Kenya has shelved plans to increase its installed electricity generation capacity to 5 000 MW in the immediate future as it is concerned that this could leave the country with excess capacity.
Previously, the East African country intended to implement a “5 000 MW by 2018” initiative to attract foreign direct investment by offering cheap electricity.
However, new projections by the Ministry of Energy indicate that, over the next ten years, Kenya will require only 3 000 MW to meet demand, given the current economic growth rate.
The country’s installed electricity generation capacity stands at 2 300 MW, compared with peak demand of 1 600 MW.
President Uhuru Kenyatta’s government is concerned that building the proposed plants would leave the country with excess power that would see consumers paying millions of dollars each year for electricity that is not used.
“Electricity demand grows at the same rate as the economy. At the current economic growth rate and allowing for a 15% reserve margin, we will need 3 000 MW in a decade – the best case scenario is seven years – if the economy accelerates, as we hope it will, to a 7% annual growth rate, on average,” says economist David Ndii.
The review of Kenya’s energy needs has put major projects that have been in the pipeline in jeopardy. Among these is a 1 000 MW nuclear build project that is touted as a critical component in the country’s energy master plan.
The project was conceived in 2011 and Kenya has been laying the groundwork, with plans to start implementation in 2022 at a cost of $5-billion.
Initial plans were for Kenya’s first nuclear reactor to have a capacity of 1 000 MW, and this was to be scaled up to four plants with a total capacity of 4 000 MW.
Another key project that is under threat is a $2-billion coal power plant that private investors plan to build in the coastal town of Lamu. The plant will generate 960 MW, about 55% of Kenya’s total power production. It is to be built by Amu Power, a consortium comprising Kenyan firms Gulf Energy and Centum, as well as Chinese companies Sichuan Electric Power Design & Consulting Company and Sichuan No 3 Power Construction Company, both subsidiaries of energy giant PowerChina and China Huadian Corporation Power Operation Company.
The investors recently accused the Kenya government of frustrating plans to build the project, citing the slow process of relocating affected communities and failure to sign a letter of support for the project. Such a letter is a commitment that government fully supports the project and gives financiers and investors the confidence that they will be able to recoup their investments when the project is operational.
That Kenya was determined to go slow on electricity generation investments became apparent when the authorities rejected a proposal by a Sweden-based company to invest in a 600 MW offshore wind power plant in the Indian Ocean.
VR Holding had submitted an expression of interest in building the wind plant, but government refused to approve it on the grounds that Kenya would be unable to absorb the additional capacity.