We are on the right path in the electricity sector

Published on the Star News Website

Recent protests are annoying in their requests to ensure accountability, transparency and acknowledgement that the nation is bigger than any one or group of us. A renewed sense of nationality and hope for a fair future that we don’t need, at least not in the energy sector.

After all peak demand has increased to 2186MW, more Kenyans are connected to power, 80%, and are thriving as they use electricity. We are doing great.

Development assistance is promoting direct deals that are announcing very low and sustainable prices for energy. What is the use of transparency and competition, and following the plan that we hear people murmuring about. We should prop up the listed generator in direct deals. DFIs are rightfully falling over themselves to offer the most concessional terms to the state. They are not deploying funds to impress their sovereigns, or to meet fund deployment quotas, or to capture a segment of the market for foreign businesses. They are doing this out of a sense of humanity for us. We can put these projects in the plan and circle back later to competition and building a fair, transparent and reliable system. Don’t we want to reduce the cost of power right now?

We have deals in battery, wind and solar that promise floor prices for energy that cannot possibly be achieved in a fair competitive market. That’s the beauty of single sourcing to the state generator in Africa. Refreshingly different from the competitive markets DFIs come from. Kenya is not ready for true open competition; baby steps; baby steps.

Big multinationals and local private sector are being left behind in this fad. Sadly, they are not directly negotiating with higher offices to ensure they get ahead of the queue. They are not bypassing the recognized channels of the MoE to secure support that would allow them to slide their deals down the throats of the planners. They are humbly utilizing their networking skills and, Hail Mary; their project will sneak through. Faith is indeed the substance of things hoped for, the evidence of things not seen.

Moratoriums are in place to smoke out the hidden hands that own the private generators. This will not end up in the country having insufficient power, soon. We shall all rejoice in the end when we can put a spotlight on the names; one dark night.

You know, it wouldn’t make sense to focus on finding a path for the stuck investments in the sector, to assure supply availability over the coming years, to build a fair, transparent and competitive system that will guarantee long-term price discovery. The investors came into the market of their own will. They will wait. We can use the bilateral deals to pressure the market to bring lower prices. What options do they have? Kenya is the best investment destination for power in Africa.

We have two main opportunities in the sector, reducing the price of electricity and ensuring availability.

To ensure availability, let’s ignore the pre-investments already made by the private sector and bring in new public and private sector projects that we can negotiate directly. That way we ensure there are no state and private wheeler dealers short-circuiting, and we can announce our success as the benchmark. Let us prioritize our beloved geothermal, and who can do it better than the state. It is baseload after all, and a national security asset. What would be the use of asking for competitive sourcing of baseload capacity, and have it open to all when we can already directly identify the best proponent. Afterall, we have already announced for the umpteenth time that we are switching to auctions soon. That should be enough for a signal. Developers, tick. Lenders, tick. Public, tick.

Single sourcing is sure to tackle the issue of price in the period before AFCON comes to Kenya. Isn’t that the timeframe that matters? After the Cup we can see how to proceed. Why worry now of how prices will develop after Kenya hosts and wins the AFCON? Who wants the stress of declaring a cut off point for feed-in-tariff projects and a way of transitioning the LCPDP to a capacity only plan paralleled with an auction, and a wholesale market? No. Let a for-profit licensee plan for the sector. Let us not practice kicking the can down the road. We are on the right path.