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Kenya saves Sh9 billion in three months with geothermal energy switch on

By Kagure Gacheche | November 8th 2014

Kenya has saved about Sh9 billion in three months since the Kenya Electricity Generating Company (KenGen) added power to the national electricity grid.

The company commissioned 280 megawatts (MW) of geothermal power, with 140MW of this added to the grid in July, 70MW last month, and the final 70MW to be added this month.

“This geothermal power displaces diesel, which saves the economy Sh100 million a day. Once we switch on the entire 280MW, Kenya will save Sh42 billion a year,” said KenGen Chairman Joshua Choge.

In an interview with Weekend Business, he added that electricity consumers will begin to feel the effect of this drop in costs in December, “and you can take that to the bank”. Prices are expected to be 30 per cent lower by next month than they were in July.

Already, power bills are showing a reduction in the fuel cost adjustment, with the price dropping 50 per cent in the last three months.

In a notice appearing in sections of the media, the Energy Regulatory Commission (ERC) points out that a recent reduction in fuel cost charge is set to push down retail electricity tariffs. As a result of this development, the ERC says electricity bills have declined steadily in the period between July-November 2014. This was driven by a reduction in the fuel cost charge from Sh7.22 per KWh in July to Sh3.47 in November, a decrease of 52 per cent.

This reduction in fuel cost charge has been a consequence of additional geothermal power generation and sustained dispatch of hydro plants.During this period, unit cost of electricity for domestic customers has decreased by 24 per cent, says the ERC update. “If the rains had been better in the major catchment areas where we have our hydro-power stations, the effect on costs would have been bigger. Fortunately, with geothermal power, we do not have concerns about drought or off seasons; it is reliable and long term. We are getting the steam from wells that are 3km deep,” said Mr Choge.

To further boost the supply of green power into the national grid, KenGen recently added 10MW from wind mills in Ngong’ and 7MW from well heads, a technology used in geothermal generation, and this combined power has taken Kenya’s installed electricity capacity to more than 2,000MW. As a result, it appears the Government’s plan to more than double power generation to 5,000MW by 2017 is on course. But with Kenya Power selling only ten per cent more units of electricity in the year to June than over a similar period the previous year, is there going to be sufficient demand for the additional power supply? “We have started a serious campaign to create demand. We don’t see ourselves struggling to find customers. The instruction KenGen has is to lower the cost of power by 40 per cent by 2017. The moment we lower the cost of power, we will get the industries.

Secured funding

“Already, we have signed a memorandum of understanding with Calvin Klein, who manufacture 40 per cent of apparel in the world market. They toured our stations in Olkaria, Naivasha and Kiambu. They have seen we have steam and water, and they are confident our power supply will be reliable,” said Choge.

The American fashion house is looking to set up a factory that will require a labour force of 30,000 people. “They are relocating from China, where labour has become more expensive now that the economy has got richer. We are competing with Ethiopia and Mauritius for this kind of business. The advantage Kenya has is that the level of education and training is high, and our renewable energy efforts are being noticed.” Choge added that the standard gauge railway and Lamu Port-Southern Sudan-Ethiopia Transport Corridor (Laps set) are expected to take up 1,000MW each.

“And with rural electrification being prioritised, every school is to be connected to power by the end of this financial year, which ends in June. Out of 22,000 schools, there are only about 6,000 yet to be connected. These efforts will electrify entire localities. So, there is creation of demand.”
Further, he said, the Ministry of Energy has signed a Sh10 million MoU with the Nairobi County government to light up the city, starting with Kibera.

KenGen has also secured funding for new geothermal power plants. By March, the firm expects to break ground on Olkaria V, a $400 million (Sh35.9 billion), 140MW station that will be financed by the Japan International Cooperation Agency (JICA). The power generated should be on the grid within two years.

“We also have Olkaria I, unit 6, which will generate 70MW. The funding for this will come from the savings we made from the 280MW Olkaria IV station, which had a budget of $1 billion (Sh89.7 billion); we were able to save $500 million (Sh44.8 billion). There is also the 140MW Olkaria VI, which is a public-private partnership project,” said Choge.

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