KenGen spent three times more on fuel for power generation

KenGen thermal power plant at Olkaria. [Wilberforce Okwiri, Standard]

Production from geothermal power plants started dropping towards the end of 2021, dropping to 348 million kilowatt hours in December and further to 304 million units in February 2022, the lowest output from the geothermal power plants in nearly a decade.

It is in comparison to the 521 million units that geothermal power plants, operated by both KenGen and its rivals, fed the grid in May last year. Output by thermal plants peaked in February 2022 when they produced 224 million kilowatt hours, the highest since February 2018 when production by thermal segment of the industry stood at 249 million units, according to data by the Kenya National Bureau of Statistics (KNBS).

Powerline collapse

Sources say the drop in production by geothermal was caused by the collapse of the Loiyangilani-Suswa power line which caused a major power outage in December 2021, which affected some of the power plants in the Olkaria geothermal fields.

Following the disruption, it took some time before the plants could be restored and resume to feeding the grid at an optimal capacity resulting in lower output in the subsequent months of January and February.

The higher power from thermal plants was not unique to KenGen but an industry trend as the sector tried to fill the void created with lower production from geothermal and hydro, the two key baseload electricity sources.

Other than KenGen, which operates two thermal plants on the Kenyan coast, a number of IPPs operate thermal plants that are usually a fallback plan in case key power plants are unavailable or are not generating adequate power to meet demand.

Reliance on thermal plants

The higher reliance on thermal plants, coupled with increase in fuel prices over the better part of 2022, are the reasons for the spike in retail power prices over the recent months.

A unit of electricity has gone up from Sh21.9 in August 2022 to Sh26.3 in December for users in the Ordinary Consumers band. The increase is largely been on account of higher fuel cost charge that has risen to Sh7.12 per unit in December from Sh4.63 per unit in August as well as the foreign exchange adjustment that has gone up to Sh2.07 per unit in December from 73 cents per unit in August.

For Kengen, higher fuel charge revenue cushioned the firm from reporting a decline in total revenues. The firm reported total revenue of Sh49.23 billion over the year to June 2022 compared to Sh45.79 billion in 2021.

This was due to the fuel charge revenue going up 137 per cent to Sh9.67 billion and in turn, driving up revenue from thermal power plants (which combine the fuel charge as well as payment for energy generated by thermal plants) 100 per cent to Sh13.2 billion over the year from Sh7.1 billion in 2021.

This is even as revenues from electricity fell to Sh32.7 billion in 2022 from Sh34.9 billion in 2021. The lower revenues from the sale of electricity was due to a decline in money generated by geothermal and hydropower plants.