Ideas & Debate

How power supply drives Kenya’s 24-hour economy

Electricity is literally the heartbeat of an economy. FILE PHOTO | NMG
Electricity is literally the heartbeat of an economy. FILE PHOTO | NMG 

One of the cardinal functions of governments is to provide a conducive environment for commercial businesses to thrive. This should in turn lead to employment creation, generation of wealth, tax and overall development of the people.

Among the critical infrastructural facilities government provides to enable the above is electricity. Electricity is literally the heartbeat of an economy.

Electricity generation, transmission and eventual distribution is capital-intensive and it may not be feasible to fully provide it on commercial terms without having to raise the final cost to be borne by the consumer.

To mitigate this, governments have had to shoulder some of the initial costs to ensure the final cost is bearable to the consumers and the economy. Indeed, this is even more crucial to businesses for them to be competitive both at the domestic and international markets.

In the case of Kenya, the government has been active in providing resources to enhance generation, especially from renewable sources such as geothermal. Similarly, transmission and distribution have also been funded to ensure power is evacuated and supplied across the country.

The need to spur a 24–hour economy is gaining momentum as the country seeks to leverage on availability of stable and quality electricity. To encourage this drive, the introduction of ‘Time of Use’ (ToU) tariff is expected to see commercial business, especially in the manufacturing sector, increase their operations during the night.

Time of Use’ tariff implies that manufacturers who increase their night production will benefit from much lower power tariff, leading to lower electricity bills, hence improve the competitiveness of products.

Kenya Power started implementing this initiative in December last year. In January, 850 large power customers benefited from the ToU tariff compared to 804 customers in December.

As a result of the discounted tariff, these companies have realised a reduction in their power bills. Such savings are expected to grow as more companies come on board and extend their hours of operations.

For Kenya Power, our power consumption in the night has increased, thereby improving our overall sales. For instance, in December an additional 21.8GWh was consumed.

With more companies expected to increase their night operations by taking advantage of the lower night tariff, we are looking forward to a robust growth of our top line. This will be net sales that we were not realising before implementation of the ToU.

During a recent visit by the Energy Cabinet Secretary Charles Keter to Bamburi Cement factory in Athi River, we were informed that the company will be taking up an additional load of 150 MW for their new processing plant.

Benefits include creation of jobs, expected reduction in shelf prices for the goods, hence a trickle down to the common mwananchi.

Other companies that have adopted the ToU tariff have indicated that they intend to employ more people to manage the increase in the night shift.

The aim of the new tariff is not to have customers shift their production to off-peak hours but it is designed to stimulate demand by providing an incentive to increase production.

The discounted rates will, therefore, be applicable on energy consumed during defined off-peak hours above each customer’s daily consumption during such periods.

As a condition, the benefiting customers will, therefore, be required to meet their monthly energy consumption threshold.

Any units consumed over and above that threshold are billed at the discounted rate of 50 per cent for energy consumed at off-peak hours.

The threshold will be determined from the monthly energy consumption of the previous six consecutive months. This means that the customer will have to not only maintain normal production but increase it and then any production above what the customer carries out at off-peak benefits from the discount.

Large commercial and industrial customers already operating at normal production capacity levels during both on-peak and off-peak hours will benefit from a five per cent discount for their off-peak consumption.

Whereas large power consumers will benefit from decreased production costs, the 50 per cent reduction of tariffs during off-peak hours will also help in efficient utilisation of power generated during low energy demand periods.

Ken Tarus is Managing Director and CEO of Kenya Power.