be that as it may, we now know why those frequent power cuts have been happening over the past couple of years. Old machine parts breaking down, a peak in demand thanks to a surge in the sale of AC units to withstand the heat waves, and frankly, a lack of planning. 

 This state of play will last approximately three years, the time it will take for new energy projects, renewable energy projects, to come to fruition and secure electricity supply.

Meanwhile, the Central Electricity Board has found a solution of sorts with the private sector to cater for worst-case scenarios during peak hours. Businesses such as hotels and shopping malls, both energy-intensive, will exit the CEB network and use their own generators to produce the electricity they will need, against remuneration. This temporary measure will help ensure that electricity is available around the clock, with little to no disruption to households and the economy. 

But once this is said and done, what's next for the country in terms of its energy mix as well as its supply? This is what this first episode of Season 3 of MCB Talk attempts to find out as we enter the year's hottest months with load shedding at its highest risk. 

“We have a new generation of IPPs, new players which are not in coal, for instance, or even bagasse. They are in renewable energy, wind, solar, and very soon in battery also. So when we look forward to the future, we can see a new variety of IPPs, smaller ones, because we also already have a number of very small power producers, rooftop PV generation.”

 This is MCB Talk, the podcast on matters that matter.

I am Deepa, and in this special episode on energy transition, I talk to Khalil Elahee, whom you've just heard. He is the chairperson of the Mauritius Renewable Energy Agency and a lecturer at the University of Mauritius. I discuss with Mohamed Shamshir Mukoon, director of the Central Electricity Board. I chat with Jacques d’Unienville, CEO of Omnicane, a company whose core activity is electricity production. And I also ask Thierry Hebraud, MCB's CEO, why he believes the country is ripe for the transition to a low-carbon economy.  

Mohamed Shamshir Mukoon is not your run-of-the-mill CEB director.

Asked whether the government's ambitions, as expressed in the commitments taken at the level of Mauritius's nationally determined contributions, that is to reach 60% of renewable energy in the country's energy mix by 2035, that's in just 10 years. So asked whether this is achievable. His answer is a resounding yes.

 “Today, we have about 40% of the electricity coming from coal. We have 40% coming from heavy fuel oil. Coal is from the IPPs. Heavy fuel oil is from the CEB power stations. But the IPPs, they burn also bagasse along with the coal. Right. The bagasse is about, let's just say, 10%. So 40-40 in 10, it makes about 90. Out of the 90, then we have the 10 remaining, which is renewable energy. Part of it is hydro, which CEB has, and part of it is the solar power that we have installed all over the island. So it's roughly...”

“CEB also?”

“ No, it's private and CEB. Mostly private. This is a bit about how the mix is today. Now, what will happen in time, let's say in 2035, you will be having replacement of that coal by biomass. So they're already burning bagasse, but that coal which they're burning will have to be replaced by biomass. So imported wood chips, which are renewable energy. So meaning that we will be having the 40% renewable. Total 40%, which was coal before, will be renewable. So then we'll be able to replace the coal that we have in the country. The 40% and would that remain? The share would remain around? 

“The share would remain around? So the share will remain 40% coal.”

“It will be maybe a bit less because of the growing demand in 2035. Maybe that percentage may drop to 30%. Okay. It can be that. But apart from that, we are going to have a continued water hydro from the CEB power plant. So let's say it's about 5%, so 35%. Then the remaining 25% will have to come from solar power. So we are roughly around, let's say, 8% to 10%. We have to push and get more and more of solar installation to push in that to get to 25%.

Then the 40% that we have diesel today, we will have to keep the what you call thermal power plants. That is those running on fuel oil will be replaced and running on liquid natural gas. So the gas, as you say, is not a completely clean product, but it emits for every unit of electricity produced only half of the CO2 emissions.

“Right. It's cleaner." 

