High bills persist as reliance on costly power plants drops
By Macharia Kamau | March 1st 2021
Thermal power plants are losing their shine in the country’s energy sector mix due to various factors, including investments in geothermal sources and favourable weather patterns.
The investment in cheaper sources of energy has started to bear fruit, and the rains have led to an increase in power generation from hydropower plants.
While the power generated from costly and environmentally destructive plants has drastically reduced, coupled with the reduction in fuel costs, Kenyans will continue to bear the huge costs associated with these plants for years as some contracts will take long to lapse.
The reduction in the amount of power that thermal plants feed into the electricity grid is seen in the recently published Kenya Power financials for the period to June 2020.
The power utility firm said the money it spent on buying electricity from thermal power producers reduced by about 40 per cent over the year.
“Fuel cost decreased by 39.5 per cent from Sh18.29 billion from the previous year to Sh11.06 billion due to lower utilisation of thermal plants,” said Kenya Power.
“Units generated from thermal plants decreased by 416 gigawatt-hours (GWh) from 1,298 GWh the previous year to 882 GWh, a 32 per cent decrease.”
The power utility firm noted that these costs had dropped further in the half-year to December 2020 to Sh4.62 billion, compared to Sh7.15 billion over a similar half in 2019.
Kenya Electricity Generating Company (KenGen) in its report for the half-year to December 2020 noted that thermal power plants had reduced their share in its ecosystem to only two per cent.
This has over time come down from upwards of 10 per cent.
“Increased hydro production displaced thermal generation whose contribution declined from six per cent during the period to two per cent for the period ended December 31, 2020,” said the power producer.
The reduced reliance on thermal plants would have meant power prices would go down.
Kenya National Bureau of Statistics (KNBS) data shows that a family consuming 200 units (kWh) of power every month paid Sh4,800 in January this year, seven per cent more than the Sh4,480 they paid in January 2020.
Energy Cabinet Secretary Charles Keter said the State has reduced the amount of thermal power it feeds into the national electricity grid.
While it may seem the cost of power has always been on the rise, Keter said major milestones have been achieved, including the retiring of emergency power plants as well as reducing power from thermal plants to manageable levels.
This, he said, has slowed the pace at which retail power prices have increased. He explained that the increase in power prices in recent years has been due to many factors, including inflation.
“We have managed to shed-off expensive emergency thermal power from our grid and diversified the generation mix through a portfolio of projects developed by public and private entities,” he said.
“We have generally stabilised prices and reduced the cost of power in real terms over the last decade. To achieve further gains, we are enhancing our transmission network to address constraints and enable more optimal utilisation of geothermal and other renewable energy sources.”
The CS said the State has supported national electrification and increased usage of clean energy - achieving lower overall electricity unit costs.
He added that it would take time before Kenyans benefit from reduced thermal capacity on the pricing of power, including the need by investors in renewable energy power plants to recoup their money.
This is due to high costs in the early days after operationalisation of a power plant, which reduces as plants age.
“We have managed to bring down thermal generation to a level that does not result in wide fluctuations in power prices due to variations in global oil prices,” Keter said.
“Other than the generation mix, overall power prices are determined by a blend of factors. Investments in alternatives to thermal power also need to be amortised, and new capacity added to the grid comes at a cost. We have in the recent past integrated new renewable energy sources to the grid.”
He said the power that comes on board from the renewable plants is priced lower than the thermal plants they are displacing.
But while thermal plants might not be supplying as much power to the grid as they have in the past, there is still a cost that is passed on to consumers in the form of capacity charges.
According to the Ministry of Energy, Power Purchase Agreements (PPAs) for the three thermal power plants are expected to lapse in the next two years.
Another six PPAs are set to lapse between 2030 and 2035, four of them in Nairobi and another two in Mombasa.
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