A better way to spend the $187Million Emergency power subsidy

Posted Sep 9, 2009 | 0 | Filed under:

The Kenyan taxpayer through the treasury, will spend $187million on emergency power subsidies. Yet, both consumer and industry will feel the financial pain in fuel surcharge costs in addition to the above said expense, because the emergency power uses imported fossil fuel costs. 

Another, and I dare say, better way of spending that kind of money would have been to buy down the cost of renewable energy and energy efficiency technology. Kenyans need electricity today and so the diesel generators must be acquired. But this should set the stage for government and Kenyans to plan ahead for future energy crisis regardless of whether the crisis is driven by a change in climate, shortfall in rainfall or growing demand. And planning ahead requires that the government aggressively court renewable energy and energy efficiency project developers by providing attractive enough feed in tariffs and buying down the capital cost of renewable energy equipment. Countries such as Germany have set a precedence for this by offering attractive incentives for renewable energy. I often hear the argument that Africa cannot afford such incentives, but based on our current situation today, the argument should be that Kenya cannot afford not to give such incentives.

By using the $187Million to buy down the capital cost of renewable energy or offering attractive feed in tariffs for biogas, the government will ensured quick deployment of renewable energy without saddling the country with the added cost of fuel surcharge. It is my understanding that every emergency power generator Kenya has acquired has remained in operation and operates 22hrs a day. So while the idea of emergency diesel generators is great for the crisis we are in at the moment, it is yet to be seen if they will go offline should the energy situation improve.

We either the spend the money investing in sustainable clean energy solutions or in a few short years, we'll be spending another $187MM on fuel subsidies along with hundreds of millions on fuel surcharges.