Reduced trade activity uncovers opportunity in energy sector

Kenya’s economy showed significant slowdown due to the coronavirus pandemic, an effect that was felt by every country around the world.

Import and export activities took the back burner as international travel and logistics were dealt a blow by government measures to reduce the spread of Covid-19. Kenya, traditionally a haven for imports, saw a large drop in the trade deficit as the country imported 7.77 per cent less in 2020 than the previous year, a record double-digit drop of 16.97 per cent in the trade deficit over the past decade.

A large amount of the drop in imports was due to slower uptake of petroleum products. The country imported 31.42 per cent or Sh103.78 billion less worth of fuel petroleum products in 2020 than in 2019, as a result of the lower demand occasioned by movement restrictions, and lower energy demand by industries.

Oil demand has reduced all over the world. The United States of America Energy Information Administration noted a global decrease in oil consumption from 101.18 million barrels per day in 2019 to 92.29 million barrels per day in 2020.

But there is a lesson to be learnt from this, according to Lake Turkana Wind Power (LTWP) Chief Financial Officer, Ashish Chadda, who noted that the pandemic has shown the need for uptake of more green energy.

“With the lockdowns that were instituted around the world, we saw a global reduction in demand for electricity of about six per cent on average, and that showed us that there is a gap for renewables to fill, as they require no import or export to supply the necessary energy.”

While diesel-based power plants depend on oil imports, renewable energy such as the wind power that LTWP supplies to the national grid is dependent only on locally available resources.

According to the Energy and Petroleum Regulatory Authority, thermal energy sources contributed to 19.1 per cent of the energy mix in April 2019, which reduced to 4.2 per cent in 2020. The gap was filled by renewable energy sources specifically geothermal, hydroelectricity and wind power.

While Kenya maintains a continent-leading dependence on renewable energy, there is still high dependence on fossil fuels to produce electricity when hydroelectricity – which accounts for 85 per cent of Kenya’s generation mix – is challenged by drought.

In a move that shows even Kenya’s long-time and sole electricity distributor understands the precarious position that dependence on fossil fuel for electricity generation is, Kenya Power recently invited bids for firms to retrofit 23 thermal plants with solar and wind power-producing capabilities.

Consumer bills

As Kenyans dig deeper into already distressed pockets to contend with rising electricity bills, the move to shift to renewables is a good idea. Consumer bills are currently based on foreign exchange fluctuations, hydropower levies and fuel charges, the latter of which is a function of the global oil prices.

The government is working to improve the robustness of the manufacturing sector as one of its key development pillars under the Big 4 agenda.

This pillar seeks to ensure 15 per cent of the gross domestic product comes from manufacturing, create one million jobs, and increase foreign direct inflows five times from $672 million to $3.8 billion.

“When the country manages to achieve the 100 per cent renewable electricity target that is envisioned in Vision 2030, the effects will trickle down significantly to every mwananchi who will not have to pay heavily for diesel or a foreign exchange charge because the electricity that they use at home and in their workplace will all be locally sourced from renewable sources,” Chadda said.

- The writer is an energy communications consultant