Why coal has no place in Kenya’s energy future


Why coal has no place in Kenya’s energy future

Economic and environmental realities spur countries across the world to close coal power plants

A fall in the cost of renewable energies, ever-improving technologies and the threat of climate change have all come together to make wind and solar energy more attractive than coal across the world.

Still coal accounts for 40 per cent of global electricity, according to the World Bank.

Kenya is set to build a 981.5 megawatt (MW) coal-fired thermal electricity-generating plant in the Manda Bay area, Lamu County, even as costs of renewable energies are falling dramatically and fuelling a push to phase out coal power generation around the world.

Energy Regulatory Commission figures show that as at June 2015, Kenya had an installed electricity generation capacity of 2,299MW. For its population and per capita GDP, Kenya is performing well in terms of power generated. For instance, the country’s power consumption per capita is 167 kWh (2014) compared to 145 kWh in Nigeria, which has a per capita GDP nearly five times higher.

Kenya is set to build a 981.5 megawatt (MW) coal-fired thermal electricity-generating plant in the Manda Bay area, Lamu County, even as costs of renewable energies are falling dramatically and fuelling a push to phase out coal power generation around the world.

To keep up with demand, Kenya needs to deliver 2,700 MW of new generation capacity by 2020. The successful completion of the Lamu plant would supply a third of the projected energy demand.

However, a NationNewsplex cost-benefit analysis suggests that meeting the future demand through coal power may not be a smart idea due to economic and environmental reasons as well as the nation’s vast green energy potential.

Besides the Sh205 billion it will cost to construct the Lamu plant that has a design life of 30 years and an operating life of up to 50, the coal used will be imported at a hefty cost from South Africa, for five to 10 years, until a 350km rail line is constructed from coal-producing Kitui County to Lamu.

The project development company, Amu Power, states that the project will consume between 2.4 million tonnes and 3.1 million tonnes of coal annually and on average burn 2.8 million tonnes during the same period. According to the World Bank Commodities Price Forecast, the cost of coal from South Africa in 2020 will be US$55 per tonne. This means that the annual price of the imported coal will be more than Sh17 billion each year, exclusive of the shipping cost. The distance from Richards Bay in South Africa, the port of exit, to Manda Bay in Lamu is more than 3,550km by sea and the shipment is estimated to take about two weeks.

A recent World Economic Forum (WEF) report reveals that barely a decade ago, the price of producing power from solar energy was about Sh60,000 per MWh, while it cost about Sh10,000 to generate the same amount of power through coal and natural gas. By the end of 2016, it cost about or below Sh10,000 to generate solar electricity and about half of that through wind.

Same price

During the same year, grid-scale solar and wind power cost the same price or was cheaper than wholesale fossil fuels (coal and natural gas) in 30 countries across the world, according to WEF. However, the cost of producing electricity from the fossil fuel hardly changed in the past decade.

The Newsplex review suggests that the price of wholesale renewables will continue to fall and will be cheaper than fossil fuels like coal in most countries by 2020.

Cost is partly a function of economies of scale, meaning the bigger the power plant, the lower the cost. Due to more efficient technologies, wind and solar electricity generating plants are becoming bigger every day.

China is now home to the largest solar farm in the world with a capacity of 850MW, enough to supply power to 200,000 households, almost the same capacity as the Lamu coal plant.

Early this year, the Nasa Earth Observatory published images that showed how the Longyangxia Dam Solar Park in northwestern Qinghai province grew from a few panels to become an expansive farm with four million solar panels in just four years. Bloomberg reports that China is building a 2GW capacity solar farm with six million solar panels in the Ningxia autonomous region, which would make it the world’s largest solar plant.

The technology that will be used on the Lamu plant will come from China, as is one of the main financiers – Industrial and Commercial Bank of China. The country is the world’s largest solar power producer by capacity. At the start of last year, the country had a total installed capacity of 77.4GW, almost double that of the United States, according to China’s National Energy Administration.

The surge in the take-up of solar energy is partly due to the solar panels efficiency increasing by 46 per cent in the last five years and wind turbines improving by half in the past decade, according to the International Energy Agency (IEA).

Because of the economic and environmental realities, 20 countries and two US states (Washington and Oregon) last year joined the Global Alliance to Power Past Coal to phase out coal from power generation before 2030. They were Angola, Austria, Belgium, Britain, Canada, Costa Rica, Denmark, El Salvador, Fiji, Finland, France, Italy, Luxembourg, the Marshall Islands, Mexico, Netherlands, New Zealand, Niue, Portugal and Switzerland.

Some of the world's biggest coal consumers — China, India, the United States, Germany and Russia — were not included. However, at the end of last year, China’s National Energy Administration announced that the country had cancelled more than 100 coal projects that were planned or under construction, eliminating 120 gigawatts of future coal-fired capacity, more than double the entire coal-fired capacity of Germany.

Despite being the world’s largest producer and consumer of coal, China’s coal share in the country’s energy mix has shrunk since 2014.
Kenya’s electricity generation mix comprised 36 per cent hydro, 19 per cent gas and oil, 44 per cent geothermal, co-generation 0.2 per cent and 1.2 per cent from wind and solar. There is however a continued decrease in hydro-generation as a result of frequent droughts.

Solar potential

According to the Ministry of Energy, Kenya has the potential to produce 10,000MW of geothermal power from the Rift Valley Basin. The United Nations Environment Programme estimates that Kenya’s wind capacity could be as high as 3,000MW. The solar power potential is limitless given that the sun shines in Kenya all year long. In other words, Kenya has barely started to exploit its solar and wind power potential.

Latin American countries that have long sunny intervals, such as Mexico, Brazil and Chile, have increased investment in renewable energy 11-fold since 2004, placing them among the top 10 renewable energy markets in the world, according to a 2016 report by the International Renewable Energy Agency, an intergovernmental organisation.

The solar capacity on Chile’s central power grid has more than quadrupled to 770 megawatts since 2013, almost the same as what the Lamu coal plant will produce.

Even though the Lamu plant is a private venture, it is the government that in 2014, invited bids from private developers to build, own, and operate the power station. The government, through Kenya Power, signed a 25-year power purchase agreement (PPA) with Amu Power. A PPA defines all of the commercial terms for the sale of electricity between the two parties.

In July 2017, activist Okiya Omtatah Okoit filed a petition at the Environment and Land Court requesting the court to compel the government to make full disclosure of the secretive PPA into which it entered. His petition claims that the PPA binds taxpayers to pay about Sh38.7 billion per year as capacity charges whether we use the electricity or not. The case was dismissed in March this year.

Writing in a recent column in the SaturdayNation, economist David Ndii says PPAs “of this type have three components, a capacity charge which is paid regardless (like a lease of the plant), a generation component (buying the electricity) and a fuel cost adjustment (if coal price goes up from contract price, we pay the difference)”. He says the capacity charge component has been set at 85 per cent capacity factor, which the power plant cannot achieve and therefore Amu Power will be paid a capacity charge at a level that the plant could not possibly achieve. Data from the International Energy Agency shows that the coal power plant capacity factor is at 60-65 per cent in the US, 55-60 per cent in the UK and 46 per cent in China.

But perhaps the strongest argument against coal, the dirtiest fossil fuel, is an environmental one. Read more about the environmental impacts of coal-fired power plants here.