Once the 1,045 kilometre transmission power line between the two countries is complete in 2018, Kenya will import power at a rate of seven US cents (Sh6.08) per kilowatt hour.
Ethiopia, which is laden with a huge hydropower potential, boasts some of the world’s lowest energy costs at three US cents (Sh2.58) per kilowatt hour, and has set out a plan to make electricity exportation its main foreign exchange earner.
The loan from the World Bank is to support the larger $1.3 billion Eastern Electricity Highway Project that seeks to establish the regional integration of a power transmission network that will connect the five East African countries including the Democratic Republic of Congo.
The Ethiopia-Kenya Power interconnector marks the first phase of the regional project, which Finance Minister Njeru Githae said will be more cost-effective and reliable in enhancing Kenya’s power supply.
“The intention is to make electricity a tradable commodity so if we have excess we can sell it. We have a competitive edge on other countries in geothermal,” he said.
Kenya also has a transmission line to Uganda, which Githae says is to be upgraded as well.
The government has made several efforts to increase the country’s energy capacity with the commissioning of the Sh10 billion Kipevu III Power Plant in Mombasa that adds an additional 115 Megawatts (MW) to the national grid.
President Mwai Kibaki recently launched the construction of the 280 Megawatt geothermal project at Olkaria geothermal field which is scheduled for commercial operation by September 2014.
High energy costs remain a major hindrance in the ease of doing business in Kenya when compared to some of its regional competitors of Uganda, Tanzania, South Africa and Egypt.
Over 60 percent of generated energy in the national grid is used in manufacturing enterprises.
The Kenya Association of Manufacturers has put pressure on the government to ensure that an additional 41,300MW of energy is created by 2030 in order for the country to remain competitive.
Kenya’s total installed electricity capacity stands at 1,500MW against a peak demand of 1,300MW.
Under the Vision 2030 economic blueprint the country’s electricity generation capacity is to rise to 21,000MW in the next 17 years.