Why thermal power plants are set for a big comeback

Members of the National Assembly last week voted to lift a seven-year moratorium on the signing of new Power Purchase Agreements (PPAs) between power producers and Kenya Power.

The freeze had been put in place by the Jubilee Administration as it sought ways to put in place safeguards that would protect Kenyans from the high cost of power. This was due to concerns that power purchase agreements (PPAs) had been skewed in favour of power producers, and there were no mechanisms put in place to cater for the interests of households and businesses.

The report that was adopted by Parliament and which recommended the lifting of the moratorium has also put in place mechanisms that could tame the cost of power when new electricity plants start coming on board.  But observers are now questioning the mix of factors that have led to the lifting of the moratorium by Parliament, even as some claim that this could be something orchestrated to help power players bring thermal plants, which are costly for consumers of electricity but also easy to set up.

The decision by the MPs came a week after President William Ruto said the country had been rationing electricity owing to fast-growing demand that can no longer be met by the existing power-generating capacity. “When we are saying at this point that we do not have enough power, what can be done immediately to ensure that we have power?” posed Isaac Ndereva, executive director of Electricity Consumers Society of Kenya (Elcos), speaking to The Standard Group’s Spice FM last week.

“You cannot bring solar, even though it is the quickest to set up; the problem is between 5pm and 10pm,” he said, noting that by the time the huge demand kicks in, the sun would have set and solar power plants would have stopped generating electricity.

“The only option is to bring in more diesel generators… because that is easy to set up. You have seen the problems we have had with diesel generators (in the past).” “Anybody who had not planned for this a long time ago had a plan for diesel generators. Demand for electricity has been growing consistently.”

Consumer-friendly tariffs

Another highly sought-after project is the High Grand Falls dam, which has been looked at as an option to bridge the gap between demand and supply. Ndereva, however, noted that this is a long-term project that could not be relied on in the short and medium term to provide electricity. 

The hydro dam, which was expected to cost Sh337 billion and produce 1,000MW when complete, has been off to a shaky start with Treasury cancelling the award of the tender in July this year. “For you to have this dam working, it will have to be in the year 2033 or 2035 if it is done right now, because the process of constructing a dam takes a long time,” he said.

The report that lifted the moratorium has already given the go-ahead to Kenya Power to re-engage IPPs whose PPAs have expired. The MPs, however, directed them to be at consumer-friendly tariffs, with the committee also noting that since the owners had already recouped their investments during the tenure of the PPAs, charges should now be minimal.

The Kenya Electricity Generating Company (KenGen) is supposed to manage the plants. “KPLC (Kenya Power) prioritises the recommissioning and extension of PPA for retired power plants through KenGen, with negligible capacity charges and structured under a take-and-pay. This recommissioning must follow a thorough assessment of the suitability, technical viability and cost effectiveness of these power plants by the Office of the Auditor General.

Already, the Muhoroni Gas Turbine, which is among those that had been retired after their PPAs lapsed. The Kenya Kwanza regime lifted the moratorium in early 2023, but Parliament disagreed with the Cabinet and reinstated the freeze in April 2023.

The report that was adopted last week by Parliament has also been ready since November 2024, when it was first published. At the time, sector players criticised MPs for taking too long to look into the issue of the cost of electricity, having embarked on the issue in April 2023. The report by the Energy Committee was triggered by a motion moved by Laikipia County Women Representative Jane Kagiri that sought to reduce the cost of electricity in the country in 2023.

Kagiri had questioned the disparity between the cost of power generated by KenGen and IPPs. When she brought the motion to Parliament, she noted that there is a need to regulate all IPPs in the country and publicise their locations, stakeholders, directors, management and their addresses.

Energy sources

In addition, she said, “the agreements the IPPs have entered into with Kenya Power should be made public to enable proper scrutiny”.   She also wanted the Energy Committee to make an inquiry into the operations of Kenya Power, particularly looking into the PPAs they have been signed with IPPs, as well as what she said was an over-reliance on IPPs against available renewable and other energy sources.

She also wanted the committee to recommend measures to be taken to reduce the cost of electricity. The Jubilee administration had in 2013 mooted plans to increase the country’s electricity generating capacity by 5,000MW, which was to be achieved by 2016. The plans, however, were scuttled by myriad factors.

These included concerns about demand, with experts noting that increasing power-generating capacity with such a huge margin over a short period could lead to high power costs as consumers paid for idle capacity. Among the power plants proposed was a coal plant, whose development was also scuttled by Lamu residents, and conservationists argued in court that they had not been consulted and that Lamu was too sensitive to set up a coal power plant.

Several other plants that were to feed into the 5,000MW plan have also slowed down due to other factors, including communities agitating over little or no consultation by project proponents and the Energy Ministry’s failure to secure financing.

Ndereva noted that despite the headwinds that the sector faced, the government should have pushed ahead with plans to grow generation, while factoring in concerns that were being raised. 

However, he notes that there is a somewhat of a preference for thermal plants.

“Instead of instituting measures that would ensure that there would be a progressive journey, they first set up a few diesel plants that were put up in 2013 and 2014. They also tried to venture into coal, but it faced challenges… planning needs time,” he said, adding that if Kenya fails to get it right, it will experience major challenges in the coming years.

“The best way to do this is geothermal. We have a potential of 10,000MW in geothermal. If we can keep injecting 100MW every year, then I would not see the need for thermal power in a few years.”