Dwindling power reserves shine light on Uhuru PPAs ban

Energy CS Opiyo Wandayi on September 10, 2024.

Photo credit: Boniface Mwangi| Nation Media Group

Kenya’s thinning electricity reserves have turned the focus on a ban on new power purchase agreements (PPAs) by former President Uhuru Kenyatta three years ago, which led to the cancellation of 92 power projects that were at early stages of development.

The country is under renewed pressure to raise its power output amid low reserves. Energy Cabinet Secretary Opiyo Wandayi last week said Kenya experienced load-shedding in August on low power reserves.

“During the last peak demand of 2239MW recorded on 21st August 2024, 6MW was load shed from the grid while the reserve margin was only 9MW against the system requirement of 310MW,” the CS said in a statement.

The shelved projects had a total generation capacity of 2,345.07MW.

At the time of the ban in 2021, six projects had started PPAs, a further 28 deals were under negotiation, and 58 projects were awaiting discussions.

A taskforce appointed by Mr Kenyatta recommended cancellation of all PPAs that had not been signed. The edict was implemented, putting on ice talks.

“All unsigned PPAs to be cancelled. This will give room for any new PPAs to be aligned to the LCPDP (least cost power development plan) as reviewed and, where necessary, revised under the new arrangements being recommended by the taskforce,” the team, which was chaired by Mr John Ngumi said.

President Kenyatta cancelled the PPAs on concerns of their high costs and long duration.

Many of the PPAs involved renewable energy projects and therefore the government was keen on cheaper tariffs owing to the rapidly falling costs of renewable energy technologies.

There was also concern over the dollar-denomination of the long-term contracts in foreign currency. The government wanted all new projects to be signed in Kenyan shillings to protect consumers from forex losses.

Some 44 of the cancelled projects were to generate power from solar with a total capacity of 1,093.1MW while 35 with a total capacity of 900.72MW targeted generation from hydro.

Five projects sought to generate electricity from wind with a total generation capacity of 202.5MW, while a further eight biogas projects totaling 148.75MW were also put on hold.

It is so far unclear if some of the cancelled projects will be revived.

Although the Cabinet reversed the ban in February last year, no new PPAs have been signed since then. This has resulted in a situation where the country’s power demand especially at peak hours is now ever closer to what can be generated by power producers.

Energy Principal Secretary Alex Wachira said on Wednesday that Kenya will add an extra 285 MW of renewable energy to its national grid by 2027, boosting the country’s fast-dwindling electricity reserves.

He said a pipeline of geothermal power projects, including the 100MW Paka in Baringo county, is expected to help the country meet its growing energy demands while promoting green energy production.

“Looking at the country’s spinning reserve and capacity, I am happy we have about 35MW coming in by 2025 from UK-based Globeleq, and for China’s Kaishan, after unlocking some challenges in the coming days, will give us some 70 MW by the same period or in the first quarter of 2026,” the official said on the sidelines of a geothermal development symposium in Nakuru.

Power rationing was widespread in Kenya in the 1990s which forced Kenya to open up the sector to private investment through IPPs.

The investment in new generation capacity by both the State-owned KenGen and IPPs helped stabilise the power supply and ended rationing.

Kenya has however been slow to add new generation capacity in recent years to match the growing demand.

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