Kenya dims prospects for independent power producers

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NAIROBI, KENYA: The Government has outlined elaborate plans to kick out producers of expensive diesel-generated power. The move is part of efforts to lower the costs of production and living, which have rendered Kenya an expensive investment destination. Technocrats in the energy sub-sector are working out the modalities of producing an additional 5,000MW of clean, renewable and cheaper power to the national grid by 2017. This will require halting the purchase of high-cost electricity from independent power producers ( IPPs) during the dry season.

HIGHER POWER TARIFFS

Energy and Petroleum Cabinet Secretary Davis Chirchir said the Government is ready to terminate long-term power purchase agreements (PPAs) with these IPPs. “Diesel is very expensive. We have defined a power-generation matrix that is cheaper and will include geothermal, coal and liquefied natural gas,” he told Business Beat last week. “We want to produce very cheap power for the economy.” However, Mr Chirchir said IPPs would be entitled to a fixed-capacity charge of $0.04 (Sh3.47) per kilowatt-hour throughout their remaining contract period — long-term PPAs normally run for 20 to 25 years. Analysts, however, warn that the country could still face higher power tariffs in the medium-term as electricity-distributing firm Kenya Power passes the fixed capacity costs to consumers. “The actual cost of power will go down as the country minimises the use of diesel-generated power, but the consumers will still pay for the capacity that is not being utilised,” said Mr Eric Musau, an analyst at Standard Investment Bank.

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