Kenyan President William Ruto is calling on private investors to significantly scale up geothermal energy exploration, emphasizing the vast, largely untapped potential of this renewable resource in the country. Currently, only 10 percent of Kenya’s geothermal reserves have been explored, presenting a substantial opportunity for expansion, both for the nation’s economy and for sustainable energy production.

During the groundbreaking ceremony for the 35-megawatt (MW) Orpower 22 geothermal power plant in Menengai, Nakuru County, northwest Kenya, Ruto highlighted the country’s geothermal potential and the need for a robust push from both private and public sectors to maximize this energy source. “So far, we have tapped only 950 MW, a small fraction of our geothermal potential of nearly 10,000 MW, leaving immense opportunities still untapped,” he said. His remarks, covered by Xinhua News Agency, underscore Kenya’s position as a leader in geothermal development in Africa, and his government’s intention to make it a cornerstone of Kenya’s energy future.

Kenya’s geothermal potential, estimated at around 10,000 MW, is considered one of the largest on the continent. As a renewable, stable, and clean energy source, geothermal power aligns with Kenya’s climate goals and could play a significant role in reducing reliance on fossil fuels, minimizing carbon emissions, and improving energy security. The country’s geothermal resources are primarily located within the geologically active Great Rift Valley, an area with abundant high-temperature geothermal reservoirs.

Expanding Geothermal Production: A Path to Clean Energy Goals

President Ruto underscored the strategic importance of geothermal power in Kenya’s commitment to achieving universal access to clean, affordable, and reliable energy by 2030. Geothermal power currently makes up about half of the electricity in Kenya’s energy mix, allowing the country to rely less on coal and other fossil fuels compared to other African nations. By increasing geothermal output, Kenya could accelerate progress toward a 100 percent clean energy grid, a key element of its ambitious 2030 climate action targets.

The government is actively working with private sector partners to harness Kenya’s geothermal potential. Ruto’s administration is seeking to foster an investment-friendly environment that encourages foreign and local companies to engage in geothermal exploration and development. “As a global leader in this space, Kenya continues to demonstrate how every nation can achieve sustained, rapid, and transformative growth while remaining true to climate action commitments,” said Ruto. He emphasized that geothermal energy will be central to decarbonizing Kenya’s national grid and advancing the country’s goal of net-zero emissions by mid-century.

Foreign Investments and International Partnerships Bolstering Kenya’s Geothermal Ambitions

Ruto also highlighted a major investment by the Chinese company Kaishan Group, which contributed approximately 12 billion Kenyan shillings ($93 million) to the Menengai geothermal project. This collaboration marks an important milestone for Kenya’s energy sector and reflects foreign investors’ confidence in the country’s geothermal potential. Kaishan Group’s involvement not only provides crucial funding but also brings technological expertise, an essential factor for efficiently tapping into geothermal resources.

Other international players have shown interest in Kenya’s geothermal potential as well. The African Development Bank (AfDB) and the World Bank have been supporting geothermal projects in Kenya for years, and private investors from Europe, the United States, and Japan have also begun to invest. These partnerships help Kenya to address some of the technological and financial barriers associated with geothermal energy exploration and production, which can be more complex and capital-intensive than other forms of renewable energy.

The Kenyan government has also set up various policies to encourage geothermal investments. For instance, the Geothermal Development Company (GDC), a state-owned enterprise, was established to develop geothermal resources on behalf of the government. GDC de-risks geothermal investments by handling the initial exploration and drilling stages, which are the riskiest and most costly parts of geothermal development. By providing investors with ready-to-build geothermal fields, GDC lowers the entry barriers for private companies and accelerates the growth of the sector.

Economic Impact of Geothermal Development

Expanding geothermal energy production could have far-reaching economic benefits for Kenya. Reduced electricity costs would enhance the competitiveness of Kenya’s manufacturing sector, making it an attractive destination for foreign investors. Additionally, a reliable and affordable power supply is essential for small and medium-sized enterprises (SMEs), which constitute a significant portion of Kenya’s economy. Access to stable electricity would allow these businesses to operate more efficiently, supporting job creation and economic growth.

