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KenGen outlines new 40-month plan to lower electricity costs by 47pc

By Graham Kajilwa | April 12th 2016 at 00:00:00 GMT +0300

KenGen’s Cyrus Karingithi points at a drill that makes wells for geothermal power at Ol-karia. PHOTO DAVID GICHURU

NAIROBI: Kenya could become a fully industrialised country by 2020 if efforts to lower power costs go according to plan.

Lower prices are expected to lead to the growth of key sectors critical to the country’s economic goals.

The projects and sectors set to fuel this growth include the standard gauge railway that requires 1,171 megawatts (MW) of power, ICT that needs 625MW, Lamu Port-South Sudan-Ethiopia Transport (Lapsset) Corridor at 350MW, and iron and steel at 200MW.

According to the Kenya Electricity Generating Company (KenGen), planned mega projects are expected to take the total required electricity capacity to 4,196MW. The current peak demand is 2,347MW.

GAME CHANGER

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During a presentation on a new 40-month strategy two weeks ago, KenGen said it plans to reduce the average cost of power from about Sh20 per kilowatt-hour to Sh10.54, a drop of 47.3 per cent.

For industries, it should go down to Sh9 from the current Sh14.30, a drop of 37.1 per cent.

By 2020, the electricity generator expects the country’s capacity to be at 5,538MW, with 61 per cent of the power generated being renewable.

KenGen’s target is 33,000MW by 2030, with reduced dependence on hydro-generated power from the 2016-17 target of 49.9 per cent to 28 per cent.

Currently 58 per cent of KenGen’s power is hydro-generated, which is both expensive and unstable in dry weather conditions.

The expected groundbreaking of the 140MW Olkaria V geothermal power plant is expected to be a key game changer in power production and supply, as it will increase Kenya’s steam power to 719MW on completion.

KenGen’s manager in charge of infrastructure and resource development for Olkaria, Cyrus Karingithi, added that the country’s peak demand is growing at 8 per cent per year.

“This is probably faster than our capacity to produce affordable energy. We currently have suppressed demand of 343MW, and a reserved margin of 30 per cent of 536MW,” he said.

While 343MW may sound little, Mr Karingithi said 1MW can power 3,000 households.

“So 343MW has the potential to connect up to 1.5 million people, and you cannot imagine the economic impact, as these persons will do more, however small-scale, than just be employed.”

Suppressed demand, however, is inevitable considering the risk associated with generating power using expensive means when the producer is not sure of the demand.

“The paradox of power supply and economy in Kenya is like that of a chicken and an egg. Which one comes first?” asked Evanson Njenga, a consultant at the Japan International Cooperation Agency (Jica). Jica is the financier of the Sh40 billion Olkaria V project.

CREATE DEMAND

Mr Njenga said it is up to power companies create the demand “by making sure the power reaches the people who will see its benefits, and in turn, many will want the same. This is a growing economy; demand is always there.”

Karingithi added that investment in power is lucrative.

“As long as our machines are running effectively, we get paid. Kenya Power might just advise us to reduce the megawatts produced during certain seasons, such as Easter when fewer industries are operating,” he said.

Compared to hydro and diesel, steam power once harvested can last up to 25 years. Though it costs a lot to set up (about Sh700 million to drill a single steam well), it requires less to maintain, and producers earn carbon credits because of emitting less CO2.

Kenya has the potential to produce 10,000MW of geothermal power from 23 sites along the Rift Valley. The country is already the seventh-largest producer of geothermal power, with Olkaria being the biggest single-turbine geothermal plant in the world.

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