Over 3.5 billion people across the world live without reliable electricity access. To address the crises would mean to pump in more capital resources into the energy sector. While the energy sector in Kenya is largely dominated by petroleum and electricity, with wood fuel providing the basic energy needs of the rural communities, urban poor, and the informal sector. Electricity access in Kenya is low despite the government’s ambitious target to increase electricity connectivity from the current 15% to at least 65% by the year 2022.
It is highly important to note that the cost of generation, transmission and distribution is borne exclusively by the consumer, this capital would only come from consumers. This understanding has often resulted in most utilities enormously increasing energy tariffs. Despite the continuous increase in tariffs, the issue of energy crises still persists. Evidently, this strategy is not sufficient enough.
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An analysis of the national energy shows heavy dependency on wood fuel and other biomass that account for 68% of the total energy consumption (petroleum 22%, electricity 9%, others account for 1%). The Kenyan Electricity Supply Industry (ESI) has gone through several reform programmes, particularly during the 1990s and early 2000s. Reforms have led to a relatively stable and attractive power market for foreign investors. Issues remain, but the government continues to be relatively proactive in improving the sector, despite a slow policy-making process.
The Electric Power Act in 1997 and the Energy Act in 2006 accelerated the reform by creating an autonomous regulatory body, unbundling electricity utilities to promote more private investment in generation and reviewing tariffs to improve the financial performance of power companies. Electricity prices in 2009 averaged USD 8.6 cents per kWh and are relatively cheaper than those in US (10.34 cents per kWhs). The power utilities of generation, transmission and distribution are separately managed by three different state companies. Four Independent Power Producers (IPPs) and an Emergency Power Producer (EPP) supports generation mainly through thermal plants, accounting for 20% of total power generated. The government promulgated an ambitious target to connect one million households within five years, so more public and private investments are expected to develop reliable and affordable supply capacities in order to achieve the goal.
- Installed on-grid capacity stands at 2,545MW as of July 2019, which is in excess of the 2018 demand figure of 1,802MW. However, network losses of over 20%, reserve margin requirements, frequent droughts and variable renewable power mean supply is not considered adequate to cover demand.
- There is strong private participation: independent power producers (IPPs) account for 991MW of on-grid capacity. Substantial capacity additions are due online in the short term to meet expected domestic demand growth, according to the project pipeline compiled.
- The EAPP’s connection with the Southern African Power Pool (SAPP) through the under-construction Zambia-Tanzania-Kenya (ZTK) interconnection could prove a gamechanger.
- Distribution utility Kenya Power and Lighting Company (KPLC) has a credible payments record. But a big concern is the Kinangop wind project’s failed attempt to call in a sovereign Letter of Support’, causing the government to consider watering down its IPP guarantee and investors to fret.
- Even with the introduction of regulated and cost-reflective tariffs, the financial outlook for KPLC and state generation company KenGen is mixed; both had to restructure their short-term debts with assistance from the World Bank Group. (WBG)
Emphasis has been placed on least-cost generation expansion. Geothermal generation – already a key component of Kenya’s energy mix – is identified as a key resource for medium- to long-term capacity additions. An estimated 656MW of geothermal generation is expected to come online by 2024.
- The government has set ambitious targets for universal electricity access by 2020, but these are unlikely to be achieved. Off-grid and renewable hybrid mini-grid solutions have received considerable attention, while the private sector-backed solar home systems (SHS) market has taken off in Kenya.
- The 2019 Energy Act is leading to the creation of new regulatory bodies. It mandates Kenya Electricity Transmission Company (Ketraco) as the sole independent systems operator.
- Controversy has grown over the use of non-renewable power. The government has agreed to review the $59bn Updated Least Cost Power Development Plan 2017-2037 (LCPDP), published in June 2018, due to its recommendations regarding nuclear and coal.
- The future of the planned 1,050MW Lamu coal-fired plant has been thrown into doubt after a tribunal deemed Chinese-funded project’s environmental impact assessment inadequate’. Among its several problems are its siting within a Unesco-listed World Heritage Site.
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Kenya’s current effective installed (grid connected) electricity capacity is 1,429 MW. Electricity supply is predominantly sourced from hydro and fossil fuel (thermal) sources. This generation energy mix comprises 52.1% from hydro, 32.5% from fossil fuels, 13.2% from geothermal, 1.8% from biogas cogeneration and 0.4% from wind, respectively. As of 2018, 6.9 million people in Kenya have been connected to the grid i.e three quarters of the total population.
Despite this progress, many households still lack electricity, those with connections experience poor quality, while reliability stifles economic growth. Like many utilities in Africa, the Kenya Power and Lighting Company (KPLC) is beleaguered by an unprofitable customer base, mismanagement, and an often-conflicting dual mandate of access and profitability.
Governments around the world have already done the cost-benefit analysis and the impact of installing smart meters for consumers. Meanwhile, Kenyan utilities are thus moving to smart meters and grids as part of long-range plans to ensure a reliable energy supply, incorporate distributed generation resources, develop innovative storage solutions, reduce the need to build new power plants and enable customers to have more control over their power use.
Remarkably, new technologies in smart meters and smart grids are now providing companies with first-time capabilities for forecasting demand, shaping customer usage patterns, preventing outages and optimizing unit pricing. The information collected helps draw patterns of usage across networks thus aid network planning and development, including future smart energy systems.
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Energy suppliers are responsible for procuring, proving, supplying and installing smart meters. Recently, Kenya Power and Lighting Company (KPLC) has rolled out a smart metering project that will benefit customers in the Small and Medium Enterprise (SMEs) sector across the country.
According to official report, the Kshs.1.25 billion World Bank funded project is part of the Kenya Electricity Modernisation Project and is slated to be completed by 30th June this year. The smart meters are part of an Advanced Metering Infrastructure that facilitates two-way communication between the company and the customer.
The meters are expected to help the firm protect its revenues, giving it capability to switch off defaulting customers remotely but also reconnect them fast in case of outages through automatically generated surveillance alerts.
Future development
Given customer trends and deployment challenges, most suppliers expected to miss the initial smart meter installation target in any part of the developing world.
To avoid the risk of potential fines, energy suppliers need to build in by design how they ensure and plan to evidence their compliance with the “all reasonable steps” requirement in time to mitigate any risks to review supplier performance as the current regulatory framework nears its close.
Finance executives, retail executives, and smart programme directors need to challenge their smart meter deployment teams on how they’re meeting and evidencing the “all reasonable steps” requirement to reduce, as far as possible, the commercial and reputational risk of future regulatory fines. Suppliers need to be on the front foot and address gaps or high-risk areas now; back-ending remediation is unlikely to be sufficient.
Energy suppliers need to quickly diagnose the extent of their exposure across each of the critical domains. They need to understand their baseline, identify gaps, and create and implement workable remediation plans where necessary to address any shortfalls.
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