Cost of electricity to drop as Kenya injects 668MW into national grid

Saturday January 12 2013

The extra power is expected between next month and September next year, with six key projects being pursued by independent producers. TEA Graphic

Kenyan consumers can expect to spend less on electricity following plans to inject an extra 668MW into the national grid.

Projections by Kenya Power, the country’s power supplier show the fresh injection will come between next month and September next year, with six key projects being pursued by Independent Power Producers (IPPs) and state-owned Kenya Electricity Generating Company (KenGen).

The country’s current installed capacity stands at about 1,600MW. KenGen plans to raise this to 3,000MW by 2015.

The move comes as the country taps into thermal and geothermal sources to meet an expected 8 per cent jump in power demand this year.

ALSO READ: Kenya in cheaper geothermal option

Kenya Power, KenGen, and Kenya Electricity Transmission Company have been investing in power generation and transmission even as new independent producers come on board.


The new investments aim to bring down the cost of connections in the next five to 10 years, enabling more households to access electricity.

Demand for electricity is driven by the country’s growing economy, resulting in a middle class with spending power and an expanding informal business sector. Ministry of Energy officials said this should help improve access to electricity in Kenya.

According to the World Bank, only 15 per cent of households in the region are connected to national grids.

Tanzania has the highest number of households without electricity at 7.2 million,. This is followed by Kenya at 6.2 million, Uganda at 5.5 million, Rwanda at 1.7 million and Burundi at 1.4 million.

Kenya Power says the cost of connecting an additional consumer has gone up from $823 to $1,176 due to the huge capital needed to invest in transmission infrastructure.

A recent study by the Lighting Africa programme of the World Bank shows that even though Kenya’s power grid is more reliable than any of its EAC counterparts, the country still experiences an average of seven blackouts a month.

Rwanda experiences the highest number of power outages averaging 14 per month, followed by Burundi and Tanzania both with 12. Ugandans expect 11 blackouts a month.

READ: Rwanda to start power rationing as demand peaks

Kenyans are already burdened by heavy power bills caused by the high cost of fuel and exchange rates given that the country gets 34 per cent of its electricity from thermal power.

Erratic rainfall due to climate change and breakdown of machinery at hydro power plants, often forces the country to turn to thermal power sources to compensate for shortfalls.

Kenya Association of Manufacturers chief executive officer Betty Maina said energy costs account for up to 40 per cent of production expenses, hurting Kenya’s global competitiveness.

“One would rather have expensive but consistent and reliable power, than rationing which will result in massive losses as a result of non- productivity,” she said adding that the high cost of power had eroded the competitiveness of the local manufacturing industry in the face of cut-throat competition from Egypt, South Africa, and South East Asia that enjoy cheaper power.

But according to the Permanent Secretary in the Ministry of Energy Patrick Nyoike, medium speed heavy fuel oil plants by several IPPs — Thika Power Ltd (TPL), Gulf Power Ltd (GPL) and Triumph Power Generating Ltd (TPGL)— and a geothermal power facility by Ormat are expected to bring in cheaper options to hiring emergency diesel generators.

From next month, TPL is expected to supply Kenya Power 87MW of electricity, with 36MW of Olkaria geothermal fields based Ormat coming on the grid in May and GPL’s 80MW in September.

TPGL’s plant in Kitengela on the outskirts of Nairobi will supply 85MW early next year followed by KenGen’s output of 140MW of geothermal power in June and another 140MW in September 2014 from Olkaria near Naivasha town.

TPL has invested about $146 million, Ormat ($212 million), GPL ($108 million), TPGL ($157 million) to push through the plants. The new projects are expected to raise the number of customers connected to the national grid by at least 300,000 annually.

To enhance reliability of distribution system, Kenya Power has committed $182.91 million for various on-going power projects. A total of $18.29 million has been allocated for system automation for Nairobi and Mombasa.

ALSO READ: Kenyan firms to invest $930m in power

“The automation project will facilitate efficient monitoring and quick resolution of disturbances,” said Kenya Power in a statement last week.

At least $21.47 million has been allocated for building new lines in various parts of Kenya and $31.46 million is being invested in reinforcing projects to improve quality of power supply.

But the reprieve might take longer, warned business executives. The Kenya Private Sector Alliance (KEPSA) wants an urgent review of the tariff system to reduce the cost of electricity for consumers as new facilities will help to increase generation capacity and stabilise supply.

“The system has to be revised for any real reduction in the cost of power. But it is not a simple undertaking as almost all new PPAs are modelled on the old ones,” said Kepsa chairman Patrick Obath.

He said Thika Power Ltd with other new facilities will help increase generation capacity and stabilise supply of electricity but there will be no reduction in the cost of power due to an increase in thermal generation.

The Energy Regulatory Commission (ERC) expects Kenya’s electricity demand in near future to increase by at least 11.2 per cent annually due to accelerated connectivity in urban and rural areas, population and economic growth.

Other drivers are Vision 2030 projects such as light rail for Nairobi and the suburbs requiring 16GW hours from 2014, the second container terminal in Mombasa (13 GWh) and Lamu port (16 GWh).

ERC’s Director General Kaburu Mwirichia said Kenya’s total generation capacity up to the year 2016 will be 2,371MW from 27 power plants planned to be commissioned in tandem with demand.

“Of the total additional capacity, 826.52MW is from IPP, 1110MW from KenGen and the remaining 470MW could be either KenGen or IPPs depending on who wins the tender,” Mr Mwirichia said.