Freeze on power purchase deals sparks fresh fears of rationing

Joseph Siror Kenya Power CEO presents the Kenya Power's Half Year Financial results announcement at Stima Plaza, Nairobi. Key Performance Highlights- 1. KSh.9.97 billion in net profit compared to KSh.319 million net profit during a similar period in the previous financial year. 2. 5% growth in electricity sales from 5,225 GWh to 5,506 GWh. 3. An additional 404 GWh of renewable energy was dispatched. 4. KSh.11.65 billion reduction in power purchase costs. 5. KSh.13 billion reduction in finance costs. Friday, 31 January 2025. [Jonah Onyango, Standard] Kenya's electricity demand is now threatening to outstrip available power-generating capacity in what could see the country's sole power distributor resort to rationing. The growing demand is despite a near-empty pipeline of power-generating projects that are expected to come on board in the coming years and increase supply following the 2018 freeze in the signing of power purchase agreements between Kenya Power and Independent Power Producers. The country recorded a new peak demand of 2,304 megawatts (MW) on January 15 this year, sustaining the trend over the last two years when the country has recorded a new peak demand every few months. Last year, power sector agencies recorded six new peak demands, rising from 2,177MW in February last year to 2,288MW in October before a further increase to the new high early this year. Peak demand is the highest power requirement in the power system at any given time and in Kenya, this happens in the evening between 6pm and 10pm. The demand is against a firm capacity of 2,320MW, which is what the power generators can pump to the grid during peak hours. Kenya had an installed capacity of 3,199MW as of December 2024 and an effective capacity of 3,030MW. However, due to the intermittency of energy sources such as solar and wind, the effective capacity significantly comes down to 2,320MW. During the evening peak when many Kenyans switch on household appliances and industries are still running, solar is not available, while wind plants can only produce about 25 per cent of their installed capacity. Kenya Power now warns that if the government does not lift the moratorium on the signing of new PPAs, the country could in the coming years find itself having to ration electricity as available sources will not be able to meet demand. "We will have pressure to deal with the challenges that may arise should we take too long [to lift the moratorium]. We should also bear in mind the time it takes from signing a PPA to developing a power plant," said Kenya Power Chief Executive Joseph Siror when the firm released its half-year financial results in Nairobi last Friday. "The impact will be felt if we do not lift the moratorium now... it may not be felt now but in a year or two." He added that the electricity grid also needed an operating reserve that would allow existing power plants to undergo scheduled maintenance but also ensure continued supply in case of emergencies. "The reality is that even with the power plants that are in place have to undergo maintenance which means that for some period of time, you are not going to have power from the plant. That reserve margin is used to cater for times when there are major breakdowns or maintenance or any other eventually," said Eng Siror, adding that the country also needs to consider that in times of prolonged dry spells, output from hydropower plants usually dips. The government in 2018 put a moratorium on the signing of new PPAs, at the time trying to tame high power costs. PPAs said to be skewed in favour of power producers and disadvantaged consumers have been blamed for high power costs. The Cabinet in March 2023 lifted the moratorium but Parliament shortly after, in April 2023, imposed another ban that is still in place. This has meant that nearly all power plants that had obtained PPAs with Kenya Power by 2018 have come on board, and the pipeline of planned power plants is now almost empty. The key power plants that are yet to come on board are two geothermal generators being constructed at Menengai by US firm Orpower 22 and UK's Globeleq, which have a combined power generating capacity of 70MW. Due to the slowdown in the construction of new power plants, the total installed capacity dropped by 75.3MW in the year to June 2024 to 3,199.9MW from 3,275.2MW in the year to June 2023, according to data by the Energy and Petroleum Regulatory Authority. This was due to the expiration of the PPA for Kipevu 1, a heavy fuel power plant in Mombasa. is now threatening to outstrip available power-generating capacity in what could see the country's sole power distributor resort to rationing. The growing demand is despite a near-empty pipeline of power-generating projects that are expected to come on board in the coming years and increase supply following the 2018 freeze in the signing of power purchase agreements between Kenya Power and Independent Power Producers. The country recorded a new peak demand of 2,304 megawatts (MW) on January 15 this year, sustaining the trend over the last two years when the country has recorded a new peak demand every few months. Last year, power sector agencies recorded six new peak demands, rising from 2,177MW in February last year to 2,288MW in October before a further increase to the new high early this year. Peak demand is the highest power requirement in the power system at any given time and in Kenya, this happens in the evening between 6pm and 10pm. The demand is against a firm capacity of 2,320MW, which is what the power generators can pump to the grid during peak hours. Kenya had an installed capacity of 3,199MW as of December 2024 and an effective capacity of 3,030MW. However, due to the intermittency of energy sources such as solar and wind, the effective capacity significantly comes down to 2,320MW. During the evening peak when many Kenyans switch on household appliances and industries are still running, solar is not available, while wind plants can only produce about 25 per cent of their installed capacity. Kenya Power now warns that if the government does not lift the moratorium on the signing of new PPAs, the country could in the coming years find itself having to ration electricity as available sources will not be able to meet demand. "We will have pressure to deal with the challenges that may arise should we take too long [to lift the moratorium]. We should also bear in mind the time it takes from signing a PPA to developing a power plant," said Kenya Power Chief Executive Joseph Siror when the firm released its half-year financial results in Nairobi last Friday. "The impact will be felt if we do not lift the moratorium now... it may not be felt now but in a year or two." He added that the electricity grid also needed an operating reserve that would allow existing power plants to undergo scheduled maintenance but also ensure continued supply in case of emergencies. "The reality is that even with the power plants that are in place have to undergo maintenance which means that for some period of time, you are not going to have power from the plant. That reserve margin is used to cater for times when there are major breakdowns or maintenance or any other eventually," said Eng Siror, adding that the country also needs to consider that in times of prolonged dry spells, output from hydropower plants usually dips. The government in 2018 put a moratorium on the signing of new PPAs, at the time trying to tame high power costs. PPAs said to be skewed in favour of power producers and disadvantaged consumers have been blamed for high power costs. The Cabinet in March 2023 lifted the moratorium but Parliament shortly after, in April 2023, imposed another ban that is still in place. This has meant that nearly all power plants that had obtained PPAs with Kenya Power by 2018 have come on board, and the pipeline of planned power plants is now almost empty. The key power plants that are yet to come on board are two geothermal generators being constructed at Menengai by US firm Orpower 22 and UK's Globeleq, which have a combined power generating capacity of 70MW. Due to the slowdown in the construction of new power plants, the total installed capacity dropped by 75.3MW in the year to June 2024 to 3,199.9MW from 3,275.2MW in the year to June 2023, according to data by the Energy and Petroleum Regulatory Authority. This was due to the expiration of the PPA for Kipevu 1, a heavy fuel power plant in Mombasa.

Freeze on power purchase deals sparks fresh fears of rationing

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Freeze on power purchase deals sparks fresh fears of rationing

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