Chinese boost Kenya geothermal ambitions: geothermal power is clean and cheap, and Kenya has plenty of it in the Great Rift Valley. But new investment in this source has been hard to come by--until recently with the entry of the Chinese.

Kenya's recent power supply woes have attracted a great deal of attention. Electricity rationing has affected homes, businesses, schools and hospitals, and when sustained over a long period can have a considerable impact on GDP.

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The East African nation has traditionally relied on hydroelectric plants backed up by oil fired facilities--a balance that has proved problematic during periods of low rainfall. Yet new investment in the country's geothermal resources should inject a much needed element of stability and diversification into the generation mix as Africa begins to make more of its renewable energy resources.

Many other forms of renewables, such as wind and solar, can be useful sources of both on-grid and off-grid electricity, but provide power only intermittently.

No economic method of long-term electricity storage has yet been devised and so such ventures can contribute only a limited proportion of a country's overall generation stock.

Geothermal power, however, is at least as reliable as thermal power plants or nuclear reactors. It is also a great deal more cost effective than oil or diesel fired plants, for which Kenya currently relies on foreign supplies at fluctuating prices.

Kenya's geothermal potential has long been recognised, particularly at Olkaria, in Hell's Gate National Park, close to Lake Naivasha, where Africa's first geothermal power plant was developed.

The Olkaria East single flash Mitsubishi plant, which was brought on stream between 1981 and 1985, provides 45MW through three units, which are supplied by 26 wells. Geothermal power involves passing water over very hot air deep underground to produce steam that can be used to drive turbines. Wells must therefore be drilled to access the very high temperatures required. The Olkaria area is ideally placed to supply electricity to the main centres of consumption in Kenya because it lies just 120km from Nairobi. Two transmission lines have been developed to connect Olkaria with the national grid.

Olkaria aside, there is a great deal of geothermal potential elsewhere in the Great Rift Valley and it is estimated that Kenya could possess about 2,000MW of geothermal generating capacity. However, despite the success of the Olkaria East project, a second plant was not completed until 2000 because of problems in attracting investment, either from private sector sources, from the government or from international financial institutions prepared to back Kenyan state owned companies.

Olkaria II, which is still the largest geothermal plant in Africa, was brought on stream at the start of the new millennium with 20 geothermal wells feeding 70MW of capacity.

The wells were originally drilled in the 1980s and 1990s but construction of the generating facility was only made possible by funding from the European Investment Bank, Kreditanstalt fur Wiederaufbau (KfW) of Germany and the World Bank.

Chinese win drilling contract

Olkaria East and Olkaria II are owned and operated by the state owned power generating company, Kenya Electricity Generating Company (KenGen), which continues to dominate power generation in Kenya, despite power sector deregulation. Since the completion of Olkaria II, the company has sought further external investment to develop new plants and launched a competitive tender for drilling work in May 2006.

Its efforts finally bore fruit in December, when KenGen awarded Great Wall Drilling Company (GWDC) of China a KSh1.6bn contract to add 35MW of capacity to Olkaria II by drilling five new wells and develop the 70MW Olkaria IV plant from scratch.

GWDC began drilling work at the site in June this year and plans to bore to a depth of 2,600 metres. KenGen managing director Eddy Njoroge said that the work would "involve drilling six directional wells to complement three exploration wells which were drilled eight years ago". He added that the work is expected to take a year to complete. The country's only private sector geothermal operator has also announced investment in new capacity. US firm Ormat brought the Ormat III plant on stream in 2000 with an initial generating capacity of 12MW, and the facility has been operated as an independent power producer (IPP) since then.

Electricity is supplied to the company responsible for power transmission and distribution in Kenya, the Kenya Power and Light Company (KPLC), under a power purchase agreement (PPA). Earlier this year, Ormat revealed that a new PPA had been agreed with KPLC to enable it to proceed with the development of phase two.

Drilling additional wells will enable the US firm to add 35MW of capacity by December 2008, taking the total up to 48MW, generating revenues of $32m a year. Ormat chief executive Dita Bronicki said: "This is an important milestone in the advancement of private sector investments in Kenya's energy infrastructure, providing the Kenyan people affordable, clean energy as well as the benefits of Ormat's technological expertise." Bronicki added: "This second phase of Olkaria III will add more clean and reliable electricity that will assist KPLC in meeting the increasing demand of the Kenyan economy at a cost which is lower then any other new local capacity. In addition to its clean energy benefits, the first phase of the project supplies C[O.sub.2] to Oserian Development Corporation's greenhouses that are adjacent to the plant."

The C[O.sub.2] extracted during the first phase is used to enhance the growth of flowers on a large flower farm. Additionally, the construction of phase two will generate about 250 local jobs. It is hoped that the plant can be further expanded through a third phase but details of the scale and timing of the investment have not yet been revealed.

The Kenyan Ministry for Energy has drawn up its Least Cost Development Programme for the power sector, which aims to bring the maximum amount of generating capacity on stream at the lowest possible cost.

Geothermal energy is considered very economic and has therefore been placed at the heart of this strategy. The energy minister, Kiraitu Murungi, says that funding for geothermal exploration has been increased in order to enable 70MW of new capacity to be added every two years.

Murungi commented: "We anticipate having an installed capacity from geothermal of 400MW by the year 2020. To achieve this aspiration the government is making key steps and in the last financial year allocated KSh2.4bn for geothermal exploration."

These are ambitious targets but if Kenya is to sustain economic growth in excess of 5%, a rapid increase in generating capacity is required. As both a stable and a renewable source of electricity, geothermal is surely the ideal option.

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RELATED ARTICLE: Natural Gas

Nigeria, Algeria looking for pipeline investment

The governments of Nigeria and Algeria have agreed to proceed with the development of the Trans-Sahara Gas Pipeline (TSGP) and are seeking private sector investors to help back the project.

The TSGP would enable gas from Nigeria to be piped northwards through Niger to Algeria, where it would join Algeria's existing pipeline grid for export across the Mediterranean Sea to the growing markets of the European Union (EU).

At present, Algeria has two subsea pipelines to Europe--one each to Spain and Italy--but two further links are now under construction.

It might be expected that Algeria would seek to block any Nigerian effort to muscle in on its key market. However, in the true spirit of the New Partnership for Africa's Development (Nepad), Algiers is keen to back the scheme as a prime example of cross-border co-operation.

Algeria will of course also earn substantial transit fees from Nigeria and it is possible that handling even greater volumes of gas will give it more muscle when negotiating European deals.

The state owned oil companies of the two countries, Sonatrach and the NNPC, are likely to take a stake in any development consortium but require private sector partners to fund the venture. Speaking at an investment conference in July, Algeria's veteran minister of energy, Chakib Khelil said that the 4,200km pipeline would cost $10bn to construct, higher than the original estimates of $7bn. He said: "The market, experience and political will are all there." The two governments hope that a very large pipeline, with transport capacity of 30bn cubic metres a year, can be developed by 2015.

The EU is keen to minimise its reliance on Russian gas and is seeking alternative sources to counter a supply deficit forecast to reach 20bn cu metres a year by 2015. The EU energy commissioner, Andris Piebalgs, commented: "It's very clear that we're interested in Nigerian gas" and added "the EU can guarantee security of demand".

Nigeria already exports gas in the form of liquefied natural gas (LNG) but piped gas will be far more easily traded between European markets once it reaches the shores of Southern Europe.

Nigeria and Algeria possess about 70% of the proven gas reserves on the African continent, so any strategic alliance between the two could create a strong global gas power, probably the second biggest source of export in the world after Russia.