Ministry of Economy, Trade and Industry, Japan
Joint Credit Mechanism Feasibility Study on Introduction of
Small-scale Geothermal Power Generation Unit to the Republic of Kenya
Report
March 2015
Mizuho Information & Research Institute, Inc.
Contents 1 Outline of this present study ....................................................................................... 1 1.1 Purpose of this present study ............................................................................................... 1 1.2 Content of this present study ................................................................................................ 1 1.3 Schedule of this present study .............................................................................................. 4 2 Overview of the Republic of Kenya ............................................................................ 5 2.1 Outline .................................................................................................................................. 5 2.2 Political and economic situation .......................................................................................... 11 2.3 Investment climate .............................................................................................................. 15 2.4 Energy consumption, CO2 emissions and the situation of power generation ..................... 19 3 General situation of the power sector of the Republic of Kenya and the
situation of geothermal power generation projects .................................................. 23 3.1 General situation of power sector ....................................................................................... 23 3.2 Situation of geothermal energy development ..................................................................... 37 4 Overview of small-scale geothermal power generation ............................................ 43 4.1 What is small-scale geothermal power generation? ........................................................... 43 4.2 Market trend of small-scale geothermal power generation installations ............................. 50 4.3 Trends of manufacturers of small-scale geothermal power plants ..................................... 54 5 Concrete business plan for introduction of a small-scale geothermal power
generation facilities to the Republic of Kenya ......................................................... 56 5.1 Flow to develop business plans .......................................................................................... 56 5.2 Geothermal Field A ............................................................................................................. 57 5.3 Geothermal Field B ............................................................................................................. 63 6 Study of a GHG emissions reduction methodology and trial estimation of
expected GHG emissions reductions based on the methodology ........................... 71 6.1 Outline ................................................................................................................................ 71 6.2 Eligibility criteria .................................................................................................................. 73 6.3 Relevant GHG .................................................................................................................... 74 6.4 Estimation of expected greenhouse gas emissions reduction ............................................ 75 7 Policy recommendation to promote introduction of small-scale geothermal
power generation facilities and formation of JCM projects ...................................... 80 7.1 Risks and barriers to the introduction of small-scale geothermal power generation
facilities ................................................................................................................................. 80 7.2 Policy recommendation to mitigate or remove the risks and barriers ................................. 84 7.3 Visit of the host country’s administration officials to related facilities in Japan or
holding seminars for them .................................................................................................... 86
Figures and Tables Figure 1 Implementation Schedule ............................................................................................ 4 Figure 2 Map of Kenya .............................................................................................................. 6 Figure 3 Changes in GDP of major East African countries and their per-capita GDP ............... 7 Figure 4 Changes in population of major East African countries and their GDP ...................... 8 Figure 5 Changes in the Gini coefficient of major East African countries, their poverty rate
and unemployment rate ....................................................................................................... 10 Figure 6 Changes in the breakdown of major industries in Kenya .......................................... 10 Figure 7 Changes in the number of Internet users in major East African countries ................. 11 Figure 8 Changes in net foreign direct investment by major East African countries ............... 19 Figure 9 Changes in the energy mix in Kenya ......................................................................... 20 Figure 10 Changes in per-capita GDP and primary energy supply in Kenya and Japan .......... 21 Figure 11 Breakdown of energy supply by type and changes in power generated in Kenya ... 22 Figure 12 Changes in the share of geothermal power generation against TPES in Kenya ...... 22 Figure 13 Total power output capacity in Kenya (as of December 2013) ................................ 26 Figure 14 Changes in peak-time power demand （2007/08-2013/14） ................................ 26 Figure 15 Power transmission and distribution networks in Kenya and improvement plans .. 28 Figure 16 Expected breakdown of power generation sources in Kenya in 2030 ..................... 29 Figure 17 Medium-term power demand outlook in Kenya ...................................................... 30 Figure 18 Existing power stations or planned power stations .................................................. 32 Figure 19 Map showing mining lots in Kenya ......................................................................... 33 Figure 20 Breakdown of electricity sources expected in 2018 ................................................ 34 Figure 21 Locations of geothermal energy resources in Kenya ............................................... 37 Figure 22 Potential of geothermal power generation in East Africa ........................................ 38 Figure 24 Proportions of Geothermal Power Plant Manufactures ........................................... 54 Figure 25 Flow to develop and propose concrete business plans ............................................ 56 Figure 26 Feature of production characteristic curve ............................................................... 57 Figure 27 Project concept (Field A) ......................................................................................... 58 Figure 28 Layout of the wellhead generation system (condensing-type) ................................ 59 Figure 29 Basic Concept of Electricity Evacuation (Field A) .................................................. 60 Figure 30 Project concept (Field B, connect to the national grid) ........................................... 64 Figure 31 Actual example of daily consumption of fuel oil A at drilling site .......................... 64 Figure 32 Project concept (Field B, drilling rig option) .............................................................. 65 Figure 33 Layout of the wellhead generation system (condensing-type) ................................ 66 Figure 34 Basic concept of Electricity Evacuation (Field B) ................................................... 67 Figure 35 Principal risks related to diffusion of the well-head geothermal generation unit .... 84
Table 1 Outline of Kenya's political and economic systems .................................................... 12 Table 2 Exports and imports of major trade items for Kenya (above); Exports and imports of
Kenya by country (below) [customs-clearance base]) ........................................................ 14 Table 3 Exports to Kenya and imports from Kenya of major trade items for Japan
(Customs-clearance base) ................................................................................................... 15 Table 4 Import duties levied in Kenya by product group ......................................................... 18 Table 5 Changes of energy- and CO2 -related indictors in Kenya ........................................... 20 Table 6 Energy policy-related administrative organizations .................................................... 23 Table 7 Region-by-region electricity sales in Kenya (GWh) ................................................... 31 Table 8 Geothermal power plant construction plans in Kenya ................................................ 39 Table 9 Feed-in-Tariff (FIT) under small-scale renewable energy projects in Kenya (capacity
not exceeding 10 MW) ........................................................................................................ 40 Table 10 Feed-in-Tariff (FIT) under large-scale renewable energy projects in Kenya （capacity
exceeding 10 MW） ........................................................................................................... 41
Table 11 Comparison in Installations between Small-Scale Power Generation and Medium- to Large-Scale Power Generation ........................................................................................... 45
Table 12 Geothermal Power Plant Cycle Methods .................................................................. 46 Table 13 Average Capacity and Energy for Each Plant Category (MW/unit) .......................... 50 Table 14 list of geothermal power plants in the world commissioned between 2005 and 2009
............................................................................................................................................ 52 Table 15 Outline of the feasibility study results ....................................................................... 61 Table 16 Results of sensitivity analysis ................................................................................... 62 Table 17 Outline of the feasibility study results ....................................................................... 68 Table 18 Results of sensitivity analysis (Rig case) .................................................................. 69 Table 19 Results of sensitivity analysis (Early grid connection case)...................................... 70 Table 20 Major Issues in Main JCM Feasibility Studies on Geothermal Power Generation to
Date ..................................................................................................................................... 72 Table 21 Relevant GHG ........................................................................................................... 74 Table 22 Data required to calculate GHG .............................................................................. 75 Table 23 Concepts for setting the baseline scenario ................................................................ 76 Table 24 Monitoring items to calculate the reference emissions ............................................. 77 Table 25 Monitoring item to calculate the project emissions ................................................... 78 Table 26 Trial estimation of expected emission reductions ..................................................... 79 Table 27 FiT Values for Small Renewable Projects (Up to 10 MW of Installed Capacity)
Connected to the Grid ......................................................................................................... 83 Table 28 FiT Values for Renewable Projects above 10 MW of Installed Capacity.................. 83 Table 29 Summary of the visit of the host country’s administration officials to related
facilities in Japan or holding seminars for them under this present study .......................... 86
1
1 Outline of this present study
1.1 Purpose of this present study
Japan has many excellent technologies and products regarded as instrumental in reducing
greenhouse gas emissions overseas as part of its efforts to solve problems associated with global
warming. The Clean Development Mechanism (CDM) is the only institutionalized system aimed at
reducing greenhouse gas emissions in developing countries through the diffusion of such
technologies and products. However, the CDM has been used relatively less in fields in which Japan
has expertise—low-carbon technologies, including energy-saving technologies, new energy
technologies and highly-efficient coal-fired thermal power generation. Moreover, the CDM is not an
easy-to-use tool for medium-sized developing countries due to highly-demanding procedural
requirements and screening complexities, making it difficult for Japan to use its excellent
low-carbon technologies and products to contribute to the reduction of greenhouse gas emissions in
these countries.
Under these circumstances, the Japanese government has been establishing the Joint Crediting
Mechanism (JCM), which the country has been promoting as a complementary tool for the CDM.
The JCM is designed for Japan to penetrate its excellent low-carbon technologies and products into
developing countries in the hope of combating global warming on a global scale.
Japan has already signed bilateral accords on the JCM with some Asian and African countries.
Specific operations under the JCM have already started with several such countries, raising
expectations that Japan’s low-carbon technologies and the JCM will permeate through developing
countries.
This research is intended to clarify the effectiveness of the JCM, and Japan’s low-carbon
technologies and products by making new policy proposals to the Republic of Kenya and
recommending business schemes aimed at diffusing such technologies and products. By so doing,
Japan hopes to spread its low-carbon technologies and products to the Republic of Kenya, with the
aim of increasing the number of countries with which Japan signs bilateral accords regarding the
JCM.
1.2 Content of this present study
Business operations by this company in the Republic of Kenya for in relation to geothermal power
generation projects are expected to continue in the future in light of abundant geothermal resources
in the African country, its past track records concerning geothermal power generation, the business
superiority of this company (robust sales and high market shares), and local needs for a geothermal
power generation project combining small-scale wellhead power generation that can become feasible
at an early time and large-scale power generation. This research is intended to make policy proposals
2
to Kenya to assist this company in exporting relevant infrastructure to the African country, and to
propose the introduction of small-scale geothermal power generation facilities along with the MRV
(measurement, reporting and verification) in step with the policy proposals. Listed below are specific
research focuses to be considered or conducted.
(1) Making policy proposals to Kenya regarding the JCM (proposals on technological standards
related to low-carbon technologies and products, and provision of financial support)
a) Market research
When policy proposals were made to Kenya regarding the JCM (proposals on technological
standards related to low-carbon technologies and products, and provision of financial support),
market research was conducted concerning Kenya’s geothermal power generation market, especially
small-scale geothermal power generation facilities.
b) Identifying challenges and barriers standing in the way to implement projects
Problems standing in the way of a geothermal power generation project undertaken by this
company in Kenya using small-scale power generation facilities was found through the analysis of
relevant e energy policies in the country, confirmed problems were scrutinized and studied, and
measures to alleviate these problems and barriers were worked out.
c) Working out policies aimed at mitigating or solving challenges and abolishing barriers
To reduce problems and barriers standing in the way of a geothermal power generation project
undertaken by this company in Kenya using small-scale power generation facilities, policy proposals
were made to Kenya’s government agency in charge of the project and other Kenyan counterparts.
Such proposals are aimed to serve the interests of both Japan and Kenya.
(2) Developing a concrete plan to make the project feasible using policy proposals shown in (1)
Information on new project candidates were provided from Kenya’s counterpart agency and a
design concept regarding geothermal power generation facilities were worked out and possible
performance on power generation were studied while taking into account various conditions such
as plant location.
(3) Studying a methodology to reduce greenhouse gas emissions that is applicable under the
proposed project and trial estimation amount of emissions being reduced under the methodology
A methodology to reduce greenhouse gas emissions under the geothermal power generation project
undertaken by this company in Kenya based on an existing CDM methodology and past studies on
3
the possibility of the JCM was studied and a monitoring methodology was worked out.
The amount of emissions reduction under the facilities and performance being studied as
mentioned in (2) was estimated.
The potential regarding a reduction in greenhouse gas emissions in Kenya based on the potential of
geothermal power generation being studied as mentioned in (1) was assessed.
(4) Analysis of economic viability of the project(s)
Based on the design concept being worked out as mentioned in (2), the feasibility of the
geothermal power generation project undertaken by this company was evaluated quantitatively.
Fund raising through the provision of funds from Japanese public financial institutions was studied.
Ripple economic effects was also analyzed.
(5) Invitation of government officials in Kenya in charge of the project to Japan to take a first-hand
look at relevant facilities or seminars for these officials.
Briefing and explanation sessions were held in Kenya to help Kenyan government officials and
local people in charge of the project recognize the superiority of Japan’s technologies related to
geothermal power generation and deepen their understanding of and interest in the JCM. Such
sessions were planned in consultation with the sections in charge.
