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Licences of independent producers will not be renewed
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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
Kenya Power staff maintain powerlines. Thermal power plants will be phased out.