Kenya targets green energy with increased investments in geothermal production

A sketch of the 280MW Olkaria geothermal project. The geothermal field currently produces 198 megawatts of power.

Olkaria, the picturesque volcanic masterpiece in the heart of Kenya’s Great Rift Valley, holds an energy capacity estimated at about 1,500 megawatts.

Kenya is hinging its energy security on this roughly 80-square kilometre field that would easily pass for tourist site as it sits within Hell’s Gate National Park, six kilometres to the south of Lake Naivasha.

The characteristic odour of rotten eggs wafting along the cool lake breeze welcomes you to Africa’s prime geothermal field currently producing 198 megawatts of power – accounting for about 13 per cent of Kenya’s total installed electricity capacity.

The government says it wants to tilt Kenya’s current energy mix which is heavily reliant on hydro power in favour of steam energy which is not affected by extreme climatic conditions such as drought and floods.

Hydro-power generation is considered susceptible to the vagaries of weather hence irregular availability.

Energy minister Kiraitu Murungi has smelled the hydrogen sulphide emitted by the geothermal power plants and now wants to more than double the country’s steam power output to 478 megawatts by September 2014.

“In the short term our focus remains sharply trained on geothermal generation which we have identified as the most feasible base-load source,” says Mr Murungi.

Listed power producer Kenya Electricity Generating Company last month began construction of four power plants at Olkaria I and Olkaria IV unit to generate 280 megawatts at a cost of Sh109.5 billion ($1.3 billion) —the continent’s biggest underground steam power project.

The undertaking will increase the proportion of geothermal source power in the national energy basket to 32 per cent in two years’ time with the ultimate target of 49 per cent by the year 2030.

“This is critical in having sufficient supply that will stay ahead of growing demand as more and more customers get connected and existing ones demand more power,” said Eddy Njoroge, the managing director of KenGen.

Data from the national electricity retailer Kenya Power shows that the country’s peak power demand — the highest point in energy consumption recorded — has grown 57 per cent in the last decade from 760 megawatts in 2002 to 1,194 megawatts recorded in the year 2011.

The drive towards steam power is based on its key characteristic of being firm, as it guarantees availability of up to 95 per cent, which is necessary to stabilise power supply in Kenya.

A study by global consulting firm McKinsey & Co shows that geothermal, despite carrying a high capital cost, is the cheapest and most sustainable energy option for Kenya.

The report says generating steam power costs Sh5.38 (6.4 US cents), half the price of hydro-power which costs Sh10.50 (¢12.5) per kilowatt hour.

Further, steam energy passes is environment friendly, occurs naturally and provides location and transmission benefits because power plants can be located near geothermal resources.

KenGen has said that the geothermal project is cost-efficient with a tariff of Sh4.20 (¢5) per unit and is expected to stabilise electricity prices by around 20 per cent by displacing expensive fossil fuel generation.

The Energy Regulatory Commission’s pricing formula otherwise known as feed in tariff for geothermal power is Sh7.14 (¢8.5) per kilowatt hour compared to about Sh10.08 (¢12) for small hydropower plants.

East Africa’s largest economy is an old hand at harnessing steam generated underground by the earth’s crust to produce electricity, having drilled the first two wells at Olkaria I in 1956.

But due to lack of appropriate technology at that time, it took close to three decades to begin generating Kenya’s pioneer 45 megawatts of geo energy in 1985.

“Traditionally we have struggled with the long lead times it takes between the planning of new plants and power realisation from the same, which is characteristic of geothermal plants,” says Mr Murungi.

KenGen says that geothermal energy production is capital intensive and concluding funding agreements with multilateral lenders such as the World Bank, the European Investment Bank, German Reconstruction Bank (KfW), French Development Bank (AFD) and African Development Bank (AfDB) who have always co-financed such infrastructural projects takes a long time.

Drilling of wells at Olkaria II took place between 1986 and 1993 but construction of the 70 megawatt plant was delayed until the year 2000 due to lack of funds.

The second phase of this unit was commissioned in 2010, injecting an extra 35 megawatts of steam power and making a total of 105 megawatts of energy produced through geothermal means at Olkaria II.

Olkaria III, developed by OrPower4 and commissioned in the year 2000, is Kenya’s sole independent power producer (IPP) in geothermal generation, feeding 48 megawatts into the national grid.

To plug the time gap between drilling steam wells and construction of power plants, KenGen has pioneered the use of mobile geothermal well head generators which harness steam for power production in newly drilled wells ahead of building power plants.

“Whereas, after successful drilling of steam we had to wait for years before putting up a generating plant, well-head generators will allow immediate generation once we have struck steam even as the power plant construction progresses,” said the Ministry of Energy in a statement.

Already, the State-owned power producer in June commissioned Kenya’s pilot portable 2.5 megawatts steam power plant along the flanks of Ol Doinyo Eburru, eight kilometres northwest of Lake Naivasha.

Kenya Power is currently redesigning dispatch line from the plant and should soon be injected to the national grid.

“We are at an advanced stage to deploy an additional 65MW to ensure Kenyans get electricity quickly as we sink new wells,” said Mr Njoroge.

Furthermore, KenGen has embarked on a multi-track steam development model whereby the firm will drill wells and construct power plants back to back to ensure that the country meets its future energy demands projected to increase to about 2,500 megawatts in the year 2015 and 15,000 megawatts in 2030.

For example, after contracting Great Wall Drilling Company of China to drill the 56 wells that will supply steam to generate 280 megawatts, KenGen has already embarked on a second round of drilling about 164 wells for its 540 megawatts project expected to be complete by 2018.

Thus, when the multiple well-head, 280 and 540 megawatt projects come to fruition, the country will join the league of global geothermal powerhouses such as the US and Philippines which produce 3,000 and 2,000 megawatts of steam power.

“Kenya is poised to become one of the world’s biggest producers of geothermal energy and therefore a leading pioneer in the use of recyclable green energy,” said Mr Toshihisa Takata, the Japanese ambassador to Kenya at the ground-breaking ceremony for the 280 megawatts at Olkaria.

Even then, the country will just have scratched the surface of its immense geothermal potential estimated at more than 10,000 megawatts.

Data from the draft Energy Policy shows that as at June 30 2011, 28.9 per cent of Kenya’s population or about 1.7 million households were connected to electricity compared to only 15 per in 2004.

“I have a dream of universal access to reliable and affordable electricity for all Kenyans,” says Mr Murungi.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.