More details on the restructuring of Kenya’s power sector
Alexander Richter
7 May 2009
Kenya's government has released more details on the restructuring of its energy sector. This includes details on the Geothermal Development Company and a newly funded Transmission company.
Reported locally, the government of Kenya has released more details on the restructuring of its energy sector. This includes details on the Geothermal Development Company and a newly funded Transmission company. Business Daily Africa’s article reads: “Two electricity companies will be set up to help Kenya harness and distribute more power to consumers.
The Geothermal Development Company (GDC) and the Kenya Electricity Transmission Company (KETC) are aimed at exploiting the hugely untapped geothermal energy potential and set up new transmission lines respectively. They will be hived off power generation and transmission firms, KenGen and the Kenya Power and Lighting Company (KPLC) respectively.
Last week, GDC started the process of recruiting staff , including a chief executive officer.
The CEO, along with the board are expected to develop a sustainable business model that could deliver at least 700MW of steam equivalent for the country to realise the geothermal expansion plan in the next 10 years.
The company, in an advertisement, called for consultants seeking to assist in the partitioning of the company’s offices and competitors for the design of its corporate logo and motto.
Both GDC and KETC are anchored in the Energy Act of 2006.
GDC, a limited liability company, has 20 ,000 ordinary shares, a majority of which are owned by Treasury which has 19, 990. The Energy ministry has 10.
GDC chairman Paul Gondi told the Business Daily yesterday that his six-member board was in India to learn its geothermal business model.
Board members include Rhoda Arupe Loyor, Mr Kariuki Muchemi, John Gitonga, Sally Chelangat Towett and Moitalel ole Kenta.
The ministry in the current financial year has a budget of Sh4.4 billion (US$ 55 million) for geothermal exploration. GDC was established to, among others, separate upstream and downstream aspects of geothermal energy generation.
“The Government plans to open up the marketing of power, especially through direct billing on big consumers. None of the investors are willing to explore steam from the ground,” said Mr Justus Kageenu, KETC chairman.While the two State firms are intended to encourage competition in the generation and distribution of electric power, analysts say they are likely to rekindle wars of duplication from current generation and transmission monopolies.
It is expected that GDC will free KenGen from the expenditure it incurs on exploration activities by carrying out exploration, prospecting and sinking of geothermal wells.
“The GDC will hand over productive wells to KenGen and interested private investors for development of power plants and production of electricity for sale,” he says.
Yesterday, Mr Joseph Njoroge, the KPLC managing director, shrugged off potential threats posed by the new company, saying it will concentrate on setting up new transmission lines as KPLC concentrates on addressing weaknesses in the existing but aging transmission network.
“The future is bright. There will be no impact on KPLC’s revenue streams. KETC will provide cheaper power for consumers and will complement to what we do ,” he said by phone.
Energy minister Kiraitu Murungi says GDC will undertake comprehensive geothermal resources assessment and steam production through public funds.
He said some eight geothermal plants will produce between 35-70MW, and 140MW in different sites in the Rift Valley within the next five years.
Over the period, GDC will undertake detailed investigation of sites like Longonot, Suswa, Menengai, Lake Magadi and Lake Bogoria.
Geology experts say it costs $5 million (about Sh400 million) to drill one well.
They say that by financing risks associated with exploration of viable quantities of steam for power generation in Naivasha and other high potential sites, Kenya is moving into cheaper geothermal power generation.
A transitional committee comprising officials from GDC, the Energy ministry and KenGen is currently in the process of setting up structures for the new company. GDC will rely on KenGen until it sets up its own operational structure.
GDC would take up upstream activities which have huge up front investment to spur the growth of the sector.
High initial costs have discouraged private sector investment although geothermal power is cheaper in the long term compared to use of fuel for power generation.
The country has the potential to generate 7, 000MW from geothermal power up from the current 150MW
Electricity generation mix currently stands at 60 per cent hydro, 30 per cent thermal and 10 per cent geothermal.
The main hindrance to geothermal power development has been high tariffs arising from high cost sof steam exploration.
Once the wells are established, GDC will then float tenders for interested power companies, including KenGen and Ormat International, an independent American power producer of geothermal based in Naivasha.
“For tariffs to be low, the government is undertaking exploration. KenGen and private investors will undertake plant construction for generating electricity,” Mr Murungi adds and allayed fears of conflict between existing and new power utilities.”
Source: Business Daily Africa
