Corporate News
Power prices set to fall as State opts for geothermal
Figures from the Energy ministry indicate that geothermal power can be delivered to consumers at less than Sh4.20 per kilowatt hour, which is much lower than the Sh15 per kilowatt hour that power consumers are currently paying. Photo/FILE
Posted Monday, March 22 2010 at 00:00
The short-term move is aimed at weaning the country from its increased dependence on thermal power as it prepares to build cheaper power plants including geothermal, wind and hydro power over the next decade.
A drop in hydro-electric power’s contribution to the national grid has in the past year seen electricity bills rise about 60 per cent, driven by fuel cost charges — a varying item on power bills that is linked to the amount of power on the national grid generated from thermal sources.
The fuel cost charges have risen from Sh3.92 in March 2009 to Sh7.49 this month, sparking uproar in Parliament this week on claims that power firms are profiting from the crisis.
The expected drop in power price will be a relief to the 1.2 million consumers, most of whom have suffered significant losses in purchasing power due to inflation and stagnant incomes.
It also offers relief to industrialists who have been complaining about expensive electricity, arguing that it is blunting their competitive edge in the regional market where low priced goods have emerged as the key driver of market share growth.
In mid August, KenGen, on behalf of the Government, contracted Aggreko to provide an additional 140 megawatts of emergency power to cushion the country against the effects of the power shortfall, pushing Aggreko’s contribution to 290 megawatts or 20 per cent of the country’s total power supply in the six months to December.
The government is planning to terminate 60 per cent of the Aggreko’s power next month following improved rainfall after reducing it by 40 megawatts in January — leaving the British power generator with 190 megawatts.
Business opportunity
The plans to cut back on thermal power is set to upset private power producers who have steeped up their activity in the local supply market in recent months as Kenya emerged as a ripe business opportunity.
The private operators led by Aggreko, Iberafrica and OrPower 4 have raced to fill the power generation gap left by KenGen, whose market share has been whittled by 21 per cent to 48 per cent as the State-owned firm is heavy on hydro power.
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