Kenya has dropped plans to construct a 700-megawatt (MW) natural gas power plant near Mombasa, fearing excess supply would lead to expensive electricity bills for homes and businesses.
The gas-powered power plant was part of the government’s plans to add 5,000MW to Kenya’s existing 2,294MW generation capacity in the push to diversify sources of electricity to meet rising demand to accelerate economic growth.
The Energy ministry reckons that the plant could leave Kenya with excess power, forcing consumers to pay for capacity charges on idle plants and reversing the quest to deliver cheaper electricity.
Peak demand for electricity is currently at about 1,600mw, leaving the country with nearly 700mw of excess power.
“We are not doing Dongo Kundu plant (in Mombasa). We suspended it,” said Joseph Njoroge, the Energy principal secretary in charge of electricity.
“If we put in excess power which is not consumed, power will be expensive because there is a fixed cost which must be paid to the power plant.”
Power producers are paid the capacity charge, based on their capacity to generate electricity, whether they supply to the grid or not.
The recent discovery of huge liquefied natural gas (LNG) deposits in Hadado, Wajir, has also led the ministry to reconsider the viability of the Dongo Kundu plant whose gas was to be imported.
Mr Njoroge said that even with the discovery which makes it feasible to build a gas-fired power plant in Wajir, Kenya has no plans to develop a plant for lack of demand.
In 2014, the Energy ministry started evaluating bids from investors interested in developing the 700-800mw natural gas-fired plant.
Kenya hopes to lower the cost of electricity, mainly by increasing supply from cheaper energy sources, phasing out diesel generation.
The country has injected nearly 300mw of cheaper geothermal power to the grid since August 2014, cutting electricity costs by nearly 30 per cent.
Economists have welcomed the cautious approach to increased power generation, saying it will spare the economy an unnecessary cost burden running into billions of shillings annually.
“The scale-down is necessary given the energy drive target was based on false load growth assumption and unrealistic deadlines,” said Hindpal Jabbal, a former chairman of the Energy Regulatory Commission.
Mr Jabbal has in the past faulted the government over going heavy on power production, citing lack of capacity in the economy to absorb additional energy in the near term.
His report indicates that Kenyans will pay about Sh36 billion per year as capacity charges for the 981.5mw coal power plant in Lamu whether they use the electricity or not.
Construction of the coal plant was set to start last September and end in June 2017 but has now been pushed to the last quarter of this year, slowed by resettlement of displaced people. Construction will take 42 months.