Kenya’s ambitious energy projects – and what they mean for growth
IESE second year MBA students have recently returned from Africa where they learnt about Kenya’s Energy Projects. The country is at the forefront of renewable energy implementation, and set on its target to achieve the first breaks in mass usage of clean energy on the continent. The vast amount of untapped solar energy in a country that receives 8 – 11 hours of sunlight daily, has the largest wind farm in the continent, hydroelectric dams that contribute about 36% of the grid capacity and huge investments in ongoing geothermal projects, reveal natural energy sources yet untapped and the abundance economic growth that can be unlocked in the country.
Even with these vast untapped potentials, the country is not sleeping on its toes either. A combination of the international clamor for clean energy and the underserved communities in Africa that promises even greater economic development with access to the grid probably contributed to many of the successes they have achieved. Kenya was one of the first African countries to build geothermal energy sources and by 2030 Kenya aims to have 5,530 MW of geothermal power or 51% of total grid capacity. To understand how much of an improvement they have achieved so far: In 2010, fewer than one in five Kenyans had electricity. By 2018, about 60% do – thanks mostly to geothermal power from the East African rift and the number keeps increasing dramatically as more geothermal wells are drilled.
But this is not Kenya’s primary source of electrical power now. The hydropower energy contributes about 36% of total grid capacity with its 761 MW. This comes largely from the Masinga Dam on Tana River and the Sondu Miriu. It also comes at a cost: hydropower is not a constant energy source and faces cycles of dryness in the draught. With climatic changes, it is becoming increasingly an unsustainable source of power for a country with an ambitious economic development program.
The solar energy industry is also not left behind. With the success of the modest solar project first conducted in Stathmore Univiersity, the government commissioned its first commercial-scale solar power plant, the 54.6 MW Garissa Solar Power Plant with two other major solar plants currently under development. And even then, there is still so much room for more solar energy development since the equator runs right through the country, giving it an average of 4.5 kWh per square meter of solar potential.
But that is not all. The most recent hydrocarbon discovery, exploration and production is probably one of Kenya’s best finds, providing not only another energy source to its already diversified mix but also access to play in the international oil markets; a market most east African countries have been eyeing for a long time. This new find will certainly create economic growth for the country and allow it to become a diverse energy broker in the region. It is hopefully, also the perfect timing for these hydrocarbon discoveries – Kenya has a chance to learn from the mistakes of other African Countries like Nigeria and Angola – and so will ensure that the energy sector remains diversified and investments and development in renewal energies is not impeded by the excitement of hydrocarbon discoveries.
But will they? How far will the clamor for sustainability keep Kenya’s energy projects from fully exploring these hydrocarbon finds? How much will the need to keep to the Paris agreement make or break oil and gas investments by big multinationals like Tullow and Total? For a country with a vision of becoming a globally competitive and increasing quality of life in 2030 of which a robust energy sector is an enabler, what does this mean to the projects they could or could not undertake? How much power does the environmentally-conscious consumer weld on the markets to force and unwind hydrocarbon explorations projects that hurt the earth?