ENERGY TRANSITION- KENYA AT A CROSSROADS

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ENERGY TRANSITION- KENYA AT A CROSSROADS

Author: MARTIN MUNGAI
Energy Oil and Gas Consultant

Over the past few decades, the world has focused on the issues of climate change, which is the long-term rise in temperatures and changes in weather patterns caused by increased carbon emissions into the atmosphere. Climate change has had devastating effects, particularly in sub-Saharan Africa, which has experienced prolonged droughts and a significant decline in agricultural production. The balance between household access to safe and sustainable energy and the replacement of fossil fuels with low-carbon energy sources is one of the top issues developing countries are currently struggling with.

Damilola Ogunbiyi, a Co-Chair of UN-Energy, once said, “We cannot achieve net zero by 2050 if we do not achieve sustainable energy by 2030”. Her sentiments lay bare the delicate balance between two critical issues: keeping pace with the rest of the world in moving away from “dirty” sources of energy and supporting households to meet their basic energy needs like cooking, lighting, and other economic activities. Which of the two issues should Kenya prioritize and allocate resources to?

Being a developing country, a vast segment of Kenya’s population has no access to electricity and Liquefied Petroleum Gas (LPG) for either cooking or lighting. Closing this gap remains a top priority in our Government policies, yet there is a need to balance it with transitioning to clean energy that emits near zero carbon into the atmosphere.

ENERGY TRANSITION IN AFRICA

Africa contributes less than 4% to the globe’s carbon emissions, according to the United Nations Environment Program (UNEP). This is the smallest share of contribution amongst the world’s regions. The impact of climate change due to carbon emissions, however, hits Africa the hardest compared to the other more developed regions of the world. How? Rainfall patterns have changed, and drought spells have greatly affected agricultural production, directly increasing poverty levels in the continent.

This perspective of contribution to emissions versus the impact of climate change has shaped the common position towards energy transition as adopted by the African Union in July 2022. The position takes cognizance of the deficit in Universal Energy Access and the lag in development in most African countries compared to the developed world.

The African Union (AU) has vowed to push for Just Transition coupled with energy development pathways to accelerate universal energy access. This cautionary path is balanced with the rest of the world’s efforts in addressing climate change, but more importantly, it ensures Africa does not compromise its momentum to tackle poverty through accelerated development.

2022 UNITED NATIONS CLIMATE CHANGE CONFERENCE (COP27) 

COP27 was held in November 2022 in Egypt, where developing countries, particularly in Africa were the biggest winners on the issue of compensation for losses and damage brought about by climate change. These are the impacts of climate change that countries cannot avoid or adapt to. These include impacts of extreme weather like drought, flooding and wild fires.

The conference agreed to set up a fund to cater for loss and damage and set up a transitional committee that will commence its first meeting before end of March 2023. Agreeing to set up the fund was hailed as a significant downpayment in climate justice, and a major milestone that was long overdue. The difficult part, however, will be to agree who contributes to the fund, what proportion, and actual remittance of cash.

Back in 2009, developed countries agreed to mobilize 100 billion dollars annually by 2020, to support developing countries reduce emissions and adapt to climate change. This commitment has not been honored to date, and may put commitment towards the loss and damage fund into doubts. Developing countries will therefore need to sustain pressure in the steps to actualize the fund.

KENYA’S ENERGY MIX

According to the World Bank, only 71% of Kenyan households had access to electricity by 2020, against a global average of 90%. With 29% of the Kenyan population not connected to electricity, this means difficulties in basic needs like lighting and more use of carbon-emitting fuels like firewood and charcoal. An important recall is that the country’s goal is to attain 100% access to electricity for all households by 2030. However, the fundamental issue is the source of our electricity generation and how clean it is in relation to carbon emissions.

According to the Ministry of Energy and Petroleum, 73% of our electricity is generated from clean, renewable sources, mainly hydro and geothermal. This is significantly higher than most western countries, with United States of America at 20%, the United Kingdom at 50%, and China 48% as of 2021. However, about 29% of Kenya’s electricity comes from diesel-powered generators, which the country plans to reduce to zero by 2030 by upscaling geothermal, solar, and wind as clean power sources.

