Independent Power Producers (IPPs) charged a higher cost per kWh as compared to the Kenya Electricity Generating Company PLC (KenGen) in accordance to a recent report from the Auditor-General on the Kenya Power and Lighting Company PLC for the year ending June 30, 2024.
This analysis reveals significant disparities in the cost of electricity purchased from these two sources, raising concerns about the financial implications for the country’s energy sector.
According to the report, a total of Sh150.61 billion was paid for 13,684 gigawatt-hours (GWh) of electricity. KenGen supplied 5,048 GWh, accounting for 59% of the total power purchased from thermal, geothermal, and wind sources.
IPPs, on the other hand, supplied 3,483 GWh, making up 41% of the total.
However, despite KenGen’s higher contribution, the cost of power from KenGen was significantly lower than that from IPPs. While, KenGen’s power cost Sh49.37 billion representing 40% of the total expenditure, power from IPPs cost Sh73.72 billion, 60% of the total.
The cost per kWh for thermal power from IPPs was Sh43.76, compared to Sh29.47 from KenGen. Similarly, geothermal power from IPPs cost Sh17.28 per kWh, while KenGen’s was Sh8.24. Wind power showed a similar trend, with IPPs charging Sh14.71 per kWh against KenGen’s Sh8.80.
The disparity in costs has been attributed to the terms of contracts with IPPs, where realized sales were sometimes below the cost price. To address this issue, the Presidential Taskforce recommended a comprehensive review of Power Purchase Agreements (PPAs) with IPPs in March 2021, aimed at renegotiating and amending the agreements to reduce the cost disparity. However, according to the report, there was no evidence of progress in implementing these recommendations.
There is a need for strategic interventions to ensure cost-effective power procurement. The higher costs associated with IPPs not only strain financial resources but also impact the affordability of electricity for consumers.
