Kenya launched its National Climate Change Action Plan (NCCAP) in 2013, in which accelerated geothermal power development was identified as a mitigation option that has large greenhouse gas (GHG) emissions reduction potential and highly positive co-benefits.
Kenya’s short-term ambitions for geothermal are outlined in the 5,000+ MW in 40 months initiative launched by the Government of Kenya (GoK) in 2013. This initiative aims to generate bring online approximately 1,500 MW of new additional geothermal capacity by 2017 from the current capacity of approximately 200 MW (MoEP, 2013). In the longer term, Kenya’s Vision 2030 states an ambition of 50000 MW of installed geothermal capacity by 2030.
Although there is significant ambition and political will, reaching the short, medium and even long-term geothermal ambition will be a major challenge.
According to the Business As Usual (BAU) scenario defined in the NCCAP, geothermal power will continue to expand to approximately 2500 MW by 2030 (NCCAP, 2012). This falls well short of Kenya’s stated ambitions.
If the geothermal sector fails to deliver new capacity in a timely manner, Kenya is likely to prioritise alternative options. Recent discoveries of petroleum, coal and natural gas indicate that fossil fuels likely will increase in the electricity generation fuel mix. As high carbon intensity power sources, this would put the Kenya power sector on a high-carbon development pathway.
There is, however, an accelerated growth scenario for geothermal power development in the NCCAP, which this NAMA intends to support. This accelerated growth scenario foresees significant up-scaling in private sector investment, as well as new actors (developers and Independent Power Producers [IPP]) entering the sector. In the scenario, the private sector will need to cover approximately 40-50 % of the required USD 20 billion investment to reach the 5,000 MW goal, compared with the historical 10-15% level (NCCAP, 2012).
The BAU scenario in the NCCAP analysis identified two main constraints to the accelerated scenario: capital limitations of current (largely publically owned and financed) geothermal developers active in Kenya, and the limited number of private sector developers.
In recent years, Kenya has already undertaken significant steps to support the transition towards the accelerated scenario (the ‘transformation’), including the establishment of the Geothermal Development Company (GDC) that seeks to promote development of geothermal with large private sector participation. However, engagement with Kenyan stakeholders, international IPPs and developers, potential investors and development banks indicated that significant gaps remain in the support for geothermal development.
What are the gaps and how is the NAMA designed to support on-going efforts to transform the Kenyan geothermal sector?
Three main gaps in the efforts to support increased private participation were identified during a sector analysis performed through a multi-stakeholder consultation process that began in September 2012 and continued for over 16 months. These three gaps include an inadequate risk / return profile for IPPs and other developers, a need for targeted technical assistance focused on commercial and financial aspects in the short and medium term, and a potential human capacity gap for large up-scaling of the sector in the medium and long term.
The NAMA aims to address the gaps in the existing and on-going effort to transform the sector through new, complementary, ‘low-regret’ actions. The NAMA proposes four specific components:
Financial 1) Risk mitigation instruments –Three sub-components are proposed for the early stage risks: Provision of contingent grants, complemented by a drilling risk insurance, and a Long Term Risk (LTR) guarantee.
Financial 2) Premium payment mechanism –A premium payment mechanism would entail disbursement of a pre-defined additional income per MWh to increase financial attractiveness on specific fields for a limited period.
Capacity 1) Technical Assistance Facility –A Technical Assistance Facility (TAF) will provide advisors , training, secondments and workshops addressing IPP integration, mobilising finance and expediting environmental and social approvals.
Capacity 2) National Geothermal Capacity Building Programme - The NAMA will support a National Geothermal Capacity Building Program that undertakes training, research, mapping, planning and database development.
The new, complementary components of the NAMA, in the short and medium term, will directly target an estimated 820 MW of geothermal developments of the 1500 MW outlined in the 5000MW+ in 40 months initiative. They will also indirectly support achievement of the longer term ambitions in the long term.
In terms of greenhouse gas (GHG) mitigation potential, the NAMA will contribute to directly abating approximately 3.77 MtCO2e per year in 2020.
Sustainable development co-benefits of the NAMA include improved energy security through increased domestic supply, GDP growth through lower energy prices and increased employment. Climate resilience will be improved insofar as the electricity supply will be less dependent on hydroelectricity, and thus less exposed to changes in precipitation patterns due to climate change.