Construction loan for Kenya-Tanzania power line ‘to boost regional energy trade’

The African Development Bank (AfDB), which approved the loan for the Kenya-Tanzania Power Interconnection Project, said the move will be a major boost for regional integration through the power trade market.

The AfDB said the project involves the construction of a 508-kilometre transmission line, which is “expected to improve the supply, reliability and affordability of electricity in the eastern Africa region through cross-border exchanges of cheap and cleaner surplus power from neighbouring countries”.

The director of the AfDB’s energy, environment and climate change department Alex Rugamba said the new line “will create competitiveness in the energy sector and will encourage private sector investment in the generation of electricity by facilitating power transfer”. The project loan is part of a strategic initiative to “focus on regional infrastructure and capacity building” in eastern Africa, Rugamba said.

According to the AfDB, the new line will have a have a transfer capacity of up to 2,000 megawatts in either direction.

The separate Kenya-Ethiopia interconnection line will allow the regional Eastern Africa Power Pool to connect to the Southern African Power Pool “and further in the future to Northern Africa” through the World Bank-supported East Africa Electricity Highway Project, the AfDB said. “At its initial stage, the project will allow Ethiopia and Kenya to exchange power, followed by the import and export of energy from the interconnected countries.”

According to the AfDB: “Tanzania’s national electricity coverage is estimated at about 21%, with the transmission grid covering a minor part of the country and leaving out most of the territory, particularly in western and southern regions.”

In the 2012 update of the Tanzania Power Master Plan (146-page / 2.35 MB PDF), Tanzania’s government said it wanted to see 250,000 new connections to the national grid annually from 2013 to 2017. However, the AfDB said “the vastness of the country, coupled with low population density, makes grid extension too expensive for many difficult-to-reach areas, creating a significant market potential for mini-grid systems”.

In its Country Strategy Paper for Kenya (CSP) for 2014-18 (53-page / 1.14 MB PDF), the AfDB said it wanted to work with development partners and the private sector to “leverage funding” for infrastructure development in Kenya, rather than act as a sole financier.

The CSP said Kenya had significant potential to further capitalise on regional markets and strengthen its position as east Africa’s “economic powerhouse”. According to the CSP, there is “an urgent need to strengthen Kenya’s private sector as the main engine of economic growth”.

A report published last year by the International Monetary Fund said Kenya’s medium-term growth prospects are favourable, supported by rising infrastructure investment in energy and transportation and the expansion of the East African Community market.

The UN’s Economic Commission for Africa has recommended (278-page / 10.4 MB PDF) boosting ‘energy trade’ in eastern Africa, by encouraging private investors to develop the energy infrastructure of individual states to maximise regional economic growth.