Business Daily (Nairobi)
31 March 2008
Posted to the web 31 March 2008
Zeddy Sambu
Public and independent power providers are gearing their energies towards thermal sources to avert rationing in the wake of depleted power reserve margins.
A three-year consistent boom in the economy has seen Kenya deplete its power reserves to just three per cent and emergency power is / immediately needed to help avert possible rationing.
"The peak demand is projected to grow to 1, 153MW by June against an effective generation capacity of 1,185MW, leaving a reserve capacity margin of three per cent," Kenya Power and Lighting Company reported at its Annual General Meeting.
Planned projects by the public power generator- KenGen are yet to be completed and commissioned, While official efforts are geared to diversify out of over reliance on hydrological sources of power, only thermal plants that have been procured are likely to be commissioned before year end.
The future is about diversification into other sources of power. We must also speed up interconnection with neighbouring countries to access surplus power from there, according to the Energy Regulatory Commission (ERC), the power industry regulator.
"All the projects slated for completion in 2007 are now being fast tracked. We are mobilising all resources into thermal sources of power," said ERC director general, John Mwirichia. Already, KenGen is intensifying its investment in geothermal, according to the managing director, Mr Eddy Njoroge.
Hydro power generation contributes about 60 per cent of the electricity supply in Kenya. Geothermal potential areas -located in the Rift Valley - are estimated at 2 000 MW. The exploited potential so far, stands at 128MW.
Public power generator KenGen with 80 per cent of the local generation market share is implementing a number of hydro projects that are yet to be exploited in the country ranging from re development and efficiency improvements to green field projects.
It costs $5 million to dig one well for geothermal power over a four year period. Upto 18 such wells are required to dwarf anticipated shortfall and will cost about $90 million (about Sh6.1 billion) .
KenGen's thermal capacity stands at 147MW of thermal power generation in the interconnected system. Most of these developments are along the Indian Ocean coastline because it runs on imported fuel oil.
The Government also intends to facilitate the establishment of a Liquefied Natural Gas (LNG) terminal in Mombasa so that power generation can switch to LNG, which is cheaper.
Since August 2007, Kenya has been in negotiations with Ethiopia for a power supply agreement to forestall a looming power crisis.
Ethiopia has a total power demand of about 400 MW against a production capacity of over 1,875 MW .
KPLC expects to connect Ethiopia through a 400Kv power line. Already, a joint memorandum of understanding, which also involves KenGen, has already been signed with the Ethiopian Electric Power Corporation (EEPPCO).
According to the MoU, Ethiopia is expected to build the transmission line to the border with Kenya from where KPLC shall tap the power into the national grid. Power exports are set to begin in 2010 .
While the African Development Bank has provided $1 million (about Sh68 million) for the project's feasibility study, EEPCO needs some Sh51 billion to help exports of hydroelectric power to Kenya. Djibouti and Sudan will also benefit from the deal.
The first phase of the project - designing- is under way and is hoped to be fully operational in five years'. It will take another three years to complete interconnection. Kenya is also hoping to interconnect its power grid to Zambia and Tanzania as part of the New Partnership for Africa's Development (Nepad) funded initiative.
Relevant Links
East Africa
Economy, Business and Finance
Energy
Environment
Kenya
Sustainable Development
Three years ago, Kenya's maximum daily peak power demand was 987MW compared to 916MW previously. Statistics by the transmission power monopoly show that this growth represented a 7.7 per cent growth against an effective generation capacity of 1,041MW and a reserve margin of 5.5 per cent. In the past six months, 40MW of the 100MW emergency power contracted from Aggrekko Ltd was transferred to Eldoret sub station to support the west Kenya supply system.
For along time, Uganda has been feeding Kenya with up to 80 MW during off-peak hours, way above its contracted capacity of 30 MW. The 30 MW were being supplied at the rate of US cents 9 per kilowatt hour under an agreement signed in 1997 and due for renegotiation every two years. But recent upheaval in the Uganda's energy sector has led to power exports by KenGen.
ERC says independent power is expensive and the goings on may mean that consumers should brace for expensive power in coming months.
Vibrancy in most world economies has also led to high demand for diesel engines. Power demand has risen consistently owing to improved economic growth within the last three years.
However, only 15 per cent of Kenyans have access to electricity but rural areas are set for a faster connection to the national grid under a Sh5 billion power distribution programme. REP targets one million new customers in the next five years, and will see a doubling in the number of consumers served by electricity distributor KPLC.
