
Julia is a summer associate in the East Africa office for Acumen Fund working in the energy portfolio. He is also a second year MBA student at Columbia Business School where she is an active member of the Social Enterprise Program and co-director of Pangea Advisors. Prior to Columbia, she worked for four years at KPMG Advisory where she advised private equity firms in their investments in Madrid, London and various international offices. Julia received a diploma in Business Studies from the Universidad Pontificia de Comillas, Madrid.
“Pata stima, lipa pole-pole” (swahili) means “Find electricity, pay slowly”. This advertising campaign can be found in newspapers and on bill boards all around Kenya. The campaign promotes a joint initiative of KPLC (the state-owned energy distributor) and Equity Bank to provide loans to those low income consumers willing to get connected to the grid but unable to pay the full $660 fee up-front.
These types of measures are much needed in Kenya. It is widely understood that Kenya has an under-developed energy sector, with insufficient power supply and low demand. But it is not until one experiences the power outages that one realizes how much urgent action is needed. Kenya energy per capita consumption is around 130 Kwh which is 18 times below the world average and only 15.3% of the population has energy access, falling to 3.8% in rural areas.
Biomass energy accounts for about 70% of all energy consumed while petroleum and electricity account for only 21% and 9%, respectively. Hydro Power constitutes 71% of this capacity and is mainly provided by the state-owned generator company, Ken Gen. Independent Power Producers (IPPs) have not had historically a relevant role in the market, but this trend is changing with the current liberalization of the sector. Current power deficit is aggravated by the deforestation of the Mau Forest and the closure of the Masinga hydro power plant due to drought. Drought is on-going in Kenya and other hydro power dams may soon face closure as well.
But not everything is bad news, as a summer associate at Acumen Fund, I feel lucky to be here to live a moment of transformation in the sector. Transformation has taken place from both the public and the private sector side. The public sector has realized the importance of bringing the private sector on-board and has announced a feed-in-tariff in which KPLC will sign a PPA (Power Purchase Agreement) and pay a tariff to those IPPs operating wind, hydro and biomass technologies selling power to the grid. This new incentive will help many projects become commercially viable. On the private sector side, there has been an increase in the interest of producing energy and of improving access for low income communities. It is encouraging to see that, despite not having any government incentive or subsidy, solar companies are exploring products, financial schemes and distribution networks to reach rural areas and/or low income consumers.
In the one month that I have spent at Acumen in Nairobi, I have dedicated half of my time to conduct research of the energy sector and talked to all types of players in the industry from the regulatory body, the UN, the International Finance Corporation, IPPs and potential entrepreneurs and I have learned a great deal about the sector along the way. The other half of my time has been spent analyzing potential investment opportunities for Acumen. These have been memorable experiences and I will always remember the emotion on the face of an entrepreneur as he signed the PPA for his small hydro power plant.
Acumen has tremendous opportunity in the energy sector in East Africa, although it doesn’t lack important challenges. Amongst them, ensuring that the private sector initiatives effectively reach low income communities and are not just driven by the new economic incentives, addressing the real energy needs of the low income consumers with appropriate strategies, and sorting out the necessary financing and distribution. A long way forward, but for sure Acumen has energy for that and for more!