Kenya will not terminate its long-term power purchasing agreements with private producers due to the erratic nature of its electricity supply.

The EastAfrican has learnt that the country still requires the expensive diesel-powered thermal energy as peak demand rises.

The Energy Regulatory Commission (ERC) said the country requires an additional 500MW of power daily to meet the extra demand from 6pm to 10pm.

The normal power demand on a daily basis is estimated at 1,100 MW but escalates to 1,600MW during peak hours, according to ERC.

The regulator said the extra demand is met by the independent power producers (IPPs).

“Independent power producers can be expensive but they are necessary because the system requires them to ensure stability of power during peak hours,” said ERC director general Joseph Ng’ang’a.

Among these IPPs are Iberafrica, Tsavo, Orpower 4, Thika Diesel, Mumias Cogeneration and Aggreko.

In 2014, Kenya announced plans to terminate its commercial relations with the IPPs after setting in motion a programme to generate over 5,000MW of clean renewable and cheaper energy to the national grid by 2017.

Part of the project involved generating about 1,000MW of coal power in Lamu and 800MW of liquefied natural gas power at Dongo Kundu in Mombasa, and 1,000MW of coal power at Mui Basin in Kitui in eastern Kenya, with the aim of transferring the benefits of bulk energy production to consumers.

READ: Inside the ambitious 5,000MW power plan

Bulk generation

The government expected bulk energy generation to lower the cost of power in the country from a high of Ksh16.47 ($0.16)  per kwh to Ksh7.80 ($0.07) per kwh. The fuel cost charge (FCC) component in monthly power bills has been the main cause of worry for consumers, accounting for as much as 40 per cent of what they pay for electricity.

In July 2014, the FCC was Ksh7.22 ($0.07) per KWh, but fell to an all-time low of Ksh 2.53 ($0.02) per KWh in January last year, following the injection of 280MW of geothermal power into the grid.

IPPs are entitled to a fixed capacity charge of about Ksh3.47 ($0.03) per kwh, whether they are generating power or not throughout their contract periods which usually run for 20 to 25 years.

“We pay IPPs the equivalent of what they require to pay off their debts. We pay them as long as they are available whether they generate power or not,” said Mr Ng’ang’a.

Last week Kenya Power signed a power purchase agreement (PPA) for a 100MW wind power project in Oldonyo Narok, Kajiado County. Under the PPA, Kipeto Energy will construct, own, operate and maintain the wind power project while Kenya Power will buy the electricity generated.

Renewable energy currently accounts for over 85 per cent of the country’s energy mix, according Dr Ben Chumo, Kenya Power chief executive.

East Africa’s utility firms are, however, working towards reducing power losses through transmission and distribution as the region moves closer to the grand plan of power sharing to ensure reliability and cost savings.

EastAfrican master plan

The East African Power Master Plan (EAPMP) which was developed in 2003, recommended the establishment of a power pool to facilitate power trade and joint least cost power development planning in the region.

As a result, member countries are implementing programmes to develop a vibrant regional power exchange market and to accelerate interconnection.

READ: East Africa electricity firms in bid to reduce power losses

Kenya and Uganda have adopted measures to control technical (transmission) and commercial (distribution) power losses.

Umeme Ltd plans to reduce energy losses to 15 per cent by 2018 while Kenya Power is hoping to reduce losses through transmission and distribution to as low as nine per cent from the current 17.5 per cent.

It is estimated that Kenya Power loses about Ksh1 billion  ($9.74 million)  of  its revenues  annually on each percentage point  loss in power.

A study by consultancy firm PricewaterhouseCoopers shows that cross-border electricity flows will be significant by 2025 and will account for around a third or more of electricity generated.

Currently, cross-border electricity flow is restricted to different power pool regions mainly due to limited interconnection capacity.
It is projected that the interconnection between Ethiopia, Kenya, and Tanzania will provide the foundation for large future cross-border electricity flows.