#1 ⚡ Introducing your weekly Power and Energy update...
Including a brief insight into the current state of the industry in Kenya
A little about myself…
After graduating from Aberdeen and moving back to Nairobi, I have been keenly following energy developments in Kenya, and the powers that drive demand and supply in the region.
Even though my background is primarily in oil & gas exploration, the lessons in Energy Markets and sustainability spark my interest in effective policy & strategy and how once applied, can leverage East Africa’s abundant resources to alleviate the effects of energy poverty in the region.
Today, Eastern savannah is booming with brilliant minds and innovative technological solutions all geared to improve quality of life. Nevertheless, each day we see such ideas flame-out because of hostile investment conditions, or some other odd reason. Who is to blame? Why don’t projects ever get completed? What seems to be going on? These are the kind of questions that immediately spur conversation be it on the streets, in public transport, ubers or at any social gathering.
As the world progresses into a new age, it has become a civic right for all citizens to access energy & power. This has birthed the need for communities to keep thier leaders, service providers and governments accountable despite not having clear and elaborate channels to do so.
[Knowing the vulnerabilities in our systems, How then can You and I get Involved?]
Through this, came the creation of The Spark Savannah newsletter, a weekly newsletter that simplifies energy news, reports on industry developments, observes and recognises decisions made in the industry and how they affect citizens. Additionally, it is to spark conversation and highlight insights from experts within the industry, young investors & professionals to debate on issues that affect all energy access.
And Much Much More….
Don’t forget to Subscribe for future editions!
🌐Where we are:
In Kenya, the key drivers of the energy market are fossil fuels and electric power generation. Fluctuations in either cause ripples in the various economy-driving sectors; agriculture, transport, tourism, industry, and manufacturing. [To what degree could be observed during the Covid-19 pandemic period where developing economies were nearly brought to their knees!!].
Currently, about 235 Operational Energy projects spread country-wide provide an effective installed capacity of about 3117 Megawatts(MW). [effective capacity simply meaning maximum electricity output from all energy-generation projects under ideal conditions; when the sun is shining, the wind is blowing, no generator losses, etc].
Hydroelectric and geothermal energy account for about 80.1% of total power generation, Windpower at 11.2%, Thermal-diesel(7.7%), solar(<1.0%) and power imports from Uganda and Ethiopia, accounting for the remaining 1.3%. Other power generation sources come from Bioenergy such as, Biogas; which has been in used since its first introduction in the early 1960s, and biofuels obtained from waste effluent and/or oilseed crops like palm seed, castor and rapeseed.
Based on the projects and power schemes in the works, it is estimated that Kenya could have an installed capacity of 7200 MW by 2030. Such ambitious targets can only be realised through effective public and private financing. Examples would be the Last Mile Electrification Project or Least Cost Power Development Plan (LCPDP). Such schemes are geared towards achieving universal electrification by 2030, as defined by the Kenyan government.
🛢State of the Oil...
It’s always exciting when a nation begins the journey from prospect to legitimate Oil & gas producer. It sparks hope for a prosperous future especially for the communities that occupy the identified prospective regions. Kenya currently imports petroleum products originating from refined Murban crude in Saudi Arabia, which account for about 18% of total monthly imports; second to industrially manufactured equipment.
Since 2010, Tullow Oil has been developing several significant projects in the Lokichar Region. After a period of exploration and appraisal, in 2018, the Early Oil Pilot Scheme (EOPS) was developed to help Tullow and its partners test the performance and handling of Kenyan crude in the global oil market.
About a year later… the light, waxy crude1 oil was purchased by a London-based Chinese company, worth $12 Million based on the oil price then.
A deep concern was whether the revenue would be shared as initially stated in the scheme, especially towards the development of the Turkana community living within the Lokichar region.
Recent reports however, suggest that many parts remain impoverished and underdeveloped, leaving inhabitants with more questions than answers about the ‘promised-riches’ from the black gold.
Having weathered periods of unfavourable oil prices, debilitating license delays, and effects of Covid-19, Tullow BV and its joint venture partners (JVPs) have recently released a reassessment of the Lokichar Project; citing lower unit costs, higher expected production numbers and better environmental footprint through the inclusion of a lower emissions strategy.
💡 It will be interesting to see what happens by the end of 2021 when the final list of strategic partners will be announced; a significant step towards a final investment decision.
⚡🔌Energy Access:
A way of evaluating the energy demands of a country is through electricity demands numbers and peak electricity statistics. Even with the adverse effects of the pandemic, Kenya’s electricity demand expanded to 1926 MW by June 2020 compared to 1802 MW earlier in the year. KenGen PLC; which accounts for about 72% of electricity produced countrywide, projects that energy demand will continue to rise albeit gradually even as households and industries face reduced income and increased taxation.