4
1.3 Schedule of this present study
Item July Aug Sep Oct Nov Dec Jan Feb Mar
(1) Making policy proposals to
Kenya regarding the JCM
(2) Developing a concrete plan to
make the project feasible using
policy proposals shown in (1)
(3) Studying a methodology to
reduce greenhouse gas emissions
that is applicable under the proposed
project and trial estimation amount
of emissions being reduced under the
methodology
(4) Analysis of economic viability of the project
(5) Government officials in Kenya in
charge of the project will be invited
to Japan to take a first-hand look at
relevant facilities and seminars will
be held in Japan for such officials.
Field study
▲ ▲
Compilation of a report
Figure 1 Implementation Schedule
5
2 Overview of the Republic of Kenya
2.1 Outline
The Republic of Kenya (hereinafter referred to as “Kenya”) is an East African country, lying on the
equator between latitudes 5 degrees north and 5 degrees south, and longitudes between 24 degrees
east and 31 degrees east. Its land area is equally divided by the equator, with Ethiopia and Sudan to
the north, Uganda to the west, Tanzania to the south and Somalia to the north-east. Unlike many
other landlocked countries in Africa, Kenya has a coastline on the Indian Ocean to the south-east.
Kenya covers a vast land area and its climate varies accordingly. As a result many areas attract
global interest as tourist destinations. The highlands in central Kenya have an equatorial climate
while coastal areas have a tropical climate. Some areas have an arid climate and a semi-arid climate.
The rainy season occurs twice a year. The plains stretching over vast areas of the country are home
to world famous national parks and wildlife sanctuaries. Also famous in Kenya are the Great Rift
Valley, which runs through the country from north to south, Mount Kenya, the second highest in
Africa following Mount Kilimanjaro, with its peak 5,199 meters above sea level, Lake Victoria,
Africa’s largest freshwater lake, Lake Nakuru, famous for its flamingos, and major rivers which are
used for hydroelectric power generation, such as the Tana River, Athi River and the Sondu-Miriu
River.
Kenya had a population of about 43.2 million (as of 2012), with nearly half of the population being
younger than 15 years old. Among East African countries, Kenya is a country where infrastructure
has been well established. Education levels are high in Kenya, also known as a multilingual country
where people speak English and other languages. People in Kenya are known as having a strong
entrepreneurship spirit, making the country an economic and goods distribution hub in the East
African region.
6
Figure 2 Map of Kenya
(Source: Institute of Developing Economies, http://www.ide.go.jp/Japanese/Research/Region/Africa/Kenya/)
Economic growth has been continuing in Kenya, with its GDP more than tripling from 12.7 billion
dollars (nominal U.S. dollars) in 2000 to 40.3 billion dollars (nominal U.S. dollars) in 2012. Kenya
is a major economic power in East Africa along with Ethiopia. Kenya is a wealthy country with its
per-capita GDP being the second largest in the region following Djibouti. (Despite its GDP being the
second largest in East Africa due to its large population, Ethiopia is one of the least developed
countries.) The purchasing power of Kenyan people in 2012 was close to US$1,000, a threshold
above which a country is categorized as a middle-income earner.
Sudan
Lake Turkana
Ethiopia
Uganda
Somalia
KisumuMt Kenya
Lake Victoria
Tanzania
Nairobi
Mombasa
Indian Ocean
Rift Valley Province
Eastern Province
North Eastern Province
Western Province
National borderProvincial borderCapitalMajor city
7
Figure 3 Changes in GDP of major East African countries and their per-capita GDP
(Source: Compiled based on World Development Indicators 2014 published by the World Bank)
GD
P (n
omin
al 1
mil
lion
U.S
. dol
lars
) P
er-c
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a G
DP
(nom
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U.S
. dol
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) P
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DP
(nom
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U.S
. dol
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)
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Kenya is the third most populated country in East Africa, with its population rising about 40% from
about 31.3 million in 2000 to about 43.2 million in 2012. The growth rate was an average figure for
East African countries. (See figures below.)
Figure 4 Changes in population of major East African countries and their GDP
(Source: Compiled based on World Development Indicators 2014 published by the World Bank)
Supported by higher resources prices, the economy of the East African region has been growing
Pop
ulat
ion
(1,0
00)
GD
P gr
owth
(%
) G
DP
grow
th (
%)
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steadily, overcoming the Lehman Brothers shock without falling into negative growth. In Kenya,
ethnic conflict that started in 2008 and violence that occurred in the neighborhood have become
more prevalent, slightly affecting the country’s economic growth. Many East African countries were
politically more unstable in the 1990s than they are now. Kenya, however, has taken a different
course, becoming more unstable in recent years. Economic indicators and poverty-related statistics
collected in a World Bank database show that Kenya, an economic power in the East African region,
faces problems with its policies on reducing economic disparity and overcoming poverty. In terms of
the Gini coefficient and the rate of poverty, Kenya is the second worst in the region after Rwanda.
The unemployment rate is the highest in East Africa. (See figures below.)
(Continued on the next page)
Gen
e co
effi
cien
t P
over
ty r
ate
(%)
10
(Continued from the previous page)
Figure 5 Changes in the Gini coefficient of major East African countries, their poverty rate and
unemployment rate
(Source: Compiled based on World Development Indicators 2014 published by the World Bank)
Figure 6 Changes in the breakdown of major industries in Kenya
(Source: Compiled on CD-ROM version of World Development Indicators 2012, published by the World Bank)
A breakdown of major industries in Kenya shows that the service sector, especially information and
telecommunications, has been growing significantly. In the past 10 years, the information and
telecommunications market has expanded by nearly 20%. The manufacturing sector in Kenya has
scored relatively higher growth compared with other countries in East Africa. The percentage share
of agriculture, a major industrial sector of Kenya, against total GDP has been shrinking gradually.
The number of Internet users in Kenya has been growing at a pace higher than its neighboring
countries, indicating that Kenya is far ahead of other East African countries in its use of online
0
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1991
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2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
（％
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）
Agriculture, value added (% of GDP)
Industry, value added (% of GDP)
Manufacturing, value added (% of GDP)
Services, etc., value added (% of GDP)
Une
mpl
oym
ent r
ate
(%)
11
systems.
Figure 7 Changes in the number of Internet users in major East African countries
（Source: Compiled based on World Development Indicators 2014 published by the World Bank)
2.2 Political and economic situation
2.2.1 Outline
The ethnic conflict that started in 2008 sparked more violence in the neighboring area. However,
power was transferred peacefully in Kenya following a general election in March 2013. With the
domestic situation stabilized, corporate capital spending and manufacturing activity have become
active. Security, however, has yet to be restored to a sufficient level in the country, as witnessed by a
terror incident that occurred in a shopping mall in Nairobi in September 2013.
According to the 2014 edition of a country-by-country world trade and investment report compiled
by the Japan External Trade Organization (JETRO), real GDP in Kenya grew 4.7% in 2013,
representing a gain of 0.1 point from a 4.6% rise the previous year. Both exports and imports of
goods and services increased 2.8% in Kenya in 2013. Consumer prices in the country rose 5.7% in
2013, compared with 9.4% in 2012 and 14.0% in 2011, showing that inflation has slowed in the
country. Wages paid in the formal labor market grew 13.0% in 2013, with the average income in the
year standing at 497,488 Kenyan shillings (Ksh). It is expected that the consumer and service sectors
No.
of
Inte
rnet
use
rs
No.
of
Inte
rnet
use
rs
12
will continue to underpin the Kenyan economy in 2014. Drawing attention are large-scale projects
currently under way, including a standard gauge railway project linking the port city Mombasa and
Nairobi, power projects including a geothermal power generation project, and oil development and
exploration projects in northwestern Kenya.
Table 1 Outline of Kenya's political and economic systems
Name of country or region
Republic of Kenya
Population, area 39.8 million (as of 2010, source: Kenya National Bureau of Statistics), 591,958 square kilometers（about 1.5 times larger than Japan）
Capital Nairobi, which has a population of 3.14 million
Language, religion Swahili, English (official language) Christianity (83%), Islam (11％）
Race Kikuyu, Luhya, Kalenjin, Luo
Independence day December 12, 1963
Political system
Political system, Parliamentary system
Republican system Bicameral system
State head President Uhuru Kenyatta（first term from April 9, 2013; tenure: five years, born on October 26 1961）
Outline of Parliament (tenure, No. of seats)
Tenure: 5 years, No. of Senate (upper house) seats: 67, No. of National Assembly (lower house) seats: 349 seats)
Major economic indicators
GDP 2013
Real GDP growth（%） 4.7
Nominal GDP total―$（unit: 1 million） 44,100
Per-capita GDP (nominal)―$ 1,016
Consumer price index
Consumer price growth rate (%), consumer price index 5.7 140.1 （100 for Feb. 2009）
International balance of payments
Current account balance (international balance of payments base)―$（unit: 1million） -4,788
Trade account balance (international balance of payments base)―$ (unit: 1 million) -10,578
Balance of external debt―$ (unit: 1 million) 9,568 public debt; provisionally estimated debt balance as of the end of June
Exchange rate (term average; rate against dollar) 86.1229
13
Exports―$ (unit: 1 million) 5,832
Exports to Japan―$ (unit: 1 million) 31
Imports―$ (unit: 1 million) 16,410
Imports from Japan―$ (unit: 1 million) 972
Investment
Direct investment received by Kenya―$ (unit: 1 million) 514
(Source: Compiled based on data released by JETRO ( http://www.jetro.go.jp/world/africa/ke/basic_01/)
2.2.2 “Kenya Vision 2030”
In June 2006, the Kenyan government formulated a new long-term development blueprint covering
the period between 2008 and 2030. The vision aims to transform Kenya into a newly industrializing,
middle-income country providing a high quality of life to all its citizens by 2030. It is anchored on
three key pillars: an Economic Pillar, Social Pillar and Political Pillar. An economic development
program crafted under the Economic Pillar aims for Kenya to attain an average GDP growth of 10%
by 2012 and maintain that level of growth until 2030. A social program under the Social Pillar
pursues a just and cohesive society enjoying equitable social development in a clean and secure
environment. The Political Pillar envisions the establishment of an issue-based democratic system
that respects the rule of law and protects the rights and freedom of all people in Kenya. Listed below
are three goals set under Kenya Vision 2030. The vision's first mid-term plan, currently under
implementation, covers the period between 2008 and 2012.
(1) Increasing per-capita income to US$3,000, up five times
(2) Attaining an annual GDP growth of 10%
(3) Transforming Kenya into an efficiently operated modern democratic country
2.2.3 Trade situation
Kenya's exports in 2013 (including re-exports) fell 3.0% from the previous year to 502,287 million
Ksh, while imports grew 2.8% to 1,413,316 million Ksh. As a result, the country sustained a trade
deficit of 911,029 million Ksh, up 6.3% from the previous year.
The five major export items for Kenya are tea, garden plants, clothes, accessories, coffee beans
(non-roasted) and steel products, together accounting for half the country's total exports in value.
Topping the export list is tea, which generates about 20% of Kenya's total export revenue. By export
destination, about a half of exports are bound for other African countries, followed by about 25%
each bound for European and Asian markets. The five major import items are petroleum products,
industrial machines, automobiles, steel products, and plastic materials and products, together
representing about a half of the country's total imports.
14
Table 2 Exports and imports of major trade items for Kenya (above); Exports and imports of Kenya by
country (below) [customs-clearance base])
(unit: 1 million Kenyan shillings)
Item
Exports (FOB)
Item
Imports (CIF)
2012 2013 2012 2013
Value Value Breakdown of
export
(import) items
Growth Value Value Breakdown of
export (import)
items
Growth
Tea 101,44
1104,648 23.0% 3.2%
Petroleum products
237,557 252,673 17.9% 6.4%
Garden plants 81,129 89,339 19.6% 10.1% Industrial machines 194,666 231,440 16.4% 18.9%
Clothes, accessories 20,676 24,379 5.3% 17.9% Automobiles 73,768 83,330 5.9% 13.0%
Coffee beans
(non-roasted) 22,271 16,328 3.6% -26.7% Steel products 56,667 80,749 5.7% 42.5%
Steel products 15,098 15,560 3.4% 3.1%Plastic materials
and products 47,650 55,182 3.9% 15.8%
Cigarettes and related
products 16,615 13,709 3.0% -17.5%
Animal and
vegetable oils and
fats
54,876 48,371 3.4% -11.9%
Essential oils 13,623 11,172 2.5% -18.0% Crude oil 68,086 41,037 2.9% -39.7%
Plastic products 10,278 10,263 2.3% -0.1% Pharmaceuticals 41,307 40,114 2.8% -2.9%
Soda ash 9,724 8,997 2.0% -7.5%Non-flour milling
wheat 29,743 30,189 2.1% 1.5%
Leather products 7,036 8,491 1.9% 20.7% Chemical fertilizer 20,184 27,957 2.0% 38.5%
Total (including other
products) 479,706 455,689 100.0% -5.0%
Total (including
other products)
1,374,58
7
1,413,31
6 100.0% 2.8%
(Note: Exports do not include re-exports; Figures for 2013 are provisional ones.)
