Oversupply may spike your power bill by 70pc

Consumer keying in digits after purchasing electricity units. [Photo: Courtesy]

Your power bill could rise further by as much as 70 per cent as the Government moves to raise additional revenue to sustain idle plants.

The Energy Regulatory Commission (ERC) has expressed concerns about the number of planned power projects, saying the current pace in growing electricity generation by far outpaces demand.

This is even as power-intensive industries fail to set up in the country at the expected pace.

The current state of affairs, the regulator cautions, could have the impact of further pushing up power costs as consumers are made to pay for idle power plants, burdening them further as they are already reeling from the high cost of energy.

ERC now wants different power producers to slow down on the construction of plants to ensure that supply matches demand.

A report by the regulator released yesterday shows that over the next six years, power producers could have a generating capacity of 43 per cent and prices could go up by as much as 70 per cent.  

Among the power plants that the regulator wants to be slowed down are the controversial Lamu coal plant, the much-hyped nuclear power plant, and a host of geothermal plants planned by State-owned KenGen and other independent power producers.

ERC recommends in the report that Amu Power scale down its Lamu coal plant.

The firm plans to build a plant with a generation capacity of 1,050 megawatts, split into three units of 350MW each, but ERC wants this to come down to 450MW, with each unit consisting of 150MW.

According to Amu Power plans, the three units are expected to be completed by 2024 but ERC has suggested that the first of its unit comes online in 2034.

The country had planned to put up the first of its nuclear power plants by 2027 but in the new plan, the regulator suggests pushing this by a decade to 2037.

“Implementation of the Lamu coal should be phased and the plant to constitute smaller units of 150MW each to minimise requirement of primary reserve,” said ERC in the report.

Optimise costs

The project has faced challenges, including protests by conservationists on the impact it would have on Lamu.

The regulator also wants Lamu coal and other power producers to renegotiate contracts they have with Kenya Power.

This is against fears that underutilisation would translate to high charges for power users due to levies for maintenance of plants that are ready but cannot sell power to Kenya Power.

This would mainly be due to limited capacity to absorb additional power into the grid due to lack of transmission infrastructure.

“Renegotiate PPAs (power purchase agreements) for large power plants, to introduce operation flexibility, reduce reserve requirements and optimise energy costs… (and) delay development of new geothermal plants after implementation of the committed ones to allow demand to grow and match supply,” said ERC.

According to ERC, 95 power projects are set to be completed by 2024 and will increase generation by over 3,900MW. Of these, 17 are by the country’s largest power producer KenGen, which will produce 1,250MW while the Geothermal Development Company (GDC) will derisk seven projects and invite private sector players to develop plants with a capacity of 394MW.

The balance of about 70 plants with a capacity of 1,590.05MW will be developed by independent power producers.

Kenya currently has an installed capacity of 2,340MW against a peak demand of about 1,700MW.

“An addition of 300MW Lake Turkana Wind Power at the end of 2018, Ethiopia 400MW in mid-2019, 158MW Olkaria V geothermal among other committed projects would raise the existing capacity to above 3,900 MW by 2020, resulting in an average of 583MW excess capacity in the period 2019-2023 should demand grow moderately,” said ERC.

“Capacity factors for geothermal, hydro and coal plants average 71.7 per cent, 44.9 per cent and 0.9 per cent over the period after 2019, implying that the power plants, and particularly Lamu coal, will be grossly underutilised should demand grow moderately.