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Kennedy Mukuna Final Paper

An analysis of Kenyas rural energy policy: the place of off-grid renewable energy power projects

Abstract
As Kenya lay the foundations for the development of the country from a developing nation to one with a middleincome status, the development of energy resources was central in order to sustain the growth both in the current and future sectors of the economy. From the analysis of data on energy use patterns in the past, the projected energy need in the country was set to be met if and only if the energy capacity of the country grew at steady rate of ten percent. For Kenya, however the rate of electrification in the rural areas has been disproportionate to that in the urban zones. This has led to various economic disparities between these areas despite the fact that 78% of the countrys population lives in the rural areas. It is the intention of my project to analyze the country rural energy policy. In this analysis, the rural energy situation energy will be contextualized within the greater energy economy of the country. Using data from the long-range energy forecasts, demographic trends, social patterns as well as wind and solar resource maps, the paper will analyze the prospects of off-grid energy generation projects as well as investigate how renewable energy technologies which could be used to facilitate the implementation of such projects.

Introduction

Kenya is a country in Eastern Africa. It borders Tanzania to the South, Ethiopia to the North, Somalia to the East and North East and Uganda and South Sudan to the west. It has a 536 km coastline bordering the Indian Ocean. It has landmass area of about 580,367 sq km. The country has a population of

43,013,341. Of this, 22% live in the urban areas, with an annual increase rate of 4.2%. The capital, Nairobi has some 3.375 million people.

The country has a fairly democratic system of government. In August 2010, a new constitution was promulgated and is currently being implemented. Kenya is now led by the President flanked by a Prime Minister and a cabinet of ministers drawn from Members of Parliament who serve on the National Assembly. There is a parallel system of government, a county-based government which is headed by county governors. As it is right now, the Parliament makes and approves public policy, it is relatively unclear how much power in terms of policy creation will be allocated to the county government. Under the Fourth Schedule of the Constitution of Kenya1, the national government is responsible for the regulation of energy and environmental policy, electricity and gas production and distribution all in the goal of establishing a durable and sustainable system of development(Constitution of Kenya, 2010). The county governments are responsible for planning and development(Constitution of Kenya, 2010) within the county which includes the regulation and distribution of electricity and gas as well as implementing Parliament-approved environmental policies.

Current Energy Situation in Kenya

- The Constitution of the Republic of Kenya, the Fourth Schedule, p. 175. Accessed on Thursday 3rd May 2012. http://www.kenyalaw.org/Downloads/The%20Constitution%20of %20Kenya.pdf

According to the Energy Act of Kenya2 and the Scaling-up Renewable Energy Program (SREP) Investment Plan For Kenya3, the country has a electricity demand of 1191 MW against an effective installed capacity of 1429 MW. The power generation breakdown is listed below.

Hydropower Geothermal Thermal(fossil-based) Wind Bagasse(biofuel)

52.1% 13.2% 32.5% 0.4% 1.8%

It is projected that the countrys power demand will grow to 15 GW in 2030 and consequently installed power capacity is hoped to be at about 19.2 GW. The total energy consumption of the country is estimated at 0.21 Quadrillion(Quads) Btus4. The breakdown for the supply of energy and energy consumption is shown below.

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- Constitution of Kenya, the Energy Act, 2006. - SCALING-UP RENEWABLE ENERGY PROGRAM (SREP) INVESTMENT PLAN FOR KENYA. Accessed 3rd May 2012.http://www.energy.go.ke/wp-content/uploads/2010/08/Updated %20%20SREP%20Draft%20Investment%20Plan-May%202011.pdf
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- Open Energy Info, Kenya: Energy Resources. Accessed 3rd May 2012. http://en.openei.org/wiki/Kenya

Energy Source Biomass Oil and Products Geothermal Hydroelectric Coal

Percentage 74.0% 19.2% 5.0% 1.6% ~0.2%

Table: Courtesy of Renewable Energy and Energy Efficiency Partnership Policy Database.5 and EarthTrends: The Environmental Information Portal6

The level of electrification in the country is at 25%, with 51% penetration in urban areas and 5% for the rural areas.7 Under the current energy development plan, the country hopes to achieve 40% electrification rate by 2030. Given the heavy reliance on hydropower and to a lesser extent,

