GNESD BIOENERGY STUDY THEME PAPER Status of Bioenergy Development in Kenya: The Case of Bagasse-based Cogeneration Prepared for Global Network on Energy for Sustainable Development (GNESD) By Stephen Karekezi and John Kimani Energy Environment and Development Network for Africa (AFREPREN/FWD) P.O. Box 30979, 00100 GPO Nairobi, Kenya Tel: +254 20 3866032/ 3871467/ 3872144 Fax: +254 20 3861464/3866231/3740524 E-mail: [email protected] or [email protected] or [email protected] Website: www.afrepren.org August, 2010 Executive summary Being relatively well endowed with biomass resources, Kenya has significant potential for bioenergy development for both liquid biofuel as well as for electricity generation. It is estimated that about 41 million litres of ethanol could be produced annually based on the existing production of molasses from the sugar production process (KSB, 2009). This is equivalent to nearly US$ 30 million per annum of oil imports (KNBS, 2009). After the recent record high world oil prices and crippling electricity generation shortfalls, Kenya joined many other Sub-Saharan African countries in encouraging bioenergy development. In Kenya, there are three main potential sources of modern bioenergy, namely: • Use of natural occurring biomass such as wood from trees and other plants to produce modern energy; • Conversion of biomass waste from processes of agro-industries into modern energy; and, • Commercially grown crops solely grown for modern energy production. Most of the existing aforementioned biofuel initiatives are driven by non-Governmental Organizations and to a limited extent the private sector using jatropha curcas – a plant that is said to do well is marginal land and that can produce biodiesel as a cleaner substitute to crude oil-based diesel. However, with growing skepticism over the potential of jatropha curcas, greater attention is now being paid to ethanol production as a by-product of sugar processing. The most advanced modern bioenergy sub-sector in Kenya is the conversion of biomass waste from processes of agro-industries into commercial energy. This experience is, presently, mainly found in the sugar industry where sugar factories use bagasse - the fibrous residue from sugarcane milling - to produce electricity, through cogeneration, for internal use with the excess sold to the national grid. Therefore, the focus of this paper is on the development of cogeneration in Kenya. Kenya is well suited for sugarcane development particularly in the lowlands around Lake Victoria in the western part of the country as well as in the coastal area on the south eastern part of Kenya. The western part of the country is comprised of 3 sugarcane growing sub-regions, namely: Nyando Sugar Belt, Western Sugar Belt and South Nyanza Sugar Belt (KSB, 2010). However, the full potential for sugarcane development in the country is inhibited by over-reliance on rain-fed cultivation of sugarcane. In addition, the mismanagement of state-owned sugar factories has discouraged small holder farmers from expanding sugarcane development. In terms of cogeneration development in Kenya, bagasse-based cogeneration is not new in the Kenyan sugar industry. By design, all sugar factories have an in-built cogeneration plant. However, historically, due to age of the equipment, poor maintenance, inefficient sugar production processes and lack of a ready market for available electricity, sugar factories in Kenya have operated relatively inefficient boilers 1 to limit the amount of excess bagasse in their backyards. The factories were essentially using boilers as incinerators of bagasse. However, with the demand for new investment in electricity supply, all existing and planned sugar factories in Kenya are keen to upgrade their cogeneration plants in order to more efficiently mop up all available bagasse to produce electricity for own use and sale of excess power to the national grid. At the prevailing sugar production levels and assuming that all sugar factories had efficient high pressure boiler technology installed, sugar factories in Kenya could generate nearly 80 MW of electricity. If sugarcane farming areas were substantially expanded, the country’s existing sugar factories have the potential to produce about 270 - 300 MW of electricity (Murungi, 2009). The benefits of cogeneration development are many, chief among them being the following: • Reduction of the cost of energy • Additional revenue stream • Potentially higher income for farmers • Employment creation • Enhancement of energy security • Could be used to expand rural electrification • Source of cleaner energy • Solution to environmental hazards associated with agro-waste While Kenya has not yet developed dedicated policies for bioenergy development or