The Energy Debate

With the ever-escalating price of energy in Kenya, contrasting views have emerged prompting differing proposals. While the government seems bent on letting the market set the price of fuel, captains of industries under the auspices of the Kenya Private Sector Alliance (KEPSA) wants the government to reign in on the cost of electricity through price controls and or subsidy. But this is not where the problem lies however. KEPSA has intimated that some of its members are considering or are in the process of relocating to countries where electricity prices are more affordable.

The government has not responded directly (at least not publicly) to the 'threat' issued by KEPSA, which seems to suggest that it is probably serious about its market friendly position. Meanwhile, a National Energy Conference (NEC) is scheduled to begin in Nairobi this week from 7-10 October 2008. The 2008 National Energy Conference aims to provide an insight into pricing issues impacting development of competitive energy markets, among other topics.

The position taken by the government to let the market reign supreme is perilous from several perspectives. One, fuel and energy are major inputs in the process of production and transportation and any significant rise in the cost of these two means higher inflation. Higher inflation and decline in consumer demand will result in a slowing down of the economy. Given the crisis that followed the 2007 Elections, the last thing that the Kenyan economy requires is another shot in the foot.

 

Two, higher and rising prices of locally manufactured goods and services will reduce our regional competitiveness with the attendant risk of losing to our competitors in the region the lucrative East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA). Three, with food prices already beyond the reach of many households and a looming national food shortage (with famine having been declared in parts of the country), there is a danger of major social and political unrest breaking out unless urgent action is taken to remedy the situation.

 On the other hand, the position taken by KEPSA members is surprising given trends in other countries where the high cost of energy has inspired investments in energy efficiency (EE) and energy technology (ET). Given Kenya's higher energy cost relative to its competitors, shouldn't more be done to promote EE? This is the crux of the matter and where vision and leadership is mostly required. Many things need to happen at the legislative, policy, research, design and development (RD&D) and financing levels if Kenya is to become energy efficient. Certainly one hopes that going into the NEC some of these issues will be discussed and clear positions taken with regard to each.

A growing economy and expanding industry and manufacturing sector will demand more energy in the future. Vision 2030 acknowledges that Kenya must generate more (sic cleaner) energy at a lower cost and increased efficiency in energy consumption. There is need for substantial amount of investments to deploy Best Available Technologies (BATs) as cost effective emission and energy reduction options.