world small hydropower development report · pdf filethe ministry of energy and petroleum...

World Small Hydropower Development Report 2016

Kenya

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Electricity sector overview

Biomass, petroleum and electricity dominate the energy mix in Kenya. Traditional wood fuel represents approximately 70 per cent of the energy consumption in Kenya, while petroleum and electricity account for 21 per cent and 9 per cent respectively.3

As of March 2015, the total installed electricity capacity was 2,177 MW, and comprised hydropower (approximately 38 per cent), thermal (33 per cent), geothermal (27 per cent), cogeneration (1 per cent) and wind (1 per cent) (Figure 1).4

FIGURE 1

Installed electricity capacity in Kenya by source (MW)

588.0

26.0

25.5

820.6

717.0

Hydropower

Thermal power

Geothermal

Cogeneration

Wind power

Source: Energy Regulatory Commission4

In 2014, the total generation was 9,138 GWh.5 Though still dominated by large hydropower, which contributed approximately 39 per cent, the generation mix has

seen the introduction of other renewable sources with geothermal plants contributing 32 per cent. Conventional plants contributed 28 per cent of the total, while cogeneration and wind plants contributed less than 1 per cent combined (Figure 2).

The total electricity consumed in 2014 was 7,769 GWh, which was marginally higher than the previous year’s, a growth trend that has been consistent for the last decade. Approximately 50 per cent of the electricity was consumed by the large and medium industry and commercial sector and 42 per cent by domestic and small commercial businesses. Rural electrification consumed approximately 7 per cent. Consumption trends from 2011 to 2014 are given in Figure 3.

In 2013, the national electrification rate was approximately

KenyaHarrison Masiga, Practical Action

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Key facts

Population 45,925,3011

Area 580,367 km2

Climate Kenya lies on the equator and climatic conditions range from tropical humidity on the coast, dry heat of the hinterland and northern plains and cool plateaus and mountains. Temperatures average between 20°C and 28°C. Seasonal variations are distinguished by duration of rainfall rather than by changes of temperature.2

Topography Low plains rise to central highlands bisected by the Great Rift Valley. The highest mountain, Mount Kenya, is also the second highest mountain in Africa with an altitude of 5,199 m above sea level.2

Rain pattern There are two rainy seasons: March to May and October to early December. Average annual rainfall varies from 130 mm a year in the most arid regions of the northern plains to 1,930 mm near Lake Victoria. The coast and highland areas receive an annual average of 1,020 mm.2

General dissipation of rivers and other water sources

Most rivers and streams in Kenya originate in the highlands and flow either east toward the Indian Ocean, west to Lake Victoria or north to Lake Turkana. The two largest perennial rivers are the Tana (724 km) and the Athi-Galana-Sabaki (390 km) Rivers. Both empty into the Indian Ocean.2

FIGURE 2

Annual generation by source in Kenya (GWh)

2,915

46

18

3,573

2,586

Hydropower

Thermal power

Geothermal

Cogeneration

Wind power

Source: Kenya National Bureau of Statistics5

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20 per cent with the access rate in rural areas relatively low, at 7 per cent.6 The relatively low electrification rate exists despite the national grid providing access to over 68 per cent of Kenyan households, in part due to some counties having nearly 50 per cent of unconnected households located within the grid coverage area.7 Off-grid lighting programmes, including the International Finance Corporation (IFC) and the World Bank’s Lighting Africa, have encouraged an increased uptake of alternative energy sources especially in areas with no grid presence. With no reliable data on the exact use of off-grid systems, such as solar lanterns and solar home systems, it is difficult to accurately estimate the size of the population currently making use of these energy access solutions.

The country’s electricity sector is characterized by a tight demand-supply balance. This is against a backdrop of a low national electrification rate, ever-increasing domestic energy demand, frequent power outages and fluctuations, and an over-reliance on large hydropower generation operating under average hydrological conditions. The electricity sector has, however, been undergoing significant changes in the past decade with the Government keen on diversifying the generation mix into other energy sources.8 This is complimented and evidenced by fairly active independent power producer (IPP) participation in the sector.

