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Let there be light

Interview - June 23, 2016

Discuss the future of energy sector in Sub-Saharan Africa, that can unlock a better life for its citizens

Today, the future of Africa holds more promise and opportunity than ever before. From urbanization and economic growth, to public health and energy, Africa is developing at a pace that rivals nearly every other region of the world. It is truly the continent of the 21st century. While the great potential is clearer today than ever before, it still faces significant challenges in its economic and social development. It is pivotal to understand that access to electricity is crucial for sustainable economic growth. Now, while many African countries are rapidly urbanizing, sub Saharan economies understand very clearly that we must continue to invest in mini-grid and off-grid solutions as well, in order to meet the goal of doubling access to power. Distributed generation using renewable energy sources must also play an important role in the future of power generation. From solar to hydropower, geothermal, wind and natural gas, we have the tools to increase access to power while realizing a cleaner energy future.

Kenya is a great example, we are leaders in geothermal energy (third largest geothermal energy producer in the world), however, there are still untapped resources; let’s take a look on the rift valley, where some of the waters have not been taken up and there’s still massive potential.

How do you compare Kenya to the rest of Sub Saharan countries?

When the current Jubilee government came into power in 2013, we had 1,768 megawatts installed capacity. Half of that capacity, 825 megawatts, was hydro which meant every time the weather (rain) didn’t favour us, we had 50% of installed capacity out of the grid. Every so often, somewhere in December, January and February we had to ration and utilize a very expensive thermal power to support the economy.

As we speak today, that situation has changed. We're not only the third largest geothermal energy producer, but we've also moved up in terms of installed capacity; we're now doing 2,341 megawatts. You can see the change is 663 megawatts installed capacity. Out of these installed capacity, in fact, 50% is geothermal. That means the economy doesn’t have the burden of dependency on weather, reliability is guaranteed. The rest of energy mix is either Hydro 36%, or thermal 10-12%. Through heavy investment we have managed to reduce thermal drastically opening the doors to more reliable energy source. We have seen around 68% reduction in productions costs. One used to pay KSh 7.22 (0.071 USD) per kilowatt/hour, now we are paying KSh 2.31 (0.022 USD).

How has this development impacted on business environment?

If you're talking about the attractiveness of Kenya in terms of investments, any manufacturer who could have been looking at Kenya as a potential destination for investment need not to look any further because this is the place to be. We no longer run diesel engines every other day, we now reserve it at the level of 12%. We use diesel only when we require, perhaps when we're managing maintenance and repairs in the major hydro stations, etc. Otherwise we no longer run diesels and we no longer rely heavily on hydro.

Discuss what we should expect short to medium term from Kenya’s energy sector?

We are driving a major program called 5,000 megawatts in 40 months which started in September 2013 and it's going to end in December 2016. It's not necessarily to have enhanced generation, but to focus more on cheaper sources of generation so that we can reduce the cost further and eliminate reliability on hydro. We don't have a power purchase agreement with God so, if there is no rain, there is no power.

With the program in mind we are heavily investing and concentrating on geothermal and other renewables. For example there will be a 1,000 megawatts coal plant in Lamu that is going to come out at generation point at about 5 to 6 US cents per kilowatt/hour. That will reduce the cost of electricity much further than what we're witnessing at the moment.

When the current leadership came into term in 2013 they had 3 areas of focus. They focused on adequacy of generation, which is supported by that 5,000 megawatts project. We have already managed to deliver part of this, with addition of 663 megawatts. The second area of focus was reliability of power in terms of the distribution and transmission and, the third one, pricing.

We are putting positive milestones behind us; if you're looking at adequacy in generation we're doing fairly very well. We are almost number 3 after the northern African countries and Eskom. We could almost say we're number 3 in this this region.

Let us now focus then at reliability. You could have adequate generation but, if you don't have adequate and robust infrastructure to be able to transmit and distribute that power, then the economy will not be able to access that energy generation. Thus, we have set our priority to upgrade infrastructure so there are not shortages and power cuts. The reliability over the last 3 years has increased drastically in urban and non urban areas.

