Regulator forced to recall Kenya's power masterplan

Thursday October 18 2018

Turkana wind power substation

Construction works for the Turkana Wind Power substation project in Marsabit County on January 28, 2016. PHOTO | NMG 

NJIRAINI MUCHIRA
By NJIRAINI MUCHIRA
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Kenya’s Energy Regulatory Commission (ERC) has recalled a draft energy sector masterplan after queries by some industry players.

According to the players, the recommendations could have far-reaching effects on the sector.

The plan, which is intended to guide the sector on generation expansion, opportunities, transmission infrastructure target, network expansion and resource requirements for the expansion programme, was drafted with the collaboration of sector utilities and co-ordinated by the ERC.

“The objective is to derive an optimal generation expansion plan for the country for the period 2017-2037 based on the prevailing commitments, available options and assumptions,” reads the policy.

Analysts said if the Updated Least Cost Power Development Plan 2017-2037 is implemented, the investments in the proposed power projects will most likely result in excess power (going by the current demand), and eventually idle power production facilities.

It proposes the suspension of nuclear energy from the power matrix by close to two decades and reducing the contribution of geothermal and hydro in the energy generation mix

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The 20-year blueprint, which had been uploaded on the ERC website and later pulled down, also recommends deferment of a coal power plant in the immediate future, stating that the country will only need coal-generated electricity in 2030.

Power purchase agreements

The plan further proposes that the government renegotiate signed power purchase agreements (PPAs) for large power plants, delay development of new geothermal power plants and put mechanisms in place to manage delays in implementation of generation projects.

Notably, the masterplan puts emphasis on the need to expand generation from wind, solar and natural gas, whose contribution to the energy mix is projected to increase from 1.1 per cent to 8.5 per cent (wind), zero per cent to 8.6 per cent (solar) and zero per cent to 7.6 per cent (natural gas).

Faced with opposition to the plan, ERC director-general Pavel Oimeke said the document will be subjected to further reviews before being adopted.

“The plan is still a draft. It has not yet been discussed and approved by the commission or stakeholders. It could change,” he told The EastAfrican.

The draft is largely an updated version of another controversial document, the 2015-2035 Electricity Sector Masterplan, prepared by consultancy firm Lahmeyer International.

The Kenya Nuclear Electricity Board (KNEB), which is laying the groundwork for a nuclear power plant and Amu Power, which is building a coal power plant, are opposed to the plan.

“We have told the ERC that the document needs to be reviewed because we don’t agree with its contents just as we did not agree with the Lahmeyer masterplan,” said Collins Juma, KNEB managing director. Amu Power chief operating officer Cyrus Kirima said the private sector, which was not involved in the preparation of the document, is baffled by the recommendations.

“The plan is contradicting because the government is pushing us to build the coal power plant to stabilise the grid, yet the document says the plant will cause supply-demand imbalance. I don’t know the official position,” he said.

Recommendations

He added that Amu Power has been in touch with the ERC to understand the criteria used in coming up with the recommendations, because Kenya is at a point where demand for electricity is growing as a result of economic and population growth.

However, on the regional front the plan praises Kenya’s commitment to interconnecting with neighbouring countries and part of regional power pools.

“Interconnections provide mutual benefits such as purchasing energy from neighbouring countries at a lower price and receiving additional security of supply. In this regard, it is recommended to further extend interconnections with neighbouring countries in the long term,” it states.

According to the plan, the total installed capacity over the next two decades is projected to increase from 2,234MW in 2017 to 7,213MW in 2030 and 9,932 MW in 2037.

Over the period, generation from geothermal is expected to decrease from 29.1 per cent to 26.7 per cent, and hydropower from 36 per cent to 17.9 per cent, while coal should increase from zero per cent to 19.5 per cent.

In the immediate term, with the coming onstream of the 300MW Lake Turkana Wind Power this year, the importation of 400MW from Ethiopia from next year, the commissioning of the 158MW Olkaria V geothermal and other projects, the existing capacity is expected to rise to at least 3,900MW by 2020.

This would result in an average of 583MW excess electricity in 2019-2023 should demand grow moderately at the current average of six per cent per annum.

The plan raises the question about the logic behind investing of $20 billion in some projects.

In particular, it notes that the 981MW Lamu coal plant, which should be complete in 2024, would aggravate the projected supply-demand imbalance with a surplus margin above 1,500MW.

This would be 43 per cent above the sum of peak and required reserve, with 32 per cent excess energy during the year.

The plant would also impact the cost of energy, which is anticipated to increase from US Cents 8.30 per kilowatt hour (kWh) in 2018 to US Cents 16.86/kWh in 2024 before declining to a range between US Cents 14.06/kWh and US Cents 12.95/kWh in the period 2030-2037.

To avoid excess power production and to ensure the coal plant is not grossly underutilised should demand grow moderately, the plan recommends that the implementation of the plant be phased and consist of smaller units of 150MW each to minimise the requirement of primary reserves.

On nuclear, the plan recommends that Kenya defer the implementation of the $5 billion plant and rethink the model by scaling down the unit capacity.

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