The Ministry of Energy and Petroleum (MoEP) is the lead government institution for energy policy formulation and sector planning. It is charged with overall leadership and oversight in the implementation of national energy plans. The Energy Regulatory Commission provides oversight roles in the sector by developing and enforcing sector regulations. The structure of the energy sector is shown in Figure 4. Apart from MoEP, other key notable organizations in the sector include the following:

} The Energy Tribunal, which is responsible for arbitration of disputes between the Energy Regulatory Commission and aggrieved stakeholders in the energy sector;

} Energy Regulatory Commission (ERC), which regulates all energy subsectors, protects the interests of stakeholders ensuring reasonable return on investment for developers/utilities, licenses, approves PPAs between KPLC and power generators, and reviews and adjusts tariffs for consumers and IPPs;

} Rural Electrification Authority (REA), which implements rural electrification programmes through grid extension and off-grid systems such as solar and mini-hydropower. REA administers and manages the Rural Electrification Fund (REF), mobilizes funds to support rural electrification, finances project preparation studies for rural electrification and recommends suitable policies to the Government;

} Kenya Electricity Generating Company (KENGEN), which develops and manages all public power generation facilities in the country (large and small hydro, geothermal, diesel-grid connected or off-grid);

} Kenya Power and Lighting Company (KPLC), which is a public company that transmits, distributes and retails electricity to customers in Kenya;

} Kenya Electricity Transmission Company (KETRACO), which plans, designs, builds and maintains electricity transmission lines and associated substations;

} Geothermal Development Corporation (GDC), which is a government SPV charged with fast-tracking development of geothermal resources in the country;

} Independent Power Producers, which are private companies licensed by ERC to generate and sell power to the national utility through power purchase agreements. Collectively, they account for about 2 per cent of the country’s installed capacity.

FIGURE 4

Organizational chart of the electricity sector of Kenya

Source: Institution of Engineers of Kenya9

FIGURE 3

Annual electricity consumption by sector in Kenya 2011-2014 (GWh)

Domestic and small commercialLarge/medium commercial and industryRural electrificatonTotal domestic

2011 2012 2013 2014

10

5

0

Source: Kenya National Bureau of Statistics5

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The ERC is charged with the regulation of electricity tariffs within the country. While the utility company periodically revises electricity tariffs based on an ERC-approved formula, revised tariff schedules must be approved by the regulator before enforcement. Different tariffs apply to different user categories, i.e. domestic, industrial, commercial, and government premises but do not vary with geographical location. Tariffs as of July 2015 are given in Table 1.

Small hydropower sector overview and potential

The energy policy of 2004 defines small hydropower (SHP) as run-of-river power plants with installed capacities below 10 MW. These are further broken down into small, micro or pico hydropower.

It is estimated that at least 3,000 MW of potential SHP capacity exists in Kenya.16 However, only approximately 32 MW is currently installed, representing 5 per cent of the total installed hydropower capacity in the country. This indicates that approximately only 1 per cent of SHP potential has been developed. Compared to the WSHPDR 2013 potential capacity has remained the same while installed capacity has decreased slightly by 1 MW due to the decommissioning of a plant (Figure 5).16

Existing SHP plants have varying ownership structures including private, community or public ownership models. Most of the commercial and public plants are operational and generally in good condition while most of the community schemes are in need of significant refurbishment. A summary of existing plants is provided in Table 2.

In fiscal year 2013-2014, the total power purchased from existing grid-connected SHP plants was 59 GWh.17 This is expected to grow with increased private sector interest in the sector.

Potential sites are mostly concentrated in central, Rift

TABLE 1

Consumer tariffs in Kenya from July 2015

Tariff Charges (Kenyan shillings (US$))

Fixed charge Energy charge (per kWh) Demand charge (per kVA)

DC (Domestic, 240 V) 150 (1.8) Up to 50 kWh: 2.5 (0.03) —

50 to 1,500 kWh: 12.75 (0.153)

Above 1,500 kWh 20.57 (0.24684)

SC (Small commercial, 240 V) 150 (1.8) 13.5 (0.162) —

CI1 (Commercial, 415 V) 2,500 (30) 9.2 (0.1104) 800 (9.6)

CI2 (Commercial, 11 kV) 4,500 (54) 8 (0.096) 520 (6.24)

CI3 (Commercial, 33 kV) 5,500 (66) 7.5 (0.09) 270 (3.24)

CI4 (Commercial, 66 kV) 6,500 (78) 7.3 (0.0876) 220 (2.64)

CI5 (Commercial, 132 kV) 17,000 (204) 7.1 (0.0852) 220 (2.64)

