Bank plans to fund more geothermal projects in E. Africa
An illustration of the Olkaria iv geothermal power plant. Photo/FILE
What you need to know:
- The decision to set up company with specialisation in steam development was made as a result of the need to reduce the risks facing investors in geothermal exploration such as encountering dry wells and thus encourage more investments.
The African Development Bank plans to increase funding to explore more geothermal power in East Africa based on what it considers a success model in Kenya.
In a statement, the regional bank said it was working on a small-scale geothermal units, adapted to the context of each East African country that has the potential for geothermal power production.
The bank said it would fund tapping of geothermal potential in Tanzania by replicating the Kenyan model that is being used to develop 400 megawatts of geothermal power at Menengai.
“Building on the success in Kenya with the Menengai project, the African Development Bank is focusing on developing the geothermal potential in Tanzania,” said the bank in a statement.
The Kenyan model involves financing by finance institutions using concessional loans for the early stage and high-risk activities related mainly to drilling that is done through a special-purpose company such as the Kenya Geothermal Development Company.
The company is fully owned by the Kenya government.
It was set up to develop geothermal steam and sells to power producers such as the Kenya Electricity Generating Company (KenGen) and Independent Power Producers.
The decision to set up company with specialisation in steam development was made as a result of the need to reduce the risks facing investors in geothermal exploration such as encountering dry wells and thus encourage more investments.
At the moment, although the country’s total geothermal potential is estimated at 10,000 megawatts, the energy resource constitutes only 20.07 per cent of the total electricity produced annually in Kenya.
KenGen is the sole geothermal power generator with four generating plants in the Olkaria area that have a combined capacity of 247 megawatts.
According to Youssef Arfaoui, chief renewable energy expert at African Development Bank, the bank was keen on engaging East African governments to set up separate entities such as Kenya Geothermal Development Company that would undertake the early exploration and appraisal drilling works, thus mitigating risks in order to allow for cheaper consumer tariffs.
The Menengai project is financed by the African Development Bank to the tune of $150 million, partly from the bank’s resources and the climate investment funds.
AfDB’s announcement comes at a time when KenGen is developing a 280-megawatt geothermal power plant that was commissioned last year and expected to be complete by the end of 2014.
It is billed as the largest single geothermal power project on the continent.
The power producer has already hinted at plans to double its capacity once it is complete.
Last month, the government of Ethiopia announced that it intends to scale up its Aluto Langano power plant, a pilot plant for development of geothermal power from 8.3 megawatts to 75 megawatts.
The Ethiopian government intends to offer $40 million in two tranches to the country’s private sector in order to increase investment in the renewable energy source.
