Kenya Power has awarded National Oil Corporation of Kenya (Nock) a Sh4.85 billion contract to supply low sulphur diesel for its off-grid power stations over the next two years, according to a tender award notice published on Tuesday, November 20, 2018.
The deal covers 1.84 million litres of diesel each month for 30 thermal power stations, many of them in remote parts of the country where the grid is weak or absent. Kenya Power said the contract will run for 24 months from the date of the first fuel delivery, with supplies made as and when the utility places orders.
Most of the stations are in northern Kenya and other far-flung areas more than 700 kilometres from Nairobi, including Wajir, Mandera and Turkana. Those counties account for the biggest monthly fuel use at about 330,000 litres, while Marsabit follows with 200,000 litres. Other locations listed in the supply arrangement include Habaswein, Merti, Baragoi, Maikona, Khorodile, Eldas, Lokiriama, Moyale, Kakuma, Kotulo, Elwak, Lokichoggio, Kamoliban, Takaba, Rhamu, Banissa Mfangano and Sololo.
The award underlines how expensive diesel generation continues to weigh on electricity prices. Kenya Power said the cost of fuel is ultimately passed on to consumers through fuel charges, which means tariffs are unlikely to ease while the off-grid stations remain heavily dependent on thermal generation.
At the time, the fuel surcharge stood at Sh2.50 per kilowatt hour (kWh), based on the amount of electricity injected into the national grid from diesel-powered generators. Kenya Power’s fuel bill for off-grid stations rose to Sh1.47 billion in the financial year ended June 2017, up 61.9 per cent from Sh909 million in the previous year.
That pushed total fuel costs to Sh25.1 billion, a 74 per cent jump from Sh14.45 billion in the year ended June 2016. By the end of June 2017, off-grid stations had supplied 41 gigawatt-hours (GWh) of electricity to consumers.
The utility’s reliance on thermal power also sits alongside long-running purchase agreements with private producers that feed the national grid when output from renewable sources such as hydro falls. Kenya has kept those contracts in place to maturity to avoid heavy penalties for breach. Tsavo Power and Rabai Power are the first to expire in 2023, while Gulf Power, Triumph Power and IberaAfrica’s contracts run to 2031.
Even with Kenya’s push toward cheaper and cleaner energy, thermal generation remained a major part of the mix. In the 12 months to June 2017, thermal plants accounted for 21 per cent of total energy supply, up from 13 per cent the previous year, after output from those plants rose 66.9 per cent from 1,297 GWh to 2,165 GWh.
Kenya’s installed generating capacity stood at 2,370MW against peak demand of about 1,770MW. The country continued to rely mainly on geothermal and hydro power, even as new renewable projects were coming online. A large solar plant was set for launch 15 kilometres from Garissa town with a capacity of 54.6 MW, which would make it the largest in East and Central Africa, while the 310MW Lake Turkana Wind Power Station in Loiyangalani, Marsabit County, was also set for commissioning.
The wind project was expected to offer cheaper power at about Sh8 per kWh compared with thermal power at roughly Sh15 per kWh. The developments came about a year after the Kenyan government partnered with the World Bank on the Sh16 billion Kenya off-grid solar access project (K-OSAP), aimed at supplying power to 86 remote areas in 14 of the least electrified counties and connecting 1.3 million households.
Despite those cleaner-energy plans, Kenya Power’s continued use of large diesel volumes meant consumers were still likely to carry the cost of thermal generation in their bills.
