By John Njiraini
Transforming Kenya to a middle-income economy by 2030 will amount to a pipe dream unless energy sector challenges are resolved.
Although in the Vision 2030 Master Plan, the energy sector is ranked as among the key enablers under the infrastructure component in the realisation of the ambitious dream, the reality is now unraveling that unless the country confronts the myriad challenges, it will become ‘the monster that ate its own baby’.
During the Energy Conference held a fortnight ago, it became apparent that despite marginal achievements in positioning the sector in ‘powering the vision’ in recent years, the chaos in the petroleum sub-sector, the complexities in the electricity sub-sector, and the enormity of resources needed paint a picture of a country shouldering an extremely heavy burden.
"The development targets we aspire to achieve by 2030 cannot be attained without the provision of quality, reliable and affordable energy," admitted President Kibaki.
He added that to propel the country to the next level of development, challenges that constrain the energy sector like inadequate power generation, rising costs of energy production, and high and volatile oil prices must first be resolved.
Going by the realities in the sector, the country is walking a tight rope and the aspirations of Vision 2030 are increasingly looking beyond the reach.
Executive action
To start with, the Government is being pressed to develop a strategy to reign in the problems that bedevil the petroleum sub-sector, which unfortunately are mainly in the control of profit-seeking private sector operatives.
Being a net oil importer, something that during the first six months of this year gulped a staggering Sh166.4 billion of foreign reserves due to the weakening shilling, finding solutions to perennial problems of importation, discharge, storage, transportation and distribution continue to be major headaches.
Energy Minister Kiraitu Murungi admitted the sub-sector continues to grapple with challenges like over-reliance on few suppliers, weak and underdeveloped infrastructure, increasing demand, price volatility and underinvestment.
While these factors have somehow become chronic, the solutions being prescribed do not present a lot in terms of optimism due to bungled implementation.
For instance, although three years ago Kiraitu published a legal notice empowering the National Oil Corporation of Kenya (Nock) to set up a national strategic reserve to cushion the country from crude oil price volatility at the international market, the country is still awaiting for implementation.
Though Kiraitu has perfected the art of reminding Kenyans that plans to establish the strategic reserves are under way every time the country is experiencing a crisis, he has refused to admit that the project could fail.
The cost of procuring strategic stocks that would last the country for 90 days is about Sh100 billion in the current environment of a shilling gone amok. A further Sh40 billion would be needed to put up storage facilities.
In retrospect the possibilities of a strategic reserve project failing are real, more so considering the lack of enthusiasm among oil marketing companies who want to continue importing petroleum products monthly to benefit from price fluctuations.
The aggressiveness with which oil marketing firms opposed the 30 per cent import quota allocated to Nock last year, and the inability for the State-owned parastatal to implement the quota, is also another pointer to the fact that Nock lacks the muscle to oversee a national strategic reserve project.
But, while the challenges in the petroleum sub-sector offer a gloomy picture going forward, the scenario is not any better in the electricity and renewable energy sub-sectors.
During the energy conference, observers noticed the frustrations of Kenya Association of Manufacturers (KAM) Chief Executive Betty Maina when talking about the pain manufacturers have to endure.
"The current cost of electricity is discouraging new investments and constraining expansion of industries," she said.
She added that since January, the cost of energy for manufacturers has soared by 47 per cent from Sh10.7 per kilowatt-hour to Sh16 by end of last month.
The scenario, according Maina, has been brought about by over-reliance on thermal generation and lack of Government commitment to provide a favourable environment for the private sector to invest in renewable energy.
Though the private sector seems willing to invest in projects like small hydros, wind and even geothermal, their wish is that the Government to provides securities and guarantees.
They also want Kenya Power to offer agreeable power purchase agreements, an arrangement the company has largely dismissed owing to the absence of clear legislation governing private investments.
President Kibaki told the private investors and financers that Kenya is not a risky nation to invest and thus should cease the insistence on guarantees.
"While we recognise the right of financiers to demand payment securities to underwrite their loans, let us also appreciate that Kenya is not a risky country in which to invest," he said.
Effectively, this has made numerous investors to give the country a wide berth and left the onus of undertaking power generation, transmission and distribution in the hands of State-owned companies.
Yet, the enormity of the funds required to implement several projects that are critical for realisation of Vision 2030 makes many skeptical that the country is basically building castles in the air.
Investment budget
"We are skeptical of delivery, because the Government is not making any commitments," observed Maina.
According to the Kenya Electricity Investment Plan, a mind boggling $45 billion is required for investments in the energy sector by 2030, $18 billion of which will go towards developing 5,000 MW of geothermal power.
In country where over 70 per cent of the population depend on biomass for energy needs and electricity connectivity rate stands at 29 per cent, raising the funds in a tall order.
Speaking in Norway last week, Prime Minister Raila Odinga pleaded with institutions financing investments in energy to review stringent conditions attached to the loans to enable Kenya access the funds.
Clearly, Kenya is travelling a treacherous path to attaining the aspirations of the Vision 2030 is as far as the energy sector is concerned.
Courtesy EA Standard
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