Menengai volcano
The Menengai volcano, where engineers are hunting for steam

Deep inside the rim of the world’s second-largest volcanic caldera, the smell of rotten eggs and furious clouds of white smoke hug the rugged land. Here, where the earth’s crust thins as the Rift Valley twists its way north, scientists are hunting for steam.

Stephen Kalgogo, an engineer, stands at the foot of a $30m rig that plunges its drill-bit more than 2km into the sulphurous heart of the Menengai volcano, 180km north-west of Nairobi. He says: “We’ve drilled eight wells and found steam in every one.”

It is at the forefront of hopes that geothermal energy will boost Kenya’s dismal power output. By channelling high pressure steam sourced deep underground to turn turbines, the government hopes to make the most of an estimated 10,000MW of geothermal potential.

For now, the entire country produces 1,200MW, serving only 20 per cent of the population, and power prices are so high that they limit manufacturing and the jobs that go with it.

The approach appeals to deep-pocketed international development finance institutions that are keen to back clean energy.

Gabriel Negatu, east Africa regional director at the African Development Bank, says: “It’s risky technology, but in the long term it is clean, sustainable – much more reliable than hydro, which is vulnerable to rainfall and drought – and abundant.”

The bank is putting $145m into the Menengai project. The World Bank, French and Japanese development agencies and others have given more than $500m in loans and grants and promise more.

Even so, progress has been slow. Olkaria, south of Lake Naivasha in Kenya’s Great Rift Valley and Africa’s first geothermal power field, has taken more than 30 years to develop.

Today it produces 210MW, which makes Kenya the largest geothermal producer in Africa. However, it is a long way short of the 5,530MW target for 2030, by which time the government predicts that overall power demand will rise to 21,620MW.

Olkaria alone can produce 1,600MW, and has started drilling more projects.

“The pace of development has been slower than we wanted, partly because of the risks of hitting dry wells,” says Hino Hiroyuki, economic adviser to the prime minister Raila Odinga, who is spearheading Kenya’s green energy development.

To establish even a 50MW steam resource, prospectors must drill an average of 13 holes costing close to $100m just to locate the steam, and billions more are needed for large power plants. State-controlled KenGen, the country’s main power generator, says the 5,000MW target is likely to cost $20bn.

The state-owned Geothermal Development Company (GDC), set up three years ago, has taken on much of the risk. It assesses and drills the holes, with a view to handing steam conversion and power generation to private investors, who can recoup their costs against fixed power prices. With the aid of loans, it is buying its own drill rigs rather than contracting expensive Chinese equipment, which will shave one-third off the cost of drilling.

But it may not be enough, says Prof Hiroyuki. “The pace of development is constrained by the amount of tax money that can be made available, or borrowings from the World Bank, African Development Bank and others,” he says, mindful that some private sector groups sit on licences and wait for the value to rise.

Financiers say investors should be able to come in sooner, and GDC has asked for equity funding of up to 80 per cent for early-stage development for Menengai’s phase two; this is set to deliver 800MW by 2021.

Several technological and financial developments may lower costs and make private sector participation easier.

One will reduce the lag between discovering steam and turning it into power – and money. Mini-plants installed at the well head can convert steam to power on-site, quickly and inexpensively. “Well head is the way to go for both speed and efficiency,” says David Horsey of Civicom, which built Kenya’s first 2.5MW wellhead at Eburru.

Construction experts say a well could be drilled for $2m, rather than government estimates of three times more.

Steam-powered energy from well head mini-plants could power rigs that are drilling other wells, saving on expensive diesel. Private sector outfits are winning bids to build well head generators next year.

The other effort is to reduce the risk of drilling dud holes through various insurance schemes, which could accelerate private investment. A geothermal risk mitigation facility from Germany’s KFW Development Bank will finance 40 per cent of exploration, and Munich Re, a German insurance company, is developing a policy for Kenya.

“Kenya has a fantastic precedent in the 200MW that they have already installed,” says George Delacherois Day, operations manager at UK-based Cluff Geothermal, which is interested in building a steam conversion plant at Menengai.

He says Kenya’s “very nice” geothermal legal framework makes the country investor-friendly, while insurance schemes would be a great bonus: “All the mechanisms are there to get excited, and now we are looking to the Kenyan government to allow us to participate in exploration.”

Get alerts on African economy when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article