IT (Domestic water heating) 150 (1.8) 13.5 (0.162) —


The liberalization of the electricity sector through the Electric Power Act of 1997 and the subsequent introduction of FITs in 2008 for renewable energy projects have generated significant interest from the private sector. The policy shift, aimed at promoting private sector investment in energy and which has since resulted in the development of a Standard Power Purchase Agreement (SPPA), has been successful with six IPPs already operational in the country.11

The electricity supply industry structure remains that of the single-buyer model with all generators selling power in bulk to KPLC for onward distribution to consumers.12

The transmission network is partly owned by KPLC (for all existing infrastructure before 2008) and KETRACO. The total transmission network comprises 1,434 km of 220 kV and 2,513 km of 132 kV lines while the distribution network is composed of 1,212 km of 66 kV lines, 20,778 km of 33 kV lines and 30,860 km of 11 kV and low-voltage lines.13 The main trunk lines connect generation plants to major demand centres. The power generation plants are, however, unevenly distributed across the country. This presents a major system constraint highlighting the inadequacy of the interconnected grid for power transfers in the country.

Efforts are, however, being put in place to strengthen the transmission system network through maintenance and development of new transmission lines and adoption of N-1 criterion in all new designs to create some redundancy capacity.

Future planning for the electricity sector is based on the 10-year Power Expansion Plan between 2014 and 2024 which focuses on load forecasting, generation and transmission planning. The plan deliberately incorporates renewable energy into the projected generation mix, in particular focusing on projects approved under the FIT. The demand forecast considers the needs of accelerated investment under the Vision 2030 economic blueprint and estimates a supply gap of 10,000 MW by 2024. The total generation expansion cost required is estimated at US$25.873 billion.14

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Valley and western Kenya. Coincidentally, with the exception of western Kenya, these regions also have relatively high electrification levels. A number of potential sites across the country are currently at advanced stages of pre-development with the notable presence of private investors such as Virunga Power, ResponsAbility Africa, Frontier, VS Hydro and Gulf Energy. Potential

sites marked for development by the private sector in the medium term include Broderick Falls, Mutunguru, Mathioya Cascade and Yala Falls. According to the ERC, a total of 44 proposals for development of SHP projects under the FIT scheme with a total capacity of 194 MW had been approved by June 2014 with many more still under consideration.

The Government has commissioned a national resource assessment for SHP alongside conducting feasibility studies for potential sites in order to attract private sector investment. It is expected that sites with confirmed technical and financial viability will be offered to private investors through public auctions for development.

The Kenya Association of Manufacturers (KAM) runs a Regional Technical Assistance Programme (RTAP) aimed at catalysing financing for renewable energy projects in East Africa. RTAP’s objective is to make renewable energy and energy efficiency financing a standard business model

TABLE 2

Operational SHP plants in Kenya

Plant Year constructed Developer Installed capacity (MW)

Ndula 1925 KPLC 2.00

Mesco 1933 KPLC 0.35

Sosiani 1952 KPLC 0.40

Sagana Falls 1955 KPLC 1.50

Gogo Falls 1958 Mining Co. 2.00

Tana 1 & 2 1952 KPC 4.00

Tana 3 1952 KPC 2.40

Tana 4 1954 KPC 4.00

Tana 5 1955 KPC 2.40

Tana 6 1956 KPC 2.00

Wanjii 1 & 2 1952 KPC 5.40

Wanjii 3 & 4 1952 KPC 2.00

James Finlay 1 1934 James Finlay 0.30





Brooke Bond 1 — Brooke Bond 0.09




Savani 1927 Eastern Produce 0.09

Diguna 1997 Missionary 0.40

Tenwek — Missionary 0.32

Mujwa — Missionary 0.07

Community MHPs 2002 — 0.02

Total — — 32.19


FIGURE 5

SHP capacities 2013-2016 in Kenya (MW)

Potential

capacity

Installed

capacity

2016 2013

3,000

3,000

32

33

Sources: Ministry of Petroleum and Energy,11 Balla,16 WSHPDR 201315

Note: The comparison is made between data from WSHPDR 2013 and WSHPDR 2016.

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that can be adopted by local banks in Kenya, Uganda and Tanzania.18 The programme, funded by the Africa Infrastructure Trust Fund of the European Union, aims at providing support for the financing of renewable energy projects of SHP, biomass, cogeneration and solar as well as energy efficiency projects in the three East African countries. The programme has a portfolio of 96 projects with SHP dominating the renewable energy segment.

