According to the authoritative globalpetrolprices.com, which tracks petroleum prices, a litre of petrol in Venezuela is $0.01; in Kenya it is $1.15 (Sh115).
The South American country is facing hyper-inflation of world war proportions but can still sell petrol to its citizens at Sh1 per litre. The government heavily subsidises the cost of petrol. This is the same permanent subsidies that made fossil fuels globally cheap are simply not available to the renewable energy industry. Why not?
A new study by International monetary Fund (IMF) cites $10 million a minute as the cost of subsidy internationally. It is this situation that makes petroleum products very cheap — almost free — in oil-producing countries such as Iran and Venezuela.
Traditionally, when a finance minister in the greater East Africa wanted to widen his tax base, the natural culprits were tobacco and beer. These were, metaphorically, named ‘sin taxes’. Petrol was considered an economy enabler for it touches on every facet of our lives — from transport, energy and even petroleum jelly.
However, National Treasury Cabinet Secretary Henry Rotich, despite public protestations, went ahead to impose a 16 per cent value added tax (VAT) on all petroleum products.
Those in the renewable energy sub-sector consider the VAT another arrow in their market communication quiver. Reliance on fossil fuel for our energy needs was not, and will never, be a sustainable option in both the short- and long run.
Due to the VAT, consumers should brace for another increase in the price of electricity. It’s as if the government gives benefits with one hand and takes them back with the other!
To the credit to the President Uhuru Kenyatta administration, a task force on energy came up with a raft of measures to reduce the cost of power.
Among the key recommendations were termination of independent power producers’ (IPP) contracts and the adoption of a local currency-based tariff structure to, hopefully, reduce the high forex charges per unit consumed. Finally, there was a recommendation that can be lifeline to anyone who has invested in the solar system modules — renewable energy auction system for solar and wind power plants.
Adoption of these measures, together with the Feed-in Tariff (FiT) policy, which is part of the Energy Bill 2017, will usher in an era where ordinary Kenyans can produce and sell power to the State-run Kenya Power.
Consumers can install micro grids, even as an individual one-kilowatt solar array, or pool their resources and invest in mini grids that can produce 100KW and more.
In Germany last year, power consumers had a surprise Christmas gift. Electricity prices in the top European economy went negative — below zero — for many customers because the country’s supply of clean, renewable power actually outstripped demand, according to The New York Times.
Germany has invested over Sh20 trillion in renewable energy over the past few decades — primarily wind and solar power. During times when electricity demand is low — such as weekends, when major factories are closed, or when the weather is unexpectedly sunny — the country’s power plants pump more electricity into the grid than consumers actually need. The electricity consumers were actually paid Sh6,000 per kilowatt consumed.
The ‘Big Four’ projects can be fuelled by renewables, which can make our energy as cheap as Venezuelan oil and help us to produce globally competitive goods and services.