 “It's cleaner. So the question today is, we are going through a transition zone, a transition period. We are shifting from coal-based, fuel-based to cleaner fuel, that is, LNG, in the future. We are working on the LNG project, which is going to come. About 500 megawatt of LNG power plant. It will be transition towards clean because immediately when we're going to replace the coal by biomass, the fuel oil by LNG, we have already cleaned up the emission. But we'll be left with some emission from the LNG.

Now the LNG also will grow over time. And at a point in time in 2035, we will have more and more of PV in the system. More PV in the system means that we'll be able to reduce the amount of LNG usage. 

After maybe 2045, after 20 years, maybe then there'll be technology that will allow us to produce 100% renewable from solar. 

Technology may evolve. We don't know what may happen. And then we're going to reduce further LNG.

And by that time, the investment in that LNG plant has reached 20 years. End of life. Now at end of life, then there'll be no more LNG.

 We are going to be fully zero carbon emission in terms of energy production. It will be biomass and PV. So it is feasible.

 It is feasible. And possible. It is feasible. It is possible.

  A few interesting points there worth noting, especially this concept of transition, meaning that we're not going to get to the final destination in terms of clean energy and less emissions straight away. And that while we transition, we need to ensure that there's security of supply so that there is no disruption to the economy and to households.

 On the question of burning wood chips to replace coal, the director of the CEB admits that renewable doesn't necessarily mean clean. But he argues that the numbers add up in terms of lowering emissions. And he reveals that the energy transition is already part of CEB's reality, saying that the project to replace coal with wood chips is currently being finalised. As we speak. 

 “You burn it, but then it's renewed naturally. What you call renewable is that the fuel is renewed naturally.”

 “It doesn't mean that it's clean.”

 “OK, it's burning. It is not clean as you compare that to PV. But how can you consider it to be clean? This green biomass, you get it from the ground. While growing, it's a sink for CO2. It is sinking CO2. When you burn it, it emits CO2. When you do the balance, it's net of zero. Because this is taking CO2 and sunlight to produce the plant.”

 “Has that decision been taken that coal will be replaced by wood chips?”

“ In fact, as you're sitting now here, I have a consultant working in my boardroom, working on the whole process, how to get out the project, kickstart the project with the IPPs. We are working on that today in the boardroom. They are here.

 So they are going to advise on how to get the industry set up to import the biomass and who will burn that, how it will be burned, at what cost it will be done. This is being worked right now. So then we'll be able to replace the coal that we have in the country.”

 It has clearly been a case of lessons learned from last year's near miss, when the authorities realised that electricity demand had peaked and that there was a real chance of blackouts if the situation wasn't adequately managed. But as we work towards the security of supply, Khalil Elahee maintains that the focus must be on energy management. As our current situation proves, short-termism doesn't work.

 “So energy management is a field in itself. It's about production, distribution, usage, consumption, storage, with a view of optimising through energy efficiency, not just conservation or energy saving, but it's also through storage. We have the heat island effect and increasing ambient temperature due to climate change.

 Basically, in Port-Louis, the Met Office tells you the average temperature ambient is, let's say, 30 degrees. But in fact, when you're walking in the streets, when it's hot, traffic and everything, it's probably four, five, some say even seven, 10 degrees could be higher than what is reported as an average, probably measured in a weather station near the port. We've been constructing with concrete and massive abuse of concrete.

 But when you have been using concrete so much, the worst problem is that we've been trying to address the problem by using air conditioning. Air conditioning, you derive from fossil fuel electricity. Electricity derived from fossil fuel.

 So the problem is a vicious circle. So the point is, how do you get out of this vicious circle? I call it a virtuous circle. It's this virtuous circle of energy management.

 So managing demand and supply through probably storage, because this is a key factor. We have more than required supply, for instance, during daytime. But when it comes to peak hours, evening peak hours, we lack supply.

 Demand is far too high because of air conditioning. So how do we manage demand and supply in a sustainable way? So the solution is through that holistic approach, applying energy management principles. It's about engineering techniques.

 It's about good housekeeping. It's about what we call today peak load demand. Demand side, peak load demand management in particular.

 To face the increasing temperatures, and then it's not just the temperatures due to climate change or heat island effect.”