In general, financing for SHP still faces various challenges. Models utilized by developers in Kenya involve a combination of several approaches including community finance, public funding, equity investment, grants and loans from local financing institutions. Nevertheless, the Government is engaging in efforts to promote the SHP sector and, as a result, 35 plants with a total capacity of 163.7 MW are in various stages of implementation (i.e. in the licensing, construction or negotiation process).21

Renewable energy policy

The Government of Kenya is keen to increase the share of renewable energy sources in the country’s generation mix. This is evidenced by its relatively friendly policy instruments such as the FIT, duty exemption on renewable energy equipment and increased public investment in geothermal exploration, all of which are aimed at attracting private sector investment. However, with the discovery of fossil fuels in the country including coal deposits in Kitui, oil in Turkana County and natural gas in Wajir, the Government is slowly shifting towards a mixed approach encompassing development of both renewable energy plants and fossil fuel generators.

The Ten Year Power Sector Expansion Plan deliberately seeks to incorporate renewable energy in the country’s power sector planning processes with a focus on renewable energy projects approved under the FIT process. The plan gives significant recognition for renewable energy as a supply driver for power in the

country. The plan proposes the establishment of an inter-ministerial Renewable Energy Resources Advisory Committee (RERAC) to advise the Government on the management of water towers and catchment areas among other issues.

The Energy Act of 2006 set out a clear strategy for the promotion of renewable energy development and resulted in the formulation of the FITs in 2008. The FITs have since been revised twice with the latest tariffs approved in 2012 (Table 3). The Electricity Licensing Regulations of 2012 contain legal provisions for the development of renewable energy-powered mini-grid schemes by the private sector, even in areas that had been previously licensed to the national utility. Licensing requirements are dependent on the installed capacity of the mini-grid’s generator.

To a large extent, government planning on energy development is influenced installation and operation costs. Large hydropower projects of economic potential such as Magwagwa do not balance favourably in the least-cost power development plans due to the relatively high investment costs.20 This is further worsened by the need for massive relocation due to high population densities in identified project areas and the expected environmental challenges. SHP is less affected by these issues.

The draft energy bill of 2015 proposes to redefine the mandate of the Rural Electrification Authority (REA) so as to incorporate responsibility for steering the development of renewable energy projects in the country. The authority, whose name will be changed to Rural Electrification and Renewable Energy Corporation, will be responsible for promoting renewable energy development in alignment with specific regional government needs.

Legislation on small hydropower

The FITs for SHP plants are given in Table 3. Unlike other renewable energy FITs, the value of the SHP

TABLE 3

Feed-in tariffs for renewable energy projects in Kenya

Plant type Installed capacity (MW)

Standard FIT (US$/kW)

Scalable portion of the tariff

Minimum capacity (MW)

Maximum capacity (MW)

Wind 0.5-10 0.1100 12% 0.5 10

Hydropower 0.5 0.1050 8% 0.5 10

10 0.0825

Biomass 0.5-10 0.1000 15% 0.5 10

Biogas 0.2-10 0.1000 15% 0.2 10

Solar (grid) 0.5-10 0.1200 8% 0.5 10

Solar (off-grid) 0.5-10 0.2000 8% 0.5 1

Source: Ministry of Petroleum and Energy19

Note: For values between 0.5 MW and 10 MW, interpolation shall be applied to determine tariff for hydropower

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FIT is calculated depending on the precise installed capacity ranging from US$0.105/kWh for plants with a capacity of 0.5 MW to US$0.0825/kWh for plants with a capacity of 10 MW. These are regulated tariffs for the sale of generated renewable energy to the national grid by private developers. The tariffs are standard for various capacity ranges and are subject to review periodically.

Barriers to small hydropower development

Hydropower in general is vulnerable to variations in rainfall and climate change. Recently, this has proven to be

a big challenge in Kenya with unpredictable rain patterns that have resulted in power and energy shortfalls.

Financing constraints for renewable energy projects have contributed to the limited investment flows from the private sector to SHP projects in Kenya. While initiatives have been put in place to spur interest from local banks, this evidently has not taken root given the limited number of projects accessing long-term financing by local banks.

The lack of appropriate technical skills in the region has also provided a barrier to investment in SHP. This has hindered both planned and existing SHP projects in the country.

