IN­VEST­ING IN AFRICA? TRY TH­ESE COUN­TRIES

Li­cences of in­de­pen­dent pro­duc­ers will not be re­newed

The East African - - NEWS - By NJIRAINI MUCHIRA Spe­cial Cor­re­spon­dent

East africa’s largest economies, Ethiopia and Kenya, are among Africa’s top in­vest­ment desti­na­tions.

Kenya will not re­new the li­cences of in­de­pen­dent power pro­duc­ers (IPPS) as they are phased out for be­ing “ex­pe­n­e­sive”.

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).

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 fixed­ca­pac­ity charge of $0.04 per kilo­watthour. The amount is passed on to elec­tric­ity con­sumers as a fuel cost charge, which fluc­tu­atea 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.

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.

“We fol­low di­rec­tives from the min­istry, so this is not the right time for us to speak,” said Frank Ochieng, Ken­gen chief com­mu­ni­ca­tions of­fi­cer.

Once their li­cences ex­pire, we will not re­new them.” Kenya’s En­ergy Cabi­net Sec­re­tary Charles Keter

Pic­ture: File

Kenya Power staff main­tain pow­er­lines. Ther­mal power plants will be phased out.

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