Wind and solar now outpower thermal in Kenya energy mix

Kenya has in the last two years substantially increased electricity generation from clean sources.

This has, in turn, seen the country record a decline in the amount of power produced using the costly and dirty thermal generators for the first time in years.

As opposed to geothermal, wind and solar-powered plants, thermal plants use heavy fuel oil, which is both expensive for power consumers and harmful to human health and the environment.

One of the highlights of the last year, according to latest data from the Kenya National Bureau of Statistics (KNBS), was the commissioning of KenGen’s Olkaria V power plant, which pushed up the geothermal power production capacity by 25 per cent.

The Lake Turkana Wind Power Plant and the Garissa Solar Plant, both commissioned in late 2018, marked a full year of operation, showcasing the impact that they can have on the power generation mix.

Another key highlight was the reduction in the installed capacity of thermal power plants, which came down to about 750 megawatts (MW) from 807MW in 2018.

Notable too is the fact that Kenyans are consuming more power generated from the wind plant in Marsabit County than electricity from the different thermal plants.

According to the KNBS data, wind power surpassed thermal plants in terms of power generated and consumed by Kenyans.

The energy source accounts for 15 per cent of the power consumed in the country compared to thermal at 12 per cent. Wind is third to geothermal and hydropower.

“Total installed capacity increased to 2,818.9MW in 2019 from 2,711.7MW in 2018. Geothermal capacity increased significantly by 25 per cent to 828.4MW in 2019," said KNBS in the recently released Economic Survey 2020.

"This was mainly as a result of KenGen adding the first unit of its new Olkaria V geothermal power plant at Olkaria to the grid in the review period. In contrast, thermal capacity declined by 7.2 per cent to 749.3 MW in 2019.”

According to the statistics body, Kenyans bought 11.62 billion units of power (kilowatt hours – kWh) last year. Geothermal contributed the largest share at 45 per cent, hydro (27 per cent) and wind (13 per cent).

“Wind was the third largest source of electricity generation in 2019,” said KNBS.

There are further plans to increase the power generation capacity by an additional 1,729MW by 2025, which the government said would come from renewable energy sources mainly from geothermal, hydro and wind resources.

State-owned power producer KenGen said it is looking to increase electricity generation capacity through Public Private Partnerships (PPPs). It is already in the process of selecting a firm to partner with in putting up a 140MW plant at Olkaria.

“In the past, KenGen has financed its power projects through syndicated debt funding sourced primarily from multilateral and bilateral institutions, locally raised debt (infrastructure bond), own equity and state-to-state concessionary funding,” said KenGen in a statement last week.

“Due to the heavy capital investment required to develop power projects, KenGen found it necessary to have private investors take active part in the development of its power projects to achieve a fast capacity expansion program. The PPP project will ensure a quick rate of conversion of steam into power while reducing risks and debt burden for KenGen. It will also enable technology transfer and capacity building.”

While some parts of the country that are yet to be connected to the national electricity grid will continue using thermal power plants, the recent growth in alternative power sources is an indicator that thermal power can be kept to a minimum.

But cleaning up the country's power generation mix faces challenges, with the recent proposals that could make it more expensive through additional tax measures slowing down the process.

The Finance Bill 2020 has clauses introducing Value Added Tax (VAT) on previously VAT-exempt wind and solar energy equipment.

“This is likely to increase the cost of producing power in the country and also deter future investments in these sectors,” noted KPMG in an analysis on the Finance Bill.

The additional tax measures could slow down investments in the two renewable energy sub-sectors, with players noting that it could wipe out the gains made and give room for dirty fuels to thrive again in the electricity generation sector.

Players noted that there is a need for policymakers to work with stakeholders in formulating laws.

“We would encourage policymakers to engage more with industry players in policy formulation. In order for the green economy implementation to be successful, it must be mainstreamed in policy planning and budgeting processes at both the national and county level,” said Jibril Omar, a director at Ofgen, a local solar energy solutions provider.

This, he said, entails embedding green economy policies and initiatives in County Integrated Development Plans (CIDPs) as well as sector plans linked to the annual budget process.”

If policy and industry are well aligned, the country benefits from the changing fortunes for renewables, which are increasingly getting the attention of investors.

Major financiers such as the Africa Development Bank (AfDB) look at renewables more positively while shunning fossil fuels.

This is in addition to the huge potential to grow both solar and wind as costs of equipment decline.

Martin Baart, chief executive Ecoligo, a solar power firm, noted that standalone and scalable solar power plants make more sense for businesses today.

“Barriers that previously prevented the uptake of solar energy – like understanding of the technology and high cost – are being removed as customer confidence grows and high-quality projects increase the overall reputation of solar,” he said.

“Businesses are increasingly interested in being sustainable, driven both by internal goals and requests from their customers. Grid energy tariffs continue to fluctuate, which makes it difficult for Kenyan businesses to plan ahead. The pricing is much more predictable with solar, which businesses really value. As a consequence, we will see a huge increase in commercial and industrial clients using solar power over the next few years.”

Many companies that have installed small solar plants to meet their needs but end up producing excess power during the day are mostly unable to feed the excess into the grid owing to lack of an enabling legal framework.

A feed-in tariff would enable such companies to pump extra power to the grid and even get paid for the same.

“There’s currently no feed-in tariff in Kenya, which means that extra energy produced is not utilised. A feed-in tariff, where solar energy producers can sell excess energy to the grid at a fixed price, would make a huge difference to the uptake of solar energy, as it would add a further financial incentive for people to get solar systems,” said Mr Baart.

“Similar effect would be generated by a net-metering scheme, something that has been discussed by the Kenyan regulators and officials for many years now. The increased supply of solar power that would result from this would also have a positive impact on Kenya’s energy landscape: solar energy is already more competitive than sources like oil and gas, and increased capacity at a lower price would decrease overall energy prices and reduce the need for fossil power, relying heavily on import of fossil fuels.”