- Renewable Energy and Energy Efficiency Policy Database. Accessed 3rd May 2012. http://www.reeep.org/index.php?id=9353&text=policy-database&special=viewitem&cid=54 6 - EarthTrends: The Environmental Information Portal http://earthtrends.wri.org/text/energyresources/country-profile-96.html 7 - Renewable Energy and Energy Efficiency Policy Database. Accessed 3rd May 2012. http://www.reeep.org/index.php?id=9353&text=policy-database&special=viewitem&cid=54

geothermal power, Kenya is thought to be a big producer of green energy within Africa. However with the adverse climatic changes, the reliability of hydropower can not be guaranteed and this has led to severe power shortages in recent years. This has led the government to strategize on reducing hydropower dependence by 40% from the current 52% to about 35%. To put things into perspective, at the height of the drought crisis in 2010, the government commissioned diesel-powered generators which produced 290 MW of power at a cost of about $30 million in 12 months8. This was not inclusive of the importation cost for the diesel. The table below shows the impact of emergency power generation on GDP for 5 East African nations:

Source : Eberhard et al, 2008

The current GDP of Kenya is estimated at $70.85 billion (CIA 2012). 1.45% of this GDP is about $1.027 billion US dollars which if the country reinvested in sustainable power generating projects would be equivalent to 680 MW of energy. This is about 3 times the emergency power generation from dieselpowered generators which immediately shows the need for a long-term

- New York Times, published March 10, 2010. Accessed 3rd May 2012.

solution to the energy problem in Kenya. At the same time, this solution should be able to proportionately benefit the citizens of the country. As it was seen before, the current electrification rates are biased towards the urban dwellers with the rural folk suffering from lack of grid connection. The cost of power connection is also exceedingly high at about $450 and the cost of consumer power is about 34 cents per kWh.

For most of the rural dwellers in Kenya, this is a prohibitive cost for access to electrical energy. Common challenges which rural dwellers face today include high HIV/AIDS prevalence rates, gender imbalance, unequal access to education, poor quality of education systems as well as greater levels of unemployment and underemployment which not only contribute to higher poverty levels within these areas but also higher levels of income inequality as compared to their urban counterparts(Mwabu et al 2002)9. UNEP estimates that the average urban dweller in Kenya earns about twice as much as the rural counterpart10.

The rural energy situation

For the 78% of the countrys population living in rural areas, biomass is the major source of energy. In many parts of rural Kenya, particularly in the western and central regions, most rural households use crop residue for
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- Mwabu et al, 2002. - UNEP, Kenya: an integrated assessment of the energy policy. p. 6

energy production. This crop residue ranges from maize cobs in western Kenya to coffee and tea prunings in central Kenya. Wood fuel is also very popular. The variety of alternatives energywise always varies from region to region depending on scarcity and climatic conditions. According to reports, the use of firewood and charcoal still remains high despite a drop from 1997 - 2004. Fuelwood demand moved from 15.42 million tonnes(1997) to 15.1 million tonnes in 2000. Charcoal demand in 2004 was about 1.6 million tonnes (UNEP 2004). Government projections predict a peak demand of 53.4 million tonnes of firewood in 2020(Government of Kenya 2004). At this rate, the amount of forest cover in the country will continue decreasing - for example, due to charcoal production, forest cover is decreasing at a rate of 50000 ha/year11. To put this into context, only 3% of Kenyas land area is under forest cover , an area of about 19333 square kilometres. The use of LPG and kerosene has also increased significantly. Most rural households use kerosene and , to a lesser extent LPG, to supplement the use of firewood and charcoal. Over the last decade, there have been efforts to invest in more efficient kiln designs for firewood and charcoal use such as the one shown in the picture below. However, cost and availability has hampered their adaptation by most rural households.

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- ESDA 2003

Image courtesy: http://www.madegood.org/fuel-for-kenya/stoves/types-ofceramic-stoves/

Given this kind of energy economy, the pace of rural development has been crippled. The environmental impact of using biomass fuels in the unsustainable manner in which it is happening at this time - the demand for wood and charcoal stands at 35 million tonnes and the sustainable supply is at 15 million tonnes12 - is extremely severe.

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- UNEP 2004

The above chart shows the global warming impacts of the various biomass, LPG and kerosene technologies Credit: UNEP 2004.

Rural electrification: grid expansion vs off grid projects.

