Kenya's plan to import electricity from Ethiopia faces potential roadblocks due to the worsening energy crisis in the nation. The Energy and Petroleum Regulatory Authority (EPRA) is concerned that power shortages in Addis Ababa could disrupt supply to Nairobi, potentially forcing a renegotiation of the 25-year power purchase agreement (PPA) signed in July 2022.
While Ethiopia is not in default yet, EPRA CEO Daniel Kiptoo highlights the precarious situation. He stated that the contract obliged Ethiopia to fulfill demand. Even with potential compensation for breaches, a lack of power could still necessitate renegotiation.
This agreement is crucial for Kenya, as it currently relies solely on Ethiopia and Uganda for imported electricity. The initial price of 6.5 US cents per kilowatt-hour for the first five years offered a cheaper alternative to domestic sources and aimed to ensure reserves during peak demand. The interconnection with Ethiopia was supposed to provide reliable and affordable energy to nearly 1.4 million Kenyan households, including those in rural areas.
However, Ethiopia's own struggles with limited electrification and frequent outages cast a shadow on the deal. The World Bank emphasizes that Ethiopia needs better infrastructure and utilities to improve electricity access and alleviate poverty. It has launched a USD 1.4 billion program over ten years to collaborate with the Ethiopian government, attract investment, and modernize the electricity sector.
The Ethiopian Electric Power (EEP) recently announced plans to build 14 new power distribution stations and lines with a USD 500 million funding garnered from the World Bank, alongside renovations of existing power plants and distribution networks. The project is set to be completed in three years. EEP aims to improve efficiency, address existing challenges, and increase access to electricity. Upgrading the transmission infrastructure is key, as power outages often stem from maintenance needs rather than generation limitations.
Meanwhile, Kenya grapples with high electricity tariffs from independent power producers. A presidential task force recommended renegotiating existing contracts to lower consumer bills, leading to a freeze on new deals and investigations into existing ones.
Source: The East African
Additional source: 2Merkato Archives
