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AfDB Calls on Kenya to Sign New Power Plants Deals

The African Development Bank (AfDB) has backed Energy Cabinet Secretary Davis Chirchir’s calls on parliament to lift a moratorium that stopped Kenya Power from signing new deals with power producers.

The AfDB said Kenya Power urgently needs to onboard new independent power producers (IPPs) and plug the gap created by falling hydro-power generation, besides easing the impact of irregular production from wind and solar.

The parliament barred Kenya Power from signing new deals with IPPs from April this year to pave the way for investigations into the existing agreements that have been blamed for expensive electricity.

Hydroelectricity generation dipped to its lowest in at least a decade in the year ended June, with Kenya Power buying 2,569 gigawatt hours (GWh), being the first time that the units dipped below the 3,000 GWh mark.

Solar and wind, whose generation of power has been growing over the years are intermittent sources—fluctuate depending on weather patterns—and cannot be used to help meet a peak in electricity demand.

“There is an urgent need to bring online new plants to plug the decreasing reserve margins to address the drought-prone hydropower generation shortfalls while avoiding oversupply and mitigating the variable renewable energy solar and wind intermittences,” said AfDB in the report.

But the AfDB’s push comes amid concerns that there is enough electricity generated in Kenya and neighbouring countries and that the biggest challenge remains an ageing transmission network that has been blamed for growing unreliability, most recently the overload that caused a nationwide blackout last Sunday.

Allowing Kenya Power to sign new deals with IPPs also opens consumers to the possibility of increased power bills in the form of capacity charges—the amount that is payable to an IPP whether or not it generates electricity.

Power purchase deals between Kenya Power and IPPs have come under scrutiny in recent years given the high prices offered compared to those of KenGen.

A presidential task force had in 2021 recommended the freezing of new deals between Kenya Power and IPPs, saying existing deals needed to be renegotiated in a bid to allow Kenya Power lower bills on consumers.

An analysis shows that KenGen supplies the cheapest electricity to Kenya, at Sh4.71 per kilowatt-hour with IPPs having priced their power more than five times that of KenGen.

Mr Chirchir has repeatedly urged Parliament to lift the freeze and allow the entry of more IPPs as the country grapples with falling production from the dams.

The declining production from the country’s dams threatens the stability of the power supply, especially at peak demand.

Kenya has since last year turned to Ethiopia for electricity imports in a bid to meet the growing demand, ease the impact of the declining hydro generation and avoid increased reliance on the dirty and expensive thermal plants.

Kenya Power started importing 200MW of hydropower from Ethiopia in November last year. The electricity is priced at $6.5 cents per kilowatt.

Wind is the third biggest source of electricity in the national grid at 17 percent, behind hydro at 19 percent and geothermal (45 percent).

Electricity imports jumped 90 percent to 644 GWh in the year that ended June from 338 GWh a year earlier, mainly driven by supplies from Ethiopia.

Source: The East African