Thu Aug 4, 2011
Last month distributor Kenya Power said it would ration power to industrial zones in the capital and in western Kenya for three hours on alternating days due to a supply deficit, angering manufacturers.
The east African nation has an effective generation capacity of 1,400 MW and consumption of 1,300 MW, leading to a shortfall of 217 megawatts when factors such as reserve margins are included.
“There is nothing like the situation improving. Demand is already higher than supply so it is a question of mobilising some additional capacity to bridge the gap between demand and supply,” Nyoike told Reuters in an interview.
Nyoike said Kenya planned to invite bids for the contract from private firms and have extra capacity in place next month before water levels in hydropower dams start falling ahead of the country’s so-called short rains in late October.
“The proposal is to put in 140 megawatts, then rationing for industrial customers will disappear. We should be able to do it fairly fast before the drought strikes. The dams are going down fairly fast and if you don’t move fast, you can get into a very devastating rationing,” he said.
The plan will lead to higher fuel imports into an economy whose currency is already more than 10 percent weaker against the dollar so far this year.
Nyoike said failure to install additional capacity could do more harm to the economy than any impact on public finances or the balance of payments
“The economic cost of not providing that energy is 84 U.S. cents per kilowatt hour. The cost of bringing that in is about 20 cents, so the net gain to the economy is 60 cents,” he said.
Other plans to raise energy generation include exploiting the country’s proven coal deposits of 400 million tonnes in Eastern Province, as well as the construction of a gas-to-electricity plant at the coast.
“We have 400 million metric tonnes of coal in one block, block C. We have coal also in the other three blocks. These blocks have been leased out to the private sector. This financial year we will have private companies actually mining coal,” Nyoike said.
Tenders for the construction of the gas to electricity plant, expected to cost $500 million, will be issued before the end of the year, Nyoike said, adding that the winning firm would invest its own money.
“Payback will be fairly fast. We will make it attractive for them to come on board,” he said, adding that natural gas will be brought in from either Qatar or Mozambique.
PARTIAL RISK GUARANTEES
Officials blame delays in processing security guarantees worth $209 million, demanded by independent power producers, for the precarious energy supply situation.
At least four independent generation projects using diesel, geothermal and wind were expected to start feeding into the grid this year but the government declined to offer guarantees due to the impact on the country’s sovereign rating.
“That is why there was a delay of power plants which would be up and running with a combined capacity of 252 megawatts,” Nyoike said.
In the next two months the government expects to conclude negotiations with the World Bank for a $60 million facility in partial risk guarantees that will also cover the developers and financiers of the projects against political risks.
Kenya plans to shift to geothermal energy in the next decade to cut overdependence on hydro generation, which is prone to shortfalls whenever rains fail.
Two geothermal projects underway at a cost of $1.1 billion, Ol Karia 1 and 4 in Naivasha in the Rift Valley, are expected to start generating 280 megawatts in 2013.