dc.description.abstract | “Greening the Tea Industry in East Africa” (GTIEA), a global environmental facility (GEF)
funded 4-year project, was officially started in August 2007 (EATTA/UNEP, 2008). Its
objectives are to increase investments in small hydro-power development projects and reduce
energy costs in the tea industry in countries covered by the East Africa Tea Trade Association
(EATTA), improve reliability of power supply, increase power supply for rural electrification,
and reduce greenhouse gas (GHG) emissions (EATTA/UNEP, 2008).
GTIEA project supports potential small hydro-power developers (tea factories) by conducting
feasibility studies and produce bankable reports on the basis of which these projects are expected
to be funded by financial institution and the developers’ equity contributions. One such study,
feasibility study on Gura small hydropower project in Kenya-March 2008, was carried out on the
Gura river in the Aberdare Mountains, Nyeri District by IED. Gura small hydropower project is
expected to serve four KTDA managed tea factories: Chinga, Iriaini, Gitugi and Gathuthi in the
project area (KTDA 2005).
In the Gura SHP feasibility study a finding was made to the effect that the actual household
electrification rate was not known but was probably below 50% (IED, 2008 .pg 47-48). The
study also reached a conclusion that there was no demand for rural electrification even though
KPLC’s had planned to expand 11kV-lines to remote tea buying centres (TBC) by 100% by
December 2007. These two findings of this study contradicted the Ministry of Energy rural
electrification master plan of 2008 which found that the Kenya’s central region had an unmet
electricity demand. The MOE rural electrification master plan of 2008 also found the mean
monthly household electricity consumption to be 70kWh. The IED study did not quantify the
expected environmental benefits of the reduced GHG emissions when the SHP project is
completed from the society’s point of view, nevertheless.
In view of these shortcomings of the Gura SHP feasibility study report, this study aimed at
analyzing the rural electricity demand and the indirect environmental benefits of the project. A
total of 212 households, approximately 50 each from a 20km2 area (or a radii distance of 2.5km)
surrounding each of the 4 tea factories, were randomly sampled for the survey. The mean
monthly electricity consumption and load demand was calculated from the data. The analysis of
the factors that influence rural electricity demand was carried out using a double–logarithm
demand model that was able to calculate own and cross elasticities of that demand. The doublelogarithm
demand model was ran using the two-stage Heckmann selection model to first
determine the factors that influence the probability of electricity connection and second the
factors that influence electricity demand. Contingent valuation method (CVM) was used for
valuation of the environmental benefits. Central tendency mean was used to elicit the willingness
xi
to pay (WTP) value for the environmental benefits. Ordinary Least Square (OLS) model was
used to determine the variables that influence the communities’ WTP for the small hydro-electric
project (SHP) construction in view of the perceived environmental benefits.
The monthly current and projected rural electricity demand were found to be approximately
105MW and 543MW respectively. Total household’s income and the price of kerosene were
found as the probable factors that would increase new electricity connections. Connection fee
amongst households not connected to the national grid, the number of electric appliances
amongst household on the national grid, price of electricity and the age of the household head
were identified as the main factors that directly influence electricity demand. Other factor found
to negatively influence electricity demand were the number of people living in the household and
education level. Out of 212 respondents 193 were willing to contribute monthly for 2 years
towards the project implementation for the perceived environmental benefits. The household’s
mean WTP value for two years was KShs 4552 which translated to Kshs1399/tCO2 or
US$20/tCO2 assuming that Gura SHP would install a 2.8 MW capacity power plant. Income and
employment status were found to affect the WTP positively. | en |