We recently caught up with Elsie Mbugua to discuss the African Energy industry. We tackled different issues, including how how sustainable investments present a great opportunity for companies and governments alike to tackle Africa’s energy challenges.
Having worked extensively in the US and the UK, Elsie Mbugua believes that the African energy industry is still at a very nascent stage, perhaps 10-15 years behind the other markets like Europe or the US. Therefore, it is paramount that we promote sustainable investments and get the right mix of policies that work for our specific countries and industries to spur growth.
We are still in the process of laying the frameworks; establishing the right policies to drive the strategic energy efforts across the continent. So, I think having been an energy trader in mature markets is almost like having a crystal ball to see what our energy markets could potentially look like 10 – 15 years from now.Elsie Mbugua – Founder and Managing Director, Leadwood Energy on Africa’s energy scene
Oil & Gas
Following the demand disruption of oil and gas supply chains last year due to the pandemic, we have seen some recoveries. However, Elsie Mbugua notes that East Africa is still a price-taker in the oil market due to its reliance on the importation of its petroleum products and low consumption volumes relative to global demand. Even though we discovered oil deposits many years ago in Turkana, we haven’t reached commercialising it, and although there is progress, it could take quite some time before it is fully realized.
With regard to infrastructure developments, Tanzania-Kenya gas pipeline, Elsie Mbugua explains that it usually takes time between MoU signing and actual groundbreaking of the project. Therefore there is a need for a lot of patience to realise these infrastructure benefits.
“By the time you move from a memorandum of understanding to when you break ground on a pipeline, a lot of work needs to be done….one is managing the expectations of how quickly that could potentially come on and recognising that that’s years as well…”Elsie Mbugua on the recent MoU of a gas pipeline between Kenya and Tanzania
East Africa has been a significant destination for renewable energy capital investments in recent times, with Kenya ranking third overall across Middle East and Africa. Now, there is a global urgency towards decarbonisation and getting to a net-zero world; we see a dramatic increase in renewable energy investments as more governments and the private sector align with climate change. Africa contributes 2% of global emissions but is disproportionately affected by climate change; the African Development Bank estimates that climate change already costs the continent between $7bn and $15bn. Therefore, there’s an obvious need to shift towards more cleaner energy sources.
Elsie is quick to applaud the Kenya Generating Company (KenGen) on the incredible efforts made to advance our geothermal energy capacity and the neighbouring countries by way of sharing technical expertise. KenGen has just recently announced that they are commencing drilling of the Djibouti power project in June 2021.
Geothermal power has much potential in East Africa. Kenya, however, has the greatest, with an estimated 10GW geothermal potential and currently only generates about 1000MW, only a tenth of what is possible, from geothermal sources.
Environmental, Social & Corporate Governance (ESG)
Elsie Mbugua opines that environmental, social and corporate governance is no longer a nice-to-have metric on financial reports but rather something that investors and shareholders are demanding for. Therefore, African companies must adopt ESG principles within their operations and strategies, if they are to be sustainable.
Elsie Mbugua on Innovations to Watch Out For
When it comes to innovation, startups as well as established companies are pushing the envelope of what is possible. Elsie personally picks the following as the most exciting areas to watch out for in the energy space
- Advisors that bridge the gap between public and private entities encouraging a harmonised voice across the energy sector
- Smart Meters – To ensure and enhance operational capability and effective revenue collection.
- Cost reflective tariffs – whereby it reflects the actual cost of supplying electricity and removes the reliance on State and/or Government subsidies to cover the variance between the current tariff and the true cost of electricity supply.
- Optimisation of the energy generation mix – due to its intermittency; eliant upon hydro, wind or solar is inherently unreliable for industrialization; however, natural gas generation options can be a substitute for baseload power generation and a bridge for even more renewable energy. There are companies we support that are seriously evaluating gas conversion for their power plants from heavy fuel oil to cleaner natural gas. The conversion will support the growth of our industrial customer base and associated energy consumption in key load centers.