  ACs, yes, but also all energy-intensive activities such as hospitality and entertainment. Khalil Elahee says that because hotels and malls are and will be the first to experience load shedding whenever energy production is short, it now makes financial sense for them to use renewable energy for their generators.

 “Right now, one of the solutions towards meeting the peak demand, evening peak and summer, is the government has agreed with the tourism industries. Most hotels, in fact, they are equipped with diesel or fuel oil generators, mostly diesel generators, and they need it. I mean, when you build a hotel, you need that backup.

 But now they are voluntarily using those generators in order to allow the country, the grid, to supply residential sector. I'm referring specifically during peak hours. It doesn't happen every day, but when there is a yellow, in fact, when there's a red alert, this is what's going to happen.

 It's called the demand response programme under the management of the CEB. But what can happen and what we envisage and what we can hope happens in the future is that when we turn towards hotels, it's not just they are providing, they are sharing the load, it's called load sharing, but also they are doing it not from diesel power generators, but from batteries that have been charged during the day using photovoltaics. And it does make sense because right now hotels, like commercial sector, consumers pay quite high tariff.

 It does make sense for them to turn towards renewable energy with battery storage, obviously. And it's also good for their image.”

 For years now, we've been talking about the need to lower emissions, to transition to cleaner energy, to decarbonise and make the country's development model sustainable.

 Mauritius's first attempt at sustainability started circa 2008 with the Maurice Ile Durable project. 18 years down the line, we have leapfrogged in terms of maturity on the subject, even though this hasn't yet translated to our energy mix. But the fact of the matter is, the country is finally ready to embrace renewable energy and to honour its international commitments to drastically increase the share of renewable energy in its energy mix.

 Now, this doesn't happen without the private sector. 40% of the current mix is already produced by independent power producers, the IPPs, who burn coal and bagasse to generate electricity, and then they sell it to the CEB under power purchase agreements that have been renewed many times over. Omnicane is one of those IPPs currently operating two power plants, in Saint-Aubin and in La Baraque.

 While the company is getting ready to launch a solar farm project in Poudre d’Or in collaboration with MCB Group, and has other renewable energy projects in the pipeline, it still has to prepare for the transition to lower-carbon power plants. Omnicane CEO Jacques d’Unienville says that while imperative, the transition doesn't come without constraints. 

 “Well, our plan is to discuss with the authorities how we can move away from coal and put wood chips instead of coal. Now, the problem with that is obviously there's a cost element. There are lots of investments to be made in the power plant itself to be technically compatible with wood chips. This is fine.

 This is not the biggest hurdle. The second thing is the cost of the fuel itself. To buy the wood chips, to process it, to bring it to the site, it's going to cost more than coal.

 And the way this can be... I mean, the cost can be brought down is through carbon money. Because when you take out coal and you put wood chips, your carbon footprint is going to go down drastically. So the delta has to be financed.

 And this is where the carbon money comes in. This is how they have been very successful in Réunion. They've gone out of coal into wood pellets now.

 And they've managed to do that because in the EU, in Réunion, you have carbon taxes and everything. So the tax was higher and the carbon revenues are higher than the increase in costs of going from coal to wood chips. So in the end, it works.

 Now, in Mauritius, it's going to be different because we are not the EU. We don't have this carbon mechanism. So we have to work out with government, with international agencies, how do we get hold of this carbon money? And how are we able to switch away from coal to wood chips whilst producing energy at an affordable price? That's the challenge.

 Cost. Cost, yeah.”

 The cost of energy. A very real stake in this debate, as Shamshir Mukoon says. 

 “Now, we have to see also what will be the impact of the cost of electricity on the economy. You may kill the economy if tomorrow I say I have to double the tariff to be able to achieve that dream. Now, if I do that tomorrow morning, what happens to all the industries? Can they sustain that? Can the economy sustain that? Now, this is a policy issue. Government has to take a decision on that. How fast we want to go. So everything has to be weighed in the real value before taking a decision. We may dream a lot, but there’s a cost to dreaming.”