The rural electrification project was born out of the need to spark economic growth within rural areas. The common development theory of import substitution which has its roots in the Asian tiger success story and even more so in the Latin-American context13, proposed the laying down of infrastructure as a way to stimulate growth , industrially and subsequently economically. This was in the same vein as the setting up of institutions for formalization of property rights in order for people to access and mobilize their land assets as tools for economic mobility. However, the realities of the socio-economic situations of the rural populations have hampered the programme severely. The connection fees are not only prohibitive as aforementioned14, at about 35,000 Kenya Shillings15 but also there is a lack of financial schemes to help the rural population access funding to get connected to the grid. The forms of funding available are loans from commercial banks which are often laden with
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- Baer, Werner (1972), "Import Substitution and Industrialization in Latin America: Experiences and Interpretations", Latin American Research Review vol. 7 (Spring): 95-122. (1972) 14 - SCALING-UP RENEWABLE ENERGY PROGRAM (SREP) INVESTMENT PLAN FOR KENYA. Accessed 3rd May 2012.http://www.energy.go.ke/wp-content/uploads/2010/08/Updated %20%20SREP%20Draft%20Investment%20Plan-May%202011.pdf 15 - Equivalent to about $450.

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high interest rates.16 In addition to this, the cost of electricity is also high due to the unfavorable climatic conditions which have rocked the country forcing it to resort to diesel-powered generators to produce power, an expensive process, and the constant power rationing is also a problem that the rural folk have to live with. As a result,less rural households were willing to have mains electricity installed , partly due to the range of energy sources they had and the cost. Indeed it could not be stated better than it was in the World Bank report:

One of the most persistent claims for RE is that it can induce industrial growth in otherwise lagging low-income rural economies. The evidence from developing countries does not support this claim; RE has not, by itself, triggered industrial growth or regional developmentThe study found that where other prerequisites of sustained development were absent, demand for electricity for productive uses did not growRE is economically justified only when the emerging uses of electricity are strong enough to ensure sufficient growth in demand to produce a reasonable economic rate of return on the investment (p. 2).

This effectively means that rural electrification is not helping alleviate rural poverty, instead it is building social and economic stratification into the rural social fabric - only the wealthy could access the programme, with the poor having to continue using locally available, often polluting sources of energy. It is in light of these issues that attempts were made to develop off-grid power systems to enable easy access to power by the rural population. More

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- The Central Bank of Kenya has pegged the benchmark lending rate at 18%. Source: Business Recorder, Accessed 3rd May 2012. http://www.brecorder.com/business-afinance/banking-a-finance/55938-kenya-holds-benchmark-interest-rate-.html. Other local banks, such as Equity Bank, the largest lender for personal loans in the country, have interest rates at 25%.

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importantly, these new off-grid power projects were made to cater to the needs, economically and socially, of the rural population.

Mpeketoni Power Project: off-grid power production

In a study run by Kirubi et al17on an off-grid diesel-power plant at Mpeketoni in the Coast Province of Kenya, it was established that the access to electricity cheaply and readily by rural communities through off-grid renewable projects not only invigorated the agricultural production within these areas but it also aided the growth of infrastructure as well as maintaining healthy revenue margins for cost-recovery. This was attributed to the local consumers of the power generated, charging and enforcing power tariffs and having the power generation closely correlated to income-generating activities. The study established small and medium enterprises(SMEs) as a key part of the rural electrification process. Rural commercial economy included microfinance setups like grinding mills, coffee pulping factories, gas filling stations(Kirubi et al, 2008).

This was indeed a huge breakthrough because the existence of an off-grid power project which was sustainable without subsidies, was indeed very encouraging. However, the sustainability of the fossil fuel-powered energy project has been called into question due to the escalating prices of oil in the
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- Kirubi et al, Community-Based Electric Micro-Grids Can Contribute to Rural Development: Evidence from Kenya

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world, high maintenance costs, greenhouse gas emissions and the rising demand of power due to growth of the rural population. The project was started in 1993, when oil prices were about $20 per barrel. Today the prices are about $80 per barrel, a change which is reflected in the cost of power for the locals as well. From an initial tariff of about 6ct/kWh, the current cost is about 35ct/kWh18. This has set the precedent for the development of renewable energy sources which would reduce generation costs and be better suited environmentally while still upholding the working model for off-grid power projects.

Off-grid renewable energy power projects

At the heart of the off-grid power projects is the economic and social consciousness of the infrastructure setup to the needs of the communities within which they are setup. Off-grid power projects while bringing electrical power closer to rural communities have enabled the symbiotic growth of opportunities for growth within rural communities. However, this situation is only consistent if the cost of energy production grows in tandem or remains low compared to the growth responsiveness of the rural economy. Off-grid fossil-fuel powered projects are subject to changes in the cost of petroleum and coal on the international market. This is in addition to the greenhouse gas emissions.
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- Kinyanjui et al, Mpeketoni Electricity Project, Session paper. Accessed 3rd May 2012. http://www.globalelectricity.org/Projects/RuralElectrification/Nairobi/Day-2_fichiers/Case %20Study%20Mpeketoni%20Electricity%20Project.pdf

