South Africa could be among the countries to benefit from geothermal-produced renewable energy from Kenya in the years ahead if the cross-border transmission network in the Southern African Development Community region and power-purchase agreements are put in place.
This comes as the Development Bank of Southern Africa (DBSA) has signed a 12-year $68 million (R1.2 billion) loan agreement with Kenyan independent power producer Sosian Energy in a bid to boost the country’s renewable energy capacity.
The DBSA said yesterday that the loan to Sosian would help it generate 10 megawatts of additional capacity to the 35MW of renewable energy it produces for the national grid.
During the signing ceremony at the Continental Energy Investment Forum in Cape Town yesterday, DBSA group executive for transacting Mpho Mokwele said its coverage division, which hunted for projects across the continent, had begun conversations with Sosian last year and helped it reach a financial close after delays in getting the project started.
“We played a mandated lead-arranger role in the project where we were the leading financier in the project. We provided funding to the tune of $68m to that project called Sosian Energy in Kenya,” Mokwele said.
“Geothermal is a steam that comes from underground and what it provides is what we call baseload energy. It’s similar to coal but this is a renewable energy source. (Sosian) has got other prospects on a privately owned land of theirs where they’re looking at putting up another geothermal plant.
“We are the only lenders in this transaction and that’s how much we believed in this project. But what we’ll do is we’ll bring other lenders as we go along in the process.”
Sosian Energy, which is associated with the wealthy Moi family, is one of three geothermal energy IPPs, including UK firm Globeleq and US firm OrPower, with a combined capacity of 105MW, which were awarded a 15-year power purchase agreement by the Kenyan government.
Sosian’s 35MW geothermal power plant in the Menengai geothermal field in Kenya started supplying electricity to the national grid last year.
Around 28% of Kenya’s installed capacity is owned and operated by IPPs, while 72% is supplied by state-owned Kenya Electricity Generating Company PLC.
Electricity from Sosian’s geothermal power plant is being sold at a rate of 6.9 US cents per kWh, a competitive price that is expected to help displace expensive power-generating capacity, most of them from thermal plants.
Mokwele said there were big opportunities, not only for Kenya but also for the DBSA to partner with Sosian Energy in order to do more with it.
He said the energy generated by the company was, for now, for the domestic market because of Kenya’s energy deficit but there were plans in the pipeline to start exporting it to neighbouring countries.
“Right now, because they’ve got energy shortages, this is for local use. But what they’re doing to other projects where they want to expand even on their own privately owned land; they want to venture into cross-border transmission of that energy to other neighbouring countries,” Mokwele said.
“And, hopefully, what they said to us recently is that they potentially want to export some of that geothermal-produced energy to as far as South Africa. But provided we could have proper cross-border transmission regionally as well.
“They are looking at doing exactly that because the resource, the geothermal resource, is abundant in Kenya. And imagine, unlike solar PV and wind which do not provide baseload, you could provide the region with baseload energy 24 hours in a day. It would be amazing.”
Sosian is also developing a 50MW capacity wind power project in the upper Eastern part of Kenya and a 40MW solar park on 160 hectares of private land in Mogotio.
Sosian managing director Kigen Moi said Sosian was proud to be the first indigenous privately owned energy company providing electricity supply to the national grid as all other IPPs had been foreign-owned.
“Our electrification rate is about 76%, and that is a modest figure for a country of our size of 50 million people. We have quite a bit of a way to go. And out of this, the energy mix is about 90% renewable energy, of which geothermal plays a massive role,” Moi said.
“We have installed geothermal capacity of 900MW, but more important than that, we have up to 10GW of geothermal resources and steering potential.”
Moi said Sosian was grateful to the DBSA for wanting to see private sector growth in that particular area of renewables in Africa.
“We really need to bridge this energy gap, and the only way to do that is to have dynamic team members such as the DBSA to support privateers like us who are actually African,” he said.
“We are the first African-owned company that has been financed by an entirely African-owned development bank in geothermal space in the world. It has never happened before.”