When I joined the Energy Regulators Association of East Africa, few people understood the dream of achieving the Energy Union.
The region has faced a turbulent time, thanks to the Covid-19 pandemic and the Ukraine-Russia war. However, the challenges may soon change, if the governments can put in place robust strategies to mitigate any imminent future energy crisis.
But what is an energy union?
The term refers to deliberate policy development to encourage EAC member states to achieve certainty and predictability for investors, achieve affordable and reliable energy, sustainable capacity building, enhance effective regulation and work towards low carbon economies. The umbrella body supporting this movement is the EREA.
As part of the policy advisory, the region's electricity market is still nascent. The region still lags behind many other nations with low energy access rates, a factor that will delay the vision toward middle-income levels.
Indeed, energy is critical in driving the industrial revolution and economic growth. EREA identifies fundamental challenges of the region but focuses on the power sector in Kenya, which has recently been brought to the limelight.
The region has limited electricity market designs; although significant steps have been made toward liberalising the electricity markets, the future of the electricity market requires thinking outside the box.
Developing robust procurement models and introducing short-term markets are vital to expanding the market and attracting more players. For example, when a country, such as Kenya, has at least 15 independent power producers, the short-term market can be introduced alongside the existing power purchase contracts.
Similarly, creating autonomous power system operators is critical to providing a level playing ground for many actors. Ultimately, the competition in the generation market and the introduction of many distribution entities will promote efficiency and increased market. These designs are ripe for Kenya, Uganda and Tanzania.
Another challenge is the slow pace of developing and adopting energy policies geared towards increased energy access, such as mini-grids. The mini-grids strategy has far-reaching implications, especially in the East African region. Many of the EAC partner states are in the process of upgrading their dilapidated networks.
Initially, the move was a gateway to increasing energy access, especially in sub-Saharan Africa. But this approach is expensive and slow. The mini-grids potent comparatively low cost of infrastructure, higher value per invested dollars and a higher level of services for consumers. Rightly designed, the region could benefit from related low hanging fruits such as increased reliability and demand stimulation and a trajectory for the future technologies of the continental and local grid.
Interestingly, the cost of electricity in the region has not been friendly. For example, Tanzania and Burundi have the lowest domestic lifeline tariff of $7.07 and $4.7, respectively. While Kenya leads the region with $14.03, a value doubles that what other regions provide.
How should the electricity market in Kenya evolve?
The power market in Kenya has undergone unprecedented turbulence for almost a decade. However, some of the challenges could have been avoided. This organisation has been a monopsony for a while and is expected to be one of the highest income earners in the region.
Although the problems such losses are common in many parts of the world, the difference is the strategic implementation to minimise them. For example, the current Supply-Average Interruption Duration Index is over 98 hours per year against the international best practice of about 1.5 hours per year.
Similarly, the Customer Average Interruption Duration Index in Kenya ranges between 3 to 3.3 hours against 1.36 hours outlined in the international best practice, while the System Average Interruption Frequency Index is 32 times per year against the global best practice 1.3 times per year. Such disparities and inefficiencies should be addressed to lower the tariff and reduce wastage.
Many innovative ways have been developed, such as digital metering and Nodes on strategic transmission and distribution lines to monitor real-time information on the power flow. But what worries me is the continual management disruptions and uncertainty in the utilities. Such operational and management risks delayed the implementation of the strategic plan.
One has to ask about the robustness of its strategic plan and how well the strategic plan is being implemented.
The Presidential Task Force unearthed numerous ways to evolve the entire energy sector to make the institutions a going concern. Although some of the strategies are drastic, it is time to implement them strategically and boldly.
Dr Geoffrey Aori Mabea is the Energy Regulators Association of East Africa executive secretary
