A Publication of AFREPREN/FWD and HBF – HA Initiative on

Renewables in Eastern and Horn of Africa

Sponsored by

HBF-HA and AFREPREN/FWD

By

Stephen Karekezi, John Kimani, Jared Atiang', Oscar Onguru and Justus Mbithii

Executive Summary 

The energy resources available in Kenya include biomass, petroleum (imported), hydropower, geothermal power and renewable sources of energy such as solar, wind and, to a small extent, small-hydropower and biomass - based cogeneration in the sugar industry.

The energy scene in Kenya is dominated by two key factors: an over reliance on dwindling biomass energy resources which meets the energy needs of most of the rural households and a heavy dependence on imported petroleum which drives the needs of the modern economy. Biomass is the main source of primary energy for majority of the population and accounts for up to 68% of the total energy consumed. Petroleum and its related products, though mainly used by the modern sectors of the economy, accounts for a further 22% of the total energy consumed. Use of electricity is usually associated with a rise or change in lifestyle and its consumption accounts for 9% of the total energy consumed.

The other energy sources, though used, are not widely disseminated and harnessed across the country. They mainly include renewables such as solar energy technologies, wind energy technologies, small scale renewable energy technologies and biomass cogeneration. Cumulatively, their usage at the national level only accounts for 1% of the total energy consumed.
The key objective of this study was to investigate what it would take to achieve a fully participatory and vibrant sustainable energy sector in Kenya with specific emphasis on cogeneration.
This report is divided into five chapters. Chapter 1 provides a background review of the energy sector in Kenya including energy supply and demand as well as the status of power sector reforms. This chapter also examines the Government’s agenda for action vis a vis the Rural Electrification Programme.

Chapter two reviews cogeneration development in Kenya including the current status and the key stakeholders involved in the cogeneration industry. This chapter also provides a justification for cogeneration in rural areas.

The third chapter assesses the involvement of local groups in the cogeneration industry in Kenya. It begins by providing a rationale for involving local groups in cogeneration development and then outlines suitable models for local groups’ participation in cogeneration. The chapter concludes by providing a description of barriers that may affect/hinder local groups’ involvement in cogeneration.

Chapter four reviews the existing policy and legal/regulatory framework for sustainable local participation in cogeneration and identifies the key policies that need to be strengthened in the National Energy Policy document.

The final chapter (chapter five) provides the study’s key conclusions and recommendations. One of the key conclusions is that there is a significant potential for cogeneration in the sugar industries demonstrated by the amount of bagasse available e.g. in 2006, a total of 1,878,153 metric tonnes of bagasse with a potential to generate 120 MW of electricity. In addition, there are several drivers that enhance the attractiveness of cogeneration: the increased price of cane is compelling sugar factories to maximise value extracted from sugarcane; the rising cost of generating oil based electricity; employment opportunities created by the cogeneration installation; additional incomes to the small scale farmers arising from the cogeneration installation; and, contribution to the rural development.

There are several opportunities for local participation in the cogeneration industry. Buying shares or co-investing in the privatised or yet to be privatised sugar factories by the Government; co-investing in the revival of the defunct sugar factories; and purchasing shares of profitable sugar companies through the stock exchange. A good model is the Mauritius revenue sharing mechanism that ensures that even the smallest sugar farmer benefits from cogeneration proceeds.

There is an already a market for the bagasse - based co-generated electricity owing to the low levels of electrification in the rural areas. Furthermore, the Government has zero rated tax and accrued revenue from the capital invested in cogeneration i.e. dividends earned are not taxed.

The Government has also drafted legislation that promote cogeneration. In addition, technical and financial support is available to assist the local groups and other investors interested in investing in the development and promotion of cogeneration.

In spite of the aforementioned opportunities, there are some barriers identified that constrain the involvement of local communities in the cogeneration industry, for example;

• The legal and regulatory frame work needs to be strengthened to provide incentives to local investors who include local groups in the implementation of cogeneration.

• Provision of a standard price offer as well as implementation of a standard (Power Purchase Agreement (PPA) for cogeneration. This will not only make it lucrative for local investors but also ensure a level playing field among interested investors.

• Implementation of an appropriate revenue sharing mechanism, similar to the one implemented in Mauritius, should be adopted to strengthen the participation of local groups and communities in the cogeneration industry and ensure wider distribution of accrued benefits.
   

Back

This paper is available on an exchange basis. If you find it to be useful, we encourage you to send us any relevant publications from your organization. To request for the full paper, please fill in the publications request form