16 August 2014

Kenya: Manufacturers Targeted With New Power Use Plan

The government is working on a 'time-of-use' tariff plan targeted at consumer goods manufacturers and Nairobi county in a two-prong drive to reduce prices and light up the city.

Davis Chirchir, the Energy and Petroleum Cabinet Secretary, said the plan will start with flour millers who will sign agreements to discount prices in exchange of reduced electricity charges.

The plan is expected to be ready by end of the year for roll out in January.

"It's on the drawing board but certainly it will be implemented," Chirchir said on Thursday after a media briefing on the recent US-Africa Summit.

Nairobi county will be required to triple lighting points from the current to boost security to encourage more industries to operate at night during off-peak hours.

Chirchir said this is part of plans to grow demand for electricity as the country gears to increase generation capacity to 5000 megawatts.

"If you look at the 24-hour power generation profile, usage is low at night when most people go to sleep. We are working on time-of-use tariff that will apply from 9pm when there is so much power on the grid," he said.

"We'll use that to strike agreements with manufacturers, such as the unga industry, so they can discount prices of goods if we give them power at lower prices."

He said the off-peak plan will give reflect on cheaper food prices and rev up a 24-hour economy in the city. President Uhuru is expected to announce the time-of-use plan on Jamhuri Day (December 12) as one of the goodies to be dished out.

"We have a programme with Nairobi county to increase the lighting points three times from the current. This will also boost security and encourage industries to start night shifts working on cheap power," Chirchir said.

Chichir however declined to disclose how much cheaper the time-of-use tariff plan will be, saying "it's work in progress".

"We can discount in a way that will be felt by the economy, on negotiated delivery," he said, adding that the agreements will involve manufacturers stating the margin of discount on prices for a given percentage reduction on tariff.

The Energy and Petroleum ministry and other stakeholders are working in committees to deliver the new tariff plan.

The country plans to load on more geothermal and wind energy to the grid over the next three years. This year alone 140MW of geothermal power have been connected and an additional 140MW are expected next month.

Several projects for wind power and geothermal development are lined up by the private sector. The additional capacity of is expected to reduce electricity costs for users by at least 25 per cent.

"We dispatch our power on what we call least-cost-order-of-merit and we believe we'll have enough hydro and geothermal energy to displace thermal energy," Chirchir said

He said the fuel cost charge on power bills could climb down to Sh4 per unit by the end of the year from the current Sh7.22 per unit.

It is expected that an additional 1.6 gigawatts of geothermal - out of a capacity of 10GW - will be tapped into the grid within three years.

"Geothermal comes at $0.07-0.08 (Sh6.16-7.04) per unit to the grid, hydro at $0.03 (Sh2.64) and thermal $0.25 (Sh22.01). Even without water, the cost will come down. We'll see savings of up to Sh25 billion annually by bringing on more geothermal to replace the diesel which is the cost of the fuel on power bills," he said.


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