Reform energy sector to spur industrialisation

For a while economists have argued about the benefits of electrification. Some claimed electrification causes economic growth and development – by reducing the cost of energy and thereby enabling firms to increase their productivity, expand operations, and hire more workers. Others believe that economic growth precedes or co-evolves with energy consumption. The difference is subtle, but either belief generates its unique set of policy implications. Now new research from Vietnam shows reliable electrification does indeed cause development (in some contexts). Researchers were able to show that reliable power supply is linked to future increase in household income and asset accumulation. These findings provide important lesson on the need to streamline power production and distribution in Kenya.

Reliable electricity connectivity was supposed to be a core legacy achievement for President Uhuru Kenyatta’s administration. Yet over the last six years, Kenyans have paid through the nose for new installed power generation capacity. Yet nearly one third of all power generated lies idle due to the mismanagement of transmission lines. According to government figures, we will soon have a total installed capacity of 2900MW. Peak demand stands at just over 1880MW. During off-peak hours consumption declines to as low as 765MW. Meanwhile, at about Sh19 per unit, the Kenyan power market remains one of the more expensive in the region, rendering our manufacturers uncompetitive. Why should you worry about how the government manages power distribution through transmission infrastructure?