Kenya teeters on brink of power crisis as demand hits new highs

Drisilla Jumwa, 87, after her house was connected to electricity when the President William Ruto launched the Last Mile Electricity Connectivity Project in Mwanguwi, Taita Taveta county, on December 2, 2024. [File, Standard] In the five weeks leading up to August 5 this year, Kenya recorded three new peaks in electricity demand. While this is a pointer to a growing economy, it also poses challenges for Kenya, whose power production has not kept pace with the growth in demand. On August 5, peak demand-the maximum power needed on the grid at a specific time-hit a new high of 2,363.41 megawatts (MW). This was only two weeks after the previous record of 2,362.28MW on July 23. Earlier on July 2, the sector had recorded a new peak of 2,325.23MW. The Energy Ministry said there is adequate capacity to handle demand, at least for now. The Secretary for Renewable Energy at the State Department for Energy Isaac Kiva said peak electricity demand constantly reaching new highs is a good sign, as it is an indicator that the economy is growing, with more and more homes, businesses, and industries getting connected to the grid and utilising more power. Over the year to June this year, Kenya Power said another 404,848 new customers were connected to the grid, increasing its total number of both domestic and commercial customers to 10.06 million. "This good momentum and trajectory is expected to continue as we connect more customers and as the country's population, as well as socio-economic activities and industrialisation increase," Kiva told Financial Standard in a statement, adding that "for now, we have enough capacity to meet this growth in the coming months." But even as he insists the momentum is encouraging, Kiva also admits that the country is dancing on the edge as far as electricity production is concerned. As consumption records a new high every few months and in some instances every few weeks, generating capacity has stagnated for years. "However, with the expectation of the sustained growth in peak demand, due to measures put in place to increase economic and industrial activities, we have trained our focus on ensuring additional strategic investments. We need to continuously invest in new power generation projects and reinforce our transmission and distribution infrastructure. This will ensure our grid can reliably handle the increased load and support our country's continued socio-economic transformation," said Kiva. "To stay ahead, we need both public and private funding to increase our generation capacities and secondly to beef up our transmission and distribution lines." Kiva said despite pressure from the consumer side, the power sector is unlikely to increase production from costly thermal electricity sources. "We have no intention of increasing the output of thermal producers. Our strategy is to prioritise dispatch from our most cost-effective and cleanest sources of geothermal, hydro, wind, and solar energy. By ramping up production from these renewable sources, we can keep costs down." He, however, said there are chances of increasing imports from Uganda and Ethiopia. "We have transmission line interconnectors with countries like Uganda and Ethiopia, which allow us to import power when needed to supplement our supply, but the focus is on building our own indigenous renewable capacity," he said Already, Kenya is relying heavily on imports to meet local demand. Recent data from the Energy and Petroleum Regulatory Authority (Epra) show that the market share for imports, a large chunk of which comes from Ethiopia, grew to account for 10.48 per cent of all the power consumed in Kenya over the six months to December last year. Kiva said the government is also looking into alternatives such as Battery Energy Storage Systems (BESS), which store energy generated from renewable sources such as geothermal, wind and solar during idle hours for use when demand increases. These might, however, take time from inception to commissioning. "We are also exploring new technologies like BESS to help stabilise the grid and store excess power from intermittent sources like wind and solar, which will further reduce the need for thermal power during peak hours." While the growing electricity demand is encouraging, it is also troubling. Kenya Power notes that demand, which is not matched by growth in production, presents major challenges for the country in the near future. The firm, which is the single offtaker of electricity fed to the grid, noted that the country could end up increasing generation from thermal plants. These use heavy fuel oil to generate power, which is both costly and more harmful to the environment. Kenya has an installed generation capacity of 3,235.5MW, which is above the current peak demand on paper. Yet the system's effective interconnected capacity-the power that can realistically be dispatched-is only 3,056MW. Of the effective capacity, about 635MW is from variable renewable sources such as wind and solar, which cannot always be relied on during surges. That leaves about 2,421MW of firm capacity, only slightly above the record demand of 2,363MW. "The