The government of Kenya seems to have made efforts in bringing electricity costs down and a growing number of Kenyans point out that there has been some modest reduction.
Industry analysts however, insists that Kenyans should be enjoying far cheaper rates than what they currently pay. Kenyan consumers have for years been ranked as paying one of the highest electricity rates in Africa that ranged from Ksh 17 to Ksh 23.
Interest groups reap billions off our current electricity bills slowing down this reduction. Energy is a critical input in the manufacturing process and Kenya has for the longest time endured high cost of power making the cost of living and doing business in Kenya non-competitive. Its capital city Nairobi was in 2014 regarded as Africa’s most expensive city by the Economist Intelligence Unit.
In the last 10 years investors have moved to invest in other countries such as South Africa and Egypt whose cost of power is 13 US cents and 4 US cents respectively, Kenya’s cost of power has for a long time been much higher than these comparative figures.
In the 2013/2014 financial year, the government paid 76% of its electricity budget (almost Kshs 57 billion) to the diesel generating IPPs, these companies produce only 30% of Kenya’s electricity. The remaining 24% of the government electricity spending pays for 70% of Kenya’s electricity. It is an arrangement a majority of industry analysts describe as outrageous and criminal.
Albert Mugo KenGen MD, has repeatedly declared in several speeches, that Geothermal is the choice for speeding generation capacity. It only costs US7c/KWh compared with diesel generation that costs 22c. Kenya’s over-reliance on hydro-power since independence has been hurt by lack of sufficient rains, which over the years have decreased hydro power output. To meet the growing demand for power in line with the projected power needs under the Vision 2030, In June 2014,the government was forced to not only use the expensive diesel generated power, but to also deploy emergency power which is four times more expensive (KES 35/kwh) than the average bulk power price at KES 10/kwh .
Thermal plants for emergency power were introduced to reduce frequent power blackouts. The costly power they generated resulted in Kenyans paying higher electricity bills over the years. Kenya will bank on geothermal, wind, natural gas and other cheaper energy sources to reduce the cost of electricity according to a statement by President Uhuru Kenyatta in 2013 that is said to send shockwaves through the energy cartels fraternity as it put billions of dollars of business at risk for diesel power generation companies.
“Kenya plans to add 5,000 megawatts to its grid by the end of 2016, with geothermal power accounting for almost a third or 1,646 megawatts while wind will load 630 megawatts. The shift will reduce the cost of doing business and make Kenya one of the low-cost countries,” said Uhuru in 2014.
As Kenyans celebrated this good news they didn’t put much thought on the fact that the beneficiaries of the existing power arrangement, would fight with unrelenting effort to crush any moves that tap alternative green power.
Kenya spends KShs. 44 billion annually on purchase of diesel for power generation alone, and an additional KShs. 13 billion on electricity generation. Geothermal has helped reduce the cost of power generation by 57 billion annually. The solution lies in total replacement of the diesel power generation to thermal generation sources.
The current reduction of the cost of power is due to the fuel cost charge (FCC) which is as a result of replacing diesel fuel with steam. The 310MW of power being generated at Olkaria is using GDC’s (Geothermal development Company) developed steam.
While nobody wants to mention this contribution to the reduction of the cost of power diesel-generated power should come down to 3% but owing to the fact that the transmission from Olkaria to the coast has been incomplete for the last three years, due to politically-instigated local community unrest, more than 70MW of geothermal power that should be wheeled to Mombasa remains unused at Olkaria.
If politics and intrigue could reduce and allow KETRACO to complete the Olkaria – Mombasa transmission line, coastal residents would get cheaper power and Kenyans in general would enjoy an even cheaper tariff since diesel will only contribute 3% to the national grid.
Reducing diesel power from 38% to 3% is giving IPPs sleepless nights, since it cuts their revenue drastically. It is therefore Kenyans who suffer from this state of affairs.
Geothermal development pace was deliberately slowed down by using development models that emphasized many years of developing steam without putting power plants to convert it into power. For example, the recently commissioned 280MW geothermal plant took 16 years.
Drilling started in 1998 and until 2014/15 for the 280MW Olkaria power plant to be completed and commissioned. The 105MW Olkaria II Power plant took 23 years while the 45MW Olkaria I power plant took 28 years and even the 110MW Olkaria III IPP power plant took 27 years from commencement of drilling to the time 110MW of power got connected to the national grid. At the 105MW GDC’s Menengai project, connection to the grid would be in 5 years since drilling started in 2011.
Independent Power Producers (IPPs) have not done better either.
The allegations of illegal use of funds at GDC keep financiers away from funding of Geothermal Development projects. There is doubt whether Jubilee can implement its energy manifesto fast enough as it will aggravate the Lords of diesel power generation who are losing money for generating less electricity.
According to last year’s data, diesel generation has been coming down while being replaced by Geothermal. But overall cost of power needs to reduce by the 50% benchmark that President Kenyatta pledged and Kenyans are demanding. Geothermal activity in Kenya is abundant, making it good to develop more geothermal power here.