Kenya to see competition between KenGen and the new GDC

Alexander Richter 21 Kas 2009

In a market share battle, Kenya's GDC might sell geothermal power directly to Kenya Power and Lighting. The main buyer of power in the country, is likely to purchase more of the relatively cheaper geothermal power than hydro power creating a competition for KenGen.

Talked about in local news, Kenya’s “Geothermal Development Company (GDC) plans to start producing power for direct sale to Kenya Power and Lighting Company, setting the stage for a market share battle in the energy sector.

The company, which was formed to develop geothermal power resources and turn them over to KenGen, says it will produce 100MW in the next six months and an additional 100MW later in the year.

This new development appears to usurp the role of KenGen — the sole seller of geothermal power to KPLC.

“Our understanding is that GDC is supposed to explore the wells and hand them over for power production and not to engage in power production,” said Rebecca Miano, director of corporate affairs at KenGen, adding that KenGen had already tendered for a feasibility study on Olkaria IV.

Efforts to seek clarification from the Energy ministry Permanent Secretary Peter Nyoike and the director general of the Energy Regulatory Commission (ERC) were fruitless as they were said to be in day long meetings.

Business Daily has learned that KenGen turned down an offer by the government to partner with it in forming the GDC.

KenGen decision’s was informed by its initial plans to push for exclusive rights to the development of geothermal wells in the country.

The move by GDC to supply KPLC with power directly sets the stage for a bruising battle in the energy sector as it effectively short circuits KenGen which had expected to be the sole seller of geothermal power to KPLC.

GDC plans to start producing 100 MW in the next six month and growing that initial capacity by 100 MW per annum.

The production will be done through an early generation strategy using modular containerised power plant.

The move by the state corporation is likely to cause anxiety to KenGen which currently contributes 80 per cent of the country’s power, the balance being supplied by Independent Power Producers (IPPs).

For KenGen, the entry of GDC into geothermal power production is likely to ruffle feathers as it is likely to result in a shift in the country’s power base load from hydro to geothermal.

Currently the country base load is dominated by hydro power which is considered unreliable, expensive and unable to meet growing demand from industries and households.

Such a shift will affect the bottom line of KenGen as Kenya Power and Lighting Company (KPLC), the main buyer of power, is likely to purchase more of the relatively cheaper geothermal power than hydro power.”

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Source: The Business Daily Africa