Policy poses fresh headache for Sh200b Lamu coal plant

A coal power plant sits at the river's edge at dusk. Lights from the buildings and streets glow, and a reflection of the whole scene can be seen on the water of the calm river below.

Kenya’s proposed coal-fired power plant is headed for fresh headwinds in 2019 as climate change activists and international agencies exert pressure on the State and investors to review the infrastructure project.

The latest sign that the Sh200 billion project faces a bleak future came from the Government’s Kenya National Electrification Strategy released early December 2018 outlaying the country’s ambitious strategy of building 3,000 megawatts (MW) in installed capacity over the next five years.

 The Sh1.5 trillion plan is developed in partnership with the World Bank and leverages on a combination of financing options including public debt and concessionary loans.

In the plan, the Government indicates the Lamu coal-fired power plant, developed by a consortium of firms led by Gulf Energy and Centum as the local partners with General Electric and the Investment and Power Construction Corporation of China, will take longer to come on stream owing to completed renewable energy projects.

“It is anticipated that accelerated consumption of energy will be realised once some of the Vision 2030 projects begin to be implemented especially given the focus on manufacturing of the “Big 4” agenda,” said the Ministry of Energy in a prospectus detailing the new plan.

However, the ministry of energy warns that creating too much-installed capacity without the proven demand to absorb the same will lead to under-utilised capacity that must be paid for by end-consumers or by the Government.

“A power purchasing agreement between Amu Power and Kenya Power has already been signed. The commissioning of this power plant is however unlikely to materialise before 2022,” said the Energy Ministry.

Earlier this month the Energy Regulatory Commission (ERC) raised concern that current pace in growing electricity generation will soon see supply outstrip demand pushing up power costs as consumers pay for idle power plants.

In a special report, the ERC indicates that by 2024, power producers in Kenya could be running 43 per cent of generating capacity pushing prices up by as much as 70 per cent over the next six years.

Among the power plants that the regulator advised be slowed down include the controversial Lamu coal power plant, the nuclear power plant and a host of geothermal plants planned by KenGen and other independent power producers.

Earlier December 2018, President Uhuru Kenyatta broke ground for the construction of the 83MW 6th phase of the Olkaria 1 geothermal energy project saying Kenya was gearing for 100 per cent green energy in the next two years.

“Kenya is leading in Africa as a global powerhouse in geothermal energy and we have also stepped up efforts to utilise other forms of renewable energy such as wind, solar and small hydropower as well as bio-energy,” he said. “Our intention is to deepen the use of renewable energy particularly solar as per our National Electrification Strategy,” he said.

This came barely weeks after the official commissioning of the Lake Turkana Wind Power firm that at full capacity could add 300MW to the national grid, placing Kenya among the highest producers of wind power in Africa.

In October 2018, the High Court reinstated stay orders granted to civil society group Save Lamu after the Katiba Institute and activist Okiya Omtatah filed to have the development of the 1050MW project halted.

The National Environment tribunal is also in the process of reviewing a case on the same submitted by community based organisations and activists seeking to halt the construction of the project arguing it poses a danger to the ecosystem of the 600 year-old Lamu Archipelago.