- Public-Private Partnerships have allowed drilling and geothermal energy production capacity to rise.
- Combined with hydro, these two sources contribute 65.62 percent of the total, while wind and solar account for 18.69 percent.
- While Kenya Power has tried to revise energy prices in the country, analysts observe that expanding geothermal investments will provide the country with cheaper power for future expansion.
Kenya is the leading producer of geothermal energy in Africa and ranks seventh in the world, behind the United States, Indonesia, the Philippines, Turkey, New Zealand, and Mexico.
Ongoing investments, primarily through Public-Private Partnerships (PPPs), have allowed the country’s drilling and geothermal energy production capacity to rise.
Part of this investment is the development of a 35MW Menengai geothermal project is scheduled to begin this month, according to the London-based energy company Globeleq.
Toyota Tsusho Company (TTC) has signed an engineering, procurement, and construction (EPC) contract and a long-term service agreement (LTSA) for the project.
Menengai is a green field geothermal project and the first phase of the larger Menengai complex, the second large-scale geothermal field to be created in Kenya after Olkaria in Naivasha.
Geothermal is currently the leading source of energy in Kenya, accounting for 30.87percent of the country’s total installed capacity of 3,074.34 MW, according to data from the Energy and Petroleum Regulatory Authority (EPRA).
Combined with hydro, these two sources contribute 65.62 percent of the total, while wind and solar account for 18.69 percent.
The installed capacity of thermal power electricity decreased from 748.7 MW in 2021 to 646.32 MW in June 2022 due to the retirement of Tsavo Power, whose power purchase contract expired in September2021.
Despite this diverse mix of sources, electricity costs remained high in Kenya due to other causes, such as pricey Power Purchase Agreements (PPAs) with Independent Power Producers, the high cost of fuel, multiple taxes and levies imposed on electricity bills, foreign exchange losses, and the sluggish growth in demand despite the increased power generation capacity.
Public-listed company Kenya Electricity Generating Company (KenGen) is the country’s geothermal energy producer, pioneering Kenya’s clean electricity goal in which 89% of the total electricity generated is from renewable sources.
The company is the largest generator of electricity in Kenya, generating over sixty percent of the electricity consumed in the country, primarily from geothermal sources. Kenya Power, which is the sole distributor in the country, is being offered the cheapest power available.
Possibility to spur development
In the next ten years, Kenya aims to boost the manufacturing sector’s contribution to GDP from 7% to20%, increase the proportion of exports to GDP from 10% to 30%, and increase Foreign Direct Investments (FDIs) from $500 million to $10 billion annually.
To achieve this, the government is eager to assist large manufacturers and small and medium-sized enterprises with value addition and greater output.
Investments, Trade, and Industry Cabinet Secretary Moses Kuria says boosting manufacturing will reduce reliance on imports which will lower import bill, create jobs, and drive the development of the country.
The government is also interested in significant investments in Special Economic Zones and Industrial Parks, such as the Dongo Kundu Special Economic Zone, the Naivasha Special Economic Zone, the Lamu Special Economic Zone, the Nairobi Financial District Special Economic Zone, and the Kenanie Leather Park.
Asa means of fostering a value chain approach and aiding the export-led growth economic model, further measures include the establishment of aggregation centers and industrial parks in all 47counties.
The aggregation centres will be responsible for the storage, processing, distribution, and marketing of locally and regionally produced food items.
Kenya is one of the countries piloting the Africa Continental Free Trade Agreement (AfCFTA) which will significantly reduce the tariff and non-tariff trade barriers in Africa. ,”Growth in manufacturing cannot be accomplished by relying simply on domestic markets,” noted CS Kuria adding that the country must recognize that as globalization increases, it is crucial that products and services are competitive on the global market.
The economic powerhouse of East Africa has one of the highest electricity rates in the area, currently averaging $0.16 per kilowatt-hour.
This cannot be accomplished without reliable and affordable electricity.
This is compared to other African exporting nations, such as South Africa, Egypt ($0.03), Morocco, Ethiopia ($0.05), and Tanzania ($0.08), this country has the lowest export price.
Over time, manufacturers have expressed concern over the high cost of electricity in the country, which affects the total cost of production.
Despite investments in renewable energy resources, the Kenya Association of Manufacturers (KAM)reports that Kenya’s competitive position on the strength of power is deteriorating annually.
“It is impossible for the nation to be a competitive investment destination and industrialize without inexpensive, reliable, high-quality, and sustainable power for the manufacturing sector,” says Rajan Shah, chairman of the KAM.
Hence, KAM believes that the government should reduce the cost of electricity to less than $0.10 a unit and make it available and stable for industrial customers.
This, it states, will improve regional and local manufacturing competitiveness. Customers should not bear the cost of transmission and distribution inefficiencies, adds Shah. Geothermal energy is viewed as the solution to Kenya’s need for cheaper power, as it has the ability to boost industrialization and economic progress.
Despite recent global and internal shocks, the World Bank projects that Kenya’s GDP would grow by an average of 5.2% between 2023 and 2024.
The baseline anticipates substantial expansion in lending to the private sector, ongoing low Covid-19infection rates, a near-term recovery in agricultural productivity, and favorable commodity prices for Kenyan exports.
It is anticipated that these developments would stimulate private investment to sustain economic growth over the medium term.
“Private sector-led growth is essential for job creation and a continuous rise in household living standards over time,” stated Naomi Mathenge, senior economist for Kenya at the World Bank.
Kenya’s investment in clean energy: Building geothermal energy
In response to the rising demand for electricity, KenGen wants to install at least 400 megawatts of geothermal power-producing capacity within the next five years.
This is accomplished by rehabilitating existing geothermal power facilities and pursuing new projects. KenGen has finished construction on the 83.3 MW Olkaria I unit 6 facility.
The company aims to add 50 MW through well head leasing in Olkaria and 40 MW from upgrading turbines by 2025.The restoration of Olkaria I adds 50.7 MW and the Olkaria VI project adds an additional 140 MW.
The company listed on the Nairobi Securities Exchange (NSE) is eager to tap into the Rift Valley region’s geothermal energy potential, which is believed to be around 10,000MW of clean and sustainable energy.
“We have only used around 0.9GW of the 10GW geothermal potential, which is why a significant portion of the increased capacity will come from geothermal,” management explains.
The company’s focus going forward is to secure the baseload capacity to stabilize Kenya’s energy supply primarily from green renewable energy, which will be crucial in meeting the steadily rising electricity demand in the country, which has increased by an average of 3.1% per year, according to EPRA.
The regulator adds that power plants must be created at a similar or greater rate to ensure supply. EPRA’s newest Energy and Petroleum Statistics report states.
“Geothermal generation now accounts for a significant share of base load power and will continue to occupy a leadership position due to its relatively cheap generating costs and resilience from weather conditions.”
In addition, the Rift Valley contains numerous locations with untapped geothermal capacity. It is anticipated that the government will continue to receive substantial assistance from international partners in the development of geothermal projects and the injection of geothermal energy into the national grid.
During COP27 in Egypt in November, President William Ruto and UK Prime Minister Rishi Sunak promised to expedite Sh500 billion worth of green investment projects, including the Menengai project.
Since then, Ambassador Jane Marriott has reaffirmed the UK’s commitment to Kenya’s development plan.
“We are dedicated to supporting infrastructure in Kenya and are prepared to deliver jobs and clean energy at Menengai geothermal in Nakuru, which will supply affordable, clean, and dependable energy to over 700,000 Kenyans,” said Marriot.
While Kenya Power has tried to revise energy prices in the country, analysts observe that expanding geothermal investments will provide the country with cheaper power for future expansion.
