The Big Interview – Power Player

| May 14, 2013 - 12.34UTC
Interview

We’ve all experienced frustration with repeated power cuts. With a growing population and a booming economy, demand for electricity will only increase, so what does the future hold for Kenya’s energy supply? We met Kenya Power MD Joseph Njoroge to find out.

In the 19th century Africa was labelled the ‘The Dark Continent’. Although this moniker had more to do with the lack of knowledge of the continent than with any shortage of light, decades after the wave of independence most of Africa still endures night time darkness due to severe power interruptions. Seven out of every ten Africans have no access to electricity at all.

While Kenya has made significant steps to improve access to electricity– from about 650,000 customers to 2.1 million in the last ten years – a tough challenge lies ahead as the country works toward achieving its Vision 2030 goals. After all, the ambitious dream of becoming a middle-income state in the next 17 years is linked to access to affordable and reliable energy.

The Government aims to achieve universal access to energy by 2030. According to the Least Cost Power Development Plan (LCPDP), peak demand will rise to about 2,500MW by 2015 and hit over 15,000MW by 2030. To put things in perspective, current peak demand is 1,340MW. Although our installed capacity is 1,620MW, there are times when the current demand cannot be met, especially when equipment is under repair.

Eng. Joseph Njoroge, Managing Director of Kenya Power, the firm charged with the transmission, distribution and retailing of electricity throughout the country, is optimistic that the country will meet the 15,000MW demand in 2030. The gains made in the last ten years, he believes, are proof that with focus and proper investment, Kenya can solve its energy challenges.

“The number of people in Kenya with access to electricity has risen from 10 per cent in 2002 to 35 per cent in 2013. That change within a period of just ten years is very encouraging. It creates a lot of hope,” Njoroge tells me.

Eng. Njoroge estimates that the number of customers when he joined Kenya Power in the 1970s was about 100,000. While proud of the progress  to date, he admits that the company has not fully met the expectations of its customers.

Power blackouts are a frustration for every Kenyan, and even more so for business people, who ensure heavy costs running generators.

The Kenya Power MD attributes these outages to a multitude of problems, one being limited resources for maintaining a reliable infrastructure.

“Kenya does not have enough contingency and feeder lines. The infrastructure that we use is vulnerable to the environment, especially trees. It is not practically possible to remove all the trees that encroach on power lines,” says Njoroge.

Members of the public also pose a threat, he adds, citing frequent incidents of intoxicated drivers damaging electricity poles, thereby causing power interruptions.

Vandalism is a major problem that has seen much-needed resources diverted towards repair and maintenance. Njoroge estimates that Kenya Power loses about Ksh1.5 billion every year because of vandalism. The economy, he adds, could be suffering losses of up to Ksh6 billion.

“The spiral effect on the economy is almost four times higher. We are losing extensive resources: the fact that a welder can’t do his job because a transformer was vandalised, or children cannot study because there are no lights, or sick people are not attended to in good time because machines cannot be operated,” he said.

To mitigate these risks, Kenya Power intends to implement several solutions, such us investing in underground and insulated cables to reduce transmission downtimes.

“As we work on these improvements, our customers just have to bear with us. These interventions involve huge capital investment and cannot be done overnight. These challenges keep us on our toes and make us think innovatively about how to forestall them,” says Njoroge.

Kenya Power is undertaking system automation pilot projects in Mombasa and Nairobi to improve efficiency in monitoring and solving disturbances on its power lines. The Ksh300 million Mombasa automation system has already enabled Kenya Power to remotely locate and isolate faulty positions along its power distribution lines without disrupting service to unaffected customers.

“Our people in the field say it is a godsend. It has enabled them to undertake operations at night and even when the weather is not favourable,” says Njoroge. “Automation is a flagship project that we want to build on towards expediting our goal of exceeding our customer expectations. The entire system should be automated in ten years,” he said.

Born 54 years ago, Njoroge was educated at Mohoho High, a provincial school in Gatundu, and later went to Alliance High School for his A-Level certificate. Njoroge’s dream career was always engineering, thanks to his excellence in mathematics.

After school, Kenya Power sponsored his education at the University of Nairobi, where he graduated in 1980 with a degree in electrical engineering. Njoroge began working at Kenya Power as a bursar three years before his graduation, during school holidays. After graduation, he was employed as a field engineer.

