Now Available: Kenya Power Report Q3 2013

Similarly to its neighbours, Kenya's power sector is characterised by a capacity deficit, whereby at peak demand there is insufficient supply to meet expanding consumer demand. In addition, over reliance on hydropower has exposed the country to chronic power shortages, especially in the dry season, making expensive emergency diesel-fired power generation a necessity. As such, the country has put forward some ambitious capacity expansion and diversification targets in its 'Vision 2030' and following energy policies and, while some delays will be likely, we anticipate positive growth across segments (especially geothermal).

Inadequate electricity generating capacity, limited diversification and a consequently unreliable power supply have been perennial problems in Kenya for over a decade. As for other African countries, the country has experienced a divergence between planning and implementation, with repeated delays and cancellations preventing adequate refurbishment and expansion of its ageing capacity - ultimately leading to a significant shortfall. The vast majority of Kenya's generating capacity is based on domestic hydropower, while geothermal and thermal power supply the rest of the country's requirements. Yet, this unreliable source has exposed the country to chronic power shortages, driving up costs.

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Cognisant of the fact that electricity is crucial to economic growth, the Kenyan government has thus included the expansion and restructuring of the power sector among the key elements of its 'Vision 2030' strategy, highlighting that the country will require an installed capacity of over 19 gigawatts (GW) to meet its projected peak demand in 2030. In line with this:

* The country is considering a variety of fuels and technologies for its new capacity. Although hydropower generation remains vulnerable to drought and variations in rainfall, additional hydro facilities are being developed in order to reduce the country's dependence on costly oil-fired
* Yet, in its most recent national energy policy (2012), the government also listed coal- and gas-based generating projects as a way to provide electricity supply over the medium term. The installation of a diverse power source should indeed lower the cost of power, while reducing the capacity deficit and playing a significant role in the stabilisation of the power situation in the country. This is a point corroborated by a recent announcement made by Kenya Power, which predicted that Kenyan consumers can expect to spend less on electricity following plans to inject an extra 668 megawatts (MW) into the national grid.
* Along the same lines, we highlight that over the longer term non-hydro renewables are also set to play a much bigger role in the country's energy mix. Most notably, we see geothermal as the favoured form of renewable energy, as its potential is considerable.

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