Kenya to concession geothermal power generation

A geothermal Plant at Ol Karia in kenya

KENYA, AFRICA'S geothermal power giant, has changed its business plan in order to speed up geothermal power generation. The new plan involved separating the drilling function from the generation function. Drilling will remain in the hands of the government, while the private sector will be invited to generating power from the steam wells, through the concession mode of PPP.

 The new plan is working well and is expected to add an additional 400MW into the national grid come July 2016.  The company that was created to take over the drilling function, the Geothermal Development Corporation, GDC, a wholly government owned enterprise, plans to develop some 3000MW by 2020 and then on 5500MW in 2031, an appraisal report seen by this publication.

GDC’s role is to develop the steam wells and install the wellheads and then concession the developed wells to power producers who shall build generating stations. Previously both the drilling and the power generating functions were rolled into one. This made it impossible to attract the private sector into the geothermal power sub-sector.

The model will start at the Menengai Geothermal development Project whose first phase is currently under development. It will produce some 400MW-an estimated 26 per cent of the current national supply, by 2016 at a cost of US$502 million. The Kenya government will pick the Lion’s share of this tab at US$245 million. African Development Bank is second with a significant US$147 million while the rest will be funded by other donors including AFD, the French international co-operation agency and the European investment bank.

GDC will then concession the steam wells to IPPs to generate power for the national grid. Already, reports say, phase 1 has attracted 19 bids, among them Kenya’s leading electricity generator, KenGen and a local investment firm, Centum investments, have applied for the concession .Only four will win the concession.

The concessions, according to GDC, will be awarded subject to fulfillment of certain conditions. One of the conditions is they produce and sale power to Kenya at Kshs 6 (US$.0.070) per KWh, which is 50 per cent below the current cost.

The second phase to start soon after phase will generate 800 MW at a cost of US$800 million. Reports indicate that AfDB is considering a proposal to finance part of the cost. There are indications that the bank will approve the proposal, informed sources say. In total Menangai steam wells are expected to produce an additional 1200MW of geothermal power by 2020 rising to more than 5000MW by 2030.

Wind power. Needs Geothermal's base power to operate effectively.

The creation of GDC to develop steam wells followed disappointment with the BOT model of PPP in drilling and steam well development. While the country was in a hurry to develop geothermal energy, the private sector’s delivery was very slow and frustrating. The only active operation Ol Karia IV, being developed by Or power will add only 52MW to the grid.

 Investors are not ready to accept the drilling risk but are prepared to take the power generating risk says a report by African development Bank seen by this publication. The Kenya government, says the AfDB report, had issued three licenses for steam well drilling between 2007 and 2009 but is now considering cancelling them since there has been no movement on the license for more than three years.

GDC was thus born to mitigate the drilling risk. Kenya has the potential for 10000MW of geothermal power. The country is in a hurry to develop geothermal sources of electric energy as other sources are no longer reliable.

Currently, hydro is the leading source generating a 766.88MW which forms 65 per cent of the KenGen’s installed capacity. KenGen is the power generating utility. Kenya’s generating capacity of 1400MW serves only 14 per cent of the Population. And the power is expensive.

Apart from GDC’s programme, the power generating company, KenGen, also has its own expansion programme which ends in 2016. The company plans to increase its power generating capacity by an additional 1832 MW by 2016.  Of these, Hydro will generate an additional only 53MW while wind power will generate an additional 56.8 MW, geothermal will generate an additional 732MW over the same period.

Geothermal energy is the natural heat stored within the earth’s crust. The energy is manifested on the earth’s surface in the form of fumaroles, hot springs and hot and altered grounds. To extract this energy, wells are drilled to tap steam and water at high temperatures (250-350°C) and pressures (600-1200 PSI) at depths of 1-3 km. For electricity generation, the steam is piped to a turbine, which rotates a generator to produce electrical energy.

Kenya is the leader in geothermal power generation in Africa having built its first geothermal power in early 1980s. It now generates some 150MW from two geothermal plants. The first plant was the Olkaria I Power Station which was also the first in Africa. The 45 MW plant was commissioned in three phases and has three units each generating 15MW. The first unit was commissioned in June 1981, the second and third units in November 1982 and March 1985.

Olkaria II Power Station, Africa’s largest Geothermal Power Station to date was built in the year 2000 and generates 70MW. It is the second geothermal plant owned and operated by KenGen. The second phase of Olkaria II was commissioned in 2010 injecting an extra 35 MW of power making a total of 150MW of power generated by geothermal means