Government should prioritise geothermal power

Inadequate electricity generation capacity and high power bills have been perennial problems in Kenya prompting the Government to explore various ways of tackling the glitches.

Currently, a lot of effort is geared at developing the country’s geothermal power capacity, which experts opine is environmental friendly and more affordable to run compared to other sources of energy like fossil fuel.

A major shift to geothermal power will also insulate the country against the effects of drought, which often interferes with hydroelectric power. Over 70 per cent of our installed capacity of power plants has historically been powered by hydroelectric sources with diesel-fired plants also accounting for a significant portion of the total energy demand.

The reliance on diesel is unhealthy, as it has helped push the average cost of production of electricity and made it expensive for consumers. Overall the prices of the commodities we rely on or hope to use for future generation are spiraling and are projected to continue that trend.

Here are the numbers: According to the current International Energy Agency’s World Energy Outlook, coal prices are projected to increase to about $200 per ton by 2035 and oil prices to $250 per barrel.

This means continued reliance on traditional sources of energy could be catastrophic to Kenya’s development as a nation. This is why the idea of geothermal power looks and sounds attractive.

But to make the dream of having geothermal as the main source of electricity generation, estimates indicate the country requires $20 billion (Sh1.7 trillion), which is about double Kenya’s annual budget.

This amount is staggering by any measure and it would be illogical to expect the Kenya Electricity Generating Company (KenGen) or the State corporation responsible for the development of this kind of energy – Geothermal Development Company (GDC) – to have this kind of money.

The proposed shift to geothermal energy is of significant importance for the national economy. It certainly would guarantee better prices and less corrosive interference with the environment.

Making geothermal Kenya’s main source of energy would allow for a complete stop to the usage or reallocation of price-volatile fossil fuels, such as diesel, which otherwise would have been needed for electricity generation.

By reducing the component of our energy mix that is dependent on the price of fossil fuels – and increasing geothermal power use, which in the long term will guarantee stability – takes away fossil fuel price risks.

Having borrowed Sh59.5 billion from various international financial institutions for the Olkaria geothermal plant whose total cost is projected at Sh102 billion, KenGen says it might be catastrophic for it to add more debt to its books.

Billions of shillings

Being State-owned and lacking any assets, GDC has extremely limited options out of the fix. That it cannot borrow directly from international financial institutions means it has to depend on Treasury, which means it can also not mobilise resources to meet the threshold required to actualise the geothermal dream.

With KenGen admitting that it has already exhausted its borrowing capacity, the options seem to have narrowed. It also opens us up to unfathomable thoughts that efforts to exploit geothermal resources could stall due to the massive investments required.

This need not be the case. Government should move fast and explore other alternatives to ensure that plans to generate up to 30 per cent of the country’s total energy demands from geothermal materialises.

As it is not exposed to price increases, geothermal could provide a very important element in the country’s total electricity energy portfolio. If the total benefits of using this form of energy are extrapolated the country could possibly save billions of shillings.

We believe international lenders can be persuaded to partner with KenGen and GDC in this project and given a window to recoup their investment after a period of time, say 10 to 20 years.

Carefully implemented, a partnership between these bodies and international lenders will expand geothermal’s share of the national energy mix, and help reduce greenhouse gas emissions and dependence on hydroelectric power.

With this framework, the Government will basically be delivering real fiscal incentives for renewable energy development.