Consumers to pay less for electricity from November with new tariff deal

Sunday April 14 2019

A Kenya Power substation

A Kenya Power substation. FILE PHOTO | NMG 

EDWIN OKOTH
By EDWIN OKOTH
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Hopes for cheaper electricity could become a reality in November when Kenya renegotiates its Power Purchase Agreement (PPA) with Uganda.

The Ministry of Energy has also lined up various investments meant to harvest cheaper energy into the grid while retiring the expensive thermal plants in a major drive for affordable power from June 2019.

Energy Cabinet Secretary Charles Keter told the Sunday Nation that the PPA with Uganda, signed in 2014, will be revised downwards from the current Sh22 per kilowatt-hour (kWh) to Sh14, a relief that will be passed down to consumers.

“The new PPA we will sign has been made to benefit us through a gradual reduction in cost which will hit Sh10 per kWh by the end of the PPA. Our new geothermal plants will also be a major boost when we have the power into the grid as we invest in infrastructure to make connectivity universal and achieve even greater stability,” Mr Keter said.

By June, the 105MW Olkaria geothermal plant is expected to start contributing to the national grid. Another 83MW plant is expected to be completed shortly after to boost the country’s fast pace towards greener and cheaper power.

Preference for geothermal is underpinned by the fact that it is a renewable energy source, environmentally friendly and with relatively low generation tariffs.

Further, it is not subject to the vagaries of weather changes, making it a preferred base load for power-supply stability.

Currently, imports from Uganda and use of diesel-generated thermal plants make the biggest contributors to higher power tariffs, which have greatly reduced consumption and discouraged industrialisation.

In western Kenya and parts of Nyanza, for example, homes and businesses experience frequent power outages due to reliance on the 65MW generator in Muhoroni, where another generator of a similar capacity is currently being installed.

At Sh34 per unit of power, the energy source is the most expensive in the country, making a key factor in eroding the gains brought about by cheaper power from wind and solar generation.

The Kenya Electricity Transmission Company is now expected to complete the 300km Olkaria-Lessos-Kisumu line to evacuate the geothermal power to serve the western region and cut reliance on the Muhoroni generator.

The line, which comprises 400kV, 220kV and 132kV networks, has been the missing link between the region and the idle power at Olkaria. A mix of way-leave headwinds, underfunding and contractual failures by the builder have been blamed for the delay of the Sh19.8 billion project.

The latest Kenya Power data shows that western Kenya and the North Rift have recorded almost a double increase in electricity demand in the past one year without a commensurate boost in supply.

As a result, South Nyanza, which doubled its electricity demand for the domestic load from 51 million to 106 million units, had zero demand for Large Commercial and Industrial Load (both 66kV and 132kV), which is used by large manufacturing plants. Western Kenya has less than 20GWh in both categories, data from Kenya Power’s annual report shows.

The Energy Regulatory Commission (ERC) also estimates to reduce the diesel-power contribution to the grid down to zero. If this is achieved, consumers will no longer pay the variable Fuel Cost Charge, which is among the heaviest load on power tariffs now.

ERC Director-General Pavel Oimeke said the regulator’s projected rise in the geothermal power generation and a further reduction of reliance on the weather-dependent hydro sources will be a major drive for a tariff relief.

“Geothermal generation is projected to increase contribution to the generation mix gradually from 42 percent in 2020 to 49 percent in 2025,” Mr Oimeke said.

Kenya also hopes to increase wind, solar and cogeneration in the production mix, with the contribution of wind rising from 12 percent to 14 percent in the next five years, ERC says. Power imports from Uganda, which had fallen to 7.6 million units in September 2018, rose to 15.2 in January 2019.

Uganda remains the sole exporter of electricity to Kenya. Kenya hopes to revise this trend by increasing power exports to Uganda after the geothermal power reaches the western parts and its Lesos-Tororo line is completed.