(Sources: Kenya National Bureau of Statistics)
(Sources: The 2014 edition of a country-by-country world trade and investment report compiled by the Japan External Trade
Organization [JETRO])
(unit: 1 million Kenyan shillings)
Item
Exports (FOB)
Item
Imports (CIF)
2012 2013 2012 2013
Value Value Breakdown of
export (import)
items Growth Value Value
Breakdown of
export (import)
items Growth
Uganda 67,450 65,362 13.0% -3.1% India 195,230 258,230 18.3% 32.3%
Tanzania 46,036 40,496 8.1% -12.0% China 167,206 182,356 12.9% 9.1%
Britain 40,630 37,613 7.5% -7.4%The United Arab
Emirates (UAE) 149,879 117,360 8.3% -21.7%
The Netherlands 31,056 32,578 6.5% 4.9% Japan 63,135 83,720 5.9% 32.6%
United States 26,405 29,936 6.0% 13.4% South Africa 61,954 70,724 5.0% 14.2%
Total (including
other products) 517,847 502,286 100.0% -3.0%
Total (including
other products) 1,374,587
1,413,31
6 100.0% 2.8%
(Note: Exports include re-exports; Figures for 2013 are provisional.)
(Sources: Kenya National Bureau of Statistics)
(Sources: Top five countries selected from the 2014 edition of a country-by-country world trade and investment report compiled
by the Japan External Trade Organization [JETRO])
15
Trade ties between Japan and Kenya have deepened in recent years. Japan was Kenya’s fourth
largest importer in 2013, with shipments to the African country of such items as automobiles, steel
products and steam turbines increasing.
Table 3 Exports to Kenya and imports from Kenya of major trade items for Japan (Customs-clearance
base)
(Unit: US$1 million)
Item
Exports (FOB)
Item
Imports (CIF)
2012 2013 2012 2013
Value Value Breakdown of
export (import)
items
Growth
Value Value Breakdown of
export
(import) items
Growth
Vehicles excluding
railway cars
436.7 541.9 59.5% 24.1% Trees and plants 17.0 15.9 34.4% -6.6%
Passenger cars 258.8 341.5 37.5% 32.0% Cut flowers and flower
buds
12.1 11.3 24.5% -6.2%
Trucks 137.1 163.5 18.0% 19.2% Leaves of plants,
branches, grass, moss and
others
3.6 3.2 7.0% -10.4%
Chassis with motors 13.4 19.2 2.1% 42.7% Spices, coffee, tea 12.1 12.4 26.8% 2.6%
Steel 95.1 177.7 19.5% 86.8% Tea 7.8 7.1 15.4% -8.4%
Iron or unalloyed steel
flat rolls
85.6 148 16.3% 72.9% Coffee beans
(non-roasted)
3.0 3.5 7.6% 15.4%
Other alloyed steel bars － 17.8 2.0% - Coffee beans (roasted) 1.3 1.8 3.8% 39.7%
Machines 32.1 89.2 9.8% 177.9% Prepared foodstuffs 11.1 8.9 19.3% -19.7%
Steam turbines 0.0 50.8 5.6% 1413
times
Coffee, extracts of tea and
concentrates
11.1 8.9 19.3% -19.8%
Electrical appliance 7.2 20.8 2.3% 190.9% Fish and marine products 1.6 1.9 4.2% 21.2%
Electric equipment and
power generators
0.1 15.5 1.7% 166
times
Fish fillets and fish meat 1.5 1.8 3.9% 22.0%
Artificially made short
fibers and fabrics
18.2 16.7 1.8% -8.2% Edible fruits and nuts 0.6 1.7 3.7% 192.1%
Cigarettes 0.4 1.2 2.5% 167.6%
Total (including other
products)
657.7 910.6 100.0% 38.5% Total (including other
products)
46.8 46.2 100.0% -1.4%
(Sources: Compiled based on trade statistics [customs clearance base] released by the Finance Ministry)
(Sources: The 2014 edition of a country-by-country world trade and investment report compiled by the Japan External Trade
Organization [JETRO])
2.3 Investment climate
The Central Bank of Kenya supervises financial-related operations in Kenya with authority to
approve banking business, housing loan business, microfinance business, operations by nonbank
financial institutions (NBFI), credit-inquiry business and currency-exchange business. At present, 43
banks (27 domestic commercial banks, 13 foreign-affiliated banks and three government-affiliated
banks) are operating in Kenya.
16
The Kenyan government has been encouraging investment in agricultural production, infrastructure
development and public-interest businesses (including water-supply work, sanitation projects,
electricity generation and telecommunications networks), housing development, information and
telecommunications technologies, and other knowledge-intensive industries, natural resources
development, and oil and mineral exploration. Measures being taken by the government for such
investments include a) designation of a special export-processing zone and b) tax incentives.
2.3.1 Tax incentives provided within Export Processing Zone (EPZ）
Manufacturing companies operating within the EPZ are required to export at least 80% of their
products to countries outside the East African Community (EAC).
∙ Corporate income tax will not be levied in the first 10 years, followed by the imposition of a
25% tax in the next 10 years.
∙ Withholding tax will not be levied for 10 years.
∙ Both tariffs and VAT will not be levied for machines, raw materials and intermediate goods
being imported into Kenya. (However, tariffs and VAT will be levied for non-EPZ automobiles.)
∙ Revenue-stamp duty will not be levied.
∙ Companies operating within the EPZ are eligible for a 100% investment deduction for initial
investment within the EPZ. (This deduction is effective for 20 years.)
2.3.2 Incentives associated with taxation systems
A) VAT on capital goods will not be levied.
B) Import duties will not be levied on materials being imported for manufacturing of products
meant for re-export or for domestic sale as duty-free items.
C) In the case of private-sector investment exceeding US$5 million, the amount equal to the
import duty being levied on capital goods can be deducted from income tax if such deduction
is approved by the government.
D) VAT and tariffs on machines and other facilities used for agricultural production will not be
levied.
E) A 100% investment deduction is granted for investment in Nairobi, Kisumu and Mombasa. A
higher 150% investment deduction is granted for investment in other regions. (Investment
deduction can be carried over into the next year.)
2.3.2.1 Corporate income tax
Corporate income tax in Kenya is set at (1) 30% for Kenyan companies, including subsidiaries of
foreign entities, and (2) 37.5% for other companies, including branches of foreign entities. The tax
will be reduced to 20-27% for three to five years for companies newly listed on the Nairobi Stock
17
Exchange. (This tax break is applied when share ownership by general investors meets certain
conditions. A newly listed company at least 20% owned by general shareholders is eligible to receive
this measure.)
2.3.2.2 Value added tax
Value added tax (VAT) is set at 16% in principle. However, the tax is not levied for items
designated by the Kenya Revenue Authority (KRA) (http://www.kra.go.ke/).
2.3.2.3 Import duty
Duties imposed in Kenya are composed of one applied within the East African Community (EAC)
and a common duty imposed outside the EAC.
(i) Within the EAC: duty-free (applied to trade items whose country of origin is confirmed within
the EAC)
(ii) Outside the EAC: a common EAC duty (In principle, no duty is levied for raw materials, a
10% duty is levied for intermediate goods and a 25% duty is imposed for final goods.)
However, a duty exceeding 25% is applied to items designated as “sensitive” by the EAC. When
the duty is changed, it is publicized in the EAC Gazette.
http://www.eac.int/customs/index.php?option=com_docman&task=cat_view&gid=44&limit=10&
limitstart=0&order=date&dir=DESC&Itemid=106
http://www.eac.int/customs/index.php?option=com_docman&task=doc_download&gid=184&Ite
mid=106
Duties listed below under the most favored nation treatment (MFN) are applied to products
imported from Japan.
18
Table 4 Import duties levied in Kenya by product group
Note: MFN（Most Favored Nation）
(Source: Compiled based on World Tariff Profiles 2013 published by the WTO)
2.3.3 Recent situation of foreign direct investment in Kenya
According to the 2014 edition of a country-by-country world trade and investment report compiled
by the Japan External Trade Organization (JETRO), foreign direct investment in Kenya
(international balance of payments base, net flow) doubled to 44.3 billion Ksh in 2013 from the
previous year (Kenya National Bureau of Statistics). The amount of foreign direct investment
registered with the Kenya Investment Authority amounted to 84.7 billion Ksh in 2013, up 68.0%
from the preceding year. A total of 22,136 jobs have been created in Kenya as a result of foreign
investment there, according to media reports. At present, foreign companies are not obliged to
register their business operations with the Kenya Investment Authority. In addition, the authority has
no capability to recognize all business operations undertaken by foreign companies in Kenya.
Therefore, the actual amount of foreign direct investment in Kenya is believed to be greater than the
official figure.
Among Japanese companies which have newly started business in Kenya, Mitsubishi Motors Corp.
set up a local representative office and Ajinomoto Co. launched a marketing firm, both in January
2014. Toridoll Corp., which operates an udon noodle chain, established a subsidiary in Nairobi in
April 2014. Among Japanese companies already doing business in the country, Rohto
Pharmaceutical Co. created a local subsidiary in May 2013 while Honda Motorcycle Kenya Ltd.
began assembling bicycles in the country in November 2013. Furthermore, Nissin Foods Holdings
Co. has begun selling instant noodle products in Kenya in preparation for local production in the
future. Other large-scale projects being undertaken in Kenya by Japanese companies include a
geothermal power generation project by Toyota Tsusho Corp. in Olkaria and a Mombasa port
terminal expansion project undertaken by Toyo Construction Co.
19
Note: Negative figures mean that foreign direct investment in each East African country is greater
than its direct investment overseas.
Figure 8 Changes in net foreign direct investment by major East African countries
(Source: Compiled based on World Development Indicators 2014 published by the World Bank)
According to a World Bank database recording the changes in net foreign direct investment by
major East African countries, investment in Kenya declined after an ethnic conflict in 2008 but later
recovered toward 2011. For foreign direct investment in Kenya to further recover and reach the 2007
level, the country’s political and security situations need to be stabilized further. According to the
database, foreign investment in Tanzania and Uganda is greater than in Kenya.
2.4 Energy consumption, CO2 emissions and the situation of power
generation
Energy consumption in Kenya, CO2 emissions and the situation of the electricity sector will be
analyzed using an IEA database. The findings obtained through the analysis will be compared with
comparative figures of Japan, when necessary, to give an international perspective to the Kenyan
situation and gain a better grasp of the recent changes in Kenya.
Net
for
eign
dir
ect i
nves
tmen
t
(BO
Pi
l$U
S1
illi
)
20
Table 5 Changes of energy- and CO2 -related indictors in Kenya
(Source: Compiled based on the 2013 edition of CO2 Emissions from Fuel Combustion, published by the IEA)
Changes in the breakdown of total primary energy supply (TPES) in Kenya
Figure 9 Changes in the energy mix in Kenya
(Source: Compiled based on the 2013 edition of the Energy Balances NON-OECD Countries, published by the IEA)
A breakdown of primary energy supply in Kenya showed that biomass, such as charcoal, firewood
and withered grass, is the major energy source in the country, accounting for about 70% of its total
energy supply in 2011. Including hydroelectric power generation and recently growing geothermal
power generation, Kenya turns to renewable for about 80% of its energy consumption. The share of
energy supply from fossil fuels, mainly petroleum energy sources, was only about 20% in 2011,
while the share of coal supply was even less. Kenya imports a tiny amount of electricity from
overseas.
Kenya’s population jumped 1.8 times in 20 years from 1990, and both GDP and energy supply 1.9
Kenya 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 Japan/Kenya
2011
CO2 Sectoral Approach (Mt of CO2) 5.51 5.77 7.81 7.56 8.61 8.52 8.94 10.73 11.48 11.64 101.9
Total primary energy supply (Mtoe) 10.68 12.11 14.06 16.15 16.9 17.23 17.81 18.9 19.72 20.18 22.9GDP (billion 2005 US dollars) 13.02 14.09 15.67 18.74 19.92 21.32 21.64 22.24 23.52 24.55 188.3Population (millions) 23.45 27.43 31.25 35.62 36.54 37.49 38.46 39.46 40.51 41.61 3.1CO2 / TPES (tCO2 per TJ) 12.32 11.39 13.27 11.18 12.17 11.81 11.99 13.56 13.91 13.78 4.5CO2 / GDP (kgCO2 per 2005 US dollar) 0.42 0.41 0.50 0.40 0.43 0.40 0.41 0.48 0.49 0.47 0.6CO2 / Population (tCO2 per capita) 0.23 0.21 0.25 0.21 0.24 0.23 0.23 0.27 0.28 0.28 33.1CO2 emissions index 100 105 142 137 156 155 162 195 209 211 -Population index 100 117 133 152 156 160 164 168 173 177 -GDP per population index 100 93 90 95 98 102 101 101 105 106 -Energy intensity index―TPES/GDP 100 105 109 105 103 99 100 104 102 100 -Carbon intensity index: ESCII―CO2/TPES 100 92 108 91 99 96 97 110 113 112 -Per capita GDP （2005 US dollars/person） 555 514 501 526 545 569 563 564 581 590 61.3Per capita TPES （KTOE/million people） 455 441 450 453 463 460 463 479 487 485 7.4
Solar power, wind power,
Solar power, wind
Geothermal
Hydroelectric
Crude oil, NGL, petroleum
Crude oil, NGL, petroleum
Kenya 2011
21
times. This indicates that the country’s energy supply has grown in step with its development in
economic and other fields. During the 20-year period, CO2 emissions increased 2.1 times, attesting
to the increased consumption of petroleum-derived fuels. However, per-capita GDP rose only 6%
during the period, meaning that the economic development has resulted from population growth.
