Power Africa: Observations from Kenya

During his trip to Africa at the end of June, President Obama announced the Power Africa initiative. The press release highlighted several goals, including adding generation capacity in the six target countries, which include Kenya, and increasing the number of households and businesses with access to electricity by at least 20 million.

I was recently in Kenya meeting with potential partners for a research project that will measure rural households’ demand for grid connections, as well as the social and economic benefits of bringing people electricity. (The project is joint with Professors Ted Miguel and Eric Brewer.) I gained several insights on the opportunities for growth in the local power sector as well as the challenges to bringing power to more Kenyans.

Let me start with a couple facts. The total electric generating capacity in Kenya is about 1,700 MW. By comparison, the generating capacity in California, where population is 40 million compared to Kenya’s 45 million, is 70,000 MW. Kenya has plans to add substantial capacity in the near future, including several large geothermal projects.

On the distribution side, the Rural Electrification Authority in Kenya has made tremendous strides over the past six years building out the low-voltage distribution network. Nationwide, more than three-quarters of the Kenyan people now live within 1.2 km of the grid. We visited a regional office for the agency and saw rows and rows of transformers, waiting to be installed, so this share will likely grow even higher in the future.

New transformers awaiting installation

New transformers awaiting installation

Kenya Power Company, which operates the distribution system nationwide, will connect a household to the grid as long as it’s within 600 meters of a transformer, so many households are within striking distance. Here’s the catch, though. The household has to pay about $400 to KPC for the connection, and there is talk that the company plans to increase the connection charge to almost $900 this summer. In a country where the per capita income is around $800, most households are priced out of a connection.

As a result, roughly 20 percent of the population actually has electricity in their homes. More than half of the people in the country are living under the grid without access to it.

Many households in Kenya are near the grid, but not yet connected

Many households in Kenya are near the grid, but not yet connected

I met with a grandfatherly gentleman I’ll call Mr. X in Kisumu rural, close to Lake Victoria. His house, on a steep hill overlooking a picturesque valley, is about 100 meters downhill from a secondary school that began receiving electricity 3 years ago. He quietly answered questions about his living situation and smiled patiently at my attempts to thank him in Swahili (“asante sana”).

Mr. X became animated when the conversation turned to “stima” or electricity. He was indignant that the nearby school had electricity but he did not. When probed, he told us that the only reason he did not have power was the large connection charge – he could pay for the wiring in his home and afford the monthly payments.

Without electricity, Mr. X spends about $7 per week buying kerosene that he uses to cook and power a large, pressured kerosene lamp that lights his whole house. Plus, to buy kerosene each week, he must pay about $1.25 for a motor scooter ride to the nearest village, about 5 km away.

When probed about what he would most like to do if he got electricity, he mentioned cooking and lighting his home, so it’s likely that his kerosene costs would decline significantly with a connection. He also wanted to iron his clothes and operate a welder, the latter of which could potentially bring him more income.

Access to electricity has the potential to transform many lives – creating income-generating opportunities, allowing children to study later at night and replacing expensive, time-consuming and polluting alternatives such as kerosene. As energy economists, we have many opportunities to learn about the benefits of electricity as well as the best business and policy models to use to increase access. Programs like Power Africa can be hugely impactful, so we need to make sure we do them right.

About Catherine Wolfram

Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, Co-Director of the Energy Institute at Haas, and a Faculty Director of The E2e Project. Her research analyzes the impact of environmental regulation on energy markets and the effects of electricity industry privatization and restructuring around the world. She is currently implementing several randomized control trials to evaluate energy efficiency programs.
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7 Responses to Power Africa: Observations from Kenya

  1. Peter Alstone says:

    How about small-scale solar power as a bridging measure? The first 5 watts of power let people ditch kerosene and charge their mobile phone. No, you can’t iron or weld (cheaply) with solar but those first few watts have a big impact (environmental, economic, health) for far less cost than a grid connection that might be years (or $100′s) away.

    I’ll shamelessly plug an organization I work with on these issues… Lighting Africa supports private sector players who are bringing pico solar products to the market. Read more here:
    http://www.lightingafrica.org

  2. Azmat says:

    “Access to electricity has the potential to transform many lives – creating income-generating opportunities, allowing children to study later at night and replacing expensive, time-consuming and polluting alternatives such as kerosene.”

    Indeed; it does.
    May I suggest that these remote villages-communities should get their electricity from ‘local’ generation (solar, wind, even thermal-bio). That eliminates the need for huge projects, with WB funding (and the associated OH and other HIGH costs). Development can happen incrementally. There is a risk that influential ‘tribal’ leaders will get more for their tribes (read: earmarks), but that is always a risk, but at least the scale of malfeasance is distributed. Less harm done. AND faster implementation.
    I like big projects as much as the next guy, but having seen decades of delays in getting them going I am increasingly a believer in micro-projects.

  3. Gilbert Adjoyi says:

    On the generation expansion side, small scale solar power plants that generate around 2MW and feed it into the greed should be appropriate for Kenya. Such endeavors are already underway in Ghana, one of the 5 countries to benefit from the President’s ambition. Land use in Africa is a militating factor against getting larger solar projects on going though. The Geothermal option there already, wind power and other smaller hydro power plants are all potential areas to further explore.

    On the distribution side, the economics of getting power to potential consumers living under transmission and distribution grids, prima facie, would appear uneconomic and demand would prima facie appear not an effective one. There would be the need to determine monetary values to things like reducing pollution from using alternatives like kerosene, diesel, or gas. Improvement in literacy which would be brought by children being able to study at night, even watching television at night instead of indulging in social vices would add more value to the gains. Certainly measured in monetary terms, the gains would far outweigh the costs.

    In terms of finding upfront capital to expand generation and fund cost of distribution, government aid to such countries like Kenya and the other five can be done by providing the materials. “Bad people” would go as far as stealing materials to sell for money but surely, that can be better controlled than other forms of funding.

    There are pricing concepts that are made exceptionally low to include low income people who would otherwise be priced out. Then nurture their ability to pay over time to a point where Long Run Average Cost = Long Run Average Revenue. The same pricing concepts use optimal non-linear concepts to tap untapped consumer surplus that might exist in the middle and higher income consumers, in attempt to cross subsidize the gap in the cost and prices paid initially by low income earners.

  4. Arthur Yip says:

    Given your experience with Kenyan electricity, I wanted to ask if you know anything about the claims in a Guardian article titled “Kenya to generate over half of its electricity through solar power by 2016″ ? The news seems unverifiable and the limited set of numbers in the article look wrong.

    http://www.theguardian.com/environment/2014/jan/17/kenya-solar-power-plants

    • Catherine Wolfram says:

      Thanks for the link. The numbers do seem implausible to me. To get 50% of their electricity from solar, Kenya would need to build at least 1.7 GW. If they’re spending $1.2 billion, as the article claims, that would not seem enough to build that much solar capacity. By comparison, the new Ivanpah plant in CA cost $2.2 billion and is not quite 400 MW. Solar PV is likely cheaper and construction in Kenya may be less expensive than construction in California, but less than $1 per watt seems ambitious to say the least.

  5. thedesignbar says:

    Reblogged this on thedesignbar and commented:
    35Million!!And to think the Rural Electrification Programme would have turned that around in 6 years.While ”Nationwide, more than three-quarters of the Kenyan people now live within 1.2 km of the grid” that is quite a stride,it goes to show that something is still not right!

  6. Pingback: The Source of All Resources – National Review Online (blog) | eegbusiness

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