Ideas & Debate

Tax action heralds road transport electrification


Electric buses in Geneva, Switzerland. The Kenya Government seeks to reduce duty on electric vehicles carrying more than 10 people. FILE PHOTO | NMG

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  • The EV import tax reduction was a timely beginning to prepare Kenya to accommodate the shift to electric vehicles.

The Treasury budget proposals a fortnight ago provided for fiscal incentives to import electric vehicles (EVs) at a reduced import duty of 10 per cent. The policy justification was to reduce carbon emissions by using electricity generated from renewable sources instead of using high carbon petroleum.

The second justification not enunciated is that by using EVs, the country will save foreign exchange by substituting expensive imported oil with electricity that is incrementally generated from indigenous resources - geothermal, wind and solar.

However, there shall be a corresponding dip in oil import tax revenues, which I consider to be a lesser pain for Kenya compared with foreign exchange savings on oil imports.

Thirdly, the advent of EVs is unstoppable and will ultimately be here in Kenya. Most European automakers have signalled timelines to stop manufacturing petroleum-driven vehicles with EU governments providing fiscal incentives and public EV charging points. Similar actions are taking place in the Far East.

Assuming that most Kenyans import secondhand cars, the bulk of used EVs from Europe and Far East will be available for this market in about five years time. For the well-moneyed Kenyans, the relatively expensive new EVs may start arriving much sooner provided battery charging infrastructure will be in place.

It is advisable to set up a technical committee comprising ministries of energy and transport, oil firms, and vehicle assemblers to brainstorm on a Kenya strategy towards EVs. It is mostly the battery charging infrastructure options (home, service stations, public and office parking) that must be made available.

Specifically, the oil marketers will need to develop a new retail business model for their service stations which will invariably require dual petroleum and battery charging services.

In addition to the battery charging infrastructure, it is the battery range (kilometres driven on a charge) and EV front-end costs that will determine the rate of EV uptake across the world and here in Kenya.

The best battery range achieved in 2019 is about 350 kilometres with expectations of 450 kilometres by 2020. Further, as EV technology progresses and mass production increases, unit costs will come down making prices more affordable.

I will now turn to opportunities for railways and public transport electrification. Kenya’s feeble electricity demands cannot grow significantly without a strong manufacturing sector and electrified railway and public transportation systems. Kenya has recently and belatedly acknowledged its low capacity for energy uptake, and scaled down its electricity demand forecasts from 10,000MW to 7,200 MW by 2030.

Whereas the energy-intensive manufacturing sector is just starting to take shape, we are yet to consolidate our policies and plans to electrify rail and public transportation.

We lost the initial opportunity to electrify the SGR, but this can be still be done in the future. We need to take cue from Tanzania’s ongoing electric SGR project which is extending all the way to Kigali.

What is however more immediate is the electrification opportunity offered by the ongoing Bus Rapid Transportation (BRT) development.

The next batch of BRT buses that we import (or assemble locally) should preferably be electric. Further, when we enhance the urban commuter rail transport, it should be electric locomotives and not diesel. Consideration should also be made to mandate the noisy urban tricycle “tuk-tuks” to be electric.

I have keenly followed green technology advances since the Kyoto protocols in the early 2000s. Pushed by climate change mitigation objectives, the two technologies that have stretched the possibilities of science to bring about substantive changes that were unimaginable at the turn of the century are photo-voltaic solar power generation, and the lithium-based batteries.

These have been significantly scaled up to reduce costs and provide opportunity for scaled-up investments and mass production. Ultimately it will be the sun energy seamlessly powering our road and railway transportation sectors. This is a green technological synergy whose uptake we need to plan to maximise.

As has happened with the emergence of ICT technology, the electric vehicles will be a common feature here in Kenya in another ten years. The EV import tax reduction was a timely beginning to prepare Kenya to accommodate the shift to electric vehicles.