NAIROBI, Kenya, Nov 20 – Stakeholders in the geothermal energy sector are exploring solutions to reduce lead times for developing geothermal projects, while trying to determine how to leverage investments to stimulate the growth of the industry.
The African Rift Geothermal (ARGeo) Development Facility, which is funded by the UNEP Global Environment Facility and other development partners, is hosting a three-day geothermal conference starting on Wednesday that will give investors a chance to see the opportunities available in the generation and supply industry.
Geothermal Development Company (GDC) General Manager Peter Omenda said they are seeking to promote geothermal resource development and utilisation by reducing the risks associated with the resource’s exploration.
“Geothermal is usually considered as capital intensive because you have to spend so much money before you get the steam and at the end of this conference, we’ll hopefully have a solution,” he said.
“Although it has never been done before, the financiers are moving towards seeking insurance which will result in even faster growth in Kenya as we open areas that we haven’t drilled at before,” he explained.
He added that the German government-owned KfW Development Bank has already set up an insurance program called the Geothermal Risk Mitigation Facility, which was launched last week and is being implemented by the African Union Commission.
“When you get to rural areas, as an investor you don’t really know what to expect. As much as you’ve done all your research, you don’t know whether what you saw in the investigations is what will turn out to be the case and opening up a rig in a new area could cost up to $100 million,” he explained.
“You have to open up the roads and provide water, which is very expensive and this all must be done upfront before you know there will be anything,” he added.
He explained that the Geothermal Risk Mitigation Facility will promise investors that if they drill a well after thorough scientific study and fail to get steam, then they will be refunded up to 80 percent of the investment cost.
“This is something that will encourage Kenyan investors and investors from all over the world to invest in energy exploration,” he emphasised.
Omenda revealed that they still need funding for a steam gathering system, but confirmed that they are in talks with the World Bank and other financiers to raise the necessary capital.
“I want to assure Kenyans that through our acquisition of rigs, we were able to lower the cost of drilling by nearly 50 percent because we use local stuff and all our engineers will be local,” he said.
However, he acknowledged that training the human capacity needed to work the rigs is proving to be a great challenge.
“All this requires experience and trained engineers and scientists. Therefore, we are training our engineers and scientists within Kenya and abroad. We are opening a geothermal training centre which will start operations sometime next year and will make it possible for us to train many people,” he revealed.
“This will be the first such academy in Africa and it has been funded by the African Development Bank. With this, we will be able to train our drilling crew much faster,” he added.
Omenda pointed out that in the past, the drilling of geothermal wells resulted in long lead times because investors wanted to be careful and cautious due to the high costs it took to drill a single well.
“The new model we’re implementing in Kenya will allow for multiple drilling in the same field to reduce lead time, because it’s better to take the risk and put all your drilling equipment in one spot once a source has been confirmed,” he said.
“We will also be using smaller units for certain rigs that can be between 20Megawatts and 50Megawatts (MW), which can be installed much faster so you don’t have to wait and confirm all the steam for 280MW before you start generating power,” he added.
The ARGeo project brings together countries from the East African Rift System (EARS) who have the potential to generate more than 20,000MW of electric power from geothermal energy.
ARGeo countries include Burundi, Comoros, Djibouti, DRC, Eritrea, Ethiopia, Kenya, Malawi, Mozambique, Rwanda, South Africa, Sudan, Tanzania, Uganda and Zambia but out of the Eastern Africa Rift countries, only Kenya and Ethiopia generate electricity from geothermal estimated at 210MW and 6MW respectively.
The theme of the conference is ‘Geothermal: Solution to Africa’s Energy Needs’ and Omenda emphasised that geothermal energy is a clean, renewable and economically competitive energy resource with the potential to transform the lives of millions.
“We have got approval from the African Development Bank for the financing of two additional rigs, which have been ordered and will be here by next year,” he revealed.
“Our target is to construct drilling in Menengai and because we will have adequate drilling equipment, we will be to move into other areas that have not been drilled before and in doing so we are sure that we will be changing lives because some of the areas we’ll be drilling into have no roads or water,” he added.
Kenya also has plans to generate an additional 280MW from Olkaria by December 2014 and an additional 400MW by 2016, with long term plans to generate more than 5,000MW from the geothermal sources by 2030.
“Through these various projects, countries in the EARS will be able to develop their geothermal resources as a means for supplementing energy supply and for improving energy supply mixes and mitigation of climate change,” Omenda said.
He explained that since Kenya is the leader in the development of geothermal energy in Africa, the conference will offer an opportunity for the country to show case its expertise to the more than 600 delegates participating from Africa, USA, Europe, New Zealand, Iceland, China and India among others.
The conference is organised by the Geothermal Association of Kenya, GDC, KenGen, United Nations Environment Programme, Kenya Electricity Transmission Company, Energy Regulatory Commission and the Ministry of Energy.