Under REP, some Sh2 billion is earmarked to extend electricity reach in the rural areas meaning at least 200,000 customers in rural areas are likely to benefit from the new connections that are expected to increase electricity sales by 10 per cent annually.
Current system: both technical and non technical losses stand at 17.9 per cent, an improvement when compared to 19.6 per cent in 2006. Tied to the connections is a network upgrade that aims to bring down technical and commercial losses-power lost while in transmission to 15.6 per cent. Percentage point reduction in losses translates to Sh200 million in savings for KPLC.
Weaknesses on the KPLC system are being addressed through $153 million (Sh10.4 billion) Energy Sector Recovery Project (ESRP) being funded by the Company and the World Bank.
"New customer connections were above the projected target in fiscal 2006/07 ," KPLC general manager, Mr Don Priestman, says in the company's annual estimates.
KenGen and KPLC have been operating under an interim power purchasing agreement of Sh1.76 per kilowatt (kw) since 1999. The first interim agreement that lapsed in July 2003 and a new one of Sh2.36/kw took effect.
Business Daily has however, learnt that a long term deal with KPLC and KenGen- the major public power generator - have been concluded and await approval by ERC. Talks are also under way between KPLC and Simba Power Company-another IPP - for purchase of some 89.5MW of thermal energy generated at Kipevu, near Mombasa.
Last week, Mumias Sugar Company-the country's most profitable sugar miller - hammered a $.06/ kilowatt deal to purchase bagasse-generated power. The miller is putting up 25MW through a Sh6.5 billion expansion project for power sales to KPLC for general supply through the national grid, expected to be ready by November 2008.
ERC also approved power sales by Aldywich PWSC, a Rabai based diesel plant. The IPP will generate some 83.3 MW at $263 million/kw/year deal. Negotiations with KPLC lasted nine months since, January, 2007.
In January, IberAfrica Power (EA) acquired seven new diesel generators with a total capacity of 52.5 megawatts seeking to cash in on rising power demand. The company entered into its first PPA with KPLC in July 1997 to sell 50MW to the power distributor for seven years.
This was later renewed to run for a period of 15 years ending 2019. Additional thermal power from the two new IPPS- Simba Energy and Aldwych PWSC will be available from September 2008, bringing total IPP generation by then, to nearly 311MW. Or Power4INC , another geothermal-based IPP ) has also received the ministry's nod to raise capacity to 48MW.
It supplies electricity to 19 African nations as governments and utilities in the region increasingly turn to the company to support their strong economic growth as they develop more permanent sources of power.
In another contract amended in December last year, Aggrekko Plc/KPLC contract, a UK firm that has been selling power at $21.825 million /kw/month, has revised downwards its rates to $19.80 million /kw/month (about $237.6 million/kw/year)n and will continue to supply some 100MW in temporary power solutions from its Embakasi (60MW) and Eldoret (40MW) plants until December 2009.
Aggrekko was commissioned in June 2006 to address generation shortfall. Following prolonged drought in March 2006, which had limited the amount of hydro-electric power generation, East Africa had experienced severe power shortages prior to installing the Aggrekko power.
The high speed power purchasing agreements (PPAs) negotiations come as official efforts are being directed towards averting a possible crisis occasioned by vibrancy in Kenya's economy, with growth now peaking at 7 per cent.
'Nobody will be allowed to quote more than they should," says Mwirichia, the ERC director general.
Power consumers meet the costs of generation which account for 70 per cent of total electricity sales. Other factors are , fuel costs and capacity costs for idle machines owned by the independent producers. Others are the Rural Electrification Programme (REP) that accounts for five per cent of total cost of power used and 16 per cent Value Added Tax.
Power economists at the public policy think thank -Kippra- reckon that tariff setting starts with a demand (sales) forecast for the market followed by determination of the mix of sources in terms of hydro, geothermal, coal, petroleum, nuclear, bio-mass and wind.
Relevant Links
East Africa
Economy, Business and Finance
Energy
Environment
Kenya
Sustainable Development
The third step involves the determination of the sector's total revenue requirements based on the actual costs of generation and supply likely to be incurred by the sector during the plan period.
Marginal costs of generation, transmission, distribution and retailing are also factored in view of the pricing periods and the computation of the ensuing revenue gap- that is the difference between the marginal cost revenue and the sector's revenue requirements.
Tariff structure is designed to facilitate the recovery of the costs imposed on the system by consumers. These include capacity related costs, energy related costs and consumer related costs.
allafrica.com
[Orininally posted to the Alternative energy thread by sageyrain] |
