The cost of energy is set to go even higher after the Energy Regulatory Commission (ERC) approved unsolicited independent solar power producers to politically correct individuals in government.
Close allies of Deputy President Mr William Ruto and a relative of President Uhuru Kenyatta were given blanket approval on what ERC calls "feed in tariff" at an exorbitant Sh12 per Kw/h (compared to an average market rate of Sh7 to Sh8 per Kw/h) for a period of 24 years.
At least 2 bidders for the same unadvertised contract were willing to be engaged at Sh8 per Kw/h meaning Kenyan consumers will lose at least Sh4 per Kw/h generated through solar.
Deputy President ally is a prominent Mombasa based businessman (Radiant, Eldosol) and the President's uncle (Malindi Solar) who runs Petro Kenya did not pick calls from Cofek.
Two other individuals prominently feature - a senior (State House based) adviser to the President and an ex-powerful CEO of an energy parastatal fronted the bids.
When reached by Cofek both individuals confirmed knowledge of the same but denied direct involvement.
DP Spokesman Mr David Mugonyi demanded for more details before responding to our query on potential link of the solar firms to his boss.
On February 8, 2017 Cofek wrote to ERC as follows;
From information we have seen, we hereby report that we know that;
- Four investors are advancing projects for a total of 120 MW of solar power to join the national grid – with 3 in Eldoret town and 1 in Malindi.
- Each of the investors is proposing a 40 MW project to be developed under the Independent Power Producers (IPPs) arrangement with feed-in tariff that currently stands at Sh12 (USD 0.12/ EUR 0.11) per kWh.
- Two of the projects, developed by Mauritius-registered Radiant Energy and Eldosol Energy Limited, are sited next to each other (13 Kms to the South East of Eldoret).
- Another solar power plant is being developed by Alten Energy Solarfarms. It will be located just 1 km east of the Radiant/Eldosol sites.
- Malindi Solar plant is being developed in Malindi
- Radiant Energy and Eldosol Energy are owned by the same shareholders, which include Frontier Investment Management, Selenkei Investment Limited, Cedate Limited, Interpro International LLC and Paramount Bank.
- Radiant Energy and Eldosol Energy secured financing from European Investment Bank (EIB) as approved by the bank's board on October 14, 2016 and possibly the said firms may have already signed financing contract with EIB.
- Environmental and social impact assessments (ESIAs) for the projects have been prepared and submitted to the National Environmental Management Authority (NEMA) for approval.
- Eldosol Energy, like the rest, will be a 40 MW project which will comprise 140,800 photovoltaic modules as well as a medium voltage step-up transformer (400V – 22kV) located either outdoors or in a sheltered housing structure. The anticipated annual electricity generation is 74,968,000 MWh while the overall investment has been estimated at USD 45 million (EUR 41.2m).
- Eldosol Energy will share a common substation with the neighbouring solar park of Radiant Energy.
- That all the 4 firms have submitted approved Power Purchase Agreements (PPA’s) from Kenya Power and Lighting Company (KPLC)
- That the Technical Committee of the ERC held on November 10, 2016 reviewed the 4 PPA’s which in summary asked for; (a) Standard Feed In Tariff for a term of 20 years encompassing solar PV with no storage (b) Project costs estimate US$82.16 million with a fixed US$0.1056/KWh(88%) fixed tariff and escalatable tariff of 0.0144 US$/Kwh(12%) (c)Effective date marked as January 1, 2017
- Globally solar costs have come down by an estimated 60 – 70% with South Africa at 6.40US cents/Kwh; Zambia 6.02 US cents /Kwh; Nigeria 8.10US cents/Kwh; India 7.00 US cents/Kwh and Brazil 8.00 US cents/KwhThat as proposed by the Cabinet Secretary for Energy and Petroleum on November 15, 2016 the UNSOLICITED bids for the solar PV project would have been ideally considered under energy auctions
From the foregoing, we request to know;
- How many firms send in UNSOLICITED bids and why the 4 – with 2 belonging to the same shareholders approved
- Why the fixed tariff of 12 US Cents/Kwh, the highest in the world, should be entertained without competition
- Why the bidders needed 20 years on a FIT (Feed in Tariff) of fixed tariff
- Why the whole arrangement should not, under the circumstances, be construed as fraud
- How does GoK offer/build capacity of investors without competition?
- Why the project was not made competitive as per the public procurement laws? This is because as procured, the 4 firms do not exactly fit within the Public Private Partnerships laws.
- Show cause why the whole project should not be immediately halted and put to public participation.
On February 14, 2017 a near casual and derogatory ERC acting director general Mr Pavel Robert Oimeke replied thus;
"We note what you have to say. We confirm that the approval with respect to: Malindi solar Farm; Alten Energy; Radiant Energy; and Eldosol Energy Ltd were approved as per the existing FiT Policy 2012, the Law and is within ERC’s legal mandate. Kindly note"
Effectively, ERC chose not to answer critical questions, contrary to the law and public interest.
ERC based its' decision on the yet to be gazetted "Feed in Tariff Policy". The Energy Act 2006 at Section 43(3)(a) requires ERC to ensure that the rates or tariffs established in the contract are just and reasonable.
Section 5(b) defining objects and functions of ERC prioritizes the existence of ERC on the need "to protect the interest of consumers". The ERC emphasizes market interests.
More information will be coming soon on the rot that ERC is entertaining and unwilling to explain