How Nairobi-Addis deal is fuelling surge in Kenya's electricity imports

Ethiopia’s State-owned power producer and distributor, Ethiopian Electric Power (EEP), is now among the largest electricity suppliers to Kenya, which increased imports from its northern neighbour to plug deficits from local producers. 

The Energy and Petroleum Regulatory Authority (Epra) last week said the market share for imports, a large chunk of which comes from Ethiopia, has grown to account for 10.48 per cent of all the power that was consumed in Kenya over the six months to December. 

="https://www.standardmedia.co.ke/health/business/article/2001451542/imports-of-cheaper-power-from-ethiopia-to-start-in-november">Kenya imports< power from Ethiopia and Uganda to meet demand whenever power production from local producers is not adequate to cope with demand.

Kenya has traditionally imported power from Uganda to meet demand, particularly in Western Kenya, which has not been adequately served by major power sources such as geothermal from Olkaria owing to weak transmission capacity to the region. 

Ethiopia has, however, increased exports to Kenya over the last two years, with electricity from the country now accounting for the bulk of exports.

This follows the signing of a Power Purchase Agreement (PPA) between Kenya Power and EEP in 2022 to import 200 megawatts (MW of electricity from Ethiopia with plans to scale this up to 400MW in the future. 

="https://www.standardmedia.co.ke/article/2001414639/kengen-starts-drilling-works-on-ethiopia-s-sh7-6b-second-phase-contract">In December 2023,< Kenya started importing 100MW, which increased to 200MW last year. This has had the effect of pushing up the amount of power that Kenya imports.

In the first half of the 2024-25 financial year, different power producers in Kenya, including imports, generated 7,222.37 gigawatt-hour (GWh) of electrical energy.

This was six per cent higher than the 6.805.28GWh recorded in the first half of the 2023-24 financial year, which, Epra said, was driven by “rising demand from organic load growth and an expanding customer base." 

Imports accounted for 10.41 per cent of the generation at 751.953GWh during the half to December 2024, which, according to Epra, translated into the second-largest market share. This was after KenGen, which accounted for 59.94 per cent of electricity consumed locally. 

“Imports held the second largest market share of 10.48 per cent followed by Lake Turkana Wind Power plant at 10.24 per cent. Other generators with notable market shares include Orpwoer (5.78 per cent), Rabai Power (3.21 per cent), Kipeto Energy (3.01 per cent) and Sossian (2.23 per cent),” said Epra in a statistical report for the first half of the 2024/25 financial year.

“KenGen maintained its dominant position in the energy market, with a market share of 59.94 per cent. This dominance underscores kenGen’s significant role as a major player in the energy generation landscape, attributed to its extensive infrastructure and diverse portfolio of power generation assets. Additionally, most of Kengen’s plants, particularly geothermal ones, operate as base load power sources and have a high availability factor.”

KenGen generated 4,302.19GWh over the six months. The State-owned power producer, while remaining the single largest producer, still ceded ground for other players, including imports, with its market share declining from 62.24 per cent over the first half of the 2023/24 financial year 

This was on account of one of its key geothermal power plants having been out for maintenance during the half.

Kenya recently started importation from Ethiopia following the completion of a high-voltage transmission line between the countries, a move that has seen imports surge.

="https://www.standardmedia.co.ke/sports/amp/business/article/2001512159/tanzania-seeks-nod-to-import-ethiopian-electricity-through-kenya">Ethiopia had also The country produces upwards of 4,800MW from hydropower plants alone and has also diversified to wind and solar. Gerd is an ambitious project, with Ethiopia planning to expand its capacity to produce over 5,000MW eventually.

Tanzania also plans to import power from Ethiopia through Kenya and has already sought regulatory approvals to use Kenya’s transmission infrastructure. 

“Electricity imports increased by 79.41 per cent from 419.13GWh in a similar period in the previous financial year to 751.95GWh during the review period. This increase was attributed to the full commercial operation of the EEP contract, which began in December 2023,” said Epra.

“Kenya imports 200MW of electricity from Ethiopian Electric Power (EEP) company and has energy exchange contracts with Uganda Electricity Transmission Company Limited (UECTL) and Tanzania Electricity Supply Company Limited (Tanesco).”

Over the six-month period to December 2024, EEP accounted for 84.9 per cent of the imports, while Uganda accounted for 14.8 per cent and Tanesco a marginal 0.24 per cent.

“These energy exchange contracts allow Kenya to obtain competitively priced renewable energy from its neighbours while increasing the interconnected grid reliability and promoting regional power trade,” said Epra.

The energy sector regulator said the high imports were to take care of rising demand occasioned by growing consumption among existing power customers but also a growth in the customer base with new users onboarded during the recent past.

It also noted that there was a dip in production from geothermal energy sources, where electricity generated by geothermal sources accounted for 39.81 per cent of the energy supplied to the grid over the half. This was compared to 44.98 per cent in the previous half year.

The drop in geothermal production was due to a scheduled shutdown of one of Kengen’s power plants.

The increased reliance on imports has also been due to the fact that few power plants are coming on board in Kenya following a freeze on the signing of new PPAs between Kenya Power and power producers. 

The moratorium on new PPAs was put in place by the Jubilee Administration in 2018 as it sought to look into the cost of energy.

At the time, the feeling was that the contracts signed between Independent Power Producers (IPPs) were skewed in favour of IPPs and largely to blame for the high cost of power.

The government then tried to look into the existing PPAs and explore ways of renegotiating them to bring down the cost but also froze on signing new PPAs as it looked at how it could cushion the country from high costs in the process of bringing on-board new power plants.

The moratorium was lifted in March 2023, shortly after the Kenya Kwanza regime came to power, but was reimposed by Parliament in April 2023.

Over the six years the freeze has been in place, no new PPAs have been signed, which means the pipeline for new power plants is nearly empty.

Power agencies have raised alarm over the situation, noting that while there are no new plants expected in the coming years, demand has been growing and is nearly outstripping available power-generating capacity.

Epra last week noted that the expanded demand without corresponding growth in power production capacity has seen Kenya resort to “overreliance on imported energy from Ethiopia, Tanzania, and Uganda."

Energy Principal Secretary Alex Wachira noted that among other possible outcomes of failure to lift the moratorium are increased power rationing during peak hours, power outages as a result of suboptimal intermittent generation, and increased cost of power due to enhanced dispatch of thermal power plants.

"The country is already experiencing power supply shortfalls and demand management, which will worsen if the moratorium is not lifted," he said.

Energy CS Opiyo Wandayi petitioned the National Assembly to consider lifting the moratorium, noting that the state of energy security and the importance of strategic infrastructure development require a critical re-look at the PPAs.  Departmental Committee on Energy in Naivasha.