Based on the above, Kenya’s energy mix underscores the great strides made towards the transition to clean energy, despite lagging in the energy access front.

KENYA’S OIL DEPOSITS

In 2012, Kenya discovered oil in Turkana, and a lot of work has gone into preparing the fields for production. The plan is to construct a pipeline that transports crude oil from Lokichar to Lamu for eventual export. However, the project has slowed down due to the prolonged search for an operator with the financial muscle to bring the resources required to move the oil discoveries to the development and production phases.

Globally, the pressure to halt new oil production has been mounting as the climate change conversation heats up. The key argument is that fossil fuels contribute the highest levels of carbon emission and are the main cause of global warming and rising global temperatures.

The key argument is that fossil fuels contribute the highest levels of carbon emission and are the main cause of global warming and the rising global temperatures.

New producers preparing for production are also facing significant challenges in raising financing for such projects. Why? Financiers are usually mandated to comply with strict lending requirements, key among them pollution to the environment and a demonstration of alignment of projects to the zero-emission goals.

Next door in Uganda, civil society organizations have been putting pressure to stop the construction of the Uganda-Tanzania crude oil pipeline, which may affect project financing. Some of the issues they have raised in the past include the contribution of crude oil to carbon emissions. Given these new trends, the dilemma for Kenya is whether the project will attract the requisite international financing for the Lokichar-Lamu pipeline.

SHOULD KENYA ABANDON CRUDE PRODUCTION?

Looking at Kenya’s local context, the benefits of producing crude oil outweigh the climate issues that have gained prominence amongst financiers. Kenya imports all its refined oil from the Arab gulf, including the heavy oils used in heavy industries for boilers and bitumen used in road construction.

The conversation then should be on the alternative to the oil products as opposed to the sourcing of the same.  For example, is there a policy direction on transitioning from using bitumen in road construction to newer technologies like concrete-based roads?

If the global pressure on financing new crude oil production carries the day, Kenya risks having a stranded asset that cannot be monetized. The opportunity cost of stranded assets includes loss of export earnings, lost opportunity to boost power generation from the associated gas, and foregoing the jobs that would be created through the project implementation.

If the country decides to produce and refine the crude oil locally by setting up low-cost modular refineries, the benefits can even be stretched further. The modular refineries would bring along the sprouting of related industries like petrochemicals and fertilizer production. The benefits would hence significantly impact on the northern part of the country, besides availing locally refined petroleum products.

WHICH WAY FOR KENYA?

The devastating impact of climate change is a reality that the globe has to tackle. On this front, Kenya has made significant strides in developing renewable energy sources, particularly geothermal, solar, and wind.

This past success is a key building block to incrementally move towards the desired energy transition.

Fossil fuel development will continue to be a central question in the climate change conversation. Kenya should step up its efforts to produce its crude oil in the next five or so years, as this will become a harder sell in the longer term. Financing will continue drying up for new oil provinces, and the risk of remaining with stranded assets may crystalize sooner than expected.

Much more effort, however, must be put into on addressing the consumption side of fossil fuels, especially for motor vehicles. The shift to electric cars is now a reality that the country needs to embrace. Most of the developed countries are now manufacturing cars that have the flexibility of being powered by either petroleum, gas, or electricity. The customer is left to choose, but the Government applies subsidies on the cost of gas and electricity to encourage the shift to clean energy.

This is being boosted by the continuous improvement in the electric batteries’ capacity and the cars’ efficiency. Some Governments have also waived taxes for electric cars to incentivize buyers. It is time for the Government of Kenya to accelerate incentives that encourage the manufacturing and importing of electric cars. The Energy and Petroleum Regulatory Authority can, for example, require all petrol stations to set up car charging points within a specific future timeline to facilitate car owners in the shift.

The most important facet of this conversation for Kenya is to pay attention to the basic challenges of its populace, particularly energy poverty, which is the lack of availability of certain types of energy like electricity and clean cooking fuel. Strategies adopted to drive energy transition should be coupled with increasing energy access.

The vision of attaining 100% connectivity to electricity in households should remain among the top priority for the Government. This will facilitate accelerated development, but more importantly, improve the livelihoods of the low-income segment of the population.