Ruto Cabinet lifts Uhuru-era ban on independent power producers

Ruto Cabinet meeting

President William Ruto chairs a Cabinet meeting at State House, Nairobi, on February 28, 2023.  

Photo credit: PCS

The Cabinet has lifted the Uhuru-era ban on procurement of new independent power producers (IPPs) in a bid to increase power generation at a time annual droughts are becoming more extreme thus reducing hydropower generation.

Former President Uhuru Kenyatta’s taskforce on review of power purchase agreements (PPAs) which was formed in March 2021 and submitted its report in September of the same year froze procurement of new IPPs.

This means Kenya Power has not signed any new PPA with any IPP in a period of just over a year in line with the taskforce’s report.

The Cabinet has, however, lifted this moratorium which now allows energy investors to come and sign contracts with the utility for the supply of electricity.

The Cabinet says the move has been necessitated by the biting drought which has reduced the dispatch of hydroelectric power generated from the major dams and allows more IPPS to come and set up shop in the country to cushion the country from power supply hitches during future droughts.

Kenya Power says that the power imports from Ethiopia of 200 megawatts (MW) that started in January have significantly helped to plug the deficit that has been caused by local hydropower generation shortfall owing to the drought.

“In addressing the challenges of realizing a sustainable energy mix occasioned by the prolonged drought, Cabinet approved the lifting of the moratorium on PPAs as a way of enhancing the nation’s energy security through opening up the energy sector for continued investments,” said Cabinet.

Any new IPP that comes on board will join some 5 new power producers that have connected to the grid over the past five years which has increased the country’s generation capacity.

Kenya Power says Kenya’s reserve margin -  the amount of unused available power generation capability – is at just 4 per cent and therefore onboarding new power generators to the grid is necessary.

This low reserve margin means that any drastic fall in generation from the hydropower plants during droughts will continue to force the country to resort to expensive thermal power to plug the deficit.

The Cabinet has also approved a framework for the engagement of these IPPs with energy auctions as opposed to the current feed-in tariffs regime.

The feed-in tariffs guarantee the firm's fixed prices for the energy they supply to the grid which encourages more investors to put their money into renewable energy projects.

In the new energy auction system however, the IPPs will be bidding for the supply of power to the grid where the lowest bidder will win the right to supply energy to the grid during that cycle.

“The new framework will enable the State to procure clean energy at prices that reflect those prevailing in the market, giving consumers the benefit of competition in pricing,” said the Cabinet.