Kenya Paid for Idle Plants Once: Dangote's 500MW Lamu Offer Must Face an AuctionKenya Paid for Idle PlantsOnce: Dangote's 500MW LamuOffer Must Face an Auction

Aliko Dangote says his planned Lamu refinery will generate about 1,000MW from petroleum coke, the solid carbon left over when crude oil is refined, and sell half to the Kenyan government. As Mwenendo reported, the government is considering it and KenGen's acting chief executive Ronoh Kibet calls it a transitional measure.

No agreement has been signed. That is exactly why this is the moment to set the rules.

Dangote's 500MW Equals a Fifth of Peak Demand

The size of the offer is the first reason for caution. Peak demand reached 2,549MW in July 2026, so 500MW would be close to one unit in every five the grid needs at its busiest hour. A single contract of that scale, signed with a single company, would shape what Kenyans pay for electricity for years to come.

The case for taking it is real, and we do not dismiss it. Peak demand rose by more than 300MW in under two years, old plants have retired, and KenGen admits it is "playing catch up" after a moratorium on new power purchase agreements froze investment.

Electricity and water supply grew 7.7% in the second quarter, the fastest of the large sectors in Kenya's latest growth figures. A country that wants factories and data centres cannot run short of power.

But a shortage is the worst possible reason to sign a deal without competition. Shortages are when buyers overpay.

Kenya Already Paid for Power It Did Not Use

Kenyans have been here before. Energy Cabinet Secretary Opiyo Wandayi told the Senate's energy committee in June 2025 that Kenya Power spent KSh 151.7B ($1.17B) buying electricity in 2023/24, up from KSh 141.8B ($1.09B) a year earlier, and that the bill includes payments for power that was available but not used.

He explained why. Most contracts carry a capacity charge, a fixed payment that covers the plant's building costs whether or not the grid calls on it. "Where a plant is not dispatched due to reduced demand, the generators are able to meet their capital recovery obligations," he said. In plain terms: the plant gets paid, and the household electricity bill carries the cost.

Independent power producers took about 60% of Kenya Power's purchase costs while supplying 41% of its electricity in the year to June 2024, industry analysis of the reforms shows, and some private geothermal units charged up to KSh 17.28 ($0.13) a unit against KenGen's KSh 8.24 ($0.06) for the same technology.

Those gaps were not created by geology. They were created at the negotiating table.

Every Shilling on the Lamu Tariff Costs KSh 4.38B

The arithmetic shows what is at stake. A 500MW plant running flat out for a year produces about 4.38 billion units of electricity. On Mwenendo's arithmetic, every extra shilling a unit agreed in a Lamu contract would add roughly KSh 4.38B ($33.74M) a year to the national power bill, before any capacity payments for hours the plant sits idle.

Over a twenty-year contract, a tariff just two shillings too high would cost more than KSh 175B ($1.35B). That money comes from the same tariff a kiosk owner in Kisumu and a welding shop in Kariobangi pay for every unit they use.

None of this means petcoke power is automatically too expensive. It may prove cheap. The point is that nobody, including the government, can know until it is tested against alternatives: geothermal from Olkaria, wind, solar with batteries, imports from Ethiopia. An unsolicited offer, however large the name behind it, is not a price discovery process.

Parliament Already Wrote the Rule Book

The rules exist. When the National Assembly lifted the moratorium in November 2025, it did so on conditions.

The Departmental Committee on Energy's report calls for new projects to be bought through competitive auctions modelled on South Africa's independent power producer programme, with only the least expensive qualifying bidder selected, full disclosure of each producer's owners before any contract is signed, and closer parliamentary oversight of power purchase agreements.

The Ministry of Energy and the Energy and Petroleum Regulatory Authority (EPRA), the regulator that approves electricity tariffs, were given twelve months to make the auction system work. That window closes this November. A 500MW direct deal with Lamu, struck before or around that deadline, would tell every other investor that the auction is optional for anyone large enough to make an offer directly to government.

There is also a sequencing problem. The refinery itself, a project put at about KSh 2T ($15.4B), faces a land dispute that Lamu families have taken to court, and as we argued earlier, it is a plant Kenya's own oil fields cannot fill.

A power contract signed now would put Kenyan electricity consumers on the hook for a project whose core business has not yet started.

The Green Pledge Has a Price Tag Too

Kenya sells itself to investors as a country with a grid drawing most of its power from geothermal, hydro, wind and solar, and committed to fully renewable electricity by 2030. That reputation is a business asset. It is part of the pitch for green hydrogen, for data centres at Olkaria and for exporters who will face carbon checks in European markets.

Petcoke is among the most carbon-heavy fuels used for power. If Kenya decides it needs it for a few years, that may be a defensible choice. But a transitional plant needs a transitional contract: a fixed end date, no automatic renewal and no capacity payments that outlive the shortage they were meant to fix.

What We Ask of the Energy Ministry and EPRA

We call on Cabinet Secretary Opiyo Wandayi and the Ministry of Energy to state publicly, no later than 30 November 2026, that no power purchase agreement for electricity from the Lamu refinery will be signed outside the competitive auction Parliament has ordered.

We call on EPRA to publish the indicative tariff band any petcoke bid would have to beat, and to require that any contract carry an expiry date tied to the 2030 renewable target, with capacity payments capped so that consumers are not paying for a plant the grid rarely calls on.

And we call on the National Assembly's Energy Committee to use its oversight power and publicly oppose any Lamu deal that has not been through that process.

Mr Dangote is entitled to make an offer. Kenya is entitled to compare it. Signing first and asking questions later is how the country ended up paying for power it never used. It should not pay that bill twice.