KenGen is investigating Norwegian firm Green Energy Group for failure to deliver on a contract that would have made it cheaper for Kenya’s power generator to harvest large-scale geothermal power by investing in a series of small, low-cost production plants.

The plan so far was to invest $90 million in 14 interconnected miniature geothermal wells that would have added 5-10 MW of electricity each into the power grid.

The success of this project was expected to radically change the way the country prospects for power and possibly open a global geothermal bonanza.

Experimentation with this clean technology at the Ol Karia geothermal fields, one of the biggest in the world, has been closely watched around the globe and it was touted by its sponsors as revolutionary and a major breakthrough in helping commercialise geothermal power on a large scale and cheaply.

Two years ago, KenGen contracted Green Energy Group Inc to install a miniature powerhouse as a proof of the concept, with the expectation that if it worked, the company would be awarded a contract to develop 14 wells. It was to be the first mobile wellhead generator to be tried in Kenya.

Stig Torvund, the managing director of Green Energy Group, confirmed to The EastAfrican that KenGen has already paid $4.2 million on work done on the problematic installation. The plant was contracted at a cost of $8.2 million. Green Energy is currently raising additional capital from private investors.

Such was the hype around the technology that when the Secretary General of the United Nations, Ban Ki-moon, was in Kenya in April this year, he visited the Olkaria geothermal fields to witness installation.

Green Energy’s technology was considered a major breakthrough because a typical geothermal plant is designed to produce 300MW of power and costs hundreds of millions of dollars and years of negotiations with development finance institutions before electricity can be brought to the market.

The Norwegians offered to develop “small modular and cost efficient geothermal plants” capable of generating between 5 and 10 MW. 

The technology was touted as a breakthrough over the conventional method of developing geothermal power production for three major reasons:

First, that it would allow KenGen to get power on the national grid from existing wells much faster, making it possible for the power utility to exploit the several geothermal wells that have already been sunk, but are currently lying idle.

Moreover, the modules would be put into commercial production while wells were being drilled, a departure from the conventional method where drilling of several wells has to be completed before production can take place.
Second, the Norwegians claimed that what they were offering was a standard module system that would be mass-produced in India and would take one year from module construction to installation and commissioning.

False claims

Third, the Norwegians claimed that that the miniature powerhouses they had developed would be delivered in standard size containers and would be mobile — making it possible for them to be moved around as more wells were drilled.

But what were the credentials of the Norwegians? There is no evidence that Green Energy Group had developed geothermal plants before. Indeed, the technology they offered Ken Gen has not been implemented anywhere in the world.

On its website, Green Energy Group describes itself as a privately traded Norwegian company owned by a team with many years of experience in the geothermal field, including design, project management and operation of geothermal power plants.

Green Energy also says that it controls a majority stake in a turbine manufacturer in Bangalore, India that works closely with its research and development team based in Reykjavik, Iceland.

The turbines would be manufactured by Hindustan Turbine Manufacturers Ltd in which Green Energy claims it has a majority stake.

The EastAfrican has learnt a team of KenGen officials visited the factory in Bangalore during initial negotiations last year.

Two years down the line, it has emerged that some of the claims made by the Norwegians were not true. The biggest embarrassment is the fact that the first modular plant delivered to Olkaria turned out to be faulty. The EastAfrican has confirmed that brand new turbines imported from Hindustan Turbine Manufacturers have failed and are presently being re-machined and modified at a factory in Nairobi’s Industrial area.

Engineers working on well number 37 in Olkaria where the installation is taking place have described to The EastAfrican how the turbines failed after running for only a few minutes.

A second turbine has had to be transported to the Kenya Airways workshop in Nairobi for what engineers described as “balancing.” Other parts of the plant have been taken to India to be machined and modified afresh.

Expatriate workers from Hindustan Turbine Manufacturers working on the installation have been asked to leave the country and new engineers have been brought in from Reykjavik.

In an interview, Mr Torvund admitted that the first plant had failed. “Due to a production error in one turbine and a transportation accident with the other turbine, both turbines had to be balanced,” he said.

But he insisted that such hitches were normal during pilot projects. He disclosed that the company had discontinued the deal with Hindustan Turbine Manufacturers and that the new turbines being imported would be manufactured and installed by a company known as Max Watt, also of India.

Whether the experiment will work remains to be seen. Whichever way things go, the Norwegian firm will come under increasing public scrutiny not only over the technology’s potential for geothermal power production, but mainly because at stake is a multibillion-shilling contract with a public entity.

The circumstances under which this first project was contracted are not without controversy.

The Norwegians had approached KenGen with a proposal for a joint venture owned equally to develop the 5MW miniature plant, which was to be put up as a “pilot study,” under a research and development arrangement.

KenGen insists that it has no exposure and that the Norwegians bear all the risks of the first installation at Ol Karia. This is in spite of the fact that Mr Torvund confirmation of the $4.2 million already paid on work done on the problematic installation.

As it turned out, this “research and development” deal was to pave the way for the Norwegians to clinch a deal to manufacture and install 14 other miniature plants at a cost of $90 million.

Although the second contract was tendered for competitively, with the American company, Geothermal Development Associates, putting up a strong bid, it was clear that the Norwegians went into the competition with a big advantage having been contracted to do the pilot study.

The Norwegians must also brace for more public pressure for transparency, including from the contracting party KenGen.

Speaking to The EastAfrican on condition of anonymity, a senior official at KenGen disclosed that the company was conducting fresh diligence on the Norwegian group to determine the credibility of the individuals behind it.

He said that although KenGen had indeed signed the $90 million contract for 14 more plants, tough conditions had been introduced to ensure that the contract does not become enforceable until the efficacy of the new technology has been established.

Under a contract with Great Wall Drilling Company of Kenya, the government has recently drilled in excess of 50 geothermal wells in the Olkaria region.

If the experiments by the Norwegians work, it will have changed the face of geothermal power production permanently.