The role of diversity, reserve margin and system structure on retail electricity tariffs in Kenya

Abstract

Electricity bills in Kenya have been an issue of concern to electricity consumers in the recent past. Highly volatile oil prices and unprecedented weather fluctuations have acted as significant shocks for electricity generation, influencing electricity pricing. This study sought to investigate the contribution of diversity, spare capacity, and system structure as metrics in determining energy resilience. We contend that electricity prices represent the underlying fleet structure's ability to adjust to change and, therefore, can be used to predict energy resilience. Resilience metrics were determined using electricity generation data, electricity sales, electricity installed capacities, and electricity imports, while electricity prices represented the response variable. A regression model was fitted between the response variable and resilience metrics. Diversity, spare capacity, and import metrics play a significant role in predicting electricity prices. However, the diversity metric's role depends on the portfolio mix and requires further comparative empirical evidence.

Keywords

• Economics
• Energy
• Resilience
• Electricity diversity
• Spare capacity
• Electricity price