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Kenya: Consumers Pay the Price As COVID-19 Electricity Cuts Hit Turkana Project

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Kenya Power has rationed the amount of electricity it can take from producers, citing a slump in demand from months of economic lockdown on account of measures to slow down the spread of Covid-19

Electricity consumers in Kenya are paying higher prices after production cuts hit the Lake Turkana Wind Power, raising the proportion of costly energy on the national grid.

Kenya Power has rationed the amount of electricity it can take from producers, citing a slump in demand resulting from months of economic lockdown on account of the Covid-19 pandemic.

The supply cuts have affected the running of the Turkana wind farm, where the turbines are engineered to rotate and produce power at optimal capacity as per wind speeds.

“The turbines are fitted with mechanisms that pitch and yaw to ensure maximum power is extracted. Naturally limiting the turbine from automatically managing the control mechanism from maximum extraction would lead to vibration on the blades and resistance on the gears,” said Jon Zaidi, the Lake Turkana Wind Power (LTWP) chief executive.

LTWP has been allocated a maximum production quota of 210MW, against an installed capacity of 310MW.

In July, the Turkana plant was hit by an operational outage of nearly two weeks.

Mr Zaidi did not confirm whether it was related to operational complications of the supply caps.

“This (limitation of output) could potentially reduce the lifespan of various components leading to additional maintenance. However, it is important to note that our turbines are fully equipped with technology that allows for adjustment should the need arise, and, during this period, this type of flexibility may be required,” said Mr Zaidi.

Kenya Power has prioritised the uptake of geothermal at 39.5 per cent, hydro at 33.9 per cent, wind at 14 per cent, diesel at 9.7 per cent with other sources like solar, imports from Uganda and co-generation accounting for about three per cent.

Main beneficiary

This arrangement has meant that Kenya Electricity Generating Company (KenGen), which is the sole producer of geothermal and hydro, is the main beneficiary.

KenGen has maintained a stable financial performance despite other generators, including independent power producers, taking a beating. In the half year ending December 2019, KenGen’s profitability doubled by 98 per cent to $74 million, from $37.5 million in the same period the previous year.

LTWP, which has 20-year power purchase agreement with Kenya Power, sells electricity to the national grid based on a low-cost initial tariff of $0.10 per kilowatt hour (kWh) for the first six years, that will be adjusted downwards to $0.08 per kWh for the remaining 14 years.

The EastAfrican has learnt that measures to contain the Covid-19 pandemic resulted in a substantial decline in demand for electricity, particularly among commercial customers who on average account for up to 65 per cent of energy consumption.

“We have conversely witnessed a drop in electricity demand during the same period, in some cases recording a drop of up to 4.1 gigawatt hours in the average daily energy demand,” said Kenya Power managing director Bernard Ngugi in an interview.

The decision to limit purchase from LTWP is denying Kenyans affordable electricity, and is also proving costly for taxpayers who financed the construction of a $271 million transmission line to evacuate the electricity, and are paying for a $54 million fine due to delays in the completion of the line.

Due to the fine imposed in 2018, electricity consumers incur an extra Ksh0.96 ($0.0089) per kilowatt hour for the government to recover the amount over six years.

Mr Zaidi said any additional maintenance costs associated with limiting the capacity of the 365 wind turbines would be passed on to consumers.

The Energy and Petroleum Regulatory Authority (Epra) acting director general, Mueni Mutung’a, however said that LTWP is yet to issue a formal complaint to the regulator.

“Being renewable energy sources, wind and solar are priority of dispatch,” she adding that although Epra had authorised Kenya Power to issue a notice to power producers, the issue is now inconsequential.

“We are aware of issuance of notices of intention to invoke provisions of the force majeure clauses. However, the electricity sector has come out of the risk posed by the Covid-19 pandemic. Demand is now almost back to the position it was at before the pandemic,” she said.

Kenya’s total installed capacity currently stands at 2,818 MW with peak demand at 1,922 MW.

Declining demand

The impact of Covid-19 has resulted in peak demand declining to an average of 1,760 MW. As such, Kenya Power is limiting the amount of electricity it is buying from each producer.

Data from the national control centre shows that over the past two weeks, consumption has averaged 1,765 MW against a projected demand of 1,930 MW.

LTWP is now banking on a rebound in electricity demand to increase its sales to Kenya Power.