Schemes such as the Last Mile Connectivity Project; funded by the World Bank (WB)& African Development Bank (AfDB), implement both grid and off-grid solutions to facilitate the connection of over 7.2million households to subsidized power. This would substantially enable the now under-70% population have access to energy thereby sparking industrialization and development. [Currently, about 68% of the population have access to energy, but with the last mile project opening up the more marginalised areas, this percentage is sure to increase.]
🤔 With the forthcoming change in government in 2022, it will be interesting to see how the potentially new government and financiers in the private sector collaborate to ensure such projects are completed to meet the energy needs of the about 50million citizens.
In the News:
Sky-high fuel pump prices have continued to cause uproar among Kenyan households and businesses. As expected, several micro-sectors are already experiencing the knock-effects; transportation costs, household energy bills, and consumer goods have all increased.
💭These conditions continue to pile on the pressure on the debt-burdened economy; with the projected increase in global oil prices, who knows how high the inflation rate will get to by end of 2021?
Treasury dept has rejected the Petroleum Ministry’s application for funds from the Petroleum Development Fund kitty after the fund was discontinued in October’s Review of the fuel pump prices. The fund is estimated to hold over Kshs. 15 billion collected over the 5-months it has been in effect, from the pockets of fuel consumers through the Petroleum Fund Levy and helped keep prices unchanged for the period it was enacted.
💭Treasury cited ‘lack of available funds’ as the reason for rejecting the application. This not only adds to the brimming frustration, bit also raises more questions about management of the petroleum development levy which is still in effect. The Ministry and Energy and Petroleum Regulatory Authority (EPRA) are yet to meet with parliament and review the current pricing formular. Failure to reach a long-lasting agreement only spells gloom for consumers as goods and services continue to escalate in price, further burdening Kenyan citizens.
Kenya’s President Kenyatta on 29th September announced a cabinet reshuffle affecting 3 ministries, including, the Ministry of Energy. This will see Dr Monica Juma take the helm of an office presently in crisis to save the debt-stricken Kenya Power and Lighting Company (KPLC).
💭 The most signifiacant concern is the continuation of on-going projects, considering the forthcomeing regime change in Aug 2022.
The special task force assembled in March 2021 to review Kenya’s troubled power purchase agreements (PPAs) mechanism, handed the president their recommendations. The most significant ones were; terminating all pending PPA negotiations to ensure future agreements first align with the government’s least-cost power development plan (LCPDP).
The effect of the above is two-fold.
On one hand, power agreements will be signed based on Kenya’s projected energy demand, guaranteeing effective power supply. Meaning, the only power purchased from generators is what the country needs. A great example would be Ghana’s power purchase model - which is forging a reputable path towards energy sector reform.
However, on the other hand, the government’s increased control over who gets PPAs in some ways increases the risks of procurement graft and biased lobbying.
Another was ensuring that electricity costs are reduced by 33% by end of 2021 through modification of consumer tariffs.
💭 What many hope is that this could be the first step toward much-needed power sub-sector reform. Nonetheless, these moves can also be seen as trying to please already disgruntled citizens; populist and political especially with the elections within sight.
In a recent visit to South Africa, US special presidential envoy for climate, Jonathan Pershing urged investors seeking oil and gas opportunities in Africa to reassess their plans, further alluding to possible regulatory and financial action against them. Further implying that future oil and gas investments could result in companies possessing stranded assets.
💭It is virtually damaging to businesses and communities that have benefited from these companies investing in the different parts of Africa. Moreover, such investments have delivered electricity to marginalised areas and have spurred economic growth within those areas. The questions to be raised are about the energy transition and what they mean for developing countries that have barely utilised their resources. [Are developed economy solutions applicable in the sub-saharan context?]👓What to Look out for…
🔮 The push & pull between the Treasury and ministry on the Petroleum Development Fund crisis. Because of the kitty’s largely unclear management & regulatory nature, who then should be accountable for what seems to be an easy target for fund misappropriation?
🔮It would be interesting to see the response to the special envoy’s remarks from organizations such as the African Energy Chamber, which have been instrumental in safeguarding the integrity and posterity of the African energy industry in order to effectively serve its people and environment. Also whether the number of final investment decisions on prospective energy projects decrease or remains the same.
⚡Spark of the Week:
If you are looking to recycle your waste, TakaTaka Solutions LTD in Kenya have several public recycling stations conveniently spread across Nairobi where you and I can drop off our trash. Check them Out 👆!!
If you have any Energy and Conservations tips? Send them my way!!
That’s it for the week. Feel free to email me if you have any ideas for the newsletter.
Subscribe and Share!!
Always remember 👉 Keep Reading! Keep Questioning! Keep Informed!
Feel free to leave a comment and/or contribution :)
Waxy Crude - this type of crude easily thickens if not kept above a certain temperature; in this case, 40 degrees Celcius.
Great insights today! Looking forward to seeing how the newsletter grows.