Bright future for business as investors boost power grid

By Nicholas Waitathu
The country’s national power grid is headed for a boost following the entry of new investors into power production.
Private companies and community-based organisations are currently setting up small hydropower stations along major rivers with a view to producing more electricity for Kenya’s growing population.
Power users, particularly those in rural areas, stand to benefit from these projects that aim to reduce the frequency of blackouts and the cost of electricity.
Feasibility studies
Feasibility studies carried out by the ministry of Energy between 2009 and 2011 identified areas where 30 small hydropower stations could be set up with the potential to produce 209 megawatts.
Energy Regulatory Commission (ERC) Director-General Kaburu Mwirichia said in a phone interview last week that out of the identified locations, 22 have been approved and are now in various stages of implementation in various parts of the country. 
Business lobby groups — Kenya Private Sector Alliance (KEPSA) and Kenya Association of Manufacturers (KAM) — have blamed high electricity costs for driving up the cost of doing business in the country.  
KAM Chief Executive Betty Maina said the cost of power has denied the country the opportunity to create an environment for job creation and investment.
Mwirichia said that the power produced by the various stations will contribute to easing the cost of doing business.
  “The small hydropower stations are part of a power diversification strategy. We expect that once they are complete, they will boost the national grid by a big margin,” Mwirichia said.
He added that the country’s power production stands at about 1,500 megawatts against a hydropotential of 7,000 megawatts.
Most of the power is generated from big water reservoirs along Tana River and by Independent Power Producers (IPPs).
“We have been pursuing strategies geared towards exploiting the available energy resources with a view to boosting the national grid and enabling Kenyans to enjoy power every day,” Mwirichia added. 
The need to shield their businesses from huge losses caused by fluctuating power supply has  seen private investors invest in power production.
Also, the rising cost of production borne by manufacturing plants, such as tea factories, has contributed to the initiation of the small hydropower stations. For instance, the Kenya Tea Development Agency (KTDA) is working on a Sh5 billion power project that is expected to produce 24 megawatts and reduce their annual cost of production by 30 per cent. The tea agency embarked on the programme after the ministry of Energy approved locations for stations in 2009.
The new station sites include the Imenti power project, which is already operational and producing about 1 megawatt.
It is selling nearly half of the produced energy to Kenya Power.
Other sites include the Gura River hydropower project in Nyeri County, North Mathioya and Aberdare in Murang’a County, Kirinyaga hydroscheme, Thuchi, Greater Meru and Kericho projects.
KTDA CEO Lerionka Tiampati said in an earlier interview that total production outlay amounts to Sh2.3 billion of tea farmers’ earnings annually, where electricity costs account for 30 per cent of the expenditure.
Various costs
“On average, tea factories spend from Sh25 million to Sh40 million annually on electricity, depending on factory size, crop level and various costs from KPLC, like fuel adjustment and forex,” he said. 
The cost of electricity consumed by the processing units has in the last decade risen from Sh5.63 in 2001 to Sh10.10 in 2010 per kilogramme of tea, a 79.4 per cent increase.
ERC Renewable Energy Director Robert Pavel Oimeke added that the commission has drafted standards that will guide proprietors’ negotiations with Kenya Power during the signing of Power Purchase Agreements (PPAs).

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