Energy intensity, measured by total primary energy supply (TPES) divided by GDP, remained almost
unchanged, while carbon concentration, measured by CO2 divided by TPES, increased 12% due to
the increased use of fossil fuels.
Major indicators in Kenya in 2011 are compared with those in Japan. Japan's population was about
three times that of Kenya in the year, Japan's GDP about 190 times as high, energy supply 23 times
as high, CO2 emissions about 100 times as high, carbon concentration, measured by CO2 divided by
TPES, about 4.5 times as high, carbon intensity, measured by CO2 divided by GDP, 0.6 time as high,
and per-capita CO2 emissions 33 times as high. Japan and Kenya are significantly different in terms
of their development stage and economic scale. These differences can be explained in light of higher
rates of biomass energy used in Kenya.
Figure 10 Changes in per-capita GDP and primary energy supply in Kenya and Japan
(Source: Compiled based on the 2013 edition of CO2 Emissions from Fuel Combustion, published by the IEA)
If per-capita GDP and per-capita TPES are compared, it can be said that both are closely linked in
Kenya. On the other hand, “decoupling” between economic development and energy supply
(demand) has been confirmed in Japan.
0
100
200
300
400
500
600
700
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
ケニア
１人当たりGDP （2005 US dollars/人
１人当たりTPES （ KTOE/百万人 ）
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
日本
１人当たりGDP （2005 US dollars/人
１人当たりTPES （ KTOE/百万人 ）
Kenya Japan
22
Figure 11 Breakdown of energy supply by type and changes in power generated in Kenya
(Source: Compiled based on the 2013 edition of Energy Balances NON-OECD Countries, published by the IEA)
The amount of electricity generated in Kenya totaled 7,849 GWh in 2011, up 8 times from 40 years
earlier. The country’s breakdown of energy supply by type in 2011 showed that hydroelectric power
generation accounted for 44% of the total supply, thermal power generation 33%, geothermal power
generation 19%, and biofuels and waste 4%.
Biomass, which represents about 70% of TPES, is little used for electricity generation. Meanwhile,
geothermal energy sources, which account for a relatively large portion of renewable energy sources,
have been used for power generation for years. In recent years, power generation projects using
geothermal energy sources are under way (explanation to follow).
Figure 12 Changes in the share of geothermal power generation against TPES in Kenya
(Source: Compiled based on the 2013 edition of Energy Balances NON-OECD Countries, published by the IEA)
33%
44%
19%
4%
Oil products
Hydro
Geothermal
Biofuels and waste
発電構成（％）
ケニア2011年
７，８４９ GWh
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
ケニアにおける発電量の推移（GWｈ）
0.0%
3.3%3.1%
2.8%2.7%2.6%
2.3%2.1%2.0%
1.9%
2.8%2.7%2.5%2.5%2.4%
2.6%
2.9%
2.3%
4.6%
5.7%
5.3%5.1%5.1%
5.7%
6.1%6.3%6.4%
0%
1%
2%
3%
4%
5%
6%
7%
ケニアのTPESに占める地熱の割合(%)
Breakdown of
energy supply by
Changes in the amount of electricity generated in Kenya (GWh)
Share of geothermal power generation against TPES in Kenya (%)
23
3 General situation of the power sector of the Republic of Kenya and the situation of geothermal power generation projects
3.1 General situation of power sector
3.1.1 Administrative organizations relating to energy policy
In Kenya, the Ministry of Energy and Petroleum (MoEP) is in charge of the country’s energy policy,
while the Ministry of Environment and Mineral Resources supervises its environmental and
resources policy. Each ministry is composed of various divisions, as listed below.
Table 6 Energy policy-related administrative organizations
ERC (Energy Regulatory Commission) regulatory agency in the energy sector*
Ministry of Energy and Petroleum (MoEP)
Renewable energy sector
(Renewable Energy Department)
Consisting of five divisions―Biomass, Alternative
Energy, Research & Development, Energy Efficiency
and Conservation
Petroleum energy sector
(Petroleum Energy Department)
Consisting of three divisions―Upstream(oil resource
development), Midstream(oil refinery, storage facility,
pipeline), and Downstream(domestic sale)
Power sector
(Electrical Power Department
[EPD])
Cf. Rural Electrification Authority (REA）
Geothermal power exploration sector
(Geo Exploration Department)
Cf. Geothermal Development Company (GDC)
Ministry of Environment and Mineral Resources (MoEMR)
National Environmental Management Authority
Kenya Meteorological Department
Mines and Geology Department
Department of Resource Surveys and Remote Sensing
National Environmental Management Authority
(Source: Compiled based on various data)
A) Energy Regulatory Commission (ERC)*
Based on the Energy Act 2006 and relevant laws, the ERC is in charge of regulation relating to
policies covered by the MoEP.
24
・ Supervision of the energy sector to ensure fair competition and proposals under a competitive
principle
・ Presentation of policy direction regarding the formulation of a state energy plan
・ Protection of consumers, investors and shareholders
・ Collection of energy-related data and their periodical report to the Minister of Energy and
Petroleum
Kenya’s Energy and Petroleum Ministry also supervises state-owned and parastatal agencies.
B) Kenya Electricity Generating Company Ltd. (KenGen), 70% of its capital owned by the
state
KenGen is the largest power company in Kenya, producing about 80% of the electricity consumed
in the country. Facilities operated by KenGen for hydroelectric power generation have a combined
power-generating capacity of 766.88 MW, accounting for 64.9% of the company’s total power
capacity.
The entity was established in 1954 as Kenya Power Company (KPC). It was split into two
companies in 1997―KPC, a power-generating firm, and Kenya Power & Lighting Company
(KPLC), a firm specializing in power retail. In 1998, KPC was renamed Kenya Electricity
Generating Company Ltd. (KenGen), 70% owned by the state. Since its foundation, KenGen has
operated public electric power plants.
C) Kenya Power, 50.1% of its capital owned by the state
In 2011, Kenya Power & Lighting Company Ltd. (KPLC) was renamed Kenya Power. As of April
2014, Kenya Power supplied electricity to more than 2.6 million customers. The entity is in charge
of formulating a power transmission plan to meet customer demands, building power distribution
networks and maintaining retail sale of electricity.
D) Kenya Electricity Transmission Company Ltd. (KETRACO), wholly owned by the state
Kenya Electricity Transmission Company Ltd. (KETRACO) was established in December 2008 to
build high-voltage lines in Kenya. In the future, the entity is expected to contribute to Ethiopia,
Tanzania and other Southern African Power Pool (SAPP) member countries while assisting an
investment project under the Nile Equatorial Lakes Subsidiary Action Program (NELSAP).
KETRACO is aimed to improve the quality of electricity being transmitted, ensure stable power
transmission and ease the financial burden of power users regarding the construction of
power-transmission facilities.
25
E) Geothermal Development Company Ltd. (GDC), wholly owned by the state
Geothermal Development Company Ltd. (GDC) was founded in 2008 and began operating in 2009.
The entity is tasked with raising its geothermal power generation capacity to 5,000 MW by 2030.
F) Rural Electrification Authority (REA)
REA is tasked with implementing a rural electrification program adopted in July 2007.
Other public energy-related companies in Kenya are the National Oil Corporation of Kenya, wholly
owned by the state, Kenya Petroleum Refineries Ltd., 50% owned by the state, and Kenya Pipeline
Company Ltd., wholly owned by the state.
3.1.2 Basic energy policy
3.1.2.1 Energy Act 2006
The Energy Act 2006 is a comprehensive energy policy adopted in 2006. It stipulates Kenya’s
national policy on short-, medium- and long-term energy development. Policy goals set under the act
are stable energy supply at a reasonable cost and steady promotion of environmental protection.
3.1.2.2 The National Energy Policy 3rd Draft
The National Energy Policy 3rd Draft has been revised by the MoEP. Energy development policies
shown in the draft are listed below.
・Securing crude oil production capacity that can meet domestic petroleum demand;
・Building oil-related infrastructure essential for the consumer market (warehouses, delivery
facilities, container terminals, gas terminals and piers);
・Preventing retail prices of petroleum products from soaring;
・Curbing excessive dependence on biomass and reducing household consumption of kerosene,
both through the promotion of LPG use;
・Speeding up oil development and exploration, and maintaining product quality at high levels in
response to demands of the domestic and export markets;
・Financially supporting private-sector companies with their investment in geothermal power
generation projects.
3.1.2.3 Reform of the power market, policy to liberalize power market
The Kenyan government has adopted a policy of assisting private-sector companies in entering the
power generation market since the 1980s. Companies which entered the market as Independent
Power Producers (IPPs) under that policy include such global companies as Aggreko, IberaAfrica,
Westmount and Mumias Sugar. These companies engage in the business to generate electricity using
such energy sources as diesel, coal and ethanol.
26
3.1.3 Situations of power generation, transmission and distribution
3.1.3.1 Present situation of power generation system
Kenya’s electrical grid network has a total power generation capacity of 1,720 MW, excluding 28
MW generated through a mini-grid, a power system not connected to the network (as of December
2013). The total power capacity through the grid network breaks down into 820 MW for
hydroelectric power generation, 250 MW for geothermal power generation, 620 MW for thermal
power generation, 5 MW for wind power generation and 26 MW for electricity generated through
the cogeneration system. Of the total capacity, effective electricity generated through the mutual
connection system came to 1,663 MW, with hydroelectric power generation commanding the largest
portion of the total effective power output (47.5%). Peak-time power demand in Kenya was 1,463
MW, registered in October 2013.
Figure 13 Total power output capacity in Kenya (as of December 2013)
Figure 14 Changes in peak-time power demand （2007/08-2013/14）
(Source: Kenya, 10-Year Power Sector Expansion Plan 2014-2024 [2014.6])
Power output capacity (MW)
Effective power output capacity
(MW)Breakdown of power
Hydroelectric power generation Geothermal power generation Thermal power generation (steam turbine) Thermal power generation (gas turbine) Wind power generation Cogeneration system
Hydroelectric power generation Geothermal power generation Thermal power generation (steam turbine) Thermal power generation (gas turbine) Wind power generation Hydroelectric power generation
Geothermal power generation
Thermal power generation (steam turbine)
Thermal power generation (gas turbine)
Wind power generation
Cogeneration system
Cogeneration system
Total electric grid system Mini-grid system Total grid and mini-grid system
(Original sources: KPLC 2014)
27
3.1.3.2 General situation of power transmission and distribution systems
Kenya’s power supply structure has been established based on a business model in which electricity
generated at all power facilities in the country is supplied to KPLC, which is in charge of devising
power transmission and distribution plans for retail sale to end consumers. At present, power
transmission and distribution networks are shared by KPLC and KETRACO. Of the total networks,
high-voltage networks (220 kV lines and 132 kV lines) stretch 3,871 kilometers, including a 424 km
network fully managed by KETRACO for 132 kV lines.
28
Figure 15 Power transmission and distribution networks in Kenya and improvement plans
(Source: Website of KETRACO [as of October 2014])
The figure above shows power transmission and distribution networks in Kenya and their
improvement plans.
The networks, with combined power transmission lines stretching 42,176km, are currently operated
by KPLC. Under the networks, 66 kV power supply lines near Nairobi are linked to Kenya’s
neighboring countries through medium-voltage 11 kV and 33 kV lines. The combined distance of
29
transmission and distribution lines was extended by 5.4% between June 2011 and December 2013.
The total power generation capacity at substations increased from 1,596 MVA in 2007 to 1,846
MVA in 2012. Total power transmission at substations rose from 2,714 MVA in 2007 to 2,976 MVA
in 2012, while total power distribution at substations grew from 1,874 MVA in 2007 to 2,442 MVA
in 2012. The total capacity of transformers for power distribution increased by about 65%, from
3,515 MVA to 5,784 MVA, during the same period.
3.1.4 Electricity supply-demand outlook
An official long-term electricity supply-demand target has yet to be adopted by the Kenyan
government. The only public power supply-demand outlook is the 10-Year Power Sector Expansion
Plan 2014-2024, published by the government in June 2014.
