Geothermal Energy Powering Kenya’s Future: Menengai Geothermal Field Development Facilitated by Public-Private Partnerships

Securing a reliable, sustainable, and affordable energy supply to meet current and future demand is a major development challenge for Kenya. The country is fortunate to have great geothermal energy potential, offering a cost-effective alternative to expensive fossil fuel power. In 2017, installed geothermal capacity in Kenya stood around 660 megawatts (MW); the government has established a target of 5,000 MW by 2030. Reaching this target requires more geothermal power projects and more investment from the public sector, private developers, and development partners. Private developers tend to invest in power plant construction and operation rather than energy exploration and field development. These are characterized by high resource needs, significant risks, and long gestation. The public sector and off-take agreements for the sale of steam can provide appropriate compensation mechanisms to cover risks. In 2008, with a view to addressing this issue, the Government of Kenya set up the Geothermal Development Company (GDC) to facilitate the entry of independent power producers (IPPs) into the geothermal sector. The public-private partnership approach that developed from this initiative is known as the “GDC model” or the “Menengai model” after the first major project developed by GDC: the Menengai Geothermal Development Project. With activities stretching across three phases, the project expects to produce enough steam from the site to generate 400 MW of power. From 2011 through 2018, the African Development Bank (AfDB) supported the initial phase of GDC’s Menengai Geothermal Development Project through financial contributions from AfDB and the Climate Investment Funds (CIF). By early 2018, Menengai Phase I was largely developed and ready to provide steam for 105 MW of power generation. Three IPPs were selected in a tender procedure and negotiations were finalized between the steam provider, GDC, the power off-taker (Kenya Power and Lighting Company, or KPLC), and the three IPPs, as well as between the IPPs and their lenders. The IPPs’ next step is to begin construction of the power facilities, expected to take approximately 18 months.