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Potential

Renewable sources of energy are essentially free and clean and according to a World Bank Report (2001), Efcient and clean energy supply is central to the reduction of poverty through many and varied linkages, as well as being important for economic growth. The solar potential in Kenya is extremely high, it is naturally decentralized, coupled with ever falling costs of installing systems with advances in technology19. The National Renewable Energy Laboratory estimates the countrys solar potential at 1,857,790,042 MWh/year.20Comparatively, the average rural household has an energy requirement of 544 kWh per year21. 78% of the countrys population lives in the rural areas which results in 33 million people. If a household consists of an average of 6 people, the number of households sums to about 5.5 million and the total energy requirement is about 2992 million kWh, 0.16% of the total solar potential for the country. It is crucial to ask whether households will still keep up their present household biomass and fossil fuel energy consumption levels with the installation of PV capacity/solar thermal systems. The following

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- Uwe Deichmann,Craig Meisner,Siobhan Murray,David Wheeler. The economics of renewable energy expansion in rural Sub-Saharan Africa. http://ac.els-cdn.com.ezpprod1.hul.harvard.edu/S0301421510007202/1-s2.0-S0301421510007202-main.pdf? _tid=ac83b214c58c82772e482937be0c0b2f&acdnat=1336093695_b6575ea0d54287e866525 43b8f22f29d 20 - http://maps.nrel.gov/swera?visible=swera_wind_nasa_lo_res&opacity=50&extent=33.91,4.67,41.91,4.62 21 - Ministry of Energy, Kenya, 2002.

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table gives us a sense of the same. It is drawn from a study22 by Sadah Abdullah et al.

NB: Currency units are in Kenyan shillings. (1US$83 Kenyan Shillings) Wind power is also a very possible option for energy generation. With wind potential of upto 346W/m2
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in some parts of the country, wind can be

exploited to support both the main grid as well as off-grid power projects. Zones with higher wind speeds tend to have less population which favors the setting up of large wind farms within these zones. The main problem is the intermittent nature of energy generation which characterizes wind energy farms. In their paper24, Sivachandran et al, propose the parallel use of
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- Sadah Abdullah et al, Rural electrification programmes in Kenya: Policy conclusion from a valuation study 23 - Energy Least Cost Power Development Plan, Government of Kenya. Accessed 4th May 2012. http://www.erc.go.ke/erc/LCPDP.pdf 24 - Sivachandran et al, A Review of Wind Energy Based Decentralized Power Generation Systems with New Developments in India. P. Sivachandran et al./Journal of Energy & Environment, Vol. 6, May 2007, Technical Note. Accessed on 4th May 2012. http://www.buet.ac.bd/ces/sivachandan.pdf

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induction and synchronous generators in wind turbines to meet the demand for power and maximize on wind speed at any one. As for the intermittency of energy production, they propose the use of hydraulic pneumatic storage and flywheel technologies for short-term storage as well as hydrogen cells and batteries for long-term storage.

Challenges facing the adoption of renewable energy power projects

In their paper25, Brent and Rogers present the findings of a sustainability assessment of a renewable energy off-grid project in South Africa. Their conclusion was that the project was not viable and the main reasons for it were the high setup cost(and subsequent supply costs were too high), lack of resilience on the part of the technological setup to the existing socioeconomic context and finally insufficient knowledge about the complexity of existing socio-economic structures on the part of the developers and designers and how to integrate it with the renewable energy project.

While it is true that renewable energy has promise and represents a sustainable option not only for energy generation but also propelling economic growth, the above challenges can not be underemphasized. Within Kenya, the situation is further compounded by the lack of robust energy policies and tariff

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- David Brent, D. Rogers. Renewable rural electrification: Sustainability assessment of minihybrid off-grid technological systems in the African context

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subsidies to support the development of such projects26. For developers interested in evaluating the potential of specific areas, the lack of up-to-date wind and solar resource assessment data confounds the process in no meager way. In addition to this, the prevalent actors in the energy sector are KenGen, a largely state-owned power generation corporation which controls about 80% of electricity generating capacity within the nation and KPLC, another largely state-owned corporation which controls the national grid. The relatively narrow space for private suppliers of power has been facilitated by a strongly regulated power market but this is changing as we have more players willing to invest in power generation ventures in the country. Finally, current power markets do not respond or correspond as well to the various socioeconomic and demographic institutions within the country. An example is the continued operation of the Mpeketoni off grid diesel-power plant, which despite supplying electricity to the resident rural population at twice as much the national average27, still runs without any upgrade to improve its efficiency and usefulness to the local population.

