The Kenya Electricity Generating Company (KenGen) is planning to enter the captive power market as part of a revenue diversification strategy amid rising own-power generators that have triggered defection from the national grid.
Captive power plants operate by generating electricity primarily for the consumption of the owner and not for sale to the public.
KenGen has already invited consultants to conduct a feasibility study on the opportunities available in the renewable captive power market, with a focus on solar photovoltaic (PV) and geothermal power generation technologies.
Insiders said the power generator would focus its captive power projects at the KenGen Green Energy Park, which sits on 845 acres at the Olkaria geothermal field in Naivasha and will include both industrial and non-industrial activities such as offices, data centres, research and development centre, hospitality, visitor experience centre as well as administrative and commercial uses.
“The Energy Act has opened up opportunities in the electricity sector and KenGen targets to use power at Olkaria to support investments at its Green Energy Park,” an official said.
A blueprint shows that the energy park, to be developed in four phases between 2025 and 2045, will host light industries such as warehousing and logistics and supporting industries, medium and heavy industries such as manufacturers of fertilisers, iron and steel, plastics and packaging, and fabricated metal products.
It will also be home to steam-intensive industries such as pulp and paper, wood and wood products, textiles and apparel, food and beverages, and leather industries.
KenGen, whose main customer is Kenya Power, says the growth of own-power generation (also called captive power generation) and the defection from the grid is due to factors including the high cost of grid electricity, the need for reliable supply and the global trend of falling prices for renewable energy technologies, particularly solar PV.
“This has led to the suppression of grid power demand reducing the revenue base for KenGen. As part of KenGen’s expansion and diversification strategy, the organisation intends to venture into the business opportunity that the new market niche of captive has presented,” said KenGen in a tender published last week.
Captive power generation has seen significant growth among commercial and industrial consumers, thanks to its cost-effectiveness, ease of setup, and supportive government policies, according to the Energy and Petroleum Regulatory Authority (Epra).
The establishment of industrial parks is part of Kenya’s Industrial Transformation Programme, which was launched in July 2015. The plan, which was developed by Mckinsey, targets to increase manufacturing to more than 15 percent of GDP, create one million jobs and increase foreign direct investment fivefold.
Epra’s latest energy statistics report puts the captive power capacity in the country at 532.6 megawatts (MW) or 14.88 percent of Kenya’s installed capacity as at the end of June 2024. The figure stood at 280.76MW as of December 2022.
Of the 532.6 MW, solar contributed 229.2 MW, followed by biomass (161.8 MW), waste heat recovery cycle (83.5 MW), hydro (33 MW), thermal (21.3 MW) and geothermal at 3.7 MW.
