By Betty Maina

High energy costs continue to be a major impediment to the expansion of the manufacturing sector.

Due to the key role provision of energy plays, the cost of the products from a manufacturing process will be related to the cost of energy, all other factors such as efficiency of production, cost of labour and raw materials notwithstanding.

The cost per unit of electricity in Kenya is high and volatile depending on the amount of thermal energy in the system, which is susceptible to changes in international oil prices. Last year, for instance, industry witnessed an increase in prices up to 60 per cent from January to December.

While a lot has been done by the government to increase and stabilize energy supply, the country is still not energy secure and capacity expansion is not keeping up with demand nor is it priced to enhance Kenya’s competitiveness yet.

Demand

Over 60 per cent of generated energy in the national grid is used in manufacturing enterprises. Kenya currently generates about 1,400 megawatts (mw) of electricity. Additional capacity in the pipeline could increase this by 500mw in the next 3 years if projects are implemented on time. But this is not enough. The current electricity demand is 1,191 MW against the effective installed capacity of 1500 MW.

The peak load is anticipated to grow to about 2,500mw by 2015 and 15,000mw by 2030. To meet this growing demand, the projected installed capacity should increase gradually to 19,200mw in the next two decades.

It is prudent therefore that any energy policies that are proposed must be aligned to the industrialization policies as well as Kenya’s Vision 2030 if we are ever to unlock our overdependence on imported goods. It is estimated that flagship projects outlined in Vision 2030 will require about 42,700mw, meaning that there is need for a lot of investment for the country to be energy secure.

Weak transmission and distribution network, low countrywide electricity access and overreliance on hydropower are some of the critical challenges facing the country’s electricity sector.

This calls for the authorities to formulate long-lasting plans whose main goals are to rapidly expand installed electricity capacity, expand and upgrade the transmission and distribution networks, and develop renewable sources of energy such as geothermal, solar, wind, biomass and small hydropower.

In keeping with the spirit of Vision 2030 goals, the country should be committed to reducing by almost half the cost of energy. Access to affordable and reliable energy is an essential prerequisite to achieving economic growth and poverty reduction in Kenya. We must, as a country, prioritise energy security.

 It must be among the highest priorities for the next Government as large chunks of our energy infrastructure urgently need replacing and Kenya faces a serious energy shortfall. The Government needs to urgently pursue policies to deliver a balanced energy mix.

The incoming Government needs to prioritize provision of affordable and sufficient, clean and reliable energy to power industry and ensure energy security, quality and affordability.

Kenya cannot deliver competitively-priced manufactured goods and services without adequate and reasonably priced energy.

When decisions are made, execution on additional capacity delivery for energy and roads should be expedited. Delays cost the economy more.

With the country’s narrow supply options, businesses have been left at the mercy of weather-prone hydropower expensive thermal power.

The climatic conditions of 1998 to 2000 and 2008 to 2009 curtailed hydropower generation and led to severe energy shortages which culminated into power rationing and increased presence of expensive thermal power in the supply mix.

This fluctuation in hydropower generation must have been a lesson to the country to appreciate the linkages between energy, environment and the country’s socio-economic development.

As one measure of mitigation and adaptation to climate change, the next Government should spearhead promotion of development and use of alternative sources of energy. A strong policy framework will guide this new shift.

Indeed, currently Kenya is pursuing an energy mix that greatly emphasises on carbon–neutral energy sources such as geothermal, wind, solar and renewable biomass. The country’s building codes are also being reviewed to incorporate measures that will encourage climate–proofing and the construction of energy–efficient buildings.

Most ambitious

The recent move by President Kibaki to unveil the construction of the world’s most ambitious power project at Olkaria is also laudable. In the long term this will be very good for the economy and a lot of excitement has been generated in the industry because of anticipated prospects. However more and cheaper power is required in the system expeditiously.

In view of the foregoing; concerted action bringing together industrialists and Government stakeholders in the energy sector to agree on how to deliver required capacity at reasonable price that can support industrialization is required. There is also a need to increase public investment in electricity generation. It is imperative to expedite investment in transmission and distribution to ensure utilization of capacity.

Failure to invest in transmission and distribution means that existing capacity is not fully used even though consumers pay for it. The Government should also incentivize private sector investments in least cost energy sector, geothermal and other renewable energy sources.

Today the private sector accounts for 15 per cent of the power supply. The country should enhance exploitation of geothermal, solar, wind and biomass resources to supply at least 5,200mw for domestic and institutional energy requirements by 2030.

The writer is the chief executive of Kenya Association of Manufacturers