International Investors In Kenya Energy Sector
News Date: 22nd October 2011
International investors are flocking into Kenya's liberalized energy
sector to engage in the generation of electricity from wind and
geothermal-powered turbines to earn carbon credits.
Kenya's electric power generation, largely dominated by water- powered
turbines, is gradually seeking to shift the more dependable geothermal
and wind powered plants due to the effects of climate change, which
has sparked off ecological damage.
The country's seven folks scheme, a combination of dams drawing its
waters from forests and deep dams has witnessed the dwindling of water
supplies due to the cutting down of trees and poor rainfall, sparked
by unpredictable weather patterns.
East Africa's worst drought in decades left most hydropower dams drier
and with less water to support peak generation and the Arab Springs
sent oil prices skyrocketing.
The World Bank and local Kenyan financial institutions are emerging as
key financiers of the "green energy" drive in Kenya. The focus has
been on the expansion of geothermal power and the construction of wind-
Kenyan Prime Minister Raila Odinga said this month the country is
short of the required finances to increase supply of electricity, a
key ingredient for reaching the UN Millennium Development Goals and
providing electricity to some 10 million rural folks.
Addressing a recent energy conference in Europe, Odinga said rural
electrification had improved lifestyles, allowing more people to own
and use mobile phones.
The electricity expansion also enabled local clinics and medical
facilities in rural areas to preserve vaccines. Pre-term babies are
also being given a lease of life.
Currently, the World Bank is supporting a geothermal power project
that is providing clean energy in Kenya to help the country facing
ongoing energy shortages.
Through its private insurance wing, the MIGA, the Multilateral
Investment Guarantee Agency, the Bank offered insurance cover to
Orpower 4 Inc, power plant in Olkaria in Naivasha, 100 km outside
"The insurance cover is for risks such as transfer restriction,
expropriation, war and civil disturbance, cover additional equity
investment of 110 million U.S dollars," the Bank announced recently.
The power plant is the first private geothermal power plant in sub-
Saharan Africa. Phase III of the project is set for completion in
2013. It would inject 84 megawatts of power, 7.6 percent of the
nation's current generation.
"The country is heavily reliant on hydropower which is seriously
constrained during droughts. As a result, Kenya imports fossil fuels
to fill the growing demand for electricity," the World Bank said in a
An increase in indigenous geothermal generation will guarantee a more
reliable supply of energy while reducing Carbon Dioxide emissions.
The existing plant has been registered as a Clean Development
Mechanism (CMD), recognized by the UN Framework Convention on Climate
The project is expected to produce carbon reduction of 180,000 tons
Odinga said with only 200 megawatts of geothermal capacity so far
exploited against the peak of 7,000 megawatts, there was room for
foreign investors to help tap the massive potential. Kenya, requires
investments of 18 billion dollars into energy sector to tap at least
5,000 megawatts of geothermal power.
Kenyan firms are amongst a chosen few in the carbon trade under the UN-
monitored CMD, yet the state environmental policy has lagged behind in
supporting the trade.
In 2009, the ministry of environment announced plans to develop
strategies that would allow local firms to trade carbon credits. Under
CMD, registered projects can sell credit and earn millions of dollars.
Foreign investors, backed by local banks, have been planning the
construction of some of Africa's largest wind-powered plants.
Dutch companies are behind a 300 MW wind farm on Lake Turkana, funded
by the African Development Bank (AfDB).
The Turkana project is estimated to cost 870 million dollars, and to
produce 30 percent of Kenya's electricity. It is also expected to
launch operations in 2012.
The first in a series of wind firms under construction is expected to
begin operations in April 2012. The wind-powered plant located in
Kinangop, is expected to generate about 60 MW.
A Danish firm, Vestas, has also put up a wind-powered turbine at the
Ngong Hills, on the outskirts of Nairobi to tap 51 MW of power.
Other projects include the Olkaria geothermal project expansion, to
generate 52 MW, the Ngong Hills project is expected to inject 100 MW
while the Oleleshwa wind Energy Limited in Kinangop, will inject 60 MW.
Kenyan government is offering guarantees to the projects to enable
them receive bank loans. The Kinangop plant has received 600 million
dollars in loans guarantees.
Demand for geothermal power is growing at 4.5 percent each year while
the state generating firm, KENGEN, plans to open a gas powered plant.
"We will be the largest and first large-scale wind power project in
Africa," the Managing director of the Kinangop power project. "Mostly,
the project is funded locally and around 26 MW would be produced
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