Economic and operational effects of introducing Independent Power Producers into the Kenyan power system

Abstract

Some significant occurrences like increase in the electricity demand, degrading catchment areas and unpredictable climatic patterns have a direct impact on the energy sector. To address this scenario, a number of changes have been made in the energy sector by the Kenyan Government. These include the unbundling of the power generation from Transmission and Distribution functions and contracting the Independent Power Producers (IPPs), and Cogeneration (collectively referred to as Non Utility Generation - NUG) to supplement the power generation from the state controlled entity - The Kenya Electricity Generating Company (KenGen) so as to meet the national electrical demand. This research study aimed at analyzing the effects of these IPPs on the cost of electrical energy in Kenya and also on the operational flexibility of the Kenyan Power System. These studies have been done using the Supervisory Control and Data Acquisition (SCADA) system from the Kenya Power and Lighting Company (KPLC). The economic aspect of this study has been done by taking a sample of four large power consumers (Kenya Pipeline Company - KPC, Sameer Africa, British American Tobacco — BAT and East African Portland Cement — E.A Portland) and analyzing their electricity bills while focusing on the Fuel Cost Adjustment (FCA) levy from the year 2003 to 2007, since majority of the IPPs run on a variety of fuels that are quite expensive and these costs are passed on to the customers at a rate proportional to the energy they consume. More so, the cost of the fuels used for power generation is dependent on the fluctuating international prices. This study has shown that the IPPs have improved the operational flexibility of the power system in terms of management of system outages and the loading of various power system equipment, but have also made the cost of electricity to increase exorbitantly to the customers. This study may further assist all the stakeholders in the energy sector to plan, design and control power system operations, while at the same time putting more emphasis on industrial cogeneration.