Ministry unveils ambitious Sh1.5tr electricity plan

The Government is looking to spend Sh1.5 trillion in energy infrastructure in a bid to establish universal electricity access over the next five years.

The ambitious strategy, developed in partnership with the World Bank, seeks to develop more than 3,000MW in installed energy capacity over the next five years through a combination of financing options, including public debt and concessionary loans.

This includes Sh520 billion targeted for geothermal power development, Sh290 billion in power generation through other sources and another Sh290 billion for increasing power transmission capacity at the state-run Kenya Electricity Transmission Company, (Ketraco).

The Government is further seeking investments totalling Sh290 billion to upgrade Kenya Power’s electricity distribution network and Sh900 million to develop mini-grids and isolated solar plants in marginalised counties.

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The plan will also see the government import 400MW, representing 21 per cent of the country’s electricity demand, from Ethiopia, beginning next year. The new energy investment strategy is based on the Government’s projection that energy demand from domestic, small and large corporate users will increase from the current 1754MW to 3,348MW over the next five years.

“It is anticipated that accelerated consumption of energy will be realised once some of the Vision 2030 projects begin to be implemented, especially given the focus on manufacturing of the “Big 4” agenda,” says the Energy Ministry in a prospectus detailing the new plan.

The ministry says already,  more than Sh700 billion has been raised in financing for the projects, including Sh200 billion for geothermal, Sh100 billion for transmission and Sh150 billion for distribution projects.

Another Sh200 billion has been raised in developing other sources, excluding geothermal, with Sh50 billion pledged for building off-grid projects in solar energy.

The new investment strategy is a revision of the government’s ambitious targets of setting up 5,538MW of installed electricity capacity by the end of last year that fell short by more than 57 per cent.

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At the same time, the previous medium-term strategy targeted a peak demand of 1,860MW as at the end of last year which fell short by six per cent.

This has raised concerns that the demand projections provided in the latest review could be over-estimated, leading to excess capacity and power rationing for consumers.

“Over the past 15 years, the average growth rate of peak demand has been around six per cent per annum. Over the past five years, average growth has been higher at 7.4 per cent.” explains the ministry in the prospectus.

“Overly optimistic demand projections lead to under-utilised capacity that must be paid for by end-consumers or by the Government while overly pessimistic demand projections may lead to power shortages that may damage economic growth.” 

In this regard, Kenya’s proposed coal-fired power plant might take longer to begin selling power to the national grid as the Government works to keep production and consumption on an even keel.  

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“A power purchasing agreement between Amu Power and Kenya Power has already been signed,” says the ministry.

“The commissioning of this power plant is however unlikely to materialise before 2022.”

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GovernmentSh1.5 trillionWorld BankElectricity