Kenya approves Olkaria VII Geothermal Power project

In a significant stride toward a sustainable and robust energy future, the Kenyan government has officially greenlit the development of the Olkaria VII Geothermal Power project. This new facility, spearheaded by state-owned electricity producer KenGen, is projected to inject a crucial 80.3MW of electricity into the national grid by mid-2027. This landmark project, a cornerstone of the country’s strategic vision, will leverage energy from 19 newly-drilled geothermal wells and is being developed through a key partnership with the Japanese government and the European Investment Bank.

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The approval of Olkaria VII marks a pivotal moment for Kenya, a nation already celebrated for its leadership in renewable energy. The project is not just about adding megawatts to the grid; it’s a strategic response to the nation’s burgeoning energy needs, which are being driven by a rapidly expanding economy, ambitious industrialization plans, and the accelerating adoption of electric vehicles. KenGen’s Chief Executive Officer, Peter Njenga, has highlighted that the country’s electricity demand is rising by approximately 100MW annually. He further projects that the national push for e-mobility will require an additional 334MW by 2032, while the industrialization plan is set to demand a staggering surge of over 1,000MW during the same period. The Olkaria VII plant is therefore seen as a critical, and timely, intervention to meet this future demand sustainably.

The Strategic Role of Geothermal Energy in Kenya’s Vision 2030

For decades, geothermal energy has been at the heart of Kenya’s long-term development plans. Unlike intermittent sources like solar and wind, geothermal provides a stable, reliable “base-load” power supply that is available 24/7, making it an ideal foundation for a modern, industrial economy. The development of Olkaria VII is a tangible step toward achieving the goals outlined in Vision 2030, which aims to transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens in a clean and secure environment.

The nation’s commitment to geothermal power is also a core part of its climate action strategy. By tapping into its vast geothermal resources, Kenya has significantly reduced its reliance on fossil fuels, making it a global leader in clean energy. Currently, renewable sources account for over 93% of Kenya’s electricity generation capacity. Geothermal alone contributes roughly 45% of the total installed capacity, making Kenya one of the top five geothermal producers in the world, alongside nations like the United States and Iceland. The Olkaria field, located in the Rift Valley, is one of the largest and most productive geothermal fields globally, a natural endowment that Kenya has expertly leveraged for its economic and environmental benefit.

The history of the Olkaria field is a testament to Kenya’s long-term strategic planning. The country’s geothermal journey began with the commissioning of the Olkaria I Geothermal Power Station in 1981, making it the first geothermal plant in Africa. This initial 45 MW facility paved the way for subsequent, larger projects. Over the years, KenGen has systematically expanded its capacity with the development of Olkaria II (105 MW), Olkaria III, Olkaria IV (140 MW), and Olkaria V. The Olkaria I complex itself has undergone significant expansions, with Units 4 and 5 adding 140 MW in 2014-2015, and Unit 6 adding another 83.3 MW in 2022. This phased approach has allowed KenGen to continuously grow its expertise and generation capacity, culminating in a combined installed capacity of 810.3 MW from the Olkaria complex as of 2020, and a total company capacity of 1,786 MW as of recent reports. Olkaria VII continues this impressive legacy, pushing the boundaries of what is possible for clean, reliable power generation.

Olkaria VII: A Pillar of KenGen’s Ambitious 10-Year Strategy

The Olkaria VII project is a key component of KenGen’s bold 10-year G2G Strategy (2024–2034), a comprehensive roadmap designed to solidify Kenya’s position as a regional energy powerhouse. KenGen’s CEO, Peter Njenga, stated that the company plans to add a remarkable 1,500MW of electricity from renewable sources over the next decade. Of this ambitious total, 800MW is specifically earmarked for geothermal expansion, demonstrating a clear and unwavering focus on this reliable resource.

This strategy is built on a foundation of proven success. KenGen’s existing geothermal plants—Olkaria I, II, III, IV, and V—have been instrumental in providing consistent power to the grid. The Olkaria VII project will build on this legacy, utilizing advanced drilling and power generation technologies to maximize efficiency. By expanding its geothermal footprint, KenGen is not only meeting local demand but also positioning itself to potentially become a key player in cross-border energy trade, supplying clean power to neighboring countries under the framework of the East African Power Pool.

