Kenya Geothermal Set to Replace Hydro with Major Development Plans

Kenya Electricity Generating Co., the East African nation’s biggest power producer, said it will reduce hydropower’s share of total output to less than half within two years as geothermal production increases.

The company, based in Nairobi, will begin providing 280 megawatts of electricity from its Olkaria IV plant to the national grid by 2014, Managing Director Eddy Njoroge said. Production at the facility, supplemented by output from an extension to Olkaria I, will reduce hydropower’s share to 45 percent from the current 60 percent, he said.

“We will have achieved our goal of a stable, reliable supply of power which is not dependent on the vagaries of weather,” Njoroge said in an interview yesterday.

Kenya, East Africa’s largest economy, rationed power to homes and businesses last year amid the worst regional drought in six decades. Growth in the $33.6 billion economy slowed to 4.4 percent in 2011 from 5.8 percent a year earlier, according to the Planning Ministry. Kenya is Africa’s largest producer of geothermal power with installed capacity of 212 megawatts.

The deadline for expressions of interest to build a new 560-megawatt plant in the Olkaria complex is Dec. 4. That will be followed by a request for proposals around March and selection of a joint-venture partner in June, Njoroge said.

“We are actually planning for that by about 2016 or 2017,” he said.

Kenya has an installed electricity capacity of 1,600 megawatts, with a peak power demand of 1,500 megawatts growing at an average rate of 8 percent a year. KenGen, as it is known, produces 1,232 megawatts currently, while four private companies generate the balance.

Solar Power in the Works

KenGen also plans to begin building its first solar-power plants next year, producing as much as 150 megawatts of electricity at a cost of about $300 million, he said.

“The plan is to start with about 10 megawatts of solar connected to the grid, what we call photovoltaic,” Njoroge said. “We are also looking at about 20 megawatts of what is called concentrated solar power.”

Feasibility studies by the company identified nine sites for solar power production, including the coastal town of Lamu, Garissa, Malindi, Gitaru and Magadi, he said. KenGen is also planning construction of wind-power plants in the northern Kenyan towns of Isiolo and Marsabit.

The company has loans of 70 billion shillings ($817 million) from various lenders and expects a further 60 billion shillings will be made available when it expands the Olkaria complex, Njoroge said.

“There is no way that we can build the projects that we want to build out of our own cash flows or out of our own retained earnings,” he said. “There is nothing really wrong with borrowing as long as you can be able to service your debt.”

Copyright 2012 Bloomberg

Lead image: Kenya sunset via Shutterstock

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