NAIROBI (Reuters) - Kenya needs $1.02 billion in the next three years to tap its geothermal power potential, seen as an answer to over-reliance on drought-hit hydroelectric power, Energy Minister Kiraitu Murungi said on Monday.
Drought has slashed capacity at Kenya’s main dams, forcing shutdowns and leading to reliance on costly diesel-powered generators, which in turn have pushed up energy bills.
East Africa’s biggest economy has relied on hydro energy to provide up to 90 percent of its electricity requirements. The country produces about 1,300 MW of power.
East Africa’s largest economy needs to add another 1,800 megawatts (MW) in new power generation to its grid to meet growing demand, Murungi said.
About 200 MW comes from geothermal sources now, although the government estimates it has the potential to produce 7,000 MW. The government aims to raise production by 2,000 MW by 2014.
Murungi told a conference that Kenya’s Geothermal Development Company (GDC) would need at least 12 rigs by 2010-11 for the drilling of 72 wells each year and the acquisition of at least 100 well head generators over the next three years.
“The financial resources required to realise this strategy include $324 million for procurement of the rigs, and $700 million for the well head generators,” he said.
Murungi added that GDC, and main power producer KenGen, had secured funds and awarded a tender for two rigs and were seeking money for another two.
He said the main obstacle in investing in geothermal was the high costs involved. For instance, it costs $6.2-$6.5 million to drill a well and a well-head generator costs between $7 million and $8 million.
“It has been difficult to attract private sector investment into the geothermal sector due to the extremely high front-end costs,” he said.
Murungi said Kenya needed to ramp up power production to meet growing demand.
“To address the current supply-demand imbalances and provide reserve margin of at least 20 percent, we need close to 1,800 MW in new generation capacity,” he said.
The country is seeking to expand generation of electricity from other renewable sources. This includes a 300 MW wind farm in northeastern Kenya due to be commissioned by 2012..
KenGen is already setting up wind turbines to produce 5.1 MW. Murungi said there were plans to increase this by another 30 MW. The government says wind power has the potential to produce 2,000 MW in Kenya.
Kenya has spent 630 million shillings in Kenya’s dry areas on solar power for hospitals, schools and health centres in the last four years and has set aside 500 million shillings more in the 2009/10 budget, Murungi said.
He said the country also has the potential to produce more than 300 MW from sugarcane by-products, but only one sugar producing company has been feeding 23 MW to the grid.