Public-private ties boost power projects

Saturday April 26 2014

Kenya has several wind projects lined up while Ethiopia has received funds for a 1,000MW geothermal project. Photo/AFP

Kenya has several wind projects lined up while Ethiopia has received funds for a 1,000MW geothermal project. Photo/AFP 

By KENNEDY SENELWA, Special Correspondent

East Africa’s renewable energy sector is getting a major funding boost through increasing public-private partnership projects.

Kenya, Tanzania, Ethiopia, Ghana, Liberia and Nigeria are beneficiaries of a $7 billion fund from the US government’s Power Africa Initiative while private companies have committed to invest $9 billion in 10,000 megawatts plants by 2018.

The US, through several of its agencies, is working with Kenya, Tanzania and Ethiopia to facilitate investment of over $5 billion by private companies in power plants of 1,637MW.

The projects are 1,000MW geothermal project inside Corbetti Caldera — a joint venture between Reykjavik Geothermal and the Ethiopian government; Kenya’s 12MW Baringo biomass plant and Lake Turkana, Kinangop and Kipeto wind projects of 460MW. Tanzania has the 10MW Kiwari small hydro plant, the 150MW Kinyerezi gas plant and a 5MW solar plant in Kigoma.

The United States Agency for International Development (USAid) is supporting Kenya to integrate renewable projects into the national grid and Tanzania to develop an energy reforms roadmap to deliver affordable power to consumers.

USAid’s assistant administrator for Africa Earl Gast said the aim is to make affordable energy accessible as well as enable the host governments to improve their legal and regulatory environment to sustain investment.

Power Africa’s communications advisor Adi Raval said Kenya is getting technical assistance to deal with intermittence of renewable sources, especially wind, and adjust the national grid to ensure power system reliability.

USAid helped Kenya develop a geothermal strategy; provided training in geothermal sciences, drilling, steam field development and power plant design, which enhanced the capacity of the country’s Geothermal Development Company.

Kenya has an installed capacity of 1,664MW and it plans to inject 5,000MW into the national grid from new geothermal plants and other sources to meet an annual demand growth of about eight per cent.

The Corporate Council on Africa (CCA) said one of the biggest challenges facing private firms that want to invest in the electricity sector is dealing with myriad rules and regulations.

The normal lead times for project funding approvals can be in the range of six months to one year or even longer. The agencies are bound by rules and regulations that do not necessarily foster alacrity.

A major challenge to the success of power investments is creditworthiness of “off-takers,” which are usually government-owned utilities that purchase the electricity from the power producers and distribute it to consumers.

In most cases, the state-owned utilities cannot assure power producers that they are able to pay promptly and in accordance with the terms of contract. “If the producers are not paid, they will in turn default on their payments to banks and other financial institutions who help fund the investments,” said Paul Hinks the chairman of CCA and chief executive officer of Symbion Power.

Ethiopia’s 1,000MW Corbetti geothermal project is expected to cost $4 billion and will be the country’s first privately owned generation unit.

“The involvement of the US government through Power Africa has helped to increase investor confidence in Corbetti, which has expanded from an initially planned 300MW project to 1,000MW today,” said Mr Gast.

Cummins Cogeneration Kenya Ltd is building a 12MW biomass plant at Marigat in Baringo county that will use mesquite wood, which is a highly invasive species locally known as mathenge, as feedstock for its generator.

The subsidiary of Cummins Power intends to invest about $22 million in the plant, which will initially generate three megawatts before the capacity reaches 12MW. Harvesting of the trees will earn local residents $4 million annually.

Tanzania has installed capacity of 1,501MW for injection into the grid and is getting USAid technical help to revise its feed-in tariff to improve power purchase agreements for renewable energy projects. The country aims to increase power output by 2,780MW in 2016.

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