The entire renewable energy expansion plan comes with a substantial price tag of approximately US $4.3 billion (KSh554.7 billion). This significant investment highlights the scale of Kenya’s ambition. To finance this massive undertaking, KenGen is actively seeking support from a diverse array of international donors, development partners, and private sector investors. The company’s ability to attract such partnerships is a testament to its strong track record and the clear, bankable nature of its projects.

The process of harnessing geothermal energy in Olkaria involves a sophisticated engineering process. Deep within the Earth’s crust, the region’s geological activity heats underground water to extreme temperatures, creating a high-pressure mixture of steam and hot water. KenGen’s engineers drill deep production wells—the 19 wells planned for Olkaria VII are an example—to tap into these geothermal reservoirs. The high-pressure steam is then piped directly to the power plant, where it is used to spin large turbines. These turbines are connected to generators that produce electricity. After the steam has passed through the turbines, it is cooled and condensed back into water, which is then re-injected back into the underground reservoir. This process makes geothermal a sustainable resource, as the water is recycled and the steam is a clean, continuous fuel source.

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Addressing Kenya’s Soaring Electricity Demand

Kenya’s economy is in a period of dynamic growth, and this expansion is creating an unprecedented demand for electricity. The Olkaria VII project and KenGen’s broader strategy are a direct response to this trend, ensuring that energy supply does not become a bottleneck for national progress. As of late July 2025, Kenya hit a new record electricity demand of 2,362.28 MW, a clear indicator of this rapid growth.

Industrialization and Economic Growth

The most significant driver of future demand is Kenya’s national industrialization plan, a cornerstone of Vision 2030. This strategy aims to boost the manufacturing sector’s contribution to the Gross Domestic Product (GDP), creating jobs and driving export growth. A robust and affordable power supply is the bedrock of any successful industrialization push. Factories, processing plants, and other industrial facilities require vast and uninterrupted electricity to operate efficiently. The addition of Olkaria VII’s 80.3MW will provide a critical boost, enabling the expansion of existing industries and attracting new investment.

This push for industrialization is also closely linked to the African Continental Free Trade Area (AfCFTA). As a key signatory to this agreement, Kenya is poised to become a manufacturing hub, producing goods for a massive continental market. The AfCFTA’s goal is to create a single market for goods and services across Africa, and for Kenya to fully capitalize on this opportunity, it must have a reliable and cost-effective energy supply. By investing heavily in renewables, Kenya is gaining a competitive edge, as its industries will be powered by clean, domestically-produced electricity, which is less susceptible to the volatility of global fossil fuel markets.

The Rise of E-mobility

The global trend toward electric vehicles (EVs) is rapidly gaining traction in Kenya. The government has been actively promoting the adoption of e-mobility through various incentives, and the private sector is investing in the necessary charging infrastructure. While EVs offer a path to cleaner transportation and reduced air pollution in urban centers, their widespread adoption will place a significant new load on the national grid. The projected demand of an additional 334MW by 2032 is a conservative estimate of the energy required to power this new fleet of vehicles. The Olkaria VII project is a forward-looking measure to ensure that this energy demand can be met with clean, green power, further cementing Kenya’s environmental credentials. The combination of clean power generation and clean transportation creates a virtuous cycle, accelerating the nation’s transition to a low-carbon economy.

Rural Electrification

In addition to industrial and e-mobility needs, Kenya continues to make significant progress in expanding its national grid to connect households and businesses in rural areas. This ongoing electrification program is a fundamental aspect of the government’s commitment to social equity and economic inclusion. The increased access to electricity in rural communities fuels the growth of small businesses, improves educational outcomes, and enhances the overall quality of life. Each new connection, whether a home or a small enterprise, adds to the cumulative national demand. The Olkaria VII project, therefore, plays a crucial role in supporting this social and economic development by ensuring there is enough supply to power a more equitable and connected Kenya. The government’s recent approval of Phase III of the Last Mile Connectivity Project, which aims to expand electricity access to 180,500 new customers, further highlights this commitment.