References

1. The World Bank (2014).Population, total.Available from http://data.worldbank.org. 2. Nations Encyclopaedia (n.d.). Kenya. Available from http://www.nationsencyclopedia.com/Africa/Kenya-CLIMATE.html#ixzz3l2CTcEas. 3. EEP Africa (n.d.). Kenya country profile.Available fromhttp://eepafrica.org/projects/kenya/. 4. Kenya, Energy Regulatory Commission (ERC) (2015). Power Sector Medium Term Plan 2015-2020.Available from http://www.erc.go.ke/images/docs/kenya_ power_sector_ medium_term_plan_2015-2020.pdf. 5. Kenya National Bureau of Statistics (2015). Kenya Facts. Available from http://www.knbs.or.ke. 6. International Energy Agency (2015). World Energy Outlook 2015 – Electricity Access.Available from www.worldenergyoutlook.org. 7. Kenneth Lee et al. (2014). Barriers to electrification for under-grid households in Kenya.National Bureau for Economic Research.Available from http://emiguel.econ.berkeley.edu/assets/miguel_research/57/Barriers_to_Electrification_for_Under_Grid_Households_in_Rural_Kenya.pdf. 8. Kenya, Energy Regulatory Commission (ERC) (2015). Electricity Subsector Medium Term Plan 2012-2016.Available from http://erc.go.ke/images/docs/Electricity_Subsector_Medium_Term_Plan_2012-2016.pdf. 9. Institution of Engineers of Kenya (IEK) (2012). Organisational Chart Of Kenya͛s Electricity Sector.Available from http://trinomics.eu/wp-content/uploads/2015/05/Market-study-to-strenghten-economic.pdf. 10. Kenya, Energy Regulatory Commission (ERC) (2013). Electricity Cost Tariffs & Schedule of Tariffs 2013. Available from http://www.kplc.co.ke/content/item/691. 11. Jason Wendle (2013). Assessing the impacts of new IPPs at country level - Case study on Kenya. Proparco. Available from http://www.proparco.fr/webdav/site/proparco/shared/PORTAILS/Secteur_prive_developpement/PDF/SPD18/SPD18_Jason_Wendle_UK.pdf. 12. Kenya, Energy Regulatory Commission (ERC) (2013). Government Policy And Regulatory Environment

To Facilitate Geothermal Development: The Case Of Kenya. Available from http://www.irena.org/DocumentDownloads/events/2013/November/OLADE/5_Ng%E2%80%99ang%E2%80%99a.pdf. 13. Kenya, Ministry of Petroleum and Energy (2015), Draft National Energy And Petroleum Policy. Available from http://www.erc.go.ke/images/docs/National_Energy_Petroleum_Policy_August_2015.pdf. 14. Kenya, Energy Regulatory Commission (ERC) (2014).10 Year Power Sector Expansion Plan 2014-2024. Available from http://erc.go.ke/images/docs/Ten_Year_Power_Sector_Expansion_Plan-2014-2024.pdf. 15.Liu, H., Masera, D. and Esser, L., eds. (2013). World Small Hydropower Development Report 2013.United Nations Industrial Development Organization; International Center on Small Hydro Power.Available from www.smallhydroworld.org. 16. Balla, P. (2006).National Study on Small Hydro PowerDevelopment: Status and Potentialof Small HydroPower Development in the Tea Industry in Kenya.Draftreport presented to AFREPREN, (2006). 17. Kenya Power & Lighting Company (KPLC) (2014). Kenya Power Annual Report & Financial Statements for the Year Ended 30 June 2014. Available from http://www.kplc.co.ke/category/view/39#sthash.yN3Nz1Fn.dpuf. 18. Kenya Association of Manufacturers (KAM) (n.d.). KAM Signs KSH 239 Million Energy Project-With AFD.Available from http://www.kam.co.ke/index.php/latest-news/413-kam-signs-ksh-239-million-energy-project-with-afd. 19. Kenya, Ministry of Petroleum and Energy (2012). Feed-In-Tariffs Policy On Wind, Biomass, Small-Hydro, Geothermal, Biogas And Solar Resource Generated Electricity. Available from http://www.energy.go.ke/downloads/FiT%20Policy,%202012.pdf. 20. Kenya, Energy Regulatory Commission (ERC) (2011). Least Cost Power Development Plan (2011-2030).Available from http://www.renewableenergy.go.ke/downloads/studies/LCPDP-2011-2030-Study.pdf. 21. Kenya, Energy Regulatory Commision (2016). Small Hydro Power Projects in Kenya. Presented at the COMESA-ICSHP Small Hydro Power Training, 20-24 June 2016, Nairobi Kenya.

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