Geothermal wells spark turf war in power generation

The formation of GDC was informed by the need to rump up power production by tapping the country enormous geothermal source in order to lower the prohibitively high cost of power in the country and to provide a reliable energy source.

When KenGen turned down its offer to partner in the production of geothermal energy, the government went ahead to form the GDC.

At the same time the government also formed the Kenya Electricity Transmission Company (KETRACO) to take over the laying of transmission lines from KPLC.

The new arrangement was to see GDC develop the sources and sell the steam to KenGen for power production.

KENTRACO is expected to build the transmission infrastructure which KPLC will use to sell power to the consumer.

It is the decision to engage in power production that is set to give KenGen’s management sleepless nights as it effectively puts paid to its plans to tap geothermal energy as its main income driver.

This is expected to adversely affect its bottom line and may lead to inferior returns for shareholders.

The recently concluded KenGen Sh25 billion infrastructure bond which was successfully oversubscribed by 11 per cent was issued on the basis that the proceeds would be channeled toward increasing power production.

It is estimated that circa Sh273 billion is required to develop the country geothermal sources.

This investment is considered well worth its while as geothermal power is not only reliable but also relatively cheaper, with an estimated unit cost of Sh4.30.

Geothermal energy also has the added advantage of being renewable.

The country’s high dependence on hydro power has been blamed for the high cost of power and its unreliability.

Uncompetitive goods

Industrialists have complained about the high cost of power in Kenya which they claim has rendered locally manufactured goods uncompetitive in the region.

“The highest input cost is power which invariably affects the prices of cement in the market making our cement more expensive than from other countries such as Egypt, China and Pakistan”, said Pradeep Paurana the managing director of Athi River Mining.