Page 4 - AfrElec Week 25

AfrElec COMMENTARY AfrElec
RENEWABLES: Kenya’s geothermal play
KenGen’s con dence in its geothermal abilities is encouraging more ambitious projects abroad, writes Richard Lockhart
KENAY
WHAT:
KenGen is close to opening the Olkaria V project
WHY:
Construction by Japanese contractors has proceeded smoothly
WHAT NEXT:
The company aims to win more contracts abroad, especially in neighbouring Ethiopia
KENYA’S KenGen is leveraging its domestic geothermal experience to win contracts across East Africa, supported by so loans and its own successful bond issues.
e company’s recent news that its was close to completing the 168-MW Olkaria V geother- mal power plant, and that construction of the adjacent Olkaria 1 Unit 6 (83MW) was under way, was another step towards achieving its aim of adding 720MW to the grid by 2022.
The company aims to use geothermal to lower the retail price of power in Kenya, and to maintain its relative ability to supply power suc- cessfully to customers and avoid the blackouts and shortages seen elsewhere in East Africa.
e company has been partially privatised in recent years, with the government holding a 70% stake, but it has also bene ted from the liberalisation of the power sector in Kenya, with generation – its own speciality – transmission and distribution all run separately.
It is also looking abroad, using its geothermal expertise to leverage new contracts in neigh- bouring Ethiopia
KenGen
Kenyan generator KenGen’s Olkaria V geother- mal power plant is now on course to begin gen- erating electricity by the end of July.
KenGen managing director Rebecca Miano said that the $400m, 168MW project would be commissioned by next month a er a 30-month construction period that saw no major scandals or delays.
“The project is on course and within the budget. We know geothermal is much cheaper than other thermals, therefore we expect to see some changes in the prices of power,” she said.
The project, located 120km from Nairobi, forms part of state-owned KenGen’s green energy strategy that aims to add 720MW of renewable energy to the national grid by 2022.
“ e project is nearly complete and we have not heard any kind of whisper or any scandal. It is not that we are too good, but both the Board and Management are guided by ethics and integ- rity,” said KenGen Chairman Joshua Choge.
e plant is being built by a consortium of Mitsubishi Corporation, Mitsubishi Hitachi
Power Systems Ltd and H-Young & Company E.A Limited.
e project was nanced by a combination of KenGen’s internally generated funds and a loan facility from Japan International Corporation Agency (JICA) that was signed in March 2016.
e company is also developing the adjacent Olkaria 1 Unit 6 (83MW) development, which is being built by Fuji Electric, while the engineer- ing, procurement and construction (EPC) con- tractor is Japan’s Marubeni Corporation.
Financing came from the Japan International Co-operation Agency and the European Devel- opment Bank. ere are currently ve turbines at Olkaria 1 with of 185MW of capacity.
KenGen currently has 1,631MW of capac- ity, comprising hydro and heavy fuel oil and accounting for roughly 70% of the country’s’ total. When Olkaria V comes online KenGen will have 699MW of geothermal capacity.
Kenya has more than 800MW of hydro and is looking to add more geothermal capacity to safeguard itself against drought. Total geother- mal stands at 500MW, operated by KenGen and private companies.
New auctions
Kenya said earlier in June that it would to reform its support for green projects, replacing the power purchase agreements (PPA) with auc- tions as PPA have proved to be too costly for the government
The government aims to aims to iden- tify suitable green projects what would meet demand-supply projections, in a bid to avoid higher subsidies and green projects that cannot nd customers, as has happened elsewhere. It aims to make future green projects more cost-ef- cient and regulated.
e Energy Act, which came into force in March, also sets up a new Rural Electri cation and Renewable Energy Agency and Energy & Petroleum Regulatory Authority. Both these bodies will run the new auction system.
Ethiopia
KenGen is also looking abroad, and earlier in June won a $52mn tender to develop geothermal wells in Ethiopia, its second such deal in Ethiopia
The project is on
course and within
the budget. We
know geothermal
is much
cheaper than
other thermals,
therefore we
expect to see
some changes
in the prices of
power
Rebecca Miano KenGen managing director
P4
w w w . N E W S B A S E . c o m Week 25 26•June•2019