NAIROBI, Kenya- Kenya Power has significantly cut down its electricity purchases from Independent Power Producers (IPPs), opting instead to increase acquisitions from the Rural Electrification and Renewable Energy Corporation (Rerec) and KenGen.
This shift comes as the government renegotiates existing contracts with IPPs, marking a pivotal change in Kenya’s energy landscape.
Kenya Power’s recent shift in energy sourcing is a response to the high costs associated with power purchase agreements (PPAs) from IPPs.
In the 2023-24 financial year, the utility firm reduced its energy purchases from IPPs to 32pc of the total, down from 36pc in the previous year.
This reduction aligns with the government’s ongoing renegotiations with 26 IPPs, a move overseen by the Energy Petroleum and Regulatory Authority (EPRA) .
According to Kenya Power Managing Director Joseph Siror, the trend of decreasing reliance on IPPs is expected to continue, with the majority of energy now being sourced from more cost-effective and sustainable producers like KenGen and Rerec.
This strategic pivot is part of Kenya Power’s broader effort to stabilize electricity prices and ensure more predictable energy costs for consumers.
The Ministry of Energy & Petroleum, through a joint PPA Negotiations Committee established in February, has made significant strides in renegotiating existing power purchase agreements.
The committee’s primary focus has been on projects with signed PPAs that have either not commenced construction or have completed construction but had lapsed agreements.
So far, eight PPAs have been successfully renegotiated, representing a total firm capacity of 28.88 MW.
These agreements are currently awaiting approval from EPRA and the National Treasury. Notably, two PPAs with Marco Borero and DWA have already received EPRA’s green light and are now pending final approval from the National Treasury .
The renegotiations have also extended to cross-border energy exchange agreements with Uganda Electricity Transmission Company (UETCL) and Tanzania Electric Supply Company (TANESCO), further diversifying Kenya’s energy sources and enhancing regional cooperation in energy distribution.
Kenya Power’s efforts to renegotiate PPAs and reduce reliance on IPPs are rooted in a broader goal of stabilizing energy costs and increasing the share of renewable energy in the national grid.
The ongoing renegotiations include seven more PPAs, with a combined capacity of 66.9 MW, that are in the final stages of drafting and approval. These include agreements with companies like Kleen Energy Limited and Iberafrica Power (EA) Ltd, among others.
Looking ahead, the energy sector in Kenya is poised for further transformation as the government continues to scrutinize and restructure power purchase agreements.
The freeze on new IPPs, initiated in 2021 under former President Uhuru Kenyatta’s administration, remains in effect, signaling a cautious approach to future energy deals.
As Kenya Power navigates these changes, the emphasis will likely remain on securing affordable and sustainable energy sources for the country’s growing electricity needs .
