According to official figures, 32% of the Kenyan population has access to
electricity1. Over the last 15 years, the number of people connected to the grid has more than doubled2. However, despite large investments to add capacity and extend power lines to rural areas, rural electrification remains low at 19%. Building on their previous electrification strategy, in March this year the Kenyan Government revealed the main lines of the new Last Mile Connectivity Project, aiming to connect up to 310,000 households (or ~1.5 Million people) living close to 35,000 power transformers in rural areas3.
The Last Mile Connectivity Project and financing connection for “under-grid” areas
As mentioned in a previous M4D Utilities blog post 4, the “under-grid” opportunity was the subject of a Berkeley research paper 5 published in 2014 – the team provided evidence that despite the grid presence, electrification rates remained low, even up to five years after infrastructure had been built. For half of the unconnected households studied by the researchers, their inhabitants were clustered within 200 metres of a low voltage power line and could be connected at a relatively low cost. One of the paper’s recommendations was to support innovative financing and payment approaches to improve connectivity for this “under-grid” population.
This recommendation appears to be at the centre of this new government plan to electrify “under-grid” Kenyan households. First, the project will extend the low voltage network to reach households located within a 600 metre-radius from a transformer as well as the installation of prepaid energy meters6. In addition, financial support will be available for households unable to afford the KSh15,000 (~150USD) fee required to be connected. Re-payments can be spread over a period of up to two years, or KSh625 (~US$8 USD) loaded on their monthly bill.
Details on the process to implement this strategy or the types of prepaid meters are limited, but this is certainly an innovative proposition from the utility company to support energy inclusion at an affordable price for underserved Kenyans. Concerns have however already been raised around the current capacity of the utility to deliver their plan and a continuous electricity service to new customers, in a country where power cuts are frequent.
Opening the competition to private players
Added to their centralised electrification strategy, the Kenyan government has also been proactive in supporting private players through more favourable legislation and regulation. Examples include the exemption of VAT on solar products and more recently, enabling solar microgrid company PowerHive East Africa to become the country’s first licensed private utility to generate, distribute and sell power to the public7.
In off-grid locations where there is a high concentration of homes, microgrid models are more cost effective than the centralised grid, thanks to the short distance between connected households and a central power source. Powerhive had been running pilots in rural west Kenyan counties, providing electricity 24/7 to around 1,500 people8. Combining multi-kW solar power, battery storage, prepaid metering and mobile money payments, their model facilitates operational and investment risk reduction through smart automation and better customer management. The company plans to expand their microgrid operations to serve more than 200,000 households in Kenya9.
With regulation and legislation appearing more conducive to competition in the energy sector, and other smart microgrid players, such as PowerGen in partnership with SteamaCo, active in the Kenyan market, the country seems to be moving in the right direction towards providing energy access to its off-grid population. However, these smaller utility companies will require more funding to build capacity in order to reach millions of customers. If Kenya Power can receive a US$147 million loan from the African Development Bank to implement the Last Mile Connectivity Project, could smaller Energy Service Companies who are building their track record and showing positive social and financial impact have access to concessional loans to scale?
Once commercial capital for such decentralised approaches, including microgrid and off-grid services such as home solar systems, is unlocked, there is a good chance the country will reach universal access to electricity for its population by 2020.
1. http://www.cnbcafrica.com/news/east-africa/2014/11/21/afdb-loan-increased-electricity-access/
2. 14% of the population had access to electricity in 2000 – World Bank Data
3. http://www.africanreview.com/energy-a-power/power-generation/kenya-s-last-mile-connectivity-project-receives-funding
4. https://www.gsma.com/solutions-and-impact/connectivity-for-good/mobile-for-development/the-role-of-mobile-in-enabling-energy-water-access-for-under-grid-areas-of-kenya
5. Barriers to Electrification for Under Grid Households in Rural Kenya
6. http://www.standardmedia.co.ke
7. http://allafrica.com/stories/201507132822.html
8. Ibid
9. Ibid