Food industry may get subsidised electricity

The government is considering introducing a discounted electricity tariff for the food and food production industry as part of a campaign to create demand for additional power to be generated under a grand plan spearheaded by the ministry of Energy and Petroleum.

The plan seeks to increase local electricity production capacity by 5,000 megawatts by the end of 2016.

Energy and Petroleum Secretary Davis Chirchir told representatives of the Kenya Association of Manufacturers (KAM) the special tariff would also reduce the need for Kenya Power to charge more for power consumption during peak hours, which is meant to compensate for the time that generators remain unutilised during off-peak hours when consumption is low.

“We could consider a time-of-use tariff (discounted) that will utilise the base load capacity to be used by food manufacturers and milk processing companies. That way, we will influence a reduction in the energy component in the price of food products,” he said.

Base load capacity, as used in the industry, refers to power such as hydro generators that cannot be switched off as such sources power keep flowing even when no power is being generated.

The plan to increase the installed electricity generation seeks to replace thermal generators with geothermal resources as the base load. At the moment, the base load capacity is estimated to be about 800 megawatts of the current total installed capacity of 1,955 megawatts.

With the expected input of 140 megawatts of geothermal power from the Olkaria plants by Kenya Electricity Generating Company (KenGen) to the national grid by end of November, the base load capacity is expected to rise to 940 MW.

“We are working to retire base load that comprises thermal generators with development of geothermal resources,” Mr Chirchir told the manufacturers.

HIGH ELECTRICITY COSTS

Potential investors have shied away from the country owing to high electricity costs said to average 20 US cents (Sh18) per unit of electricity, compared to Ethiopia where the cost is about 3 US cents (Sh3) for the same amount of power.

The additional power, to be generated mainly from renewable and cheap sources of electricity such as wind, geothermal, coal and liquefied natural gas, is expected to reduce the price of electricity to about 9 US cents (Sh8), according to the ministry.

At the meeting, investors challenged the government to learn lessons from Ethiopia, which currently produces enough electricity to exceed demand and manages to keep the cost of power affordable.

While welcoming the plan to introduce the discounted tariff, they voiced concerns about what they termed the slow pace at which Kenya Power processes customer applications for new power connections.

“There are very many people that are waiting to be connected to the grid by Kenya Power. These are all lost opportunities for power consumption,” said Polycarp Igathe, the managing director of Vivo Energy.

Other investors raised concern over frequent power outages as well as well as delays in the construction of transmission lines to evacuate power from generators to the grid network.

In February, a report by a team of experts in the power sector warned that consumers risk paying additional costs of up to Sh50 billion a year for “idle” power plants in the event that the planned capacity is not fully utilised.