Electricity supply in Kenya is falling short of power demand, which has been growing under the
government’s policy of revitalizing the economy and accelerating power supply to households. As a
way to boost power-supply capacity under these circumstances, the government has been
diversifying power sources while reducing excessive dependence on oil-fired thermal power
generation. (See an expected breakdown of power generation sources in 2030 in the following
figure.) Nuclear power generation is regarded as a potential low-cost power source in Kenya.
(Unit: MW)
Item Geothermal
power
Nuclear
power Coal Natural gas Oil
Imported
electricity
Wind
power
Hydroelectric
power Total
Output
capacity 5,530 4,000 2,720 2,340 1,955 2,000 2,036 1,039 21,620
Breakdown 26% 19% 13% 11% 9% 9% 9% 5% 100%
(Sources: Compiled based on the Nuclear Electricity Project adopted by Kenya’s Ministry of Energy on June 18, 2012)
Figure 16 Expected breakdown of power generation sources in Kenya in 2030
26%
18%
13%
11%
9%
9%
9%5% Geothermal power
Nuclear power
Coal
Natural gas
Oil
Imported electricity
Wind power
Hydroelectric power
21,620MW
30
The above figure is an expected breakdown of power generation sources in Kenya in 2030. Policy measures being taken by the Kenyan government as a means of strengthening the country’s power supply capacity include reducing dependence on hydroelectric power generation amid the water shortage resulting from droughts in recent years, and diversifying power sources by turning to geothermal power generation, wind power generation and nuclear power generation.
Figure 17 Medium-term power demand outlook in Kenya
Under the 10-Year Power Sector Expansion Plan 2014-2024, medium-term power demand in
Kenya is forecast to range from a low level to a high level.
About 30% of Kenya’s population resides in electrified areas. However, the electrification rate is
lower, about 13%, in provincial areas, prompting the government to undertake the Rural
Electrification Program (REP). Electricity consumption has been expanding sharply in provincial
areas under the REP, from 240 GWh in the 2007-2008 term to 313 GWh in the 2012-2013 term.
Rural power consumption started growing following the establishment of the Rural Electrification
Authority (REA) in the Energy Act 2006, a government agency aimed at increasing people’s access
to electricity in rural and farming areas.
Low-level electricity production capacity (MW)
High-level electricity production capacity (MW)
Low-level electricity production (GWh) High-level electricity production (GWh)
Low-level scenario High-level scenario
(Note: Figures for electricity production capacity for 2013 represent actual figures.)
31
Table 7 Region-by-region electricity sales in Kenya (GWh)
(Unit: GWh)
Regions
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2012/132007/08
-
Other
than
schemes
under
REP
Schemes
under
REP
Other
than
schemes
under
REP
Schemes
under
REP
Other
than
schemes
under
REP
Schemes
under
REP
Other
than
schemes
under
REP
Schemes
under
REP
Other
than
schemes
under
REP
Schemes
under
REP
Other
than
schemes
under
REP
Scheme
s under
REP
Region-
by-regio
n
breakdo
wn (%)
Rate of
increase
for
2007/200
8~2012/2
013 (%)
Nairobi region 2,782 48 2,898 52 3,014 55 3,268 63 3,315 63 3,507 66 54.3% 26.3%
Coastal region 929 15 979 16 1,027 18 1,118 21 1,147 21 1,134 22 17.6% 22.5%
Western region 902 121 867 125 853 135 932 153 1,003 152 1,056 152 18.4% 18.1%
Mount Kenya 423 57 411 57 424 71 467 70 494 72 539 73 9.3% 27.5%
Sales via 5,036 — 5,155 － 5,318 － 5,785 － 5,959 － 6,236 － － 23.8%
Sales of
imported 46 － 27 － 27 － 31 － 42 － 32 － － -30.4%
Total 5,082 240 5,182 250 5,345 279 5,816 307 6,001 308 6,268 313 － －
Total 5,322 5,432 5,624 6,123 6,309 6,581 100.0% 23.7%
Rate of 5.1% 2.1% 3.5% 8.9% 3.0% 4.3% － －
(Sources: Compiled based on 10 Year Power Sector Expansion Plan 2014-2024, published in June 2014 by the Kenyan government)
3.1.5 Plans to develop electricity sources
Domestic power demand is expected to grow under Kenya Vision 2030 and various power
development projects. Measures being explored by the Kenyan government to diversify energy
sources include the use of geothermal power sources, coal and renewable energy sources, and
connection with Kenya’s neighboring countries for energy supply deals. Oil and gas exploration
projects currently under way in Kenya for the development of domestic energy resource are aimed at
establishing a system to supply electricity at reasonable costs.
+5000MW for Transforming Kenya
The Kenyan government released an initiative aimed at expanding domestic power production
capacity to more than 6,700 MW within 40 months between June 2013 and December 2016. The
main purposes of this initiative are listed below.
a) To meet an expected rise in power demand in provincial areas
Only about 30% of Kenya’s population lives in electrified areas, with the rate falling to about
13% in provincial areas. (Most people living in electrified areas are middle- and high-income
earners.) The government’s strategy is designed to electrify the entire country by 2020 and
32
promote economic development.
b) Securing at least 30% of extra power production capacity
Kenya’s peak-time power demand as of December 2013 was 1,463 MW, slightly below the
effective power production capacity of 1,684.5 MW. This means that Kenya does not have
sufficient extra power production capacity, making it difficult for the Kenyan government to
respond to emergency situations, such as the decline of hydroelectric power generation and the
abrupt suspension of power stations. Extra facilities currently in place to meet emergency needs,
located in Muhoroni, are capable of generating only 30 MW.
Figure 18 Existing power stations or planned power stations
(Original sources: Kenya’s Ministry of Energy and Petroleum, 2013) (Sources: Kenya 10-Year Power Sector Expansion Plan 2014-2024 [2014.6])
c) Sharp increase in power-intensive economic activities
Power-intensive industrial sectors whose activities are expected to grow include mining,
production of steel products using local mineral resources, land irrigation for securing food
self-sufficiency and for agricultural industrial promotion, operations of petroleum pipelines
transporting crude oil and refined oil, production of petrochemical products such as urea, and
33
construction of industrial complexes.
d) Electrification of railroads and special economic zones
The initiative is also aimed at electrifying railroads in Kenya and establishing power-related
infrastructure at commercial facilities and airports. It is also meant to provide sufficient
electricity to new special economic zones where power demand is expected to grow. If all these
power-boosting measures are implemented, Kenya will see revolutionary change.
Figure 19 Map showing mining lots in Kenya
(Source: The September 2010 edition of Analysis published by JOGMEC)
Power production capacity in Kenya under this initiative is expected to increase by 6,284 MW by
2018—by 2,095 MW for geothermal power generation, 1,058 MW for natural gas-fired power
generation (including conversion), 630 MW for wind power generation, 1,920 MW for coal-fired
power generation, 163 MW for thermal power generation, 18 MW for power generation via
cogeneration systems and 400 MW for imported electricity. The increase includes 1,115 MW by
KenGen, 1,067 MW by GDC, 1,783 MW by IPP and 1,920 MW under a joint project between
KenGen and IPP. The remaining 400 MW will be secured through importation from Ethiopia.
Shown below is a breakdown of electricity sources expected in Kenya in 2018, which is based on
the assumption that power facilities being installed for additional power production will begin
operating by that year.
Winze without oil and gasshows
Winze with oil and gas shows
34
Figure 20 Breakdown of electricity sources expected in 2018
(Sources: Kenya, 10-Year Power Sector Expansion Plan 2014-2024 [2014.6])
Situation of power generation projects and energy development
A) Oil resources
As of 2013, 26 oil development companies were engaged in exploration in 44 mining areas.
However, oil reserves were not found there. No oil fields that can immediately lead to commercial
production were found either. In June 2013, Tullow Oil, an oil developer in Kenya, discovered a
commercially viable oil field, whose reserves are estimated by the company at 300 million bbl. The
company plans to export 10,000 bbl/d of crude oil by 2016.
B) Coal resources
Under the Kenyan government's initiative to develop coal resources, coal fields were found in the
Mui mining area in Mwingi district. The Kenyan government expects the discovery to lead to 2,400
MW in additional coal-fired power generation capacity in the country by 2030.
C) Nuclear power
Kenya Nuclear Electricity Board (KNEB) has been conducting preliminary feasibility studies (PFS)
on the proposed construction of a nuclear power plant. The purpose of the PFS is to evaluate the
status quo of domestic efforts to improve nuclear power-related infrastructure in accordance with
nuclear power guidelines recommended by the International Atomic Energy Agency (IAEA). The
PFS is also aiming to propose measures to rectify problems associated with infrastructure, totaling
19 in various fields (state attitude to nuclear power, electric grids, land selection and facility
procurements, etc.). The government plans to build Kenya's first nuclear power plant by 2025 with a
power output capacity of about 1,000 MW.
D) Hydroelectric power generation
Kenya's potential hydroelectric power generation capacity—both large-scale (more than 10 MW)
and small-scale facilities—is estimated at about 6,000 MW, including 807 MW for which
35
development has been already completed. As of 2013, hydroelectric power generation accounted for
about 50% of Kenya's total power supply. Development has yet to start for hydroelectric power
generation facilities whose combined production capacity is about 1,450 MW. Potential output
capacity of small-scale hydroelectric power facilities is estimated at more than 3,000 MW. Of the
sum, only 20MW has been developed. Potential production capacity of economically important
hydroelectric power facilities is estimated at 1,449 MW, including 1,249 MW for projects whose
scale is more than 30 MW. The average energy production from these projects is estimated at 5,605
GWh or more a year. The potential hydroelectric power generation capacity estimated by the Kenyan
government is based on estimated output at hydroelectric power facilities being built along the five
major rivers in Kenya— Lake Victoria (295 MW), Rift Valley (345 MW), Athi River (84 MW), Tana
River (800 MW), Ewaso Ng‘iro North River (146 MW).
Dam construction projects planned under Kenya Vision 2030 are High Grand Falls (500 MW),
Magwagwa (120 MW), Arror (60 MW) and Nandi Forest (50 MW)—all multi-purpose dams. HGF
was proposed by the Ministry of Regional Development and Authority (MORDA). The project is
currently is in the phase of detailed design. The reservoir of HGF will be as large as scoring annual
flows of water from the Tana River that will provide water for the planned hydroelectric power
project. HGF has been designed to cover peak-time electricity demand. Its power production
capacity in the first phase is 500 MW, expanding to 700 MW in the final phase.
E) Wind Power
Some arid regions in northern Kenya are windy, making them potential locations for wind power
generation business. In Kenya, wind power has traditionally been used as a means of pumping water
to remote farmlands and frontier land. Potential wind power generation capacity in Kenya is
projected at more than 4,000 MW. A wind power plant built by KenGen on Ngong Hills has a
power-production capacity of 5.1 MW. Recent studies showed that the wind power potential in
Kenya is 346W/m2 in eastern, northeastern and coastal areas. Other areas confirmed as promising
for wind power generation where large demand is expected are Garissa (132 W/m2), Malindi (1,111
W/m2), Lamu (179 W/m2) and Mandera (175 W/m2). Development is under way in these areas
under the leadership of KenGen and Kenya Power (KPLC).
F) Solar power
With its land spreading in all directions lying over the equator, Kenya receives abundant sunlight,
getting an average 4-6 kWh of sunlight per day for every square meter. This is a favorable condition
for solar power generation.
Solar power demand as measured in the number of photovoltaic (PV) panels used has increased by
200kW per year under the Kenyan government’s plan from 2005 to supply electricity to remote
36
public facilities (dormitories and sanitary facilities). Of the about 3,000 facilities covered by the
government plan, 940 facilities have already installed PV systems, whose peak-time power
generation capacity totaled 2.4 MW in the past eight years.
In addition, a program to install solar power-wind power hybrid power-generation facilities at
off-grid power stations has started in line with a master plan introduced in 2009 to electrify remote
areas. The hybrid power-generation program for a total output capacity of 210 kW has been
undertaken on a trial basis at five off-grid power stations. Measures to strengthen this program are
expected to be taken in the future, including installing hybrid facilities at newly built off-grid power
stations to provide electricity to areas not covered by domestic power transmission networks.
G) Biomass
Biomass is the most important primary energy source in Kenya, accounting for about 70% of the
country’s primary energy consumption. Biomass-derived power generation has great potential.
Transformed into biomass is, for example, farm industry-related biological material derived from
animals. Bagasse that remains after the sugar-making process is also used for a cogeneration system
in Kenya. Furthermore, biomass converted from general waste material is used by local governments
in Kenya for generation of electricity, which is consumed themselves or sold to third parties.
In Kenya, the sugar industry uses bagasse as a primary fuel source under a cogeneration system.
