Kenya Power pays Sh14.6bn to diesel electricity companies

Kenya Power’s payments to privately-owned thermal plants surged by more than a third in the year to June 2016 driven by the increased use of expensive diesel-generated electricity.

The State-owned electricity distributor paid out a total of Sh14.6 billion in basic power purchase costs to the thermal power generators, including Aggreko and six other independent power producers (IPPs).

Kenya Power managing director Ben Chumo attributed the 35 per cent growth in payments to the IPPs to temporary shutdown of geothermal and hydro plants to undergo routine maintenance — hence the need to run the diesel generators.

An order from the Energy Regulatory Commission also required diesel power generators to intermittently supply electricity to the national grid to ensure their generators remain ‘operable’ and that they honour fuel supply contracts.

“There were cases of repairs of plants. The regulator also allowed thermal plants to dispatch to the grid briefly.” Dr Chumo said in an interview.

“This growth was a one-off thing and it’s not going to be recurrent. But remember we have to pay thermal generators for capacity even when not producing,” he said in an interview.

The heavy spending on thermal power, which costs ¢20 (Sh20) per kilowatt hour, negates President Uhuru Kenyatta’s administration’s promises to turn to cheaper and cleaner sources such as geothermal (¢8.5 per kWh), solar (¢8.5 per unit) and biomass (¢10 per unit).

President Kenyatta in July ordered a review of all diesel IPP contracts signed with Kenya Power saying his regime was banking on renewable sources to halve the cost of electricity to Sh10.45 (¢10.45) per kilowatt hour.

“Those arrangements that are not cost-effective to the Kenyan people must be terminated, in a legal way, in the shortest time possible,” said Mr Kenyatta. The growth in earnings for private thermal power producers comes despite a drop in the units generated by diesel generators and sold to the grid which fell 27.6 per cent to 1,297 gigawatt-hours from 1,792 GWh in the period to June 2015.

READ: Kenyatta orders audit of thermal plants amid high cost of power

The sustained spending on expensive thermal electricity comes as a boon to thermal-based IPPs including temporary power firm Aggreko, Tsavo Power, Iberafrica Power, Rabai Power, Thika Power, Gulf Power, and Triumph Power.

Renewable energy IPPs in Kenya are OrPower 4 with an installed capacity of 139 MW of steam power, Mumias’ 26 MW from baggase, Biojule biogas (2 MW), Imenti Tea Factory owns a small hydro plant (0.3 MW) and Gikira Hydro has a 0.514 MW plant in Nyeri county.

These green energy IPPs saw their earnings grow 23 per cent to Sh10.003 billion in the period to June 2016, which is slower than the 35 per cent growth marked by their peers in thermal power.

ERC director-general Joe Ng’ang’a in April allowed thermal generators to feed the grid in order to ascertain their health and ensure they are ready to dispatch on call.

“An exception will be allowed where the plants are run to maintain them in an operable mode as recommended by the manufacturer,” the ERC boss said in a gazette notice dated April 19, 2016.

Fuel charge, linked to the amount of power from diesel-run generators and supplied to the national grid, rose to Sh2.34 per kilowatt-hour in November having remained flat at Sh2.31 per kWh since January.

Glasgow-based temporary power firm Aggreko – whose 30 MW thermal plant in Muhoroni which was switched off on July 13 this year - raked in Sh542.5 million after supplying 50 GWh to Kenya Power in the period under review.