Njoroge, who turns 55 on 15 June this year, describes his 35-year career at Kenya Power as “interesting”. He says his upbringing was “humble” and fondly recalls his deceased father’s unrivalled passion for education.

The MD deeply admires former US President Abraham Lincoln (his portrait hangs on Njoroge’s office wall) for his persistence in the face of difficulty, and draws personal and professional inspiration from Stephen Covey, author of the bestselling book The Seven Habits of Highly Effective People, easily reciting the seven tips.

In five years’ time Njoroge will have to retire from the company he has worked for all of his adult life. Before then he hopes to achieve a number of things, one of them being exceeding his customers’ expectations.

“By 2015 I would want our customers to feel more than satisfied with the quality of service they receive from Kenya Power,” he said.

He knows it is a challenging task. Kenya Power, he explains, is benchmarking against small utilities like Northern Ireland Electricity Limited (NIE) and Canada’s Manitoba Hydro International, which face similar network challenges. The firm is also drawing inspiration from Spain’s energy investment strategy.

“We want to emulate Spain’s passion for investment in green energy. You will be surprised that one third of the electricity Spain produces is for sale outside the country,” he said.

Listed at the Nairobi Securities Exchange (NSE), Kenya Power is majority owned by the Kenyan Government, which has a 50.1% stake.

While Kenyan parastatals have often in the past been associated with corruption, inefficiency, bureaucracy and poor performance, Njoroge says things have changed, adding that the involvement of government in Kenya Power has been very helpful.

“The Government’s inclusion in Kenya Power’s shareholding is what has given us access to concessional loans. It would not have been possible to operate with commercial loans.  That merit outweighs any interference that the government may bring,” he says.

Financing remains a huge challenge for Kenya Power. Earlier this year the firm received a Ksh5.1 billion loan from South Africa’s Rand Merchant Bank to finance the laying of new electricity lines and the construction of more substations. The utility company is also seeking a Ksh29.3 billion loan from China’s Exim Bank to finance investment in underground cables.

Kenya Power has so far received loans from Equity Bank (Ksh5.6 billion), a combined advancement of Ksh4.7 billion from The World Bank and the Kenyan Government, about Ksh3.1 billion from the European Investment Bank and Ksh6.4 billion from Standard Chartered Bank.

“Limited finance is our biggest challenge, and because of that constraint we cannot plan with the speed we desire,” said Njoroge. “If we had adequate resources some of the projects would be fast-tracked and we would get to our destination earlier than 20 to 30 years. We are talking of billions of dollars in required financing. This country has many priorities, from healthcare to food security and water, which override the demand for electricity.”

The future
The challenges notwithstanding, Njoroge remains optimistic that ‘energy for all’ is achievable, citing the impressive growth in connectivity witnessed in the last decade. The power distributor connected 307,000 customers to the grid last year and has maintained a 15-22 per cent connectivity growth in the last ten years.

“Not everybody will be connected to the grid, but everybody will be enjoying electricity in one form or another. Even today there are customers in off-grid areas who enjoy power through diesel generators,” said Njoroge.

Diesel generators in 2030?

If oil discoveries in Turkana are proven to be commercially viable, then yes.

“If we have commercial oil it will be cost-effective to generate power using diesel generators. At the moment we use hybrid systems that combine a diesel-powered generator with a renewable energy-driven generator to counter the environmental effects of diesel,” said Njoroge.

Diesel is routinely used in off-grid generators while heavy fuel oil is used in a number of commercial generators across the country. One runs on paraffin.
Njoroge attributes Kenya’s high electricity costs to fuel charges that arise from the operation of these generators.

“Thermo plants consume a lot of fuel. On your electricity bill there is always a ‘fuel cost charge’. Once we bring on board green energy investments, we should see costs go down,” said Njoroge.

But is open access to transmission and distribution infrastructure a solution to the country’s high electricity costs?

In 2008, the Kenya Electricity Transmission Company Limited was established to construct, own and operate high-voltage electricity transmission lines as Kenya prepares to adopt to open access in power transmission.

But Njoroge believes Kenyans may have to wait until 2040 to enjoy open access: “Until we have a critical mass of customers and a critical mass of infrastructure, I don’t think it would be cost effective to implement such a system. We could finally have open access about five to ten years after we achieve universal access in 2030.”