How is Kenya Power investing in repairing and renewing the transmission infrastructure?

In 2013 KPLC set aside KSh 10 billion (USD 99 million) to make sure that the existing infrastructure was attended to in terms of repairs and that project is still going on. We call it Boresha Stima Viwandani.

Basically at the beginning we paid more attention to our large customers. At first, we gave them more than one source of supply so that in the event there was an outage, either planned or not, they would be able to continue manufacturing their products. Then we went beyond our large customers to now making sure that everybody in the country had access; not only access but reliable access, consistent with the three areas of focus defined by the government: adequacy, reliability and pricing. We have since focused a lot of attention on reliability. Going beyond repair and maintenance of the existing infrastructure utilizing the budget mentioned before, to looking at major projects, particularly, substations, additional substations and additional distribution lines to be able to support and to enhance the reliability and the robustness of the network.

This will allow us to have a network that should be flexible. We can switch off a certain part of the network for repairs without switching off customers. You notice if you have been here long enough that every other time, when we want to repair part of the network, we want to give customers notice that we're going to interrupt them in order to repair the network. We want to avoid that situation. We want to have an uninterruptable environment for our customers, where we will repair the network or, in case of failure, have the network fitted with automatic equipment to be able to supply customers automatically from other sources. So far we have achieved the objective of 252 projects. Most of these projects are sub-stations and distribution lines worth KSh 119 billion (USD 1,17 billion).

How is Kenya Power ensuring that the country will have Universal Power by 2020?

For a long, long time, up to 2004, KPLC quoted customers the actual cost to be connected. It was expensive for ordinary Kenyans to afford. Rural communities at that time were unable to connect because of the hefty costs, however, since 2004, KPLC introduced a connection policy that reduced the actual cost to KSh 35,000 (340 USD) per single phase connection. That cost held all the way up to January 2013, when after evaluation it was evident that the cost of connecting is above and beyond the cap. However, the government decided to keep this cap, and look at alternatives. Through agreements with AFD and other international organization the government has managed to reduce the cost, subsidizing KSh 85,000 (825 USD) and so households now are paying KSh. 15,000 (145 USD), which already is a massive decrease from the previous KSh 35,000.

This implementation is under the umbrella of the Last Mile project, which is supported by the Kenyan government, the African Development Bank and other international organizations.  We connect an average of 3,000 customers every day. Access now has moved from 27% in 2013 to 54% in 2016, in 3 years’ time. This particular Last Mile project is going to be a phenomenon situation because with only KSh 15,000 (145 USD) everybody will be able to afford an electricity connection. In fact, under phase 1 we are going to take advantage of 5,320 transformers that belong to KPLC to connect 314,000 households. Each household has 5.5 people so if you multiply the number of households by 5.5 people in each one that means about 1.5 million Kenyans having access. Then we shall repeat the same thing on phase 2 of the project. By the time we're done, you can see access going towards 92% in a very short time.

The government objective is to raise access from 27% in 2013 to 70% in 2017 and then to universal access by 2020. I don't think we shall wait to 2020 to get it. It will be earlier, we could easily do it by January 2019.

What is your final message to the international business community in regards to power supply in Kenya, and why should someone be looking at setting up a business or investing in this nation?

What attracts investors are two things: security in most cases is the primary objective and, if you look at the provision of security in the country, security has a direct relationship with provision of power. If you look at what we've done in the last two years on street lighting, we have made all our developed centers brighter twenty-four hours. You can invest in industrial areas and work twenty-four hours because every industrial area is lit and has a reliable power supply.

If we talk about the reliability of supplies and reduced cost of electricity, investors should be looking for this as an opportunity to invest in the country because, unlike other Sub-Saharan countries, we are improving rapidly and, in few years’ time, the opportunity would be gone. Why not grow with us rather than face a stiff competition in few years’ time, when it is too late?