 Jacques d’Unienville also stresses the importance of what he calls competitively priced energy, something that needs to be balanced with the importance of a clean grid.

 “Europe wants to be carbon-free or carbon-neutral by 2050. Now, if we are in an industry like we are, into production and exports of goods, the carbon footprint of what we produce is probably going to be taxed. 

 “It hasn't happened yet?”

 “It hasn't happened yet, but they're setting the base for it to happen. So this is why there would be incentives to have a clean grid of energy so that everyone who uses the national grid to produce can be T-shirts, can be whatever you want, which are used for exports.

 The carbon footprint of the T-shirt, for example, will go down if the grid is clean. If it is not, well, then it will carry some weight. So this is where we have to harmonise it all so that there are incentives to have as clean as possible an electricity grid.

 And we have to keep our competitivity because, I mean, we already are a small island state. If our energy costs are higher than continental energy, how are we going to survive? Because in everything we do, energy is probably a big component. So it is very important to have competitively priced energy.”

 What is clear from what Jacques d’Unienville is saying is that there needs to be a mix so that all of the country's imperatives are balanced out and that, as in many things in life, time will take care of the rest. 

 “So sometimes there could be some compromises. Obviously, in an ideal world, we want to be carbon-free.”

 “ But the fact of the matter is, renewable energy, clean energy costs more?”

 \“Not every time. To have clean, reliable energy would probably cost more. But clean energy in itself, in the mix, sometimes costs less than fossil energies. Yes, if you generate electricity from a solar panel and put it in the grid whilst it's available, it is cheaper than a kilowatt hour being produced with diesel or coal. Right.

 But this kilowatt hour is not always available when you need it. And this is why the larger the mix we have, the better it can be. And the more renewables you probably will be able to have on the grid at a very cost attractive.”

 \“And is it true to say that with technology, in the end, it will get cheaper?”

 "I think so. Yes. Yes.

 I mean, solar is a perfect example. We can see the technology of solar panels, for example, has drastically improved. So the price of building a solar farm now to generate a certain amount of energy is now cheaper than it was 10 years ago.

 And the performance is much better. So we can expect technological evolutions going forward. And I guess that in the next five or 10 years, we're still going to have lots of improvement in that field.”

 Renewable energy expert Khalil Elahee concurs. He also believes that the government has an important role to play in helping to bring down the cost of energy through agreements with foreign powers.

 “So in brief, what we can say is that the cost of electricity is something which is determined by a number of factors. And this is why we have a regulator in Mauritius. We have a utility regulatory authority, which has to see to it that the cost reflects the economic reality, as we say, the financial aspects, but also social and other aspects.

 What the government can do up front is access green finance, climate finance. And this will make, for instance, easier for low-income groups, for instance, to afford photovoltaics. The other way is government to government agreements.

 I think today China stands as the world leader in renewable energy. And as you know, in China, for instance, it produces, whether it's photovoltaics or wind or you name it, batteries, electric vehicles at costs which can't be beaten by anyone because it's heavily subsidised by the government there. So dealing, for instance, with Chinese is one way of probably securing affordability when it comes to, we are a small island.

 I mean, we have limited resources in terms of funding, but government to government agreements can really accelerate the energy transition, along with access to green finance, climate finance for mitigation.”

  Meanwhile, commercial banks in Mauritius, such as MCB, provide dedicated credit lines to support businesses in their transition, says MCB CEO Thierry Hebrault in the following interview. 

 “The goal in Mauritius is effectively a transition to a cleaner energy, because today 40% of our energy is coal-based.

 And that's this agenda that we need to transform, to modify in order to have access to renewable energy in our country. This is where MCB can help and can participate with the private sector, with the public sector. CEB is absolutely a major actor in this transformation to work together in financing the reconversion of energy in our country from coal-based energy to more, I mean, it can be solar.

 There are many projects in the solar energy or gas or other sources of renewable energy. This is possible. It will take time, but we need absolutely to accelerate this agenda because we cannot continue being just satisfied with the way we are producing our energy right now.

