Kenya is seeking to drop the fixed tariffs offered to investors of small renewable power plants and opt for bidding to lower the cost of wholesale electricity prices, ultimately lowering bills for homes and businesses. PHOTO | FILE
What you need to know:
The government is seeking to drop the fixed tariffs offered to investors of small renewable power plants and opt for bidding to lower the cost of wholesale electricity prices, ultimately lowering bills for homes and businesses.
Currently, investors are offered pre-determined prices of between 8.5 and 12 US cents (Sh7.5-Sh10.6) per unit of power sold to Kenya Power depending on whether the plant is solar, wind or hydro based.
The Energy ministry Wednesday started the search for a consultant to develop auction rules that will guide investors keen on renewable energy.
The government is seeking to drop the fixed tariffs offered to investors of small renewable power plants and opt for bidding to lower the cost of wholesale electricity prices, ultimately lowering bills for homes and businesses.
The auction system will be a departure from the current scheme where investors in small power plants of less than 50 megawatts are offered a pre-determined price on which they sell their electricity to Kenya Power.
The bidding process applies to larger power plants and is line with the government strategy to cut power bills by more than half by 2017.
The Energy ministry Wednesday started the search for a consultant to develop auction rules that will guide investors keen on renewable energy.
“We are moving from a system where investors had a pre-set tariff to a bidding scheme where the government will deal with an investor offering the lowest tariffs,” said a top official in the Energy ministry.
“It is in line with the government aim of reducing consumer tariffs. The target is to lower the bulk tariff to seven US cents (Sh6.22.) per unit.”
Currently, investors are offered pre-determined prices of between 8.5 and 12 US cents (Sh7.5-Sh10.6) per unit of power sold to Kenya Power depending on whether the plant is solar, wind or hydro based.
Pre-set prices
The investors covered under the pre-determined tariff scheme are those injecting to the national grid not more than 50MW from wind power, 10MW from small hydro sources and 40MW from biomass sources
The pre-set prices were introduced five years ago to spur investment in renewable power and cut reliance on expensive thermal power.
So far, 100 projects have been approved under the small power plants.
The government wants to add 5,000MW to Kenya’s power output by 2017 to unleash even faster economic growth.
Power demand is expected to rise to 15,000 MW by 2030. But this must be supplied at the least cost, prompting the pre-set bulk power tariffs.
A wobbly shilling and heavy reliance on diesel-powered generators to produce electricity, due to low water levels in the country’s hydro-electric dams, have been blamed for the rise in fuel surcharge and forex adjustment costs in power bills.
The average electricity prices to homes and businesses in September stood at Sh17.50, a rate that industrialists reckon makes Kenya-made products uncompetitive.
Rising food, power and transport prices helped push up the rate of inflation in August to its highest level since June 2012, breaching Treasury targets for the first time since last October.
