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November 17, 2018

Goverment must plan demand for 5000MW

One of the Jubilee government’s most audacious promises is to bring to the country 5500+ Megawatts of power within the next 40 months.

It has not received as many headlines as the laptop project or the standard gauge railway or even the 1million acres to be put under irrigation all in the next three years.

But it should be put into perspective.

For starters 5500MW of power in the next 40 months is more than Vision 2030 promised to deliver by 2030 which was just about 2-3000MW.

Secondly, the current total installed capacity in the country is only 1700MW meaning the government is proposing to increase that by a massive 220 per cent in just three years.

There were 2,330,962 Kenyan customers connected to the national power grid as of 30 June 2013, utility Kenya Power says.

But more than 50 per cent of the power in the country is consumed by the large industrial companies, cement makers and steel mills. Another 10 per cent is taken by small commercial consumers leaving the rest to domestic consumers.

The question then has to be asked, who will consume this 5500MW that is government wants to bring into the system?

The statements from government while seeking to encourage are short on specifics.

Davis Chirchir, the Energy Secretary for example, said that Aliko Dangote, the Nigerian industrialist who wants to put up a cement factory in Kitui had asked for 1000MW of power to get his activities going.

Engineer Kamau, the Transport Secretary is also said to have requested for 700MW for the standard gauge railway.

But those are promises that hold a lot of uncertainty.

What government now needs to do, is to plan on creating demand for this power.

The Ministry of Industrialization must quickly embark on the creation of industrial zones especially near generation areas.

In the Ol Karia area for example, 350MW of geothermal power are expected to come on stream from Kengen’s current projects.

The power generator is also planning to do another 700MW in the same area.

While geothermal has high initial capital expenditure (drilling one well could cost Sh300million) it has very little running costs and therefore offers cheap power that industries can access at globally competitive rates thus cutting down the cost of our manufactured goods.

This in turn helps our export markets.

The Menengai area is another where Geothermal Development Company is working on bringing 400MW to the grid by 2016.

It has said it expects to bring in another 800MW from that area.

Given that Nakuru town is not far away, the Industrialization ministry should be engaging with the county to see how quickly an industrial park can be set up.

In Kitui where Dangote wants to set up his US$400m (Sh32billion) cement plant, other cement makers Bamburi, Athi River Mining and Bamburi are rushing to ring-fence the resources there.

Government has indicated it will put up a 960MW coal-fired power plant in the area. It so happens, that in addition to limestone, Kitui is also endowed with coal which can be used by cement makers for their energy needs.

It does not take a genius to see that a major industrial park should be set up. Headlined by the cement makers, it would also be ideal for steel millers and other big consumers of power.

These same characteristics are replicated across the country; in Kilifi where a 960MW coal-fired plant is to be set up, major mining activity is set to kick off.

Already Athi River Mining has the largest cement plant in the region in Kaloleni, Cortec Mining has announced that the area could contain billions of dollars worth of rare earths and tourism is big.

Basically, while the government’s 5500MW has already taken shape, the Ministry of Industrialization has yet to give a road map for the uptake of this power.

The nature of power purchase agreements is that they are long term and they carry something called a capacity risk.

This is to say, if they are idle, they are still being paid for a capacity charge.

It will make no sense to have all this power come onto the grid, and have no one to sell it to.

And there is very little time to do it.

The ministry must first map out leads on regions of the country where such industrial parks could be set up owing to their potential, then it must quickly move in and engage the counties affected so that the necessary land, wayleaves, environmental and building permits are all put in place to accelerate the process.

It must also work closely with the Ministry of Foreign Affairs to promote these industrial parks at international conferences and on site visits.

Basically, the statement in Vision 2030 to be a middle-income industrialized country must be actively pursued, we cannot wait for it to manifest itself.

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