New IPPs hit with 12pc tariff cut

Energy and Petroleum Regulatory Authority director-general Daniel Kiptoo.

Photo credit: File | Billy Ogada | Nation Media Group

The energy regulator has slashed the maximum prices per unit of power at which new power plants can sell electricity to Kenya Power, in the latest push to lower the cost of electricity.

Geothermal, which holds the biggest share in the national grid— took the biggest hit of the three leading sources, with the maximum price per kilowatt hour (kWh) for new plants slashed by 12 percent to $5.69 cents followed by a two percent cut for both solar and wind plants.

The new tariffs published by the Energy and Petroleum Regulatory (Epra) target new plants seeking to ink electricity sale deals with Kenya Power and are the latest move to lower consumer prices.

High prices at which Independent Power Producers (IPPs) power plants sell electricity to Kenya Power have derailed efforts to ease the pain of electricity bills on homes and businesses.

“These are the benchmarks to guide utilities. They are to guide KPLC in negotiating new contracts and guide us as we move to energy auctions. The idea is to push for price discovery in the power sector and get value for money as the cost of technologies reduce globally,” said a government official.

Epra capped the tariffs for new solar and wind plants seeking to sell electricity to Kenya Power at $5.65 cents and $5.88 cents respectively, down from $5.75 cents and $5.97 cents.

The cap on the tariff for biogas has been slashed 23 percent to $6.49 cents while that for biomass cut 18 percent to $6.9 cents.

But Epra increased the cap on the cost per unit of hydro from plants above 20 Megawatts to $2.9 cent.

An analysis of price per unit of electricity shows that between July and February this year, a unit of thermal power was costliest at Sh28.09 followed by that for solar at Sh17 and Sh15.85 for that of biogas.

The cost of electricity in Kenya is largely pegged on the prices at which Kenya Power buys the critical commodity from IPPs.

The tariffs for wind and solar are further subjected to an auction in a bid to ensure that Kenya Power gets the most competitive price, unlike those for geothermal which do not go through the auctions.

“These (gazetted tariffs) are the targeted limits, but competitive procurement can lead to higher tariffs at which Kenya Power buys the electricity.”

Geothermal is the biggest source of electricity in the national grid with a share of 37.45 percent as at the end of April this year followed by hydro at 32.16 percent. Wind and solar accounted for a share of 7.36 percent and 3.29 percent respectively.

However, the new caps on the tariffs are likely to trigger opposition from IPPs who have in the past successfully opposed a government push to lower wholesale power tariffs.

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