intermittent nature of solar and wind may hinder the system's ability to meet peak demand, necessitating load management," Kenya Power warned in a recent analysis. Load management is industry lingo for rationing, a scenario the country has not faced in recent years. "Furthermore, the geographical concentration of generation plants and transmission installations at Suswa presents challenges to transmission adequacy and investment," said Kenya Power. Average annual demand, which is different from the peak demand, has also steadily grown. Last year, it stood at 2,177MW in 2024, a steady growth from 1,926MW in 2020. This is expected to pick up pace and reach 2,815MW in 2028. Kenya's Last Cost Power Development Plan (LCPDP) expects this demand to be met through new plants with an additional 857MW of firm capacity, which are mostly geothermal power plants that are unaffected by factors such as weather, as is the case with solar. Another 665MW of capacity is expected to come from variable renewable energy sources, which comprises 324MW from solar and 341MW from wind. There is, however, doubt as to whether this new capacity, totalling 1,522MW, will materialise following the ban on the signing of new power purchase agreements (PPAs) between Kenya Power and independent power producers (IPPs). The government in 2018 put a moratorium on the signing of new PPAs, at the time trying to tame high power costs. The process of negotiating PPAs was, at the time, said to have been lopsided, with the assigned agreements ending up being skewed in favour of power producers at the expense of consumers through high power costs. The moratorium was lifted in March 2023 by the Cabinet in March 2023, but Parliament, shortly after, in April 2023, imposed another ban that is still in place. This means 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 the UK's Globeleq, which have a combined power-generating capacity of 70MW. "However, following the government moratorium on new PPAs, which stopped onboarding of new generation plants as well as the renegotiation of any expired PPAs, there is a potential supply risk that may negatively impact generation adequacy to meet the country's growing energy demand," said Kenya Power. "This is likely to increase reliance on emissive thermal energy sources." The impact of the freeze on singing on new PPAs is seen in the decline in total installed capacity in recent years. The installed capacity declined to 3,235.6MW as of December 2024 from 3,2443.6MW in December 2023. This had also been a decline from 3,321.4MW as of December 2022, as old thermal plants were retired and no major new projects entered the grid. Only two geothermal plants-being developed at Menengai by US firm Orpower 22 and UK's Globeleq, with a combined capacity of 70MW-are under construction. The current installed capacity also factors in the 200MW imported from Ethiopia, whose Ethiopian Electric Power (EEP) has a PPA with Kenya Power initially for the purchase of 400MW, with the initial offtake being 200MW for the initial years. The decline in installed capacity has been due to the decommissioning of some thermal power plants, whose PPAs expired, and the government was not keen on renewing them following public outcry on the impact that the heavy fuel power plants have on consumer prices. Concerns abound that the government also engaged power producers recklessly and ended up with more capacity than the country needed, but which consumers paid for anyway. The power plants, the critics at the time argued, should have been phased in a manner that matched demand while leaving room for a spinning reserve that can be used in cases of emergencies or planned plant outages. The arguments of the country having too much in the past years now appear to have some credence in that, despite the higher demand and decline in installed capacity, the power sector is able to meet demand. These were among the factors that led the government to place a moratorium on negotiations or the signing of new PPAs in 2018. Nearly all power plants whose PPAs had been signed by the time the moratorium became effective have been commissioned, meaning the sector's project pipeline is almost empty. Secretary for Renewable Energy, Eng Kiva, said the matter of the lifting of the moratorium is a subject of ongoing dialogue and careful engagement between the Energy Ministry and Parliament. "While the Cabinet had previously moved to lift the moratorium to restore investor confidence and secure critical new generation capacity, the one imposed by the National Assembly is still subsisting," he said. "The discussions with Parliament have progressed well, and we envisage that the moratorium will be lifted soon. In the meantime, we have also refined our planning, as well as the framework, to ensure quick onboarding of power generation projects at competitive prices and in a manner that not only continues to ensure a balance between demand and supply, but also guarantees the stability of the national grid following integration of electricity generated from variable renewable energy once the Parliament gives lifts the moratorium."

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