cogeneration, the existing policy, legal and regulatory framework that supports cogeneration development is embodied in the following documents: • Sessional Paper No.4 of 2004 on Energy • Energy Act of 2006 • Feed-in Tariff Policy for Renewable Energy This report discusses two important case studies that provide useful lessons for cogeneration development in Kenya. The first case study is from Mauritius – the country whose cogeneration development in the sugar industry is the most advanced in Africa - providing an ideal benchmark for Kenya’s cogeneration development. The second case study is on Mumias Sugar Factory in Kenya. Mumias Sugar Factory has the most advanced cogeneration development program and the most advanced cogeneration plant. Mumias provides an ideal yardstick with which other sugar factories in the country can measure up to. Sustainable development is crucial to the success of any cogeneration development. Therefore, this report provides several considerations to be made pertaining to the extent to which prevailing economic, environmental and social issues are likely to enhance or hinder successful cogeneration develpment. In addition, the report discusses the existing barriers to cogeneration development in Kenya, which include: • Absence of flexible Feed in tariffs 2 • Non-enforceable legal and regulatory instruments • Lack of technical expertise • Unavailable local financing • Limited confidence among small holder sugar farmers • Protracted sale of state-owned sugar factories To conclude, in order to realize the full potential of cogeneration, the report provides the following policy recommendations: • Institution of pre-determined feed-in tariffs for bioenergy power plants • Accelerated development and transfer of high-pressure boiler technology and skills transfer (Capacity builiding) • Innovative financing • Innovative revenue-sharing mechanisms • Sustainable bioenergy feedstock development 3 1.0 Introduction 1.1 Methodology This study on the status of bioenergy development in Kenya was mainly a desk study complemented by computer based data collection on the sugar industry in Kenya. The methods used to achieve the study objectives involved the following: Data and statistics compilation: This involved compiling existing data and statistics on the sugar industry in Kenya. Literature review: This was, essentially, a review of available statistical publications on energy, the power sector, renewables and poverty, and research reports and publications on the Kenyan sugar industry. Review of Energy Policies: This involved an analytical review of current energy policies of Kenya. The key challenges and limitations in undertaking the study include the dynamic nature of the sugar industry which is undergoing a number of important changes thus complicating detailed analysis. The authors were fortunate to gain access to recent data and information on the sugar industry. However, the quality of the data sets was, in some cases, complicated by inconsistencies in the data provided as well as errors in aggregation. In addition, different reports often provided different and conflicting perspectives. However, efforts were made to compile the available data and estimates that aided in providing a balanced assessment of bioenergy development in Kenya. 1.2 Overview of Bioenergy Development in Kenya Kenya is relatively well endowed with biomass resources. In summary there are three main potential sources of modern bioenergy in Kenya, namely: • Use of natural occurring biomass such as wood from trees and other plants to produce modern energy; • Conversion of biomass waste from processes of agro-industries into modern energy; and, • Commercially grown crops solely grown for modern energy production. Kenya has significant potential for bioenergy development for both liquid biofuel as well as for electricity generation. For example, it is estimated that about 41 million litres of ethanol could be produced annually based on the existing production of molasses from the sugar production process1 (KSB, 2009). While this is equivalent to only 1% of Kenya’s petroleum consumption in 2008, it can save the economy nearly US$ 30 million per annum of oil imports (KNBS, 2009). At the household level, there is a high potential 1 Estimate based on a case study in Thailand where 4.44 kg of molasses yield 1litre of ethanol (see Nguyen & Gheewala, 2008) 4 for biogas production. The technical potential is estimated to be 1,259,000 units but the number of installed biogas digesters is about 500 (Karekezi and Kithyoma 2005). After the recent record high world oil prices and crippling electricity generation shortfalls, Kenya joined many other Sub-Saharan African countries in encouraging bioenergy development. Most of the