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Why we must take huge risks on energy

Across the globe, the electricity sector evolved as integrated regional monopolies largely owned by governments.

Over the past 20 years, however, there have been attempts to liberalise the sector.

Kenya Power and Lighting Company Limited (KPLC) was broken into four independent units dealing with power generation entities (such as KenGen and private independent power producers), distribution entity (Kenya Electricity Transmission Company Limited), supply company (KPLC), and regulatory body (Energy Regulatory Commission of Kenya).

Even with this unbundling, the country is still far from full liberalisation of the sector. Cost and reliability of electricity supply still remain a problem.

Whilst we know there is huge latent demand for electricity, with World Bank data showing that Kenya had an overall national electrification rate of 23 per cent, of which rural energy access to the grid accounted for about five per cent and urban access for 50 per cent, there is no significant urgency to increase supply, which currently stands at a paltry 2,000MW or so.

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In comparison, South Africa is consuming more than 40,000MW, according to its department of energy. The country says it now needs an additional 40,000MW by 2025.

Ethiopia, with a comparative advantage of hydro-electric power and a potential of 45,000MW in production, is currently consuming close to 2,500MW. Her transformation plan is to produce more than 10,000MW for export to the region, including Kenya.

The Grand Ethiopian Renaissance Dam (GERD) that is under way will produce 6,000MW, significantly more than the 5,000MW that the Jubilee government promised to produce in its manifesto. The rest of the power will come from other areas like Gibe III (1,870MW).

The Ethiopians have understood that demand for electricity will far outstrip supply in the region. With her economy growing at more than 10 per cent a year, she will most likely need the entire production to feed her growth. It will be imprudent for Kenya to sit and wait to import power from Ethiopia.

Whatever predictive methods we might be using for the future demand on electricity are wrong and misleading. If we had our priorities right, we should aim at 10,000MW in new generation by 2025 in order to barely meet demand.

Manufacturing, especially value addition, is key to the attainment of Vision 2030. In a country steeped in high unemployment, food insecurity and where 40 per cent of post-harvest goes to waste, I do not see why we cannot produce more power to start cottage industries around value addition.

Perhaps the great lesson we must learn from the Ethiopians is the fact that much of the funding, especially for the GERD, came from internal sources as well as from the diaspora.

These independent sources of funding often free countries from the stringent restrictive prescriptions of the Bretton Woods institutions that often stand in the way through archaic predictive methodologies.

When we see opportunity, we must stand our ground and exploit it for the benefit of our people, with local resources if possible.

Global trends will see China cede her low-end manufacturing to either India or Africa. Whether this happens will depend on preparedness, especially on reliable power supply.

This is an opportunity Africa must seize. Criticism, especially from the Western countries, often centres on how unreliable our power is. It is one thing that we must comprehensively deal with if we are to be competitive in the days to come.

We must move from minimalist thinking that someone else will build capacity for us, to taking huge risks and building enough supply of power in the next few years.

This is not prophesy but what we must do to change the regional power dynamics. It will also be a great legacy for the current leadership.

Increased power generation is like a chicken and egg metaphor. In this case, supply must come first. In Kenya, total geothermal potential is estimated at 10,000MW and it is green energy.

We should aim to exploit this resource and if it is large enough, begin to leverage on economies of scale. We have been on this road before when we swallowed the bitter pill of liberalising the telecommunications sector.

The results of this policy shift have created unimagined innovations in the country. Much of what we showcased at the Global Entrepreneurship Summit are outcomes of the risks taken to bring large broadband capacity into the country despite criticism that we may not have the absorptive capacity.

The writer is an associate professor at University of Nairobi’s Business School.

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