 “And as far as MCB is concerned, I suppose, to help in order for Mauritius to achieve that 60% of renewable energy in the energy mix, all MCB can do is to provide the financing.”

 “ We have access with other banks as well, with funding from Proparco, for example, which is effectively dedicated to financing the renewable energy in Mauritius and as well, I mean, the transformation, the mitigation and the adaptation agenda of our country. “

 Accelerating the transition agenda can take many forms. For instance, Omnicane's solar farm project currently under construction at Poudre D’or will generate emission reductions equivalent to approximately 30% of MCB's total annual carbon footprint. This is a service that Omnicane now offers to local companies wishing to neutralise their carbon emissions. Using their expertise in renewable energy project development, Omnicane can now develop and operate renewable energy projects of up to 150% of the client's electricity demand.

 Hotels in particular are a target market for Omnicane's decarbonisation proposition, giving substance to Khalil Elahee's earlier prediction that it would make financial sense for these energy-intensive activities to invest in renewable energy. The way forward is to mix and match to ensure security, but also to modernise the electricity grid so it can accommodate all sorts of energy as and when they're available, says Jacques d’Unienville. 

 “So you need electricity, reliable electricity around the clock, whether it rains, whether there's wind, whether there's no wind, and this is where you have to have a full mix to ensure the security.

 Because obviously energy is, I mean some people's lives even depend on energy, so you can't just say you are here at 12 because there's sun and then tonight you won't be there anymore. So you have to get different sources to bridge the gap and make sure that energy is available 24 hours a day. The country is now getting geared and ready to be able to get more renewable energies on the grid.

 \This is why, following the visit of the French president, there's a big delegation from EDF coming to Mauritius, and I guess it's going to be a lot to do with how we will modernise the electricity grid so that it can accommodate more renewable energies on the grid. And that's very good news because there are limitations on the grid right now.”

 In the end, despite the constraints, things will change if the political will is there, or if the time for the change has come. Khalil Elahee is convinced that the time has come, and there's no stopping it. 

 “What's happening is that the renewable energy, in particular solar and batteries, is becoming extremely affordable. And even if we don't do anything, we can't stop it.

It's going to come here. We can't stop the wave, whether it's electric vehicles, whether it's photovoltaics or batteries, it's coming here. Even if we don't do it, it's going to come because people, for instance, fear load shedding.

 They will probably turn, they're already doing it, towards having a small, four essential appliances, a source of supply. But it's the same thing, the way people in industry, in hotels, are thinking these days. So it's going to happen.”

 MCB believes in decarbonising its operations, but as it turns out, not all of them. Context, says Thierry Hebrault, is everything. Take the African continent, for instance. Should African countries' agendas also include transitioning to a low-carbon economy? 

 “So 4% of the emissions, 20% of the population right now, 600 million Africans have no access to electricity. And this continent will double its population by 2050, which is 2.5 billion inhabitants in the continent. So if we want to transform this continent and to give an acceptable standard of living for the African populations, we will need to transform the continent by industrialisation, by developing their economy.

 For the economic development, we like it or not, but we need energy. And all will not be possible to be done quickly, exclusively with sustainable, renewable energy. But we will need to accept to have a mix of energy, which will be partly in fossil fuels energy, and better gas than oil, better oil than coal, and better coal than wood, of course.

 So our agenda in Africa is to support the transition, the transformation, what we call the just transition of the continent, into a developing continent, which will include step-by-step its population at an acceptable standard of living by developing its economy. We will move at a certain step to a fully renewable energy in the continent, I'm sure about that.”

  Low carbon, yes, but it doesn't exist in a vacuum. Mauritius, however, does not have the same excuse. 

 “We need to consider Mauritius for what it is today. Mauritius is a developed economy with an access to energy which is reasonably good.

 Yes, we hear here and there that there is a lack or a risk of a lack of energy, but still Mauritius is a very specific country having a capacity of energy production.” 

Thank you for listening. There's more Where That Came From on MCB's channel Think on Spotify.

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