When the tender for Lamu was invited, they were based on the 2011 Least Cost Power Development Plan, which projected extremely high load growth for the period 2011-2031. However, actual load growth has been far slower than predicted in 2011, and subsequent forecasts in 2015 and 2017 have been much lower.
Both the Lahmeyer report and the 2017 LCPDP concluded that if Lamu is built, the plant would be grossly underutilized through the middle of the 2030s, if not longer, generating far less electricity than Amu Power has claimed would be the case.
The LCPDP only provides the impact of adding Lamu on retail tariffs through 2024. However, even this limited data shows that adding Lamu will lead to significantly higher tariffs—even before the plant goes into service in 2024.
Building the proposed Lamu coal plant in Kenya, a three-unit, 981-megawatt (MW) facility, would be a costly error for the country, locking it into a 25-year power purchase agreement (PPA) that would force electricity consumers to pay more than $9 billion, even if Lamu doesn’t generate any power, as long as it is available for dispatch.
The project, first proposed in 2015 as part of a government initiative to build new baseload capacity to replace aging diesel-fired generation and serve planned future economic growth, has been overtaken by events, particularly lower-than-projected demand growth, lower forecasted generation from Lamu and higher anticipated costs for imported coal. These developments have undercut the plant’s financial viability and should prompt the Kenyan government to cancel the project.
The planned $2 billion coal plant, currently scheduled to enter commercial service in 2024, is being built by Amu Power Company Limited, a single-purpose entity 51 percent owned by Centum Investments, a Kenyan investment firm, with the remainder held by Gulf Energy. The construction contract for the plant was awarded to Power Construction Corporation of China and Sichuan Electric Design and Consulting Company in 2016.
However, construction has not yet started, and as will be demonstrated in this report, there is ample justification to cancel the entire project. Using data from the October 2016 Lahmeyer International report, Development of a Power Generation and Transmission Master Plan, Kenya, 2015-2035, and Kenya’s Updated 2017-2037 Least Cost Power Development Plan, released in June 2018, we show that the assumptions used by the coal plant’s developers no longer hold true and that building the facility would burden consumers with costly power for years to come. In addition, the project would make it difficult, if not impossible, for Kenya to meet its Paris climate change treaty obligations.
In particular, we find:
Please view full report PDF for references and sources.