Geothermal power investors get AU backing for exploration costs
A geothermal plant. Kenya hopes to reduce the cost of power by 40 per cent once the major geothermal projects deliver power to the national grid by 2018. FILE
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Commission seeking to promote wide use of renewable sources across Africa.
The African Union Commission (AUC) has invited geothermal power investors to apply for grants to fund initial exploration costs within the next one month.
The AUC partners with other donor organisations will finance geothermal energy investors with an aim of promoting wide use of the renewable source of power in Africa.
On Wednesday, the commission signed a Sh722 million ($8.4 million) guarantee financing with the Africa Geothermal International Kenya Limited (Agil), which is exploring with a view to producing 140 megawatts of electricity at Mt Longonot in Naivasha.
“We will give infrastructure grants of up to 20 per cent of the costs… We will also offer surface study grants of up to 80 per cent of the costs excluding infrastructure costs,” said Rashid Abdallah, an energy expert at the Regional Geothermal Coordination Unit of the AUC.
The guarantee to Agil is only part of the Sh52 billion ($600 million) the company expects to spend on exploring, drilling wells and producing geothermal power at Longonot in the next five years. Drilling of wells is set to begin next April.
The AUC is collaborating with Germany’s development finance institution, KfW, in granting Agil the Sh722 million guarantee.
The funding offer by AUC is in line with a programme it initiated in 2010 through which it assists countries and regions to minimise the exploration risk associated with geothermal resources by funding the up-front cost, developing policy guidelines as well as institutional and regulatory framework.
The AUC also offers drilling grants of up to 40 per cent of the costs for the exploration, drilling and testing programme for reservoir confirmation wells, said Mr Abdalla during the signing for the Agil-AUC deal in Nairobi.
AUC is to fund a total of three projects in Kenya which succeeded in the first round of applications for grants. Out of the five projects that succeeded in the East African region, three are in Kenya and two are in Ethiopia.
In Kenya, the three projects are by Agil, government-owned Geothermal Development Company (GDC) and privately-owned WalAm Energy Inc. GDC is drilling at Bogoria-Silali area while WalAm is drilling at Suswa.
During the Agil-AUC signing ceremony on Wednesday, Energy Principal Secretary Joseph Njoroge said the country hoped to reduce the cost of power by 40 per cent once the major geothermal projects deliver power to the national grid by 2018.
“We expect that the geothermal power projects should help us reduce the cost of electricity in the coming years. Power prices should come down by 40 per cent within the next 40 months,” said Mr Njoroge.
The PS said increased power from geothermal production would help operate the standard gauge railway as speed trains are expected to run on it.
Agil chief executive Fassiné Fofana said the project will employ up to 1,000 people during the construction phase.
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