Why more steam power will not drive down fuel charges

Energy regulator has ruled out further cuts in the fuel charge in electricity bills despite switching off Aggreko’s costly emergency power and increased generation of geothermal which is cheaper.

The Energy Regulatory Commission says the fuel levy is unlikely to drop because there is a need to use diesel-fired power plants to “stabilise” the national grid, warning that pushing a lot of steam power may collapse the system and cause a nationwide blackout.

Fuel cost charge — linked to the volume of diesel used to run generators supplying power to the grid — has remained unchanged at Sh2.31 per kilowatt-hour since January.

“We want to maintain the fuel levy at where it is. When we have very low thermal power, it makes the system unstable. Pushing too much geothermal will make the system collapse,” said Joseph Oketch, director of electricity at ERC.

“We’re not only looking at cost but reliability also. We want to have an optimum mix,” said Mr Oketch in an interview.
The ERC reviews the fuel cost charge, forex adjustment costs and as well as the water levy every month.

He revealed that the August 6 countrywide power failure was blamed on excess supply of geothermal power from Olkaria, which led to the tripping of the supply line to Nairobi. Kenya on July 13 unplugged Aggreko’s 30-megawatt diesel-fired Muhoroni temporary power plant whose electricity was priced at ¢50 (Sh50) per kWh.

Geothermal power now accounts for nearly half or 46 per cent of total energy mix in the month of July, according to official data, up from 33 per cent in July 2014. The ratio of hydro is 40 per cent, thermal (13 per cent) and a small ratio of wind, biomass and solar.

Diesel-fired electricity is priced at ¢20 for each unit. Hydropower, though susceptible to the vagaries of weather, is the cheapest at ¢3 per kWh followed by Mumias co-generation (¢6 per unit), geothermal (¢7 per kWh), Biojoule’s biogas (¢10 per unit), and Strathmore University’s solar power priced at ¢12 per unit.

It was expected that the above developments would drive the fuel levy much lower, but ERC says delays in completing transmission lines will deny consumers benefits of cheaper power.

“Reliability is also due to line constraints,” said Mr Oketch, adding that key lines linking the Coast and Western to cheap steam power remain incomplete.

The Coast region is yet to enjoy the fruits of cheaper geothermal power because there is no line linking Mombasa and Nairobi.
As such, the Coast region is largely served by two thermal plants, namely Tsavo Power and Rabai Power.

The Sh14 billion power line linking Nairobi and Mombasa began in August 2011 and was expected to be complete in three years’ time, but remains unfinished due to land acquisition challenges, according to Ketraco.

Boost supply

Western Kenya — notorious for constant outages, instability and low voltage — is also not connected to the Olkaria geothermal system.
This is the reason Aggreko was hired to boost supply to the region. The temporary plant has now been replaced by a 30MW thermal plant owned by KenGen.

The 300-kilometre Olkaria-Lessos-Kisumu line meant to evacuate power from Olkaria to Western Kenya has suffered multiple delays blamed on land acquisition, forcing Ketraco to set December 2017 as the target completion date for the project.