- Power Storage – one of the biggest drawbacks to renewable energy adoption is the lack of storage capacity, especially since batteries for storing this energy are still relatively expensive at scale. They store the energy for relatively shorter periods. However, we are currently seeing companies innovating around making batteries that can store this energy for longer periods of time, accelerating the adoption of renewable energy.
- Gas conversion of existing thermal power plants – most of Kenya’s power plants are quite old and mostly sit at the load centres where most customers are, making them critical.
- Smart Meters – To ensure and enhance operational capabilities and strengthen revenue collection. And, Pay as you Go, providers – those companies that have increasingly leveraged mobile payment technology to drive the uptake of energy solutions like MKopa, dLight e.t.c
- Mini-Grids – companies that are innovating around providing access to the rural population through mini-grids. According to the World Bank, Mini-grids are electric power generation and distribution systems that can provide electricity to either customers in a remote settlement or bring power to hundreds of thousands of customers in a town or city. They can be fully isolated from the primary grid or connected to it but able to intentionally isolate (“island”) themselves from the grid.
- Data Analytics – companies harnessing data will allow for better energy policy making and more strategic investments. This will greatly benefit the energy and investment ecosystem at large.
**Note** In the podcast, Elsie Mbugua mentions that Kenyas’ Geothermal potential is estimated to be 100GW. We have corrected the article above to reflect the correct potential, which is 10GW.
About Elsie Mbugua
Elsie Mbugua is the Founder of Elcy Investments Ltd with its power subsidiary Leadwood Energy; a specialist energy advisory company focused on renewable energy projects. She is also one of the financial transaction advisors to the Government of Kenya on the country’s crude oil and natural gas prospects and is considered a thought leader and a key policy maker in East Africa’s energy markets. She is well known for working on what she terms as ‘first of a kind’ energy transactions in the region. She has been involved in restructuring various parastatals in the country through Financial Independent Business Reviews, developing the framework for a local currency Power Purchase Agreement, negotiating the Heads of Terms for Kenya’s Upstream Crude Project.
She was voted 2019 Young Emerging Energy Leader and also received an award recognition for her exceptional leadership in Africa’s energy sector. In 2020, her Firm was voted Best Renewable Energy Consulting Firm in East Africa and also won the East Africa Green Future Leadership Award. Her thoughts on Africa’s energy transformation are widely published in numerous energy journals.
Elsie Mbugua is also an entrepreneur and energy trader with more than a decade of experience as a physical energy trader for some of the world’s largest trading houses – Goldman Sachs and J.P Morgan – covering markets in coal, emissions, power, natural gas, liquefied natural gas, and crude oil.
She started her career in New York at Goldman Sachs on the J. Aron energy trading desk, where she performed extensive research on Canadian Oil Sands and Refinery Hedging. She later joined J.P Morgan’s Global Commodities Division as a coal and emissions trader and participated in the first market-based effort to reduce greenhouse gas emissions (RGGI). In 2009 during, the global financial crisis, Elsie moved to Houston to assist in the management and optimization of 3000 MW of power generating assets in California. In this role, she collaborated with colleagues to build structural and in depth technical analyses of North America’s power markets.
In 2012, Elsie relocated to London in order to be more involved in Africa based markets and worked as a physical crude oil trader covering the dated Brent and West African crude oil markets. She was one of the youngest physical oil traders in London.
Furthermore, Elsie Mbugua was recently appointed to the Board of State Corporation Kenya Pipeline Company and made the Chair of the Technical Committee. She is the founder of a US 501c3 called Ekenywa which builds water infrastructure projects with the goal of ensuring all rural public schools in Kenya have access to clean water. So far, more than 50,000 Kenyans rely on this infrastructure for their daily access to clean water. She also sits on the United States Board of BOMA which is a multi-million USD organization committed to advancing the livelihood of women entrepreneurs in Eastern Africa.