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[h=1]Diesel power generators stuck with expensive stocks[/h]
By EVELYN SITUMA
Posted Tuesday, January 13 2015 at 00:02
IN SUMMARY
The injection of geothermal power into the national grid has left diesel power generators with stockpiles of fuel that they are unable to dispose of, leaving the energy sector regulator in a dilemma on how to compensate the affected firms.
The Energy Regulatory Commission (ERC) requires that all power generators that supply electricity to the national grid must store at least three months equivalent of fuel supplies to avoid stock-outs.
But the injection of 280MW to the national grid has seen electricity distributor Kenya Power reduce its reliance on the expensive diesel-generated energy, leaving the independent power producers (IPPs) in a fix.
The fuel held by IPPs could take them 12 to 13 months to consume, said Energy and Petroleum secretary Davis Chirchir.
The heavy fuel used to generate power cannot be sold to motorists, limiting the disposal options for the IPPs at a time of rapidly falling international oil prices.
The only possible buyers of the fuel are cement companies who use diesel to fuel their furnaces, but even these have shifted to using coal, which is a cheaper source of power.
The ERC director- general Joe Nganga says the regulatory body could be forced to review the price at which Kenya Power buys electricity from the IPPs, which could ultimately have an effect on consumers bills.
READ: Geothermal overtakes hydro power for first time
In a letter written by IPPs to the energy regulatory commission, the thermal power producers are calling on the government to help them find ways of managing the situation.
We got the request which was sent to ERC and copied to the ministry, said Energy principal secretary Joseph Njoroge in an interview. Their concerns are genuine, he added.
Mr Nganga says the IPPs main worry is that they are stuck with expensive fuel that will be even harder to dispose as oil prices continue to fall.
However, he didnt provide figures on the quantity and worth of stock held by the IPPs. ERC says it will hold a meeting with Kenya Power and the IPPs to address the concern.
The energy regulator has not yet prescribed a solution on the matter, but says the issues at hand are those pertaining to the holding stock and power purchase agreements (PPAs) signed with the diesel power generators.
Among the options (to be considered) is re-looking at PPAs Kenya Power has with thermal IPPs. Some of the PPAs were made to suit the demands at the time and may not work in the changing environment, says Mr Nganga.
READ: Why geothermal has failed to cut electricity prices
By EVELYN SITUMA
Posted Tuesday, January 13 2015 at 00:02
IN SUMMARY
- The Energy Regulatory Commission requires that all power generators that supply electricity to the national grid must store at least three months equivalent of fuel supplies to avoid stock-outs.
- But the injection of 280MW to the national grid has seen electricity distributor Kenya Power reduce its reliance on the expensive diesel-generated energy, leaving the independent power producers (IPPs) in a fix.
- The heavy fuel used to generate power cannot be sold to motorists, limiting the disposal options for the IPPs at a time of rapidly falling international oil prices.
The injection of geothermal power into the national grid has left diesel power generators with stockpiles of fuel that they are unable to dispose of, leaving the energy sector regulator in a dilemma on how to compensate the affected firms.
The Energy Regulatory Commission (ERC) requires that all power generators that supply electricity to the national grid must store at least three months equivalent of fuel supplies to avoid stock-outs.
But the injection of 280MW to the national grid has seen electricity distributor Kenya Power reduce its reliance on the expensive diesel-generated energy, leaving the independent power producers (IPPs) in a fix.
The fuel held by IPPs could take them 12 to 13 months to consume, said Energy and Petroleum secretary Davis Chirchir.
The heavy fuel used to generate power cannot be sold to motorists, limiting the disposal options for the IPPs at a time of rapidly falling international oil prices.
The only possible buyers of the fuel are cement companies who use diesel to fuel their furnaces, but even these have shifted to using coal, which is a cheaper source of power.
The ERC director- general Joe Nganga says the regulatory body could be forced to review the price at which Kenya Power buys electricity from the IPPs, which could ultimately have an effect on consumers bills.
READ: Geothermal overtakes hydro power for first time
In a letter written by IPPs to the energy regulatory commission, the thermal power producers are calling on the government to help them find ways of managing the situation.
We got the request which was sent to ERC and copied to the ministry, said Energy principal secretary Joseph Njoroge in an interview. Their concerns are genuine, he added.
Mr Nganga says the IPPs main worry is that they are stuck with expensive fuel that will be even harder to dispose as oil prices continue to fall.
However, he didnt provide figures on the quantity and worth of stock held by the IPPs. ERC says it will hold a meeting with Kenya Power and the IPPs to address the concern.
The energy regulator has not yet prescribed a solution on the matter, but says the issues at hand are those pertaining to the holding stock and power purchase agreements (PPAs) signed with the diesel power generators.
Among the options (to be considered) is re-looking at PPAs Kenya Power has with thermal IPPs. Some of the PPAs were made to suit the demands at the time and may not work in the changing environment, says Mr Nganga.
READ: Why geothermal has failed to cut electricity prices