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January 16, 2019

Cheaper Energy Could Spur Industrial Revolution

The aerial view of newly opened Ken Gen power plant in Mombasa. Photo Elkana Jacob
The aerial view of newly opened Ken Gen power plant in Mombasa. Photo Elkana Jacob

KenGen says it has commissioned 140 megawatts of geothermal energy to be fed into the national power grid. This is part of a 280MW project in four power plants that the company has been putting up and will go a long way to boost the country’s installed electricity capacity to over 2,000MW.

The company will not stop there. Because the wells it sunk yielded much more power than initially expected, it will put up an additional 70MW, bringing the total to 350MW of geothermal to be newly added to the grid.

The net effect of this is that the cost of electricity in the country will gradually reduce as geothermal increasingly becomes the source of electricity consumed, which is considerably cheaper than diesel power plants.

However, it is an Expression of Interest notice in the dailies on Thursday that should generate even more excitement. In the EoI, KenGen is seeking to set up industrial parks in Naivasha near its power plants where industries will be fed directly from Ol Karia at considerably cheaper prices.

Only this month, Cadbury’s, a chocolate maker, announced it will close its local manufacturing plant and restructure to distribute products sourced from its factories abroad.

Eveready, the battery maker, also announced it will get its batteries from Egypt henceforth, citing high costs of producing locally.

The price of electricity in Kenya has been a big contributor to these developments. By setting up industrial parks, KenGen will go a long way to address these concerns.

It is also likely to spur a revolution in Nakuru county and propel it to become the country’s industrial capital.

With close to 1,000MW expected from Ol Karia in the next year or two, and another 1,000MW from Menengai, it is easy to see how this would play out.

With plenty of land for setting up of industries and cheap power available, the allure for industries to relocate to Nakuru to take advantage of these amenities is rising considerably.

Added to the fact that a lot of power is being loaded from nearby Suswa, the Rift Valley basin may be the future for Kenyan industry.

KenGen is seeking to put up five industrial parks on its land near the Ol Karia power plants. Other companies like OrPower and Centum have interests in developing geothermal power in the area.

With Kenya being one of the six immediate beneficiaries of the US Power Africa initiative, more companies could enter this space.

Already, perhaps attracted to the cheaper power, Chinese textile giant, Jiangsu Lianfa Textile, is setting up a cotton processing plant in Naivasha, where it will farm cotton on 50,000 acres and process it creating about 30,000 jobs in the area.

KenGen and Kenya Power will need to put together business development plans to attract industry to the area, while the county government will need to put in place the necessary infrastructure to support an industrial economy.

Such business development ventures should include carrying out studies to establish the state of industry in countries we compete with, to establish what would be the ideal conditions to avail.

They should include joint cooperation with the Kenya Association of Manufacturers which has always complained about the high cost of production in the country, to get their views as to what industrialists would like offered.

KAM can advise as to location, facilities required, power costs, amenities such as housing and roads and any other requirements.

The county government should look into planning residential areas in anticipation of higher numbers of people who would work in the factories set up there. Particularly, it should move to prohibit excessive subdivision of land by speculators and where this has occurred, rezone them into single dwelling to prevent development of narrow, ungainly tenements by profit maximising landlords.

The national government should think of putting up an international airport nearby to support industry as well as the existing floriculture sector in the area. This is key if the country is to achieve its dreams of being industrialised by 2030.

Rebased economic data last week showed manufacturing still plays a distant second-fiddle to Agriculture, which is still contributing about 25 per cent of our total production in the country.

The Ministry of Industrialisation should replicate this model in other areas that have high potential for cheaper energy. Hadodo in Wajir is likely to see the development of natural gas power plants after the discovery of sizeable deposits there.

Already, the Kenya Electricity Transmission Company has been asked to extend its network to Hadodo in recognition of this potential.

A natural gas power plant that was to be built at Dongo Kundu is reportedly to be transferred to the area. A similar case applies for Kitui, where large deposits of coal exist.

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