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Tuesday, 24 July 2012

New Olkaria Geothermal plant in Kenya launched


Yesterday the President of Kenya, H.E. Mwai Kibaki launched the construction of a 280MW geothermal project at Olkaria, 100Kms from the capital Nairobi.  The new plant will cost approx. USD 1Billion and will be the largest geothermal power plant in Africa when completed in 2014. It will cumulatively increase Kenya’s electricity capacity by 40% from the current 1500MW, considering other projects already under development. 

This is good for the country because its current shortfall at peak demand is currently 200MW. Electricity supply is also known to be erratic and expensive compared to other countries in the region.

The project is funded by Kengen, Kenya’s national power producer, The Government of Kenya, the Japanese International Cooperation Agency( JICA), The World Bank, German Development Bank , (KFW), The French Development bank( AFD), and The European Investment bank.

The project is being undertaken by a consortium made up of Japan’s Toyota Tsusho Corp and South Korea’s Hyundai Engineering & Construction building the main power plant. Sinopec of China is developing the steam field while construction of the substation and transmission lines is being done by India’s KEC. We see a predominantly Asian team participating in this project.

The project is part of the government’s Vision 2030 plan to increase the country’s power production to 3,750MW by 2018 and 15,000MW by 2030.

In the speeches yesterday most officials talked about cheaper renewable energy through geothermal energy and this plant and others to follow going a long way in creating a capacity reserve. A capacity reserve that will prevent blackouts and power shedding during peak demand. Kenya currently has an estimated proven reserve of 7,000MW of Geothermal Power.
From my analysis I predict that when plant is complete it won’t have made a difference to the reserve capacity as it would have only gone to quench the current and growing power deficit. With the ongoing rapid rural electrification program, growing population and expanding foreign investment in business, manufacturing and commerce, the growth in demand should be about 10% per year. Even more I don’t believe the power will be cheaper, immediately, as the loans taken from the international lenders mentioned above have to be paid back with interest over period of time. My prediction is that power from this plant will be cost effective and cheaper  after around 10 years.

Currently only 15% of homes in Kenya have domestic power from the national grid, while industries go without power for an average of 6 hours a week or more( According to Ms Betty Maina, the Chairlady of the Kenya Association of Manufacturers). But all in all congratulations to the Kenyan government for successfully pushing through such a large and strategic project to increase provision of power that many Kenyans have been yearning for and that will make Kenya’s electricity more stable and cheaper in the long run.