New energy sources can cut business costs
With Kenya’s demand for electricity soaring, so is the cost of accessing this essential commodity, a fact that is increasing the burden on consumers already grappling with high cost of living.
But as many consumers will find out when they get their June utility bills, the fuel adjustment cost is not the only item that is pushing up their bills: there is also the foreign exchange factor that is making power more expensive. Although the Energy Regulatory Commission (ERC) has put off requests from Kenya Power and Lighting Company to review tariffs upwards, which would have been effected this month, all indications are that the cost of electricity could rise further in the coming months.
With rainfall erratic in most parts of the country, there is a likelihood that we could lean more on thermal generators, which use diesel, further causing a spike in cost of power.
An indication of how much some consumers will be paying for electricity can be seen in how fuel cost is becoming a big component in the bills, rising from Sh3.10 per kWh (kilowatt hour) in October - December to Sh7.35 cents per kWh in June, and still rising.
Latest figures from the Kenya National Bureau of Statistics (KNBS) indicate that apart from food, the second component pushing up cost of living is cost of electricity.
Of course this does not bode well for the economy, which is already struggling to absorb other shocks, including shortage of the maize staple caused by poor weather conditions, a weaker currency and escalating fuel costs.
Then, there are jitters surrounding the economy as the country heads into the 2012 elections, which could negatively affect activity at the Nairobi Stock Exchange (NSE) and the bond market.
The pockets of ordinary consumers are hit directly as they seek for more shillings to pay for electricity and food, the two items they cannot do without.
The high cost of electricity is especially difficult for the poor who also have to shoulder other burdens such as shelter, clothing, transport and rent.
It is, however, gratifying that power distributor, KPLC is coming up with various ways of reducing costs, among them investing in a local transformer assembly plant.
The Government should also move with speed and design more practical ways of making the country less reliant on electricity generated from dams, as this form of power is more often subject to the vagaries of the weather.
Instead of turning to the more expensive thermal generation, the Government should explore other sources of electricity like wind and solar rather than use more expensive diesel every time rains fail and the water levels in dams drops.
One only need look at which company has lately closed shop or been forced to cut down operations to realise the magnitude of what Kenya has suffered because of its high cost of electricity.
Well established and hitherto dominant multinational companies in Kenya are suddenly finding themselves sailing in turbulent waters.
The list of multinationals that have had to relocate production or scale down operations due to expensive electricity prices and the generally high cost of doing business in this country include Colgate Palmolive, a global business concern, Johnson & Johnson, Agip, Unilever, Procter & Gamble, and more recently, Exxon Mobil, just to mention a few. A majority shut down or downsized their operations, citing the cost of power as one of their reasons. Such relocations mean Kenyans lose jobs as companies retain largely marketing functions to push their brands.
Another alternative to hydropower, Kenya’s massive geothermal capacity, is yet to be fully exploited. Affordable power supply is considered a catalyst for industrial development and plays a major role in attracting more manufacturers to this destination.
In this respect, focus should be directed to more stable, reliable and cheaper energy infrastructure to attract investments.
The emergency power generators that introduced in 2000 as a short-term measure to forestall imminent power rationing must now be retired. KenGen is already investing in wind power, and while the initial cost is huge, the returns are massive in the long run.
The Government can also make it cheaper for Kenyans to install solar panels by zero rating the raw materials needed to make them and batteries. This can reduce the strain on the national power grid during peak hours and also create jobs.
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