As of 2023, Kenya’s electricity tariffs were among the highest in East Africa, partly due to reliance on expensive, imported fossil fuels. With geothermal power contributing a more significant share of the energy mix, electricity prices could stabilize or even decrease over time, benefiting households and businesses alike. The Kenyan Association of Manufacturers (KAM) has long advocated for more affordable energy solutions, recognizing that high electricity costs are a barrier to growth and a disincentive for foreign investment. By prioritizing geothermal development, Kenya could take a substantial step toward meeting the energy needs of its manufacturing sector and boosting industrial growth.

Technological and Environmental Benefits of Geothermal Energy

Geothermal energy has unique advantages over other renewable energy sources, such as solar and wind, which are intermittent and weather-dependent. Geothermal plants operate continuously, providing a stable supply of power that can balance the grid and complement other renewables. In areas with developed geothermal infrastructure, such as Olkaria in Kenya’s Naivasha region, geothermal energy has already proven to be a reliable baseload power source.

From an environmental perspective, geothermal energy has a low carbon footprint compared to fossil fuels. Kenya’s commitment to geothermal development aligns with the country’s climate action plans under the Paris Agreement, aimed at reducing greenhouse gas emissions. The deployment of geothermal energy will also help Kenya to decrease its dependence on hydroelectric power, which can be vulnerable to droughts and changing climate patterns. By diversifying its energy sources with geothermal, Kenya can achieve a more resilient and sustainable energy mix.

Challenges in Geothermal Expansion and Government Initiatives

Despite the promising potential, Kenya’s geothermal sector faces several challenges. The high upfront cost of geothermal exploration and drilling is a major barrier, as drilling one geothermal well can cost between $3 million and $7 million. These costs deter private companies from entering the market without substantial government or international financial support. In addition, geothermal sites are often located in remote areas with limited infrastructure, making it difficult to transport equipment and personnel.

To address these challenges, the Kenyan government has been working with development finance institutions, such as the AfDB and the World Bank, to secure concessional loans and grants for geothermal projects. The government also offers tax incentives and other financial benefits to geothermal developers, making the sector more attractive to investors. Furthermore, GDC’s role in de-risking geothermal projects has been instrumental in attracting private sector participation.

Public awareness and community engagement are also crucial for the successful expansion of geothermal energy. In some cases, geothermal development has faced resistance from local communities due to concerns over land use, water resources, and environmental impact. The government and private developers are making efforts to engage local communities in decision-making processes, providing them with information about the benefits of geothermal energy and addressing their concerns through transparent environmental and social impact assessments.

Future Prospects for Kenya’s Geothermal Sector

Looking ahead, Kenya aims to significantly expand its geothermal capacity over the next decade. The government’s Vision 2030 blueprint identifies geothermal energy as a key driver of sustainable development, with plans to increase geothermal output to 5,000 MW by 2030. Achieving this target will require substantial investment in exploration, drilling, and power plant construction, as well as the development of transmission infrastructure to deliver electricity to consumers across the country.

To support this expansion, Kenya is also exploring the potential for direct use of geothermal energy in industries such as agriculture, tourism, and manufacturing. For instance, geothermal heat can be used in greenhouses, food processing, and aquaculture, providing a sustainable source of thermal energy that could reduce reliance on fossil fuels and further enhance the economic benefits of geothermal development.

Kenya’s leadership in geothermal energy in Africa has set a precedent for other nations on the continent. With continued investment and support from both public and private sectors, Kenya could become a global model for geothermal development, demonstrating the viability of geothermal energy as a sustainable, affordable, and reliable energy source for developing countries.

In conclusion, President Ruto’s call for increased private sector involvement in geothermal energy reflects Kenya’s commitment to leveraging its natural resources for sustainable development. By expanding geothermal energy production, Kenya has the potential to not only meet its growing energy needs but also achieve its climate goals, boost economic growth, and position itself as a leader in renewable energy in Africa and beyond.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

25th October, 2024