Suswa substation in Narok County. Kenya is set to phase out thermal plants for being “expensive”. PHOTO FILE | NATION
Kenya will not renew the licences of independent power producers (IPPs) as they are phased out for being “expensive”.
Energy
Cabinet Secretary Charles Keter said the phase-out is meant to make
electricity affordable and ease the burden on Kenyans, who pay a fuel
cost adjustment component on monthly power bills.
“We
have 27 thermal power plants in the country, and once their licences
expire, we will not renew them as we have enough power,” Mr Keter said.
The
27 plants have a total capacity of 712 MW, a significant portion
considering the country’s total installed capacity stands at 2,370 MW.
This is not the first time Kenya has said it will phase out IPPs that generate electricity using diesel.
However,
the country has invested in renewable energy, particularly geothermal
sources, and can now phase out thermal power plants.
However, some IPPs have signed 20-year contracts with Kenya Power, meaning the last diesel plant should go silent in 2032.
Kenya is the only country in East Africa that plans to phase out thermal plants.
In
Uganda, thermal generation remains critical in electricity supply,
accounting for 100MW of the country’s 600MW total installed capacity.
Tanzania,
which has an installed capacity of 1,700MW, has only one liquid fuel
IPP with a capacity of 103MW, while another two plants with a capacity
of 70MW are owned by state firm Tanzania Electric Supply Company Ltd
(Tanesco).
Electricity sales
In
the 2016/17 financial year, in which Kenya suffered severe drought,
IPPs increased their electricity sales to Kenya Power to 63 per cent,
compared with 58 per cent the previous year.
During
the period, Kenya Power paid $217.2 million to IPPs that use diesel to
generate electricity, up from $124.8 million paid in 2015/16.
Earnings
by the IPPs increased as Kenyans paid more for the rising electricity
costs at a period when the prices of crude at the international market
were at a low of $50 per barrel.
Whether generating power or lying idle, IPPs are entitled to a fixed-capacity charge of $0.04 per kilowatt-hour.
The
amount is passed on to electricity consumers as a fuel cost charge,
which fluctuates depending on the amount of fuel used in power
production and currently stands at $0.03 per unit.
The fuel cost component accounts for as much as 40 per cent of what consumers pay for electricity.
An industry player operating one of the PPPs, however, thought the plan was ill-advised.
“Thermal
plants should not be decommissioned even when the contracts expire.
What the government should do is have them on stand-by just in case the
country needs quick electricity generated,” he said.
Renewable sources
He
added that although Kenya is increasing investments in renewable
sources like geothermal, wind and solar, the country cannot entirely do
away with thermal plants.
According to data by the
Energy Regulatory Commission, the contracts of at least two
diesel-burning IPPs are set to expire over the next five years.
State-owned
Kenya Electricity Generating Company is also a big player in thermal
generation with two plants in Kipevu with a combined capacity of 180MW.
Others are Iberafrica (108 MW), GulfPower (80MW), Triumph (83MW) and
Thika Power (87MW).
KenGen, which generates about 70 per cent of the country’s electricity, 16 per cent of which is from thermal, said the discussions to phase out thermal plants are still at the Ministry of Energy level.
KenGen, which generates about 70 per cent of the country’s electricity, 16 per cent of which is from thermal, said the discussions to phase out thermal plants are still at the Ministry of Energy level.
“We follow directives from the ministry,
so this is not the right time for us to speak,” said Frank Ochieng,
KenGen chief communications officer.
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