Regulator backs IPPs to challenge KenGen power generation dominance

The Energy and Petroleum Regulatory Authority (EPRA) is projecting that the domination of Kenya’s power generation sector by KenGen will be cut with the rise of Independent Power Producers (IPPs).

The regulator says the improved power supply from IPPs in recent years will bring stiff competition to Kenya’s largest public power generator KenGen which in six months to June 2021 accounted for 65.8% of effective generation capacity of 2,955.7MW up from 63% in December 2020.

“Private sector undertaking in the generation of electricity, IPPs covering about 40% of the generation has improved competition in the energy sector. With continuous private sector involvement, KenGen dominance in power generation is likely to face stiff competition in future,” said EPRA in its Energy Statistics Report 2021.

Despite a rise in generating capacity in recent years following liberalization of the power sector, IPPs registered a decline in energy generation, accounting for 33.6% of generation capacity down from 36% over the same period.

Isolated grid generation under the Rural Electrification Program (REP), implemented by Rural Electrification and Renewable Energy Corporation (REREC) also registered a decline to account for 0.63% of generating capacity down from 1.07%.

EPRA attributes this decline to fair regulation and conducive energy policies which boosted private investments in electricity generation.

Of the total capacity, KenGen generates 1,818.27MW for its 15 Power Purchase Agreements (PPAs), IPPs 1087.48MW with 23 PPAs, and REREC 50MW with 1 PPA.

According to the report, Kenya is increasingly cutting the use of fossil fuels on the grid as renewable energy now accounts for 88% of the country’s energy mix.

Geothermal leads energy mix with 41%, hydro 30%, wind 16%, thermal 10%, imports 2%, and solar 1%.

“The country has successfully adopted more renewable energy than many in the region, with less than 20% of its electricity mix derived from fossil fuels. This is in line with the Government priority in the use of green energy sources to promote environmental sustainability as well as adapt to and mitigate against the effects of climate change,” noted EPRA.

As of June last year, geothermal had the largest installed capacity of 863.1MW, hydro 838.1MW, thermal 720.3MW, wind 435.5MW, solar 90.3MW, and biomass 2%.

Since the slump witnessed in March 2020 at the height of COVID-19, peak demand rose to 1994MW in June 2021 against a total installed capacity of 2984 MW which includes utility off-grids of 34MW.

“This represents an increase of 3.5% from the 1926MW peak recorded in February 2020.”