The amount of bagasse that remains after sugar production by Kenya’s six major sugar producers
totals an average 1.8 million tons per year, with about 18% of the weight being textile content. A
cogeneration system established by Mumias Sugar Company is capable of generating 26 MW of
electricity compared with the power output capacity of 21.6 MW during effective sunlight hours. In
addition, a power station with an 18 MW cogeneration system is under construction by Kwale
International Sugar Company, for completion possibly by 2017.
As for biofuel development, Jatropha-based bio-diesel production has already begun on a small
scale.
H) Geothermal power generation sources
(to be explained in the next chapter)
37
3.2 Situation of geothermal energy development
3.2.1 Status quo of geothermal energy development
Kenya is the first country in Africa to generate electricity from geothermal energy, with its
geothermal energy resources among the world’s largest. Currently, geothermal power generation
accounts for about 14% of Kenya’s total grid-network electricity production capacity. Exploration is
currently under way at multiple points in the Great Rift Valley in search of geothermal energy
resources. Geothermal power stations currently in operation in Kenya are only in Olkaria and
Eburru.
Figure 21 Locations of geothermal energy resources in Kenya (Sources: Website of GDC [as of October 2014])
In Kenya, geothermal energy resources are located in the Great Rift Valley in East Africa where
there is volcanic activity. There are many active volcanoes in the valley and many of them are young
in terms of the Earth’s history. Activity of these volcanoes occurs mostly on plate borders or in a thin
crust. In Kenya, more than 14 locations are seen as potential sites for geothermal power generation
with a combined power generation capacity of more than 10,000 MW.
Geothermal energy is clean and less costly. The Kenyan government is exploring geothermal
38
energy resources in various sites in the country. This is part of the government’s efforts to raise the
country’s electricity production capacity in response to growing power demand. Searches of
geothermal energy resources include surface exploration, drilling and power generation. Among
potential sites for geothermal power generation in Kenya are Menengai, Suswa, Longont, Arus, Lake
Bogoria, Lake Baringo, Korosi-Chepchuk, Paka, Silai, Emuruangogolak, Namarunu, Barrier, Lake
Magadi, Akira, Elementaita.
3.2.2 Potential of geothermal power generation
Geothermal energy resources in Africa concentrate in East Africa where the Great Rift Valley runs.
Potential geothermal power generation capacity in East Africa estimated by the U.S. Geothermal
Resources Council is between 2,500 and 6,500 MW. Such potential estimated by the United Nations
is 14,000 MW.
Figure 22 Potential of geothermal power generation in East Africa
(Source: METI (2013), Geothermal Stakeholders’ Workshop (2010), Country Report (for Kenya, Ethiopia, Tanzania, Rift Valley
Total), The Business Council for Sustainable Energy (2003) (for Djibouti, Uganda))
39
Kenya embarked on a geothermal power generation project in 1957. Compared with other
renewable energy sources, Kenya’s project to develop geothermal energy resources have been
undertaken on a relatively large scale. In Kenya, geothermal energy resources are concentrated in
Rift Valley Province. Kenya’s potential geothermal power generation capacity is said to be as large
as 10,000 MW. As of the end of 2013, existing geothermal power generation facilities are capable of
generating 233 MW of electricity. Kenya Vision 2030 calls for raising the figure to 5,000 MW by
2030.
Table 8 Geothermal power plant construction plans in Kenya
Region Site Power
generation potential
Progress of construction
Central Rift
Menengai 1,600 MW Detailed exploration completed; Drilling under way; Phase I Project set for completion in 2017 for power output of 400 MW
Eburru-Badland 200 MW Power generation already under way following detailed surface exploration in 2011
Arus-Bogoria 400 MW Drilling work under way since 2014 following detailed surface exploration in 2010
South Rift
Olkaria 1,000 MW Power generation already under way, with output of 2.09 million kW at facilities in Olkaria I, Olkaria II and Olkaria III Drilling and construction under way at facilities in Olkaria IV (1.4 million kW)
Longonot 750 MW Detailed surface exploration under way; a development plan delayed
Suswa 600 MW Detailed surface exploration under way Lake Magadi 100 MW Preliminary survey conducted in 2011
North Rift (Set for
completion in
2018-2019)
Lake Baringo 200 MW Detailed surface exploration under way since 2010 following the end of preliminary exploration
Korosi 450 MW Detailed surface exploration planned in 2010 for test drilling in 2011
Paka 500 MW Detailed surface exploration planned in 2010 for test drilling in 2011
Silali 800 MW Preliminary exploration completed in the middle of 2010; detailed surface exploration set to start in 2011
Emuruagogolak 650 MW Preliminary exploration completed in 2010; detailed surface exploration set to start in 2011
Namarunu 400 MW Preliminary exploration and detailed surface exploration conducted in 2011
Barrier 450 MW A plan to conduct detailed surface exploration in 2012 announced in 2011
Total 8,100 MW
(Sources: Compiled based on the website of Kenya Geothermal Development Company [GDC] and others) (Note: the website of
GDC confirmed has not been updated)
40
3.2.3 Measures to diffuse power generation from geothermal energy sources
The Kenyan government has adopted a Feed-in Tariff (FIT) policy as a means of promoting power
generation from renewable energy sources by increasing attractiveness of large-scale investment in
the renewable energy sector for the private sector. The FIT system is designed to guarantee
investment returns to companies investing in the renewable energy business while providing market
stability. The FIT system is also intended to maximize profit accruing from the investment by
enabling private-sector investors to operate the invested power stations steadily and efficiently. This
policy is expected to spur development of abundant renewable energy sources deposited in Kenya.
Kenya introduced the FIT system in 2008. The purchasing price set under the FIT system was
revised in 2010 and 2012. The scope of renewable energy sources subject to the system expanded in
the same years.
Table 9 Feed-in-Tariff (FIT) under small-scale renewable energy projects in Kenya (capacity not
exceeding 10 MW)
Power source Power output
capacity (MW)
Standard purchasing
price (US$/kWh)
Portion of measurable charge (%)
Minimum power output
capacity (MW)
Maximum power output
capacity (MW)
Wind power 0.5-10 0.11 12 0.5 10
Hydroelectric
power*
0.5 0.105 8 0.5 10
10 0.0825
Biomass 0.5-10 0.10 15 0.5 10
Biomass 0.2-10 0.10 15 0.2 10
Solar power
(grid)
0.5-10 0.12 8 0.5 10
Solar power
(non-grid)
0.5-10 0.20 8 0.5 1
Note: *Application is necessary to determine the purchasing price of hydroelectric power when output capacity is an
in-between figure between 0.5 MW and 10 MW.
(Source) Government of the Republic of Kenya (2014) 10 Year Power Sector Expansion Plan 2014-2024.
41
Table 10 Feed-in-Tariff (FIT) under large-scale renewable energy projects in Kenya （capacity exceeding
10 MW）
Source
Power output
capacity (MW)
Standard purchasing
price (US$/kWh)
Portion of measureable charge (%)
Minimum power output
capacity (MW)
Maximum power output
capacity (MW)
Maximum cumulative
power output
capacity (MW)
Wind power 10.1-50 0.11 12 10.1 50 500
Geothermal
power
35-70 0.088 20 (first 12
years)
15 (13th year
or after）
35 70 500
Hydroelectric
power
10.1-20 0.0825 8 10.1 20 200
Biomass 10.1-40 0.10 15 10.1 40 200
Solar power
(grid)
10.1-40 0.12 12 10.1 40 100
(Source) Government of the Republic of Kenya (2014) 10 Year Power Sector Expansion Plan 2014-2024.
3.2.4 Situation regarding cooperation with private businesses and relevant
organizations
Private businesses such as IberAfrica, OrPower, Tsavo, Mumias Sugar Company contribute about
30% of the electricity they generate to Kenya’s state-run power grids as independent power
producers (IPPs).
a) Iberafrica (56-MW fossil power station)
b) OrPower (48-MWgeothermal power station)
c) Tsavo (74-MW fossil power station)
d) Mumias Sugar Company (26-MW cogeneration system)
As emergency power producers (EPP), Aggreko supplies electricity on a short-term basis in the
event of a long drought.
Collaboration with relevant organizations in Japan
∙ As a way to support Kenya’s efforts to promote power generation from geothermal energy
sources, the Japan International Cooperation Agency (JICA）decided to allot 1.8 billion yen in
July 2013 to the development of human resources and technical assistance for Geothermal
Development Company (GDC) of Kenya.
42
∙ In June 2013, Japan and Kenya signed a partnership agreement aimed at promoting economic
growth while curbing carbon emissions. Kenya became the second African country with which
Japan has signed an accord for a bilateral offset credit system following Ethiopia. Japan signed
such an accord with three other countries earlier.
43
4 Overview of small-scale geothermal power generation
4.1 What is small-scale geothermal power generation?
4.1.1 General
Geothermal fields in Kenya have high potential for geothermal resources. For example, the total
installed capacity of the Olkaria geothermal power plants is approximately 480 MW, including the
plant currently under construction with an installed capacity of 140 MW (70 MW unit x 2), and in
Menengai, where the potential geothermal capacity is 1,000 MW, more than 20 wells have been
drilled as the first phase with a target of 400 MW. In these fields, large-scale geothermal
development has been or will be carried out in the future, and at the same time, small-scale
geothermal power generation projects are also in the planning stage so as to reduce the development
lead time in order to start power generation as soon as possible.
Generally speaking, "small-scale geothermal power generation facilities" have no clear definition,
such as geothermal power generation with a capacity of up to xx MW, for instance Small-scale
geothermal power generation could mean hot spring power generation using hot spring water with a
capacity of tens of kW or geothermal power generation using geothermal steam with a capacity of
several MW to around 20 MW. In this document, "small-scale geothermal power generation" is
defined as power generation that uses geothermal resources stored in geothermal reservoirs located
some kilometers below the surface of the ground as an energy source, each single unit of which has
an output of several MW to around 10 MW.
As described hereinafter, the power generation technology for small-scale geothermal power
generation itself is not different from that for larger-scale geothermal power generation; however,
small-scale geothermal power generation has some advantages over larger-scale geothermal power
generation. First, since small-scale geothermal power generation requires a smaller number of
production wells, development of the resource requires a shorter time and costs less. Furthermore,
the construction period for a small-package plant can be shorter. In this case, the cost per MW may
be rather high; however, since small-package plants can be brought into operation within a shorter
period, they have the great advantage that the payback period is shorter. If the generated power is not
sold by connecting to the domestic grid, it can replace diesel generators as a power source for the
rigs; therefore, it is easy to recover the initial investment, considering the savings on the cost of
diesel fuel, which is said to account for 25 percent of drilling costs.
Other advantages include the fact that that geothermal fluid transportation lines that connect the
power plant with the wells are not required, or that only a bare minimum of such lines is required;
and that transportation, installation and operation of package-type plants are relatively easy. In
addition, it is possible to make the most of the fluid and output characteristics, which vary according
to well; to use distant wells that are hard to use in the case of large-capacity geothermal power
44
generation; and to effectively use steam from wells with low output. Also, if any problems occur
with a particular well, power generation installations can be moved to another well. This could be
done only for small-scale power generation, which has excellent mobility.
Since it is possible to start power generation during long-term production testing, the steam that
otherwise was discharged into the air during the testing period can be recovered as electric power
energy and the long-term production testing makes it possible to check the geothermal resource scale
more accurately, reducing the risks for large-scale development at a later time.
Therefore, small-scale geothermal power generation itself has many advantages, and advancing
large-scale geothermal development at the same time offers even more advantages. The following
figure shows the typical composition of small-scale geothermal power generation installations
(well-head power generation installations).
45
Table 11 Comparison in Installations between Small-Scale Power Generation and Medium- to
Large-Scale Power Generation
Item Small-scale Medium- to large-scale
Approximate installed
capacity*
Several MW to around 10 MW
per single unit
10 MW or more
Development period Shorter Longer
Construction period Shorter Longer
Cost per MW Higher Lower
Geothermal fluid
transportation line
Not necessary or shorter Longer
Power generation
during long-term
production testing
Possible Not possible
Mobility Higher Lower
Usage As power sources for rigs during
the development period and
connection with the grid
Connection with the grid
* There is no clear definition.
4.1.2 Small-scale geothermal power generation technology
The small-scale geothermal power plants described in this survey have a small installed capacity
and a small number of wells; however, the power generation mechanism is the same as that of
larger-scale geothermal power plants. Table 11 shows a list of geothermal power generation methods
that are currently in practical use.
The natural steam cycle is a method applicable to cases in which only steam, without hot water,
blows out from production wells.
Flash cycle is a method in which a mixture of steam and hot water (two-phase flow) blowing out
from production wells is directed to a separator, where the steam is separated in order to drive a
turbine. This method is applicable to cases in which the geothermal fluid includes hot water at
temperatures that are so high that it comes to a boil only by reducing its pressure above ground.
