KenGen plans economic zones for industrial development at Olkaria

KenGen plans economic zones for industrial development at Olkaria Power transmission lines in Kenya (source: flickr/ aaron.knox, creative commons)
Francisco Rojas 20 Feb 2015

KenGen wants to create special zones that would give manufacturers discounts on power bills due to lower transmission costs from the plants to the industrial hubs.

Local news details that the Kenya Electricity Generating Company (KenGen) will set up a special economic zone close to the geothermal plants in Olkaria to offer subsidised power to manufacturers.

President Uhuru Kenyatta on Thursday said creation of these special zones would see manufacturers offered discounts on power bills because of lower transmission costs from the plants to the industrial hubs.

“Special Economic Zones and EPZs (Export Processing Zones) will benefit from concessionary power rates to catalyse industrial production,” said Mr Kenyatta during the commissioning of 140 megawatts at KenGen’s Geothermal 1 Power Project that is part of the ongoing 5,000-megawatt programme.

Special economic zones also offer tax concessions and are built to make Kenya’s manufacturing sector competitive in the regional market.

Manufacturers cite power outages and expensive electricity as factors that contribute to making Kenya uncompetitive.

The country has increased geothermal power production to boost supply as well as reduce electricity costs and cut its reliance on expensive diesel generators.

KenGen completed the construction of the second phase of its geothermal plant last December, adding 280 megawatts to the national grid. This helped to drive up geothermal’s share of power production in January to 51 per cent from 19 per cent a year ago.

Although the additional cheaper geothermal power cut electricity costs by about a third since August, households have seen little changes when the comparison is stretched to 13 months ago due to higher tariffs awarded to Kenya Power last year.

The fixed charge for domestic consumers rose to Sh150 per month from the Sh120 while the energy charge per kilowatt-hour (kWh) for those consuming above 50 units increased to Sh13.68 from Sh8.10.

The fuel cost charge on power bills now stands at Sh2.51 per kWh from Sh5.19 in December due to the additional geothermal, a drop of Sh2.68 over the period — which is lower than the Sh5.58 tariff increase.

The Kenyatta administration has been calling on businesses to transfer the benefits of the “rock-bottom” electricity prices to consumers in the form of lower product costs.

Kenya Private Sector Alliance chairman Vimal Shah called on food industries to reduce prices of their commodities and expressed optimism that the costs would come down in the next three months.

“When you have more power, things will change. This is the time to invest in Kenya,” said Mr Shah.

Source: Business Daily