Electricity cost in largest drop since August 2018

The recent heavy rainfall has raised water levels in Kenya’s hydro-electric dams, enough to cut electricity prices by the biggest margin in 16 months.

The increased water levels in the dams have reduced the use of expensive thermal power to record lows, cutting the fuel surcharge in December and part of January electricity bills to Sh2.65 per kilowatt hour, from Sh3 last month and Sh3.75 in May.

The Sh0.35 a unit drop in fuel surcharge — which is determined by the share of thermal power in the national electricity grids — is the largest cut since August 2018.

Kenya experienced a heavier than usual rainy season from November and the Kenya Meteorological Department has also forecast that the wet weather could persist until next week in some parts of the country.

At Sh2.65, homes and businesses will in December collectively make monthly savings above Sh1 billion in fuel cost charges compared to the month of May based on the average monthly consumption.

Energy Principal Secretary Joseph Njoroge said the relief would likely be sustained due to adequate water in the dams and the short period between now and the long rains season set to start in March.

“We have not had the need to run the hydro and we are likely to sustain FCC (fuel cost charge) at that level considering that we have filled the dams and the long rain season is not so far off. We will only need to utilise the dams more prudently to sustain the fuel levy at the level it is or lower,” Mr Njoroge told the Business Daily.

The decline in fuel surcharge comes at a time when the share of expensive thermal power in the national grid reduced to 6.3 percent in November, the lowest in nearly a decade as the government turns to more green energy sources such as geothermal and wind.

This is in contrast with 2017 when thermal had a share of 26.46 percent in the national grid. It fell to 19.1 percent in April. It was at a high of 34.49 percent in 2014 owing to erratic rains that reduced hydro power source.

Consuming more electricity from green sources is supposed to result in lower bills given that wind power is priced at Sh8 per Kwh (kilowatt hours) compared to thermal energy, which costs about Sh20 per Kwh.

The falling electricity prices are in line with Kenya’s quest to make energy costs competitive compared with other African nations such as Ethiopia, South Africa and Egypt in the drive for new investments.

Most of Kenya’s electricity is generated by renewable sources, with geothermal ranked the biggest source of power to the grid followed by hydroelectricity and wind.

The share of renewable energy to the grid increased to 93 percent, setting the stage for cheaper electricity.

Kenya ranks 40th worldwide in EY’s renewable energy country attractiveness index, which was released in November.

The 310MW Turkana Wind Farm, which was switched on in October last year, accounted for 13.9 percent of Kenya’s generation mix, up from 9.8 percent in June, said the electricity regulator.

Share of hydro power has increased to 30.4 percent from 20.2 percent in April while geothermal now accounts for 46.9 percent from 41.9 percent in April.

Kenya has a target to remove all thermal power plants from the grid over the next 12 years.

“Thermal energy is expected to decrease to 0% with the planned decommissioning of petro-thermal power plants expected from year 2022 as their contracted terms come to an end,” said Pavel Oimeke, the director-general of Electricity Petroleum Regulatory Authority (EPRA).