“We are certain the demand regimes will be revisited as conditions continue to evolve,” said Mr. Zaidi.

Last year the wind farm operated at an average capacity factor of 57 per cent and hit a peak of 99 per cent (307 MW) in January.

During the year, LTWP displaced approximately $148.6 million of fuel imports. This improved the country’s balance of payments position by reducing fuel imports used in thermal plants for the generation of electricity.

The cost of electricity in Kenya remains high at $0.217 per kWh for households and $0.167 for businesses compared to world average of $0.14 per kWh for households and $0.13 for businesses.

In Uganda, the cost for households stands at $0.183 and $0.161 for businesses while in Tanzania it is at $0.099 and $0.102 respectively.

Management weaknesses and the decline in electricity demand has hit Kenya Power hard, with the company issuing a profit warning in June. It stated that its net earnings for the year ended June 30, 2020, would decline by at least 25 percent.

Last week the company released its audited financial results for the year ended June 30, 2019, that showed a net profit drop of 92 percent to $2.3 million, from $30.1 million in 2018. The bleak performance was attributed to a significant surge in non-fuel power purchase costs.

to delays in the completion of the line.

Due to the fine imposed on taxpayers in 2018, electricity consumers incur an extra KSh0.96 per kilowatt-hour in their bills to enable the government to recover the amount over a six-year period.

Mr. Zaidi said the additional maintenance costs associated with limiting the capacity of the 365 wind turbines would automatically be passed on to consumers.

The Energy and Petroleum Regulatory Authority (Epra) acting director-general, Mueni Mutung’a, however, said that LTWP is yet to issue a formal complaint to the regulator.

“Being renewable energy sources, wind and solar are given priority of dispatch,” she said.

She added that although Epra had authorized Kenya Power to issue a force majeure notice on power producers, the issue is now inconsequential owing to the fact that demand is picking up.

“mand at 1,922 MW.

The impacts of Covid-19 has resulted in peak demand declining to an average of 1,760 MW, forcing Kenya Power to limit the amount of electricity it can buy from each producer with the national control center being forced to engage in a tricky balancing act.

Data from the center show that over the past fortnight, consumption has averaged at 1,765 MW against a projected demand of 1,930 MW.

Effectively, Kenya Power has prioritized the uptake of geothermal at 39.5 percent, hydro at 33.9 percent, wind at 14 percent, diesel at 9.7 percent with the other sources like solar, imports from Uganda, and co-generation accounting for about three percent.

This arrangement has meant that Kenya Electricity Generating Company (KenGen), which is the sole producer from geothermal and hydro, is the main beneficiary.

This has seen KenGen maintain stable financial performance despite other generators including independent power producers taking a beating. In the half-year ending December 2019, KenGen saw its profitability double by 98 percent to $74 million from $37.5 million.

LTWP, which is feeling the pressure of the capping, is banking on a rebound in electricity demand to increase sales to Kenya Power.

“We are certain the demand regimes will be revisited as conditions continue to evolve,” said Mr. Zaidi.

LTWP, which has a 20-year power purchase agreement with Kenya Power, sells electricity to the national grid based on a low-cost initial tariff of $0.10 per kilowatt-hour (kWh) for the first six years, that will be adjusted downwards to $0.08 per kWh for the remaining 14 years.

Last year the wind farm operated at an average capacity factor of 57 percent and hit a peak of 99 percent (307 MW) in January.

During the year, LTWP displaced approximately $148.6 million of fuel imports, a significant contribution in improving the country’s balance of payments position by reducing fuel imports used in thermal plants for the generation of electricity.

The cost of electricity in Kenya remains high at $0.217 per kWh for households and $0.167 for businesses compared to the world average of $0.14 per kWh for households and $0.13 for businesses.

In Uganda, the cost for households stands at $0.183 and $0.161 for businesses while in Tanzania it is at $0.099 and $0.102 respectively.

Management weaknesses and the decline in electricity demand has hit Kenya Power hard, with the company issuing a profit warning in June stating that its net earnings for the year ended June 30, 2020, will decline by at least 25 percent.

Last week the company released its audited financial results for the year ended June 30, 2019, that showed a net profit nosedive of 92 percent to $2.3 million, from $30.1 million in 2018. The bleak performance was attributed to a significant surge in non-fuel power purchase costs.

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