CEO Francis Njogu:
Construction of Kenya’s first coal-fired power plant in the coastal town of Lamu has suffered delays since 2015 after it ran into headwinds from environmentalists.
Last month, American conglomerate General Electric bought out a 20 per cent shareholding in the Sh200 billion project, with a promise to deliver clean coal technology that would put to rest concerns over pollution.
Cross-post from Business Daily – Thursday, June 21, 2018
Aside from environmental concerns, critics have also questioned the need for the 981-megawatt (MW) mega plant in Kenya. It is feared the project would leave the economy with more than needed electricity and force consumers to pay for idle plants.
The Business Daily caught up with Francis Njogu, the CEO at Amu Power Company — the consortium that won the tender to construct the plant — to shed more light on the project. Excerpts:
Do we really need a coal power plant?
First, the country needs a very healthy generation mix. And coal power has a place in that. Notice our peak demand is around 6pm to around 11pm, and thereafter demand drops steeply. Now, you need a power generator that is able to profile that fluctuation in demand.
Let’s take a look at our current baseload operators — hydros, geothermal and thermal. Hydros are very flexible, you can actually ramp them up and down to match demand but they are severely dependent on the weather. Besides, we no longer have room for more hydros.
Next, diesel plants (thermal) are extremely flexible, they can react almost with demand changes. You can turn them on and off on a whim. However, their electricity is extremely expensive, working against consumers. Geothermal is not flexible. You cannot shut it suddenly. It’s a good technology, but with certain limitations.
With geothermal, you’re either at 140 megawatts or you’re at 140 megawatts. So what happens when demand drops at night? You have to pay for the power that you don’t need. Back to coal plants. Coal is extremely flexible and cheap. If you look at countries in Europe, they use coal plants to moderate fluctuations in renewables.
You can ramp down coal plant to 30 per cent of its capacity. So in Lamu’s case, each phased unit is 327 MW, you can bring it down to 110-120 MW. That way it fits the load profile of the country.
Renewables have their place and so does geothermal and coal. If something happens, you saw cracks the other day in the Rift where geothermal is, the country should be well prepared with diverse sources, located in different parts of the country.
Also, power demand, as a factor of annual economic growth, is growing. We need to plan properly. Since power plants have long turnaround periods of over three years, it wouldn’t make sense to wait till demand exceeds supply before we can bring in new sources. We learnt bitterly in 1999/2000 when drought struck our hydros and we had acute shortages, forcing us to ship in very expensive emergency plant as a matter of urgency.
Coal is a pollutant and is blamed for greenhouse gases that stoke global warming. How do you intend to address that?
Aside from carbon dioxide, other chief emissions from burnt coal are nitrous oxide and Sulphur dioxide. Sulphur dioxide is a function of input. South African coal, the one we’ll be using is extremely low on Sulphur.
Sulphur is not a creation of combustion process. It’s not a product of combustion. Whatever you put in you get out.
That said, the first quality control obviously is bringing in low-Sulphur fuel. South African coal. In addition to that, we’re required to meet the latest World Bank, AfDB and Kenya standards. Basically three-tier standards. We have designed a coal plant that has environmental protection system. That makes it a clean coal plant.
It will be the most advanced plant in Africa incorporating the latest GE technology like the 2,400-megawatt Hassyan coal plant in Dubai which is under construction.
We have a desulphuriser to remove the already low Sulphur in the coal by more than 99.5 per cent. Nitrous oxide will also be taken care of. Then dust, we have a complete dust separation system. In the furnace, we have an electrostatic dust precipitator that removes 99.5 per cent of all particulates.
When are you going to break the ground following the delays?
We are awaiting the Nema tribunal to give out its ruling on the matter. But we expect the first phase (327 MW) to come in by 2021.
Though its total capacity is 1050 MW, only 981 MW will be hooked to the national grid, with the developers using the remaining 69 MW to run the plant. Electricity will be priced in the same range as geothermal power at 7.52 US cents (Sh7.52) per unit — almost a third of what diesel-fired plants charge on average.
Do you anticipate to absorb cost overruns following delays?
It’s the job of developers to manage such issues. We cannot change the tariffs, they are fixed in the contract we have with Kenya Power.
In 2015 you awarded the construction contract to Power Construction Corporation of China. What’s the place of GE?
It’s true we signed an EPC (engineering, procurement and construction) contract with Power China. But it is has been amended to take in GE component. GE is putting in the heart of the plant.
They’re bringing in plant machinery, a boiler and steam turbine generator built using GEs latest clean coal technology as well as air quality control systems.
It’s a joint contract between GE and Power China. (The Amu consortium brings together firms like Gulf Energy, Centum investment, General Electric and Power Construction Corporation of China).
Consumers will pay a fixed charge of Sh37 billion per year through their bills towards the plant upon construction, irrespective of whether it generates power or not. That’s a heavy burden.
The capacity charges take into account payback on investment debt (three quarters) and equity (a quarter). It takes into account fixed maintenance. Because a plant like this requires constant maintenance. It’s not profit.
It’s exactly like a mortgage. If you buy a house today in cash how much it will cost you? Compare that with a mortgage and it comes to two and a half three times higher. And remember a house has no fixed maintenance of the level of a mega coal plant.
The project is very large we can’t take the whole of it at once.
The phases are still large (327 MW per phase)
But we’re taking in the 300 MW of wind power from Lake Turkana when wind blows 100 per cent. And you’re not going to say just give me half of it. When it blows 100 per cent you’re going to you have to take whole of it.