The Geothermal Development Company of Kenya (GDC) has picked three firms, New York Stock Exchange-listed power generator Ormat Technologies, Quantum Power and local firm Sosian Energy to build geothermal power plants in Menengai that are expected to form a key plank of the Jubilee government’s promise to raise Kenya’s energy capacity to 5,000 megawatts.
Each firm is expected to build a 35-megawatt steam power plant under a build–own–operate model.(BOO). Building of the power plants is set to start in December.
GDC has already signed a deal with the three independent power producers (IPPs), which it will supply with steam at a cost of US¢3.5 (Sh3.05) per kilowatt hour.
Each of the power plants will cost about Sh4 billion to set up, and the 100 megawatts of geothermal electricity will be injected into the national grid by the end of 2015.
“The three IPPs have been selected and are now engaging Kenya Power to sign a power purchase agreement,” said a GDC tender committee member who did not want to be named.
GDC said that the three were selected from the 12 bids that were submitted at the close of the tendering process in September last year.
The State-owned agency said that it would complete drilling wells that would feed steam to the power plants by end of the year.
Earnings from the Menengai project is expected to help the State-owned GDC to cut dependence on the Treasury for funding and spur drilling activities in its other geothermal fields in Suswa and Baringo.
Tender documents seen by the Business Daily show that the investors will deliver the power at US¢8.5 (Sh7.40) per kilowatt hour excluding value added tax, in what is likely to help bring down the cost of doing business in Kenya.
“The tariff will be capped at $ 0.085/kWh exclusive of value added tax which includes the cost of steam (US$ 0.035/kWh) and the cost of generation ($ 0.05),” reads the tender document.
Kenya is turning to clean and cheaper sources such as geothermal, wind and liquefied natural gas to halve the cost of electricity to Sh9.10 (US¢10.45) per kilowatt hour from the current average of Sh17.20 (US¢19.78) per unit for domestic households.