Tea body builds green energy to cut EA tea costs

The East Africa Tea Trade Association (EATTA) has set about reshaping energy use by the regional tea industry, in a bid to slice away almost 10 per cent of current EA tea prices through realising saved electricity costs. The change holds the potential to transform the global competitiveness of East African tea.

Driven by the region's high electricity costs, the Greening Tea Industry in East Africa (GTIEA) programme is establishing six small hydro power demonstration projects in at least four of the EATTA member countries, Kenya included. The studies and planned small hydropower installations will serve as training grounds for the tea sector, said GTIEA in a recent report.

The Global Environmental Facility is funding the project, which is being co-implemented by the United Nations Environmental Programme and African Development Bank. “The GTIEA project is in the final year of operation and one small hydro power project is already running. The other projects are in study phases while some are in the stage of preparation for implementation,” said the report.

Tea production costs account for 60 per cent of the tea prices realised at the Mombasa tea auctions, 30 per cent of which are energy costs. It is estimated that reverting to hydro energy would reduce energy costs to 12 per cent thereby improving the producers' profit margin substantially.

Mombasa is now the largest tea auction in the world and auctions tea from Kenya, Uganda, Burundi, Tanzania and Rwanda. Other countries include Mozambique, Madagascar, Malawi and Democratic Republic of Congo.

In Kenya, the new energy initiative is supporting Kenya Tea Development Agency's Gura river small hydro project in Nyeri county and a 3 megawatt project on Kipchoria river in Nandi county being developed by Eastern Produce Kenya, a company owning seven tea factories in Kenya and ten in Malawi.

It has been estimated that Kenyan electricity is among the most expensive in the world. This places the country, and its tea sector, at a distinct cost disadvantage compared to its international competitors, primarily Sri Lanka. Yet the tea industry supports some 10 per cent of the Kenyan population.

Small hydropower is therefore seen as a way to reduce the dependence of tea companies on fossil-fired diesel generating sets and on costly and, at times, unreliable grid-supplied electricity.

While the tea sector has not traditionally generated electricity, it is a large consumer of the costly commodity. In many cases, tea companies erect standby diesel generating sets to ensure availability of electricity to run the processes involved in tea production.

The project aims to reduce greenhouse gas emissions – a goal of GEF and UNEP – through increased investments in the development and installation of small hydropower facilities in tea areas where hydro potential is abundant.

Aside from the projected reduced production costs for tea companies and factories, the reliability and efficiency of operations of small hydropower systems are seen to further benefit the tea sector and the communities at large.

For example, the small hydropower projects will contribute toward the electrification of the communities surrounding the tea estates. This contribution to the region is vital, where as much as 90 per cent of the population in some areas have no access to electricity.

In addition, when a tea factory or company develops its small hydropower resource, the expensive-to-operate diesel generating sets can be put on standby. This will further reduce costs and minimize greenhouse gas emissions.

However, the biggest obstacle to the adoption of small hydro power projects agreement has been the tariff for 'power wheeling', which is the cost of the transmission of the power generated from a hydro site to the tea factory using the existing medium voltage power lines infrastructure.

Charging for the line use is common practice in other countries, but it is a new development in Kenya and the decision on the tariff by the Energy Regulatory Commission (ERC) will set an important precedent in determining the supply of electricity by independent producers into the national grid, said the report.

The report further adds that the extent to which the regulation of power wheeling is arrived at using accepted tariff principles and formulae elsewhere, will also have environmental implications that will reduce the depletion of forests and burning of fossil fuels to power tea factories in Kenya.

EATTA is aiming to convince ERC to take into account the methods of tariff setting used elsewhere to deliver the twin policy objectives of increasing the supply of power to the national grid and placing Kenya's tea industry in a more competitive and sustainable position.

It argues that the successful agreement and implementation of a power wheeling tariff at fair tariff rates will create a win-win situation for all stakeholders, with factories accessing green power at a fair price and excess power sold to the national grid resulting in a net increase of supply.

Last year, Kenya produced 377.9 million kilogrammes of tea, earning the country Sh109 billion. All but 12 per cent of the crop is sold in bulk according to the Tea Board of Kenya.

Tea companies in Kenya, which produce the highest volume of tea in the region, employ approximately 800,000 people and affect the lives of another 3 million. These numbers represent about 10 per cent of the country’s total population. Kenya’s tea industry also reached a milestone just a few years ago when the Mombasa Auction in Kenya became the world’s largest tea auction.

Written by Bob Koigi for African Laughter