Kenya Eyes Direct Power Purchase from Uganda, Talks Underway

Summary:

• Kenya is considering replacing its electricity exchange agreement with Uganda with a direct purchase deal, aiming to procure surplus power from its neighbor through a Power Purchase Agreement (PPA). This shift aligns with Kenya’s goal of reducing electricity costs and dependence on thermal plants, with discussions ongoing between the two countries’ electricity authorities.

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KAMPALA, (Examiner) – Kenya and Uganda are in discussions to revamp their electricity exchange agreement, with Nairobi proposing to transition from the current arrangement to a direct purchase deal from Uganda, which has been producing surplus power.

Under the proposed Power Purchase Agreement (PPA), mirroring an existing arrangement with Ethiopia, Kenya aims to secure a steady supply of electricity from its neighbor, bypassing the previous system where the country with the higher importation foots the bill at the end of a specified period.

The surplus of hydropower in Uganda, which is the most cost-effective source in the national grid, holds promise for Kenya’s objectives of reducing electricity costs and diminishing dependence on less sustainable thermal plants.

“Uganda has recently completed significant hydropower projects, resulting in excess power. Discussions are underway between Kenya Power and its Ugandan counterpart to formalize this surplus power through a PPA,” stated Daniel Kiptoo, Kenya’s Director-General of the Energy and Petroleum Regulatory Authority.

Kenya’s deficits in electricity generation have positioned it as a net importer within the exchange agreement with Uganda, prompting the shift towards a PPA.

Between January and March of this year, Kenya imported 55.85 million units of electricity from Uganda while exporting only 10.65 million units in the same period. The total electricity imports during this period reached a record high of 408.78 Gigawatt-hours (GWh), with the majority sourced from Ethiopia.

This move towards a PPA with Uganda coincides with Kenya’s increased imports from Ethiopia, bolstering its electricity supply from dams and geothermal sources and consequently reducing consumer bills.

For instance, consumers now receive 32.9 units for Ksh1,000, compared to 32.2 units last month, and 16.5 units for Ksh500, up from 16.1 units. Locally generated hydropower remains the cheapest option in the national grid, priced at Ksh3.83 per unit, followed by geothermal power at Ksh10.28 per unit, while imported hydroelectricity costs Ksh10.69 per unit as of February this year.

Kenya presently holds a 25-year PPA with Ethiopia, with electricity priced at $0.065 (Sh8.6) per kilowatt. However, the specifics of the proposed PPA with Uganda, including the tariff and validity period, are yet to be disclosed by Kenya Power.

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