In a move to tap into its vast geothermal energy resources, Kenya recently invited bids for the construction of two new power plants, representing another step forward in its 2017 target to boost electricity production by 5000MW.
The new plants, with a capacity of 60MW, will be completed by the end of next year and form one of several projects to tap into the geothermal potential, which is estimated by government bodies to be as much as 10,000MW.
Moving to expand
Kenya is trying to diversify its energy sources to become less dependent on hydroelectricity power and drive industrial development. According to a Ministry of Energy 2013-2016 investment prospectus, Kenya’s geothermal generation makes up just under 250MW of the total electricity production of roughly 1650MW. Hydroelectric comprises the largest proportion of generation, at around 800MW, followed by thermal at around 600MW.
However, with suppressed demand peaking at levels of 1400MW, according to the ministry – and unsuppressed demand forecast to reach up to 1700MW – the need to expand and diversify the power base load is clear.
Lower than expected rainfall in 2013 and 2014 has added to the urgency, reducing the output of Kenya’s hydropower stations. Masinga reservoir, which feeds Kenya’s largest hydroelectric facility, the 550MW Seven Forks, was at only one-third capacity by mid-2014. This prompted the country to slow exports to neighbouring countries and increase electricity imports.
Kenya is one of a handful of African countries, including Ethiopia and Zambia, which is exploring geothermal potential. The discovery of Kenya’s geothermal energy resources dates back to the 1950s, when the first test wells were drilled at Olkaria, near Nairobi. Kenya completed its first geothermal power plant, a 15MW facility, in 1981 at the same location. Since then, Kenya has also turned to private producers, with IPPs such as US-based Ormat Technologies 50MW plant in Olkaria contributing to geothermal production.
Kenya’s Rift Valley is the main geothermal zone. Among the largest well clusters are Menengai and Baringo, which have potential capacities of 1,600 MW and 800 MW, respectively. According to the government’s second Medium Term Plan – an action plan for the broader development strategy ‘Vision 2030’ – 620 geothermal wells will be drilled and developed. Kenya’s 10-year plan will come at a collective cost of some $2.6bn.
The government created the Geothermal Development Company (GDC) in 2006, following the passage of a new Energy Act. The state-owned operator is responsible for upstream exploration, including drilling and surveying, as well as sourcing steam for power producers. The National Treasury allocated KES12.5bn ($142m) in the budget for the fiscal year ending June 2014 to GDC to develop and drill for steam. GDC has also secured $120m from the African Development Bank and a $25m grant from Nairobi’s Scaling-up Renewable Energy Programme for the Menengai geothermal project, which is designed to produce electricity for 500,000 households.
Construction on a number of facilities is already underway. Expansion of Ormat’s plant at Olkaria, located in the Great Rift Valley, is ongoing while tenders for the first phase of the plant in Menengai – with the potential to provide as much as 400MW when completed – have been awarded to three firms, according to local press reports. The firms, which include Ormat, along with Finland’s Quantum and local firm Sosian Energy, were selected late last year, and will reportedly construct a 35MW steam plant under a build-own-operate model, at a cost of KES4bn ($45m) each. The plants are expected to be running by the end of 2015.
Finding the funding
Foreign lenders have also begun throwing their weight behind Kenya’s geothermal projects. The German Development Bank recently extended $113m in loans for the drilling and appraisal of geothermal wells in the first phase of the Bogoria-Silali project in the Rift Valley according to the GDC. This follows a $100 injection last year. The World Bank has invested over $400m in supporting geothermal energy production in Kenya while America’s Export-Import Bank (Exim Bank) extended a soft loan of $300m last year.