It did not come as a surprise when Kenya Power recently announced intentions to suspend signing of additional electricity supply agreements.
For some time, there has been justified concern that power generation investment commitments are running far ahead of national electricity demand growth. And this has adverse implications on the economy and consumers as the cost of carrying surplus generating capacity is loaded on power bills.
I attended the 2013 launch of the “5,000 megawatt (MW) generation by 2016” master plan and my opinion then was that the plan was overly unrealistic and that 2,500MW generation was a more correct target. In 2013, Kenya had a generating capacity of 1,664MW and a peak demand of 1,357MW. Today the installed generating capacity is 2,240MW with a peak demand of 1,802MW.
The 5000MW generation plan was a significant mismatch between potential demand growth and the supply generation opportunities. The economy is yet to deliver enough energy intensive projects to prompt a robust power demand growth.
The 2013 anticipated projects included the Konza ICT city, Lamu Port South Sudan Ethiopia Transport (LAPSSET) projects, crude oil infrastructure, electrified SGR, urban transport electrification, and devolution driven projects. These and many others are either work in progress or ideas.
In any developed country, it is manufacturing that accounts for the largest fraction of national electricity demand, and in Kenya the Vision 2030 manufacturing and SME expectations are yet to sufficiently mature.
The last mile power connectivity project has not increased power demand significantly due probably to low average household per capita consumption. Domestic power consumption is mainly a function of household incomes which support electric appliances affordability. Further, the ongoing energy efficiency campaigns and increased use of off-grid solar to supplement domestic and industrial energy demands may be suppressing electricity demand from the grid.
On the electricity supply and generation side we have since 2013 witnessed technological advances, and emergence of “green capital”, all of which have boosted renewable power generation opportunities with reduced unit costs and shorter project implementation timelines. Specifically for Kenya, this has increased power generation options and investor competition in a scenario of sluggish power demand.
Yes, Kenya needs to urgently update the power generation master plan, focusing on better informed and realistic demand projections over the next 20 years. On the supply side the master plan should be guided by a clearly thought out power generation policy.
Such a policy should prioritise local energy resources (geothermal, solar, wind, hydro, and locally produced natural gas and coal) ahead of imported sources like fuel oil, coal and liquefied natural gas. Indigenous energy resources conserve foreign exchange; ensure security of supply, while adding value to the local economy. Imported resources upset national balance of payments and are subject to global commodity price volatility, which destabilises consumer power prices.
Each of these generation types has its own investor vested interests and lobbies. Absence of a clear guiding generation policy puts tremendous pressure on licensing authorities, and power distributors who are responsible for signing or terminating power purchase agreements.
At this time and age Kenya should be consuming in excess of 10,000MW, not a mere 1800MW if only economic opportunities are diligently pursued and implemented.
By now, we should be pursuing more generating capacity to support a runaway demand growth, not struggling to limit supply to fit feeble demand. This should be a wakeup call and challenge to those responsible for industrialisation, which is a major economic integrator and energy demand multiplier.
There are a number of ongoing global technological developments, and these will significantly impact future electricity demand and supply. Electrification of vehicles will in the next 10 years significantly shift energy demands from petroleum to electricity.
On the supply side, advances in battery storage technology will enable large scale solar generation to be stored for peak time grid injection making it a base-load source. This will greatly increase solar generation competitiveness in the generation mix hierarchy.
Yes, we need to urgently rework the power generation master plan to capture the latest electricity demand potential to correctly guide power generation opportunities.