In the meantime, Kenya’s focus is on developing geothermal and other renewable energy resources.

The investment in geothermal energy is quite conspicuous, with last year’s launch of the Olkaria IV 280MW project billed the largest in the continent. The project, developed by Kenya Electricity Generating Company (KenGen), Kenya’s largest energy producer, will cost about $1.3 billion and be completed by the end of 2014.

“We have exploited almost all hydro resources and now our sights are set on geothermal, wind and biomass,” Njoroge explains. “Once we bring on board these clean energy resources, the thermo plants will run only during peak periods and we will do away with the fuel cost charge and improve affordability.”

Njoroge expects to see increased exploitation of solar energy in the future, which at the moment is underutilised due to prohibitive costs.

“Two firms have expressed interest in installing solar power at a fairly good cost. The technology is advancing and we should expect to see more solar power coming on board,” he said.

Kenya is banking on the Feed-in Tariff (FIT) policy, which guarantees to buy all the electricity produced from green energy sources, such as hydro, wind, solar, biomass and municipal waste energy, at a pre-determined price that is sufficiently attractive to stimulate new investment.

Adopted in 2008, Kenya’s FIT policy seeks to encourage private investment by providing investment security and market stability, and reducing transaction and administrative costs by eliminating the conventional bidding processes.

A recent study conducted by the World Future Council and the Heinrich Böll Foundation, analysing Renewable Energy Feed-in Tariff policies (REFiT) in 13 African countries including Kenya, shows that these policies could encourage energy production in areas both on and off the electricity grid.

Recent investment in renewable energy has attracted participation from Japan and China. These countries, Njoroge argues, are motivated by the opportunities in Africa where demand and population growth are high at a time the rest of the world is experiencing saturation.

“Kenya’s electricity access is just 35 per cent yet in developed countries access is at 99 per cent, leaving no opportunity for expansion,” he said.

Kenya is also looking to expand its energy trade with neighbouring countries like Tanzania, Uganda and Ethiopia.

A 1,045km transmission powerline linking Kenya Power with Ethiopia, which has enormous geothermal energy potential, is expected to be ready by 2018. The World Bank last year approved financing to both governments – US$243 million for Ethiopia and US$441 million for Kenya – to fund the cross-border project, marking a key milestone toward implementing the larger US$1.3 billion Eastern Electricity Highway Project, whose goal is to interconnect power transmission networks in five East African countries.

But even with the local and regional emphasis on renewable energy, Kenya is also seeking to develop a viable nuclear energy programme within the next 15 years. The United Nations, however, has advised the country to focus on clean, cheap and available energy resources and shelve the nuclear energy plans, citing concerns about the dangers and costs associated with nuclear plants, especially when they reach the end of their life and have to be decommissioned.

According to Ministry of Energy Permanent Secretary Patrick Nyoike, Kenya could have its first nuclear reactor by 2022. The 1000MW facility is expected to cost Ksh250 billion (US$3 billion) to set up.

Njoroge argues that in 15 to 20 years, nuclear energy will be a key option if Kenya is to meet its energy demands. The country, he added, ought to prepare for a time when most of the potential in other energy resources will have been exploited.

When he is not worrying about things power, Njoroge serves as board member at Muhoho and Alliance High Schools.

“Even with the very busy office I run, I never fail in my duties at these schools. They made me who I am,” he says.

The father of two daughters and a son is also the Chairman of Alliance Girls High School, besides being a leader at his local church.In preparation for his retirement, Njoroge is pursuing a PhD in Strategic Management at the University of Nairobi and hopes to become a lecturer, management coach and consultant in the future. No question, he is a man of considerable energy.

Njoroge’s top tips for business success
Persevere
  Abraham Lincoln tried many things in life until he finally became US President. He ran for Senator, Governor and President several times without success. Despite the challenges and failures he faced, nothing deterred him. If you want to be successful, you have to persevere.
Believe in yourself 
It is important to develop self-confidence. Believe you have what it takes.
Work hard 
Work hard to achieve your goals, and keep pursuing greater heights of success.
Be focused
  Keep your priorities clear and don’t let anything distract you from your goal.
Think with the end in mind
  If you want to be CEO, then start working towards that. Don’t work without a purpose or goal.
Think win-win
You don’t have to make somebody else lose in order for you to win. Always think of how all parties can succeed.

 

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