Kenya has agreed to start importing electricity from Ethiopia at $0.07 (Sh5.80) per kilowatt hour, in what the Ministry of Energy terms as a competitive rate.
The deal to import 400MW was reached on Monday between Kenya’s Ministry of Energy and Ethiopia’s Ministry of Water and Energy but failed to agree on pricing.
According to estimates from the Energy Regulatory Commission (ERC), new hydro-power projects price power between $0.093 (Sh7.70) and $0.111 (Sh9.20) per kilowatt hour. One kilowatt hour is equivalent to a single unit of power consumption – what is used to bill customers.
“The proposed power import is based on a feasibility study jointly undertaken by Kenya and Ethiopia,” said energy Permanent Secretary Patrick Nyoike in a statement.
Construction of the interconnector is expected to start in early 2013 and end by 2016 at a cost of $1.2 billion and is funded by World Bank, French Development Agency and African Development Bank.
The power agreement is part of the government’s effort to increase the country’s installed electricity capacity to 3,868 MW by 2016 up from the current 1,394 MW.
The plan is also expected to address the chronic power shortages that constantly push the country to adopt more expensive thermal power thus fuelling high consumer prices.
The power purchasing agreement with Ethiopia is the second Kenya has had after a similar arrangement with Uganda more than a decade ago where the country imported about 30MW from Uganda.
But unlike Uganda which only serves Western Kenya, the Ethiopia supply will be fed into the national grid making it available country wide.
Hydro-power accounts for more than half of power generation in Kenya followed by thermal and geothermal sources.