Two companies leading in geothermal power exploration in Kenya have signed multimillion deals with development partners giving a major boost to the country's prospects of realizing clean, reliable energy to power the country's development.
Government-owned entities, Kenya Electricity Generating Company (Kengen) and Geothermal Development Company (GDC), have been performing a massive amount of geothermal exploration, mostly concentrated in the Great Rift Valley province, which is the largest province in Kenya.
Kengen has been working at the Olkaria steam fields in Naivasha, a town 100 kilometers southwest of Nairobi and recently signed a Ksh. 11.6 billion (US $140 million) contract with Chinese company Sinopec International Petroleum Company (SIPC) to develop a 280-MW geothermal power plant there.
“Though the upfront costs for its generation are high, geothermal is cheaper and clean[er] than other forms of energy and the government is putting more emphasis on geothermal. This financing is a major step in the journey to realize this reliable energy,” said Eddy Njoroge Managing Director of Kengen during the signing of the contract with SIPC.
At the Olkaria site, there are two 140-MW power plants (Olakria i, unit 4 and 6 and Olakria IV) under development. The project involves the installation of steam pipelines and steam separators to the two plants. The contract with SIPC is expected to take 27 months and when completed the project will inject an additional 25 percent of power into the national grid.
For Kengen, exploration funding comes from the World Bank and Kfw of Germany, and the director said the company had sufficient steam at Olkaria to power a 380-MW-plus power plant.
According to Kengen, the project is subdivided into various contract lots for ease of management, with the SIPC contract under Lot A. Lot B contracts for both power plants were awarded earlier to the consortium of Japan’s Toyota Tyusho Corporation and Hyundai Engineering Company Limited of Korea.
The European Investment Bank and Kengen are funding the high voltage substations and transmission line contract while the Kenya government is financing the drilling of wells.
Experts say once the 280-MW project is complete in 2014, the growing demand for electricity will be better met and Kenyan grid operators will be better able to manage the power from the erratic hydro power supply.
Exploration company GDC has been looking for geothermal power at the dormant Menengai crater, 200 kilometers southwest of Nairobi, and has received a Ksh. 10 billion (US $120 million) contract from the African Development Bank (AfDB) to continue its work.
GDC Chief Executive Officer Silas Simiyu says the funds will facilitate procuring and commissioning of wellhead generation units, drilling rigs and consultancy services.
For GDC, funding for its first geothermal field of Menengai is a major step forward in driving Kenya towards energy sustainability and independence, according to Simiyu.
The Kenyan government initiated the Scaling-up Renewable Energy Program (SREP) investment plan in 2011. GDC will receive an additional US $25 million from the program on top of the AfDB funding.
GDC estimates that there is about 1,600 MW of potential geothermal power capacity at Menengai. Phase one of the project will build a 400-MW capacity plant, which is expected to be completed by 2016, according to Simiyu.
Simiyu also said the AfDB would be funding two drilling rigs and overseas supplies that would be sufficient for drilling of 90 wells. The company is however still looking for more funds on top of the US $24 billion it has already accumulated.
Last November, GDC acquired two drilling rigs at a cost of Ksh. 6 billion (about US $71 million) from China National Petroleum Corporation.
The company has already installed the two rigs at the geothermal exploration field at Menengai crater and is also undertaking steam development at the Bogoria-Silali block in Central Rift Valley province. Surface studies from the block estimate its potential to be about 3,000 MW. GDC plans to develop 2,000 MW within the block in four phases by 2023 as long as funding is available.
The company intends to invite investors to participate in steam development in a joint development strategy for the Menengai project.
In a report titled “Financing Renewable Energy in Developing Countries: Drivers and Barriers for Private Finance in Sub-saharan Africa” by UNEP, African countries have been urged to embrace renewable energy. The 2012 UNEP report suggests, “Opening up energy markets to private sector investments will be the key to unlocking Africa’s massive renewable energy potential.”
Archim Steiner, UNEP’s Executive Director who released the report observed that Kenya was taking an unnecessarily long time in its shift to renewable energies. Steiner blamed the situation on lack of commitment by the government and centralized power grids controlled by a few unscrupulous entrepreneurs.
“The reason some parts of Kenya do not have electricity is not because there is no energy, but the general lack of a willingness to shift the thinking to renewable energy,” said Steiner. Steiner said the government should shift to wind, solar, geothermal and biomass energies in order to cut costs from electric power generation.
Kenya has a Ksh. 215.9 billion (US $2.6 billion) 10-year plan to dig 566 wells at Olkaria, Menengai and Silali in Rift Valley. The goal is to find enough steam to develop geothermal power plants with capacities of up to 2,336 MW by 2020 in a bid to ease dependency on hydro-electric power.
Kenya has 212 MW of installed capacity at geothermal power plants in Olkaria but the geothermal energy potential in Kenya is estimated be upwards of 10,000 MW.
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