Tag Archives: geothermal

Kengen the Geothermal Powerhouse

Kenya is the only African country that has successfully tapped the green energy potential of geothermal power and is ranked number eight in the world. Kenya’s 676MW geothermal output trails that of the USA (3,567MW) Philippines, Indonesia, New Zealand, Italy, Mexico, Turkey, and ahead of Iceland, and Japan.

The bulk of this geothermal power comes from the Kenya Electricity Generating Company (Kengen) which supplies 1.6GW (80%) of the country’s 2.3GW electricity output. Of that 533MW is from geothermal energy, primarily from the Olkaria area near Naivasha, where the first wells were dug in 1950 and their deployment and production accelerated after 2007.

Kengen has 294 drilled walls with an 80% success rate, and part of that leap has been due to a Kengen-pioneered “wellhead technology”, which was done in partnership with Green Energy, an Icelandic company. Wellhead technology allows Kengen to tap steam energy within a year or two of sinking a well and recoup their investments faster (it usually costs $6 million to dig a well). In all, Kengen generates 75MW from 7 wellhead stations at Olkaria and one at Eburu.

Kengen’s Olkaria IV geothermal power plant.

In terms of electricity generation, Kengen plans to have supply stay ahead of demand especially considering the long setup time for energy plants (about seven years). With funds raised from shareholders and investors in 2016, they plan to add 1,000 MW to reach 1,745MW by the year 2025.

Kenya has an estimated 10,000 MW of geothermal power potential, and geothermal steam allows high energy demand manufacturing such as steel, cement and glass processing take place. These are currently hampered by the high costs of electricity, but the separation processes of geothermal gases means that such companies can tap steam to use at their factories nearby and this is the strategy behind a planned Kengen industrial park at Olkaria, Naivasha. Already Oserian Flowers buys steam and pipes it to heat their greenhouses in the nearby area.

As at  June 2017, Kengen had a diversified mix of installed energy sources comprising Hydro 818 MW (including Masinga 40 MW , Kamburu 94.2MW, Gitaru 225MW, Kindaruma 72MW, Kiambere 168MW, Turkwel 106MW,  Sondu 60MW,  Sangoro 21.2MW, Tana 20MW), Geothermal 534 MW (Olkaria I 45 MW, Olkaria II 105MW, Olkaria IV 149.8MW, Olkaria I AU 150.5MW), Thermal 253.5 MW (Kipevu I 73.5MW, Kipevu III 120MW, gas turbines 60MW) and wind power 25.5MW (three phases at Ngong Hills).

Kenya has a liberated energy production market, and other private sector players in the geothermal sector who are seeking support under a private-public partnership program include Sosian Power, Quantum Power, and Akiira, as wells as Africa Geothermal and Orpower who are close by Kengen’s fields at Olkaria.

Coal Energy in Kenya

This week, there was a debate on the future of coal in Kenya and its place in the energy mix for the country. It took place at the Strathmore (University) Extractives Industry Centre (SEIC) Nairobi, and was co-hosted by WWF Kenya). The government plans to put up a coal plant on maInland Lamu and a private developer Amu Power was selected to build it, and is seeking approval from the energy regulatory commission to commence construction.

Excerpts:

Coal around the world

  • There are 3 new coal plants in Africa, and Japan & Korea will build 60 new ones to replace their old coal & nuclear ones.
  • There are now more global jobs in solar than coal, and solar has gone from 1 GW production in 2003 to 70 GW this year.
  • Trump got votes from Appalachian coal states where jobs were lost. But coal shares are down as gas has replaced coal.
  • With or without Kenya, the world is going green – Ethiopia aims to get to 100% renewable., Germany gets 20% renewable (all in the last 8 years), US has gone from 2 to 7% renewable (in 10 years), South Africa gets 2 GW from solar, and Rwanda’s 8.5MW solar is the largest in the region.

Lamu

  • No projects happen at Lamu because NGOs on the beach want it to stay marginalized and oppose port, coal, roads etc.
  • Lamu has high unemployment leaving youth exposed to Al-shabab & drugs. This project will have 1,800 jobs for locals.
  • It is not the job of private company to create jobs or improve security in Lamu – that is the government’s role
  • “Save Lamu”  groups oppose the plant because all its side-effects have not been quantified,  and it will destroy far more (fishing) jobs than it creates.

Other Sources and Energy Mix

  • Amu Power’s 1050 MW will add 50% to Kenya’s 2,200 MW electricity from the coal plant that is 20 kilometers from Lamu town.
  • A country’s rate of development depends on availability of cheaper and reliable energy supply. Developed countries get 60% from coal/nuclear and just 3% from renewables on average.
  • Solar is okay for isolated homes, but it will not recover the cost of national power generation and distribution.
  • Geothermal costs $4-5 million per well per well & each one generates 5MW – so how many can Kenya get? It’s very expensive for government & IPP’s who often sink many dry wells
  • Geothermal depends on nature to generate the steam and you can’t tweak the inputs, unlike with coal & nuclear where you can vary the inputs to match demand.
  • Industries need coal. Moyale which gets electricity from Ethiopia hydro only has supply three days a week
  • Even today people on the grid will not turn on electric cookers – the main energy sources in Kenya are charcoal and wood, and they are larger pollutants than coal.
  • Kenya imports all glass because we don’t have the energy to make glass.
  • Coal is Kshs 7.5 per unit compared to kshs 20 from diesel-fired plants.

Environment

  • The US has lake signs that “if you fish here, don’t eat the fish” – Kenya will likewise have to monitor coal pollution risks
  • Kenya emissions (excluding extractives) will be 150 MT of carbon by 2030 and the government has committed to reduce this by 30%. How?
  • How will the plant dispose of the ash, carbon dioxide and acid rain? Lamu does not have infrastructure
  • An EIA (environmental impact assessment) audit process in Kenya is a compromised one. They are done by auditors hired by investors and will never oppose projects.
  • Amu Power will use three new clean coal technologies at the plant.
  • The government must check that industry and investors comply with environmental standards – there was a toxic battery factory in Mombasa. County and national governments need to do their own monitoring.
  • Energy projects are financed by lenders have strict conditions.e .g IFC/World Bank finance many thermal plants, and they can’t allow plants that compromise the environment. The Amu power one is guaranteed by the African Development Bank.

Kengen 2016 Rights Issue

The Kenya Electricity Generating Company (Kengen) has announced a rights issue in which they will issue 4.4 billion new shares to shareholders at a price of Kshs 6.55 each in a bid to raise Kshs 28.8 billion (~$288 million).

Shareholders of record on May 16 will be eligible to buy 2 new shares for every 1 they own, at a price, which is a discount of 18% of its recent weighted trades. Kengen has about 192,000 shareholders now.

Standard Investment Bank and Renaissance Capital are transaction advisors, Dyer & Blair and Faida are sponsoring brokers and Cooperative Bank will be the receiving bank for the rights issue which will run from May 23 to June 10, 2016.

The Kenya government which owns 70% will exercise its full shareholding rights, by converting some of the loans it has advanced to Kengen into equity in the rights issue.

Kengen owns 31 power generating plants with a combined installed capacity of 1,337 MW from diverse generation modes comprising hydro, thermal, geothermal and wind power.

$1 = Kshs 100 

Kengen shares trade at Kshs 8.00 at the NSE