Among flash cycle methods, the back pressure method is not suitable for large-scale development
since it is poor in specific steam consumption and noisy; however, in the case of small-scale
geothermal power generation, only simple facilities are required for this method, and thus
transportation, installation and operation are relatively easy.
The condensing method is more efficient due to use of a condenser; therefore, it is most-used in
medium- to large-scale commercial geothermal power plants. The condensing method, however, has
46
the disadvantage that when the steam contains a significant portion of non-condensable gases
(NCGs: carbon dioxide and other gases that are highly insoluble in water), the condenser’s
performance decreases and the power necessary for discharging gases from the condenser increases,
leading to a reduction in power output.
Binary cycle is a method in which steam or hot water is directed to a heat exchanger, where a
working fluid with a low boiling point is vaporized to drive a turbine. Many systems have been
developed by using various working fluids, and organic rankine cycle (ORC) systems in which
pentane or isopentane is used as the working fluid are currently the most popular type of commercial
system. A major advantage of the binary cycle method is that power can be generated by using a
working fluid with a low boiling point even in an environment where geothermal fluid at a high
enough temperature to obtain a large amount of steam cannot be secured. A case in which only water
with a relatively low temperature (up to approximately 180˚C) is used is called simple binary, and
when both the steam and hot water are separated and geothermal fluid with a rather high temperature
and a certain amount of steam can be secured, this is the steam and hot water combination method.
Furthermore, when a certain amount of steam is secured, combinations of several cycle methods are
used according to geothermal fluid pressure, temperature and specific enthalpy, including combined
use of flash cycle and other methods.
The method with a combination of the natural steam cycle or flash cycle and binary cycle is called
combined cycle, which has been widely adopted recently as an effective way to use steam and hot
water.
Table 12 Geothermal Power Plant Cycle Methods
Classification Power generation method Characteristics N
atural steam cycle
Back pressure ・ Applicable to wells with superheated
steam containing a large amount of
NCGs.
・ Generally low capacity.
・ The geothermal energy use efficiency is
lower than for the condensing method.
・ Construction cost is low while specific
steam consumption is high.
・ Exhaust noise control measures are
required.
atmosphere
production well
47
Classification Power generation method Characteristics
Condensing
・ Applicable to wells with superheated
steam containing few NCGs.
・ High capacity power generation is
possible.
・ Geothermal energy use efficiency is
high.
・ When high-quality steam can be
secured, the power generation cost is
the lowest of all the methods.
Flash cycle
Single flash back pressure
・ Applicable to wells with
water-dominated geothermal fluid
containing a great amount of NCGs.
・ This is well-head power generation,
which is generally low capacity.
・ Geothermal energy use efficiency is
lower than for the condensing method.
・ Construction cost is low while specific
steam consumption is high.
・ Exhaust noise control measures are
required.
atmosphere
production well
production well
condenser
cooling tower
production well
atmosphere
separator
brine
production well
steam
48
Classification Power generation method Characteristics
Single flash condensing
・ Applicable to wells with
water-dominated geothermal fluid
containing few NCGs.
・ High capacity power generation is
possible.
・ When much hot water is used,
geothermal energy use efficiency is
low.
・ Due to high-temperature and
high-pressure reinjection, this method
may be more advantageous in silica
scale prevention in reinjection wells
and for reducing the number of
reinjection wells or reducing the power
cost for reinjection pumps than the
double flash method.
Double flash condensing
・ Applicable to wells with
water-dominated geothermal fluid
containing few NCGs.
・ High capacity power generation is
possible.
・ When hot water can be secured, this
method has more output by 15 to 25
percent than for the single flash
method.
・ The construction cost is higher by
approximately 6 percent than for the
single flash method.
・ The volume of rejoined water is smaller
than for the single flash method.
atmosphere
production well
separator
production well
condenser
cooling tower
separator
cooling tower
production
flasher
49
Classification Power generation method Characteristics
Binary cycle
Simple binary
・ Heat from hot water is transported to a
heat exchanger (vaporizer), where a
working fluid with a low boiling point
is vaporized to generate steam, which
drives a turbine.
・ Applicable to low enthalpy wells that
are not suitable for the flash cycle
method.
・ Generally low-capacity package type.
・ The structure of facilities is simple and
they can easily operate without human
operators.
Steam and hot water combination
・ Applicable to low to middle enthalpy
wells with water-dominated geothermal
fluid.
・ Use of high-capacity gas extractors
(vacuum pumps) is not required.
・ There is a possibility that all NCGs can
be reinjected.
・ Since this method uses both steam and
hot water as heat sources, the use
efficiency of geothermal energy is high.
・ The output of a single unit is several
megawatts.
・ The facility structure is relatively
simple and applicable to medium-scale
power plants through the use of many
units.
atmosphere
production well
50
Classification Power generation method Characteristics
Com
bined cycle
Combined cycle
・ Applicable to high-pressure, middle to
high enthalpy wells.
・ Use of high-capacity gas extractors
(vacuum pumps) is not required.
・ All NCGs have been reinjected before.
・ Using hot water in addition to steam as
a heat source is possible.
・ The system consists of a back pressure
turbine and several binary units.
・ High capacity power generation is
possible.
(Source: Material prepared by West Japan Engineering Consultants, Inc).
4.2 Market trend of small-scale geothermal power generation installations
For small-scale geothermal power generation with a capacity of several MW to around 10 MW,
which is covered in this survey, which of the flash cycle, binary cycle or combined cycle methods, as
shown in the table above, should be adopted depends primarily on the geothermal fluid properties
and subsequently on other conditions, including economic efficiency and environmental aspects.
The table below shows the average capacity and energy for each plant category (MW/unit)
indicated in the "Geothermal Power Generation in the World 2005-2010 Update Report" presented at
the World Geothermal Congress 2010. Regarding generation capacity per unit, dry steam is the
largest at 46 MW, followed by double flash, single flash (condensing), back pressure and binary.
Table 13 Average Capacity and Energy for Each Plant Category (MW/unit)
(Source: Ruggero Bertani, Geothermal Power Generation in the World 2005-2010 Update Report, World
Geothermal Congress, 2010)
The table below shows a list of geothermal power plants in the world commissioned between 2008
and 2009. For small-capacity plants, the binary method makes up a predominantly high proportion,
TypeAverage capacity (MW/unit)
Binary 5Back Pressure 6Single Flash 31Double Flash 34Dry Steam 46
atmosphere
production well
51
although the dry steam, single flash (condensing) and back pressure methods have also been adopted.
As of 2010, when the report was issued, there are 259 units with a capacity of less than 10 MW in
operation throughout the world, and their average installed capacity is 3.2 MW. Of them, 196 units
are binary, 22 are back pressure, 22 are single flash (condensing) and 17 are double flash.
It can be seen that for the majority of small-scale power plants, the binary method was adopted.
However, as we discuss later, recently there have been more cases in which small-scale well head
power generation equipment has been introduced in the early stage of normal geothermal
development with a long lead time, and for this reason the flash cycle method has been adopted for
high temperature geothermal resources to suit the particular steam properties.
52
Table 14 list of geothermal power plants in the world commissioned between 2005 and 2009
(Source: Ruggero Bertani, Geothermal Power Generation in the World 2005-2010 Update Report, World Geothermal Congress,
2010)
53
In geothermal development, it is desirable to advance development in a phased manner while
observing reservoir movement even in fields with high potential. Since small-scale power generation
facilities, especially the back pressure method, do not require cooling towers, condensers and gas
extractors, as with the condensing method, and thus they can be easily moved, they can be used from
one well to another during production testing. Furthermore, by selling power generated by using the
steam that otherwise is just discharged into the air during testing, it is possible to gain income.
Therefore, it can be said that small-scale power generation is also economically efficient.
In this way, small-scale power generation facilities are significantly convenient in terms of
geothermal development processes, which tend to take a long time and are advanced in a phased
manner. In fact, the small-scale back pressure facilities introduced to a geothermal field located in
Los Azufles, Mexico have been used not only within the field but also in a geothermal field located
in Los Humeros in the same country, as well as geothermal fields in the nearby countries of Costa
Rica and Guatemala. On the other hand, the specific steam consumption of the back pressure method
is approximately 12-14 ton/MWh, which is less efficient than that of the condensing method at
approximately 8 ton/MWh. Furthermore, since steam is discharged into the air at the turbine exit in
back pressure units, the condensing method is preferred in terms of noise and the landscape in some
cases.
Aside from cases in which small-scale power generation facilities are introduced in the early stage
of large-scale geothermal development, like in Japan, the number of business operators that aim to
be involved in the small-scale geothermal power generation business from the beginning is growing,
as are the needs of small-scale geothermal power generation facilities. In Japan, large-scale
geothermal development is difficult due to restricted development in national and quasi-national
parks and conflicts of interests with hot springs business operators; however, since introduction of
the feed-in tariff scheme has increased the chance that small-scale geothermal power generation will
become profitable and that an environmental impact assessment is not required to geothermal power
generation development with a capacity of 7.5 MW or lower, plans for geothermal power generation
projects with a scale of several MW are underway throughout Japan. In these circumstances, Toshiba
Corporation expanded its business in Japan in addition to overseas countries by adding a
turbine-driven generator for small-scale geothermal power plants to its product lineup, based on the
delivery record of small-package back pressure turbines to Mexico in the 1980s.
4.2.1 Needs in Kenya
In the case of Kenya, which is the target country of this survey, electric power development
projects combining well head power generation installations, whose operation can be started early,
and future large-scale power generation installations are underway. In a project operated by KenGen
in Eburru (2.44 MW / operation start: 2012), Geothermal Development Associates (GDA; U.S.A.)
54
has already introduced well head geothermal power generation installations, and in Olkaria also,
well head geothermal power generation installations (5.37 MW / operation start: 2012) have been
introduced. According to the "5000+MW by 2016 Power to Transform in Kenya," projects to
introduce well head power generation installations with a total size of 140 MW are planned by 2016.
It is said that the GDC is also interested in well head power generation and prefers highly economic
installations, even if their scale is small.
In the interviews conducted to the related Kenyan authorities during the study period, they
expressed their interest in the wellhead geothermal power generation, which can start operation in
the early phase of the project. In addition, some of them showed their interest in the condensing
generation unit because of its high economic efficiency comparing to other generation method.
4.3 Trends of manufacturers of small-scale geothermal power plants
In the delivery record of global geothermal power generation installations, regardless of size, three
Japanese companies—Mitsubishi Heavy Industries (now Mitsubishi Hitachi Power Systems,
established in February 2014 by integrating thermal power generation system departments of
Mitsubishi Heavy Industries and Hitachi), Toshiba and Fuji Electric—occupy the top three spots.
Ansaldo/Tosi, which ranks fourth, is a manufacturer in Italy, which is the world's first country where
geothermal power generation was commercialized successfully. These manufacturers mainly
manufacture flash cycle power generation facilities.
Regarding binary cycle units, ORMAT in Israel (ranked fifth) manufactures equipment with a
per-unit capacity of 250 kW to 20 MW. It delivered units with a total capacity of 1,100 MW in 71
countries throughout the world and has a virtual monopoly in the global market. Fuji Electric
recently commercialized a 2,000-kW binary power generation system, and in 2013 Mitsubishi
Hitachi Power Systems merged Italy's Turboden, which had binary technologies for the organic
rankine cycle system, to establish a structure to supply binary power generation facilities.
Figure 23 Proportions of Geothermal Power Plant Manufactures
(Source: Ruggero Bertani, Geothermal Power Generation in the World 2005-2010 Update Report, World Geothermal Congress,
2010)
Mitsubishi Heavy Industries delivered four 5-MW back pressure units and Toshiba delivered one
Mitsubishi24%
Toshiba24%
Fuji20%
Ansaldo/Tosi 11%
ORMAT10%
Others11%
55
such unit in the early 1980s in Los Azufles, Mexico. They were the first of their kind to be used in
this field. They were strategically placed and used to observe the movement of the reservoir during
production testing. In this field, 50-MW condensing units were subsequently installed, and also
added were four 5-MW back pressure units (two of which were manufactured by Ansaldo) and two
1.5-MW binary units (manufactured by Ormat) aimed at effective use of heat. By utilizing
small-scale back pressure units, the characteristics of the entire reservoir were further understood,
and ultimately four 25-MW units were added. The current total installed capacity is 188 MW.
In Kenya, Green Energy Group (GEG), which is a Norwegian company that has supplied
condensing well head power generation systems in Olkaria, has been leading the market. The
company concluded a private contract with KenGen and delivered 14 units.
It is said that GEG’s power generation systems are highly evaluated in the following respects:
∙ GEG delivers small-scale condensing systems, which have lower specific steam consumption
and thus are more efficient than back pressure power generation systems.
∙ GEG’s small-scale power generation systems have a shorter lead time than large-scale power
generation systems and thus early realization of earning revenue by selling electricity is
expected. Furthermore, GEG publicizes that point effectively.
