Geothermal extends market share lead over hydro power

Geothermal power plants extended their lead over hydro power stations as sources of electricity last month, reflecting in lower bills as the country cut reliance on costly thermal power.

Data from the Energy Regulatory Commission (ERC) indicates that geothermal power accounted for 42.7 per cent of the 794.1 million units of electricity bought by homes and businesses in October while hydro power accounted for 35.1 per cent.

Last month, the share of electricity from geothermal sources surpassed hydro for the first time in Kenya’s history. In August, the share of geothermal power stood at 31.66 per cent while hydroelectricity was at 37.7 per cent. Thermal power was at 28.8 per cent. The decline follows the injection of 210 megawatts of geothermal power into the national grid.

This has seen power bills for consumers using less than 50 kilowatt hour (kWh) drop by about 27.4 per cent since July and about 18.7 per cent for households that consume 200 units of electricity monthly. By the end of this year, KenGen will have added 280 MW in geothermal capacity, helping cut power bills further.

READ: Electricity users save Sh3bn on falling fuel levy

In Kenya, an extra fuel charge is added to normal power rates depending on the amount of diesel generation used and global fuel costs.

The share of thermal power had remained above 45 per cent for the better part of this year due to low water levels in the hydro-electric dams, which resulted in the rise in the fuel surcharge and forex adjustment costs on power bills. The fuel surcharge stood at Sh3.47 per kWh for bills to be settled this month from Sh4.79 per kWh the previous month and Sh7.22 per kWh in August.

Savings on power bills will ease pressure on inflation, which stood at 6.43 per cent last month, down from 6.6 per cent in September and 8.36 per cent in August.

The falling electricity prices offers relief to businesses that say expensive power makes Kenya’s industry uncompetitive in a regional trading block where product pricing influences market share growth.

“As we go to December, we will charge our target of Sh1.78. With more geothermal power, we want to completely remove the fuel charge cost from our bills,” said Davis Chirchir, the Energy and Petroleum minister.

Kenya has a target to halve electricity bills next year from present levels of between Sh15-Sh16 per KWh. Diesel generation costs about Sh30 per kWh while the cost of geothermal power ranges between Sh7.12 and Sh8.01 per KWh.