Conclusion

The energy situation in Kenya is still biased based on geographical location and socioeconomic and demographic composition associated with a location.
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- Abdullah et al. Rural electrification programmes in Kenya: Policy conclusion from a valuation study 27 - Session paper presented by Danson Kinyanjui and Paul Kituku at the UNEP Rural Electrification Workshop Nairobi, March 2006.

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The viability of grid connection to rural areas is diminished as compared to the potential effectiveness of off-grid power generation projects. Careful consideration and analysis is however needed to determine which forms of energy generation are best suited for the rural population. The country has enormous potential in wind and solar power. More government incentives such as passing into law the Feed-In-Tariff Policy, and the institution of financial schemes to help develop such projects and markets as well.

References:
Danson Kinyanjui and Paul Kituku(2006). Mpeketoni Electricity Project. Session paper presented at the UNEP Rural Electrification Workshop Nairobi. Abdullah et al(2008). Rural electrification programmes in Kenya: Policy conclusion from a valuation study. Bilbao. University of Bath. David Brent, D. Rogers(2009). Renewable rural electrification: Sustainability assessment of mini-hybrid off-grid technological systems in the African context. Renewable Energy Volume 35, Issue 1, January 2010, Pages 257265. www.sciencedirect.com.ezp-prod1.hul.harvard.edu %2Fscience%2Fjournal%2F09601481%2F35%2F1 Kenya Ministry of Energy. (2011). Updated Energy Least Cost Power Development Plan, Government of Kenya. Accessed 4th May 2012. http://www.erc.go.ke/erc/LCPDP.pdf P. Sivachandran et al(2007). A Review of Wind Energy Based Decentralized Power Generation Systems with New Developments in India. P. Sivachandran et al./Journal of Energy & Environment, Vol. 6, May 2007, Technical Note. Accessed on 4th May 2012. http://www.buet.ac.bd/ces/sivachandan.pdf Uwe Deichmann,Craig Meisner,Siobhan Murray,David Wheeler (2010). The economics of renewable energy expansion in rural Sub-Saharan Africa. http://ac.els-cdn.com.ezpprod1.hul.harvard.edu/S0301421510007202/1-s2.0-S0301421510007202-main.pdf?_t Ministry of Energy, Kenya, Energy Report 2002. Kirubi et al(2009). Community-Based Electric Micro-Grids Can Contribute to Rural Development: Evidence from Kenya. World Development Volume 37, Issue 7, July 2009, Pages 12081221

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Baer, Werner (1972), "Import Substitution and Industrialization in Latin America: Experiences and Interpretations", Latin American Research Review vol. 7 (Spring): 95-122.(1972) SCALING-UP RENEWABLE ENERGY PROGRAM (SREP) INVESTMENT PLAN FOR KENYA. Accessed 3rd May 2012.http://www.energy.go.ke/wp-content/uploads/2010/08/Updated%20%20SREP %20Draft%20Investment%20Plan-May%202011.pdf BusinessRecorder.www.brecorder.com%2Fbusiness-a-finance%2Fbanking-a-finance %2F55938-kenya-holds-benchmark-interestrate-.html.&sa=D&sntz=1&usg=AFQjCNFc4FWKBgNyMHEyzJr6Czin6VjvtA Mwabu, G., M. S. Kimenyi, P. Kimalu, N. Nafula and D.K. Manda. (2002). Predicting household poverty: A methodological note with a Kenyan example. KIPPRA Discssion Paper No. 12, Nairobi: Kenya Institute for Public Policy Research and Analysis. ESDA(2003). A New Energy Policy for Kenya? Policy Briefing No.1, Energy Alternatives AFRICA Ltd. UNEP, Kenya(2004). An integrated assessment of the energy policy. Renewable Energy and Energy Efficiency Policy Database. Accessed 3rd May 2012. http://www.reeep.org/index.php?id=9353&text=policy-database&special=viewitem&cid=54 Open Energy Info, Kenya: Energy Resources. Accessed 3rd May 2012. http://en.openei.org/wiki/Kenya EarthTrends: The Environmental Information Portal http://earthtrends.wri.org/text/energyresources/country-profile-96.html The Constitution of The Republic of Kenya. S Karekezi, J Kimani, O Onguru and W Kithyoma(2009). Large Scale Hydropower, Renewable Energy Adaptation and Climate Change: Climate Change and Energy Security in East and Horn of Africa. Eberhard, A., Foster, V., Briceo-Garmendia, C., Ouedraogo, F., Camos, D. and Shkaratan, M. (2008). Underpowered: The State of the Power Sector in SubSaharan Africa. AICD, Background Paper, Washington, D.C., World Bank.

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