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Safeguard Kenya’s energy gains – Business Daily

The historic transformation in Kenya’s energy sector over the past decade deserves credit. A record number of households, schools, hospitals and enterprises are today connected to the national grid thanks to sustained investments in electricity generation and transmission over the past 10 years.
Data from the Ministry of Energy and Petroleum shows that Kenya’s generational capacity has increased from 1,600MW to 2,990MW over that period.
Kenya’s electrification rate has improved from around 32 percent in 2013 to almost 90 percent today, according to the latest data from the Kenya National Bureau of Statistics. We have moved much faster than many of our regional peers.
Our electrification rate today is more than double the African average, which the African Development Bank estimates at 40 percent.
The good news is that we have ramped up our installed capacity while ensuring our energy mix is purposefully skewed towards renewable sources, in line with our ambition to reduce carbon emissions and protect the environment.
Kenya is one of the very few nations that generate more than 92 percent of its electricity from renewable sources. We have the largest geothermal plants in Africa, have invested substantially in wind energy, and are also increasingly investing in solar. This is in addition to our historical investments in hydro-electric power.
The progress we have made to transition to clean and renewable energy is not only good for the planet but also beneficial to the economy. More global investors are giving special consideration to carbon emissions and other sustainability factors when deciding where to invest their capital.
This makes Kenya a preferred investment destination in the region, particularly for investors targeting emerging areas such as e-mobility and climate-smart agriculture.
The pace at which we have moved to ramp up electricity supply has, however, introduced several challenges that the Ministry of Energy and Petroleum has in recent years tediously worked to address.
The first is the over-reliance on independent power producers (IPPs), who account for 30 percent of our installed capacity and generate thermal power — which utilises fossil fuels in contradiction to our ambition to transition to clean energy.
The second challenge is the inefficiency and unaccountability of some of our electricity parastatals, which has led to wastage of public funds and unaffordability of electricity by households and enterprises.
Both challenges have been tackled head-on. In recent years, the boards and management of parastatals such as Kenya Power have been reconstituted to strengthen governance and improve operational efficiency.
The government has also spearheaded engagements with IPPs with a view to renegotiating power purchase agreements (PPAs). It is noteworthy that the government has reaffirmed that it is not at war with IPPS, but rather, seeking win-win solutions.
IPPs have helped the country bridge power supply gaps and, as investors with valid contracts, are entitled to predictable and fair government regulation.
Power tariffs have also been reduced by 15 percent this year, with more reductions slated for the second half of the year. Kenya Power also recently signed a PPA with Ethiopian Electric Power to actualise power trade between the two nations effectively on November 1, 2022.
This will significantly contribute to lower power bills given Ethiopia has one of the lowest costs of power in the region. The outgoing administration has done well in the energy sector. This needs to be acknowledged. While more can still be done, they have laid a strong foundation for the next administration to build on.
The onus is now on the next administration to consolidate and extend these gains. The plans and frameworks to do this are already in place, including the Kenya Energy Sector Roadmap 2040 and the Kenya Carbon Emission Reduction Tool 2050, among others.
What is needed to bring these plans to life is goodwill, commitment, and sustained partnership with domestic and international partners.
Key areas that the next administration needs to focus on are lowering the cost of electricity, ensuring a successful 100 percent transition to clean energy by 2030, and attracting green financing.
The reforms that were set in motion to improve the efficiency of parastatals also need to be sustained. A White Paper, titled Kenya Energy Sector Roadmap, drafted by the Ministry of Energy indicates that Kenya Power is set to be split into two.
Kenya Power will deal with commercial consumers and the other new entity – the Rural Electrification and Renewable Energy Corporation (REREC) – will take over the distribution of power to small consumers, mostly households.
We need to see this come to life sooner rather than later as it will ultimately improve reliability and affordability for commercial consumers and households alike.
In addition to improving efficiency, accountability, and transparency in the energy sector, the White Paper lays out a path towards a 50 percent reduction in energy costs over the next two decades to spur industrialization.
This is laudable as, compared to other emerging economies, Kenya’s commercial energy costs are high at 16 US cents kWh. This is more than twice the average price of in South Africa, Vietnam, and China.
KenGen’s diversification into fertilizer production also needs to be accelerated. The power producer, which produces up to 75 percent of the country’s electricity, is conducting a feasibility study to assess the possibility of producing fertiliser at its Olkaria site.
This will create new revenue streams and help address food security given the endemic scarcity and unaffordability of the critical agricultural input.
The social and economic progress that the transformation in Kenya’s energy sector has unlocked over the past decade would require a thesis to exhaustively discuss.
Bernard Osawa, Energy Planning, Strategy and Sustainability Expert. He is a project Director and Partner at Frontier Energy



Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.