Funding and Partnerships: A Model for Sustainable Development

Financing large-scale infrastructure projects like Olkaria VII is a significant challenge for any developing nation. The involvement of international partners, such as the Japanese government and the European Investment Bank (EIB), is therefore a critical component of the project’s success. These partnerships provide more than just capital; they bring a wealth of technical expertise, best practices in project management, and a stamp of international credibility that can attract further investment.

• The Japanese Government’s Role: Japan has been a long-standing partner in Kenya’s geothermal development, providing both technical assistance and concessional loans. The Japanese government’s support for Olkaria VII underscores its commitment to helping developing nations achieve their sustainable development goals and transition to clean energy. This collaboration is a model for South-South cooperation, where developed nations support emerging economies in building a green future. Japan’s expertise in geothermal technology is globally recognized, and this partnership ensures that Kenya benefits from the latest advancements.
• The European Investment Bank (EIB): As the European Union’s long-term lending institution, the EIB is a key financier of climate action and green projects globally. Its involvement in Olkaria VII highlights the project’s alignment with international environmental and social standards. The EIB’s support is vital for mobilizing the large-scale financing required for such a project, ensuring it is built to the highest standards of efficiency and sustainability. The EIB has a long history of supporting Kenya’s energy sector, having been a key financier for previous Olkaria projects and other major renewable energy initiatives like the Lake Turkana Wind Farm.

These partnerships not only facilitate the project’s execution but also help Kenya build domestic capacity in geothermal technology and management, ensuring the long-term viability and sustainability of its energy sector.

Enhancing Grid Stability: The Role of Energy Storage

A key element of KenGen’s 10-year strategy, mentioned in the initial news content, is a plan to invest in a 500-hour energy storage system for wind and solar power. This detail is highly significant and highlights a sophisticated understanding of modern grid management.

While geothermal provides stable base-load power, solar and wind energy are by nature intermittent. A solar farm only generates power when the sun is shining, and a wind farm only generates when the wind is blowing. This variability can create challenges for grid stability, as supply must constantly match demand. An energy storage system, such as a large battery or a pumped-storage hydro facility, can store excess energy generated during periods of high production and release it back into the grid during peak demand or when renewable generation is low.

The planned 500-hour storage system will act as a crucial complement to Kenya’s growing portfolio of solar and wind projects. It will smooth out the grid’s power supply, making the entire system more reliable and resilient. This allows Kenya to maximize the use of its clean, abundant, and cost-effective wind and solar resources without compromising the stability of the national grid. The combined effect of reliable geothermal and stored intermittent renewables will create a truly resilient and sustainable energy ecosystem, capable of powering a modern, digital economy.

Kenya’s Leadership and the Broader African Context

Kenya’s progress in renewable energy, culminating in projects like Olkaria VII, serves as a powerful model for the rest of Africa. The continent is grappling with significant energy poverty, with millions of people lacking access to reliable electricity. At the same time, many African nations have vast, untapped renewable resources, including solar, wind, and geothermal. By successfully developing its geothermal sector, Kenya demonstrates that a clean energy future is not only possible but also economically viable.

The nation’s strategic focus on energy is a prerequisite for its broader digital transformation. As the Mastercard report “Harnessing the transformative power of AI in Africa” suggests, the continent is on the verge of a technological revolution. This digital revolution, from AI-driven solutions in agriculture to the expansion of e-commerce, requires a massive and reliable supply of electricity. Kenya’s investment in projects like Olkaria VII is therefore foundational to its aspirations of becoming a regional hub for technology and innovation.

In a world increasingly focused on climate change, Kenya’s leadership in renewable energy provides it with a strong voice on the global stage. It shows that economic development and environmental stewardship can go hand-in-hand. The Olkaria VII project is more than just an energy plant; it is a symbol of a nation committed to a sustainable, prosperous, and self-reliant future.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

7th August, 2025