Kenya to reap big from global energy transition

By John Otini
Friday, November 27th, 2020
In summary
    • Spurred on by Covid-19 global pandemic, the world is finally galvanising its commitment to move towards a green and sustainable future by this mid-century, and the global energy transition is the cornerstone of this new world.
    • The global energy transition is being led by Europe, China and India some of which are major importers of Africa’s oil. Kenya which spends nearly a third of her import bill on crude oil according to Central Bank data will spend less money on energy.
    • The transition to renewable energy will continue to rapidly gain momentum throughout the coming decade, led by policy shifts towards green incentives as developed economies accelerate transition through adoption of greening policy, economic stimulus and investment.

Kenya stands most to gain from expected softening of  global oil prices as transition to renewable energy becomes the cornerstone of the post Coronavirus  pandemic world.

Already, renewable energy companies have made the country their Africa base and are championing a major shift in solar energy consumption, especially among rural population, winning them billions in foreign venture capital deals.

PricewaterhouseCoopers (PwC) indicates in a new report that this transition will continue throughout the coming decade, led by policy shifts towards green incentives as developed economies begin to “build back better”.

It says long-term global oil demand outlook is such that it is likely to never again exceed 2019 levels following dramatic demand slump, triggered by economic lockdowns across the world and accelerated energy transitions.

In the latest edition of PwC Africa’s Oil & Gas Review 2020 titled “Energising a new tomorrow”, the consultancy group, says the energy transition provides immense opportunities for Africa’s economic growth.

The transition, it adds, offers African countries the opportunity to diversify their economies, address energy poverty, create new employment sectors and benefit from the investment incentives out of the developed world. 

In the report, PwC has ranked Kenya second to South Africa, in terms of progressive energy transition policies.

PWC says Covid-19 has accelerated the global energy transition by as much as five years as the developed world uses renewable energy transition to anchor much of their stimulus packages and new economic diversification.

The report says that oil prices are expected to hit a ceiling of $54 a barrel after Covid-19 pandemic compared to $110 a barrel in 2012.

Principal Secretary, State Department of Energy, Joseph Njoroge says, Kenya’s success in tapping both public and private sector capital is responsible for the rapid investments in renewable energy, often referred to as clean energy.

Natural advantage

“Apart from the natural advantage of geothermal, we have managed to rally private capital helping to drive development of clean energy projects faster compared to other countries in Africa,” he said.

The match to green power is tilting the scales in favour of Kenya which had been seen to be falling behind its peers due to its low mineral base and a nasty fallout with neighbours over oil and gas pipeline routes. 

Kenya, the survey shows, has one of the most diversified export base with little reliance on re-exports of oil products at a time when major buyers of Africa’s oil are rapidly investing in clean energy.

The reports paints a picture of key oil exploration companies divesting into wind, solar and geothermal as developed nations fast- track the shift to renewable energy.

Kenya gets more than 95 per cent of its electricity from renewables sources, Njoroge says, adding that private sector producers have also accepted to come to the table to cut expensive power tariffs due to falling technology costs.

“The foundation for Kenya’s energy policy to clean energy was cast in the 2004 Energy Policy aper  which saw the formation of Geothermal Development Company at the time when Kenya was already using hydro power for most of its needs,” says Mwenda Njoka, an energy Consultant.

Mwendwa adds that Kenya’s lack of heavy oil deposits has ensured that it is not reliant on one commodity.