∙ GEG claims that costs are kept low by linking standard modules and that power generation
capacity is scalable, as necessary.
56
5 Concrete business plan for introduction of a small-scale geothermal power generation facilities to the Republic of Kenya
5.1 Flow to develop and propose business plans
In this present study, along with the steps shown in the figure below, the concrete business plan
including conceptual design of generation unit for two geothermal fields (Field A and Field B) in
Kenya was developed and proposed to the Kenyan entities.
Figure 24 Flow to develop and propose concrete business plans
（Source: Elaborated by MHIR）
<Field survey>
<Field survey>
・Preliminary research on
geothermal resources in
Kenya (literature survey)
・Site visit on geothermal
fields
・Introduction of Japanese technology
on geothermal power generation・
Hearing on Kenyan needs
・Conceptual design of generation unit・
Economic evaluation
・Proposal to Kenyan authorities
・Explanation on application for JCM subsidy
・Research on market trend of
Kenyan geothermal power
generation (literature survey)
57
5.2 Geothermal Field A
The 10-MW new wellhead generator will be installed in Field A. The generated electricity will be
evacuated to the national grid.
5.2.1 Geothermal resources
The large scale geothermal power development has already been done in Field A. Currently the
drilling activities are still ongoing for the expansion of the output of the power plant. Actually, very
high temperature of 300 degree C has been confirmed in many wells in this field. The output of the
well is not same but different one by one even which are drilled in the same field. This is because the
well’s output is controlled by the reservoir temperature, reservoir pressure, and permeability around
the well, and these parameters are not uniform in the underground.
One of the features of the production well in this field is the relatively high specific enthalpy of the
discharged fluid. This is called excess enthalpy which occurs when the geothermal fluid starts
boiling and pressure decreases in the formation and obtain the heat energy from the rock while
flowing to the well. Therefore relatively high steam ratio can be observed in many wells in this field.
The production characteristic curve of such well has a feature that the change of flow rate against
wellhead pressure is small as shown in the figure below. Therefore the well can be operated at higher
wellhead pressure without much reduction of flow rate and it makes higher generation efficiency.
Figure 25 Feature of production characteristic curve
5.2.2 Basic design
The specific well is not assumed in this present study. The project concept is shown in the figure
below. The geothermal fluid from two wells are collected by the pipeline and separated to the steam
and hot water (brine) at the separator. The separated steam is sent to the wellhead generation facility
and the separated brine is sent to the existing reinjection well through existing pipeline. The
wellhead pressure wellhead pressure
wells with high water ratio wells with high steam ratio
flow rate
flow rate
58
reinjection facilities are not included in the scope of the project since they are already prepared for
the production test.
Figure 26 Project concept (Field A)
(Source: Result of this present study)
5.2.2.1 Power generation facility
5.2.2.1.1 Preconditions
In this present study, the conceptual design of the power generation unit was made with reference
to the general information in Field A. As described above, the wellhead power plant consists of only
a turbine generator and the control device. A back pressure type exhausts steam to the atmosphere,
and a condensing type is characterized in its high generation efficiency by cooling the exhaust steam
in the condenser and in the cooling tower. There are also a simple binary system and a
combined-cycle system. For Field A, the condensing type was selected because it is suitable for the
nature of the wells in this field, characterized by high pressure and low concentration of
non-condensable gas.
In the geothermal power in the world, flash-type power generation system that generates electricity
using a steam turbine with steam from geothermal heat source is predominant. In flash-type
generation system, the geothermal brine and steam are lead to the flasher (gas-liquid separator),
where the steam is separated (flash steam). After adjusting the pressure, the electricity is generated in
the steam turbine, when the enthalpy of geothermal fluid is high and it contains the flash steam more
than 20%, the flash-type generation system is appropriate. However, if the enthalpy is low and the
content of the flash steam is low, it may be difficult to generate electricity with this system in
Production wells
Surface pipeline
Separator To reinjection well brine
steam
Wellhead
generation electricity To substation
59
commercial base.
As the characteristics of the production wells of Field A, even in the case of relatively high
wellhead pressure, the decline of production volume is low, comparing to the wells that produce a lot
of brine. Therefore, it is possible to increase the generation efficiency rate by assuming the relatively
high wellhead pressure to operate.
Utilizing the turbine, the precondition related to the cooling system such as the condenser was set
based on the estimate by the manufacturer. The analysis result is the following.
5.2.2.1.2 Result of analysis
The figure below shows the layout of the generation system.
Figure 27 Layout of the wellhead generation system (condensing-type)
(Source: Result of this present study)
Geothermal fluid is lead from the wells located in the above part of the figure above to the
separator through the pipe. The fluid is separated into brine and steam at the separator. Then, the
60
separated steam flows into the steam turbine. After generating electricity, the non-condensable gas is
removed in the gas extraction equipment, subjected to heat exchange in the condenser, and then lead
to the cooling tower.
Though the actual size of the area depends on the detailed design based on the specific wells and
site, generation system may be installed within the well pad where the production wells are drilled.
5.2.2.2 Electricity evacuation to 220-kV national grid
The generated 10-MW electricity from newly constructed well-head power plant will be connected
to the extended 33-kV bus located existing well-head power plant 33-kV substation through 33-kV
transmission line. The existing well-head power plant evacuates the generated electricity to 220-kV
national grid through 11/220-kV transformer and 220-kV transmission line to the existing substation.
G
33kV Transmision Line [5 km]OW-914 Substation
Expansion
Generation Unit (10MW)
G G
Figure 28 Basic Concept of Electricity Evacuation (Field A)
(Source: Result of this present study)
5.2.3 Economic evaluation
This sub-chapter provides an economic evaluation based on a forecasted cash flow. We estimated
expenses (construction and O&M costs) and earnings according to various preconditions to create
annual financial statements. Finally, we evaluate the tariff to meet the target EIRR, which are
indicators important to the sponsor respectively.
5.2.3.1 Summary of preconditions
We have evaluated the feasibility of the well-head geothermal power plant on the condition that it is
constructed at new project site and operated for 25 years.
61
5.2.3.2 Cost effectiveness of the proposed project (Base case)
The table below shows the tariff to meet the target EIRR, resulting from the project in accordance
with the conditions mentioned in the previous section.
Table 15 Outline of the feasibility study results
Contents Results
Target Equity IRR 12.0 %
Average Tariff 6.88 cent/kWh
- Capacity Charge 3.55 cent/kWh
- O&M Charge 1.33 cent/kWh
- Fuel Charge 0.00 cent/kWh
- Steam Charge 2.00 cent/kWh
(Source: Result of this present study)
5.2.3.3 Economic efficiency of the proposed project (sensitivity analysis)
On the basis of the above case as a base scenario, the effect on the tariff is evaluated by varying
typical parameters. Summarized results are as follows.
The table below indicates an extent of typical parameter variation and associated tariff. An example
shown in the table below assumes mainly a scenario where the tariff is increased.
62
Table 16 Results of sensitivity analysis
(1) Initial Cost (Base Case: USD 78M) (2) Load Factor (Base Case: 92%)
(3) O&M Cost (Base case: 3%) 4) Subsidy (Base case: USD0M)
(5) Target EIRR (Base case: 12%)
(Source: Result of this present study)
3.05 3.55 4.05
3.133.33
3.53
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case x 85% Base Case Base Case x 115%
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
3.73 3.55 3.39
3.40 3.33 3.26
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case ‐ 5% Base Case Base Case + 5%
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
3.55 3.55 3.55
2.89 3.33 3.77
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case ‐ 1% Base Case Base Case + 1%
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
3.552.77
3.33
3.33
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case Subsidy 5M
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
3.33 3.55 3.77
3.33 3.33 3.33
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
EIRR: 11% Base Case EIRR: 13%
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
63
5.3 Geothermal Field B
The 10-MW new wellhead generator will be installed in Field B. The generated electricity will be
evacuated to the national grid. In accordance with the local needs, the option of utilizing the
generated electricity at drilling rig is also considered.
5.3.1 Geothermal resource
The geoscientific surface survey such as geological survey, geochemical survey, geophysical survey
(MT survey and gravity survey) were carried out in Field B, and currently, exploration well are being
drilled. As of January 2015, steam production is already confirmed. Since high reservoir temperature
of more than 300 degree C is confirmed in many wells in this field, Field B has high geothermal
potential as well as Field A.
As mentioned, the productivity of a well is controlled by reservoir pressure, reservoir temperature,
and permeability around the well. Therefore the output from a well varies because these parameters
are not uniform even in the same field. The specific enthalpy of the produced geothermal fluid also
varies. Some wells produce much water while others produce almost 100% steam.
5.3.2 Basic design
The specific well is not assumed in this present study. The assumption is that the steam flow rate of
75.7 tons/hr at 9.6 bara is required for the wellhead generation of 10 MW. The project concept is
shown in the figure below. The geothermal fluid from two wells are collected by the pipeline and
separated to the steam and hot water (brine) at the separator. The separated steam is sent to the
wellhead generation facility and the separated brine is sent to the existing reinjection well through
existing pipeline. The reinjection facilities are not included in the scope of the project since they are
already prepared for the production test.
64
Figure 29 Project concept (Field B, connect to the national grid)
(Source: Result of this present study)
In general, the power required at the drilling rig is supplied from the generator. The actual daily
consumption record of the fuel oil A at a drilling site in Japan is shown in the following figure. Since
the number of generator used and their specification in unknown, it is difficult to estimate the
electricity demand from this fuel consumption data. However, this data indicate that the fuel
consumption amount is not constant but it varies according to the activity of the day. Therefore, it is
necessary to consider the load fluctuation when the electricity generated by wellhead generator is
consumed at the drilling rig.
Figure 30 Actual example of daily consumption of fuel oil A at drilling site
0
1000
2000
3000
4000
5000
6000
10/28
11/2
11/7
11/12
11/17
11/22
11/27
12/2
12/7
12/12
12/17
12/22
12/27
1/1
1/6
1/11
1/16
Consumption of fuel oil A(liter)
Production wells
Surface pipeline
Separato To reinjection wellbrine
stea
Wellhead
generatio electricity To substation
65
The steam from the existing production well is utilized by the wellhead generator to produce
electricity. It is unrealistic to adjust the steam production rate based on the load fluctuation.
Therefore, the steam flow production rate will be kept constant and the load will be adjusted by
releasing the surplus steam to the atmosphere. This is also valid in the view of obtaining the long
term mass production data from the well.
Although the demand will change due to the condition of the drilling work and hour, the maximum
demand of 10 MW is expected considering the electricity consumption at several drilling rigs, water
pumps, and so on.
After supplying of the electricity to the drilling rig, the electricity will be evacuated to the national
grid.
Figure 31 Project concept (Field B, drilling rig option)
(Source: Result of this present study)
5.3.2.1 Power generation facility
5.3.2.1.1 Preconditions
In this present study, the conceptual design of the power generation unit was made with reference
to the general information in Field B. As described above, the wellhead power plant consists of only
a turbine generator and the control device. A back pressure type exhausts steam to the atmosphere,
and a condensing type is characterized in its high generation efficiency by cooling the exhaust steam
in the condenser and in the cooling tower. There are also a simple binary system and a combined
cycle system. For Field B, the condensing type was selected because it is suitable for the nature of
Production wells
Surface pipeline
Separator To reinjection well brine
steam
Wellhead
generation electricity To drilling rig, etc.
66
the wells in this field, characterized by high pressure and low concentration of non-condensable gas.
5.3.2.1.2 Result of analysis
The figure below shows the layout of the generation system.
Figure 32 Layout of the wellhead generation system (condensing-type)
(Source: Result of this present study)
Geothermal fluid is lead from the wells located in the above part of the figure above to the
separator through the pipe. The fluid is separated into brine and steam at the separator. Then, the
separated steam flows into the steam turbine. After generating electricity, the non-condensable gas is
removed in the gas extraction equipment, subjected to heat exchange in the condenser, and then lead
to the cooling tower. Though the actual size of the area depends on the detailed design based on the
specific wells and site, the generation system may be installed within the well pad where the
67
production wells are drilled.
5.3.2.2 Electricity evacuation
5.3.2.2.1 Electricity evacuation to 132-kV national grid
Generated 10-MW electricity will be evacuated to the substation for Field B through 132-kV x 5-km
transmission line.
G
132kV Transmision Line [xx km]Existing Substation
Expansion
Generation Unit (10MW)
Figure 33 Basic concept of Electricity Evacuation (Field B)
5.3.2.2.2 Power supply for rig pad
The generated 10-MW power will be evacuated to rig pads through 33 kV x 10 km (maximum) x 2
circuits transmission lines.
The evacuated 33 kV electricity will be received 33 kV transformers and local distribution boxes
consumed at well-pads.
5.3.3 Economic evaluation
5.3.3.1 Summary of preconditions
We implemented economic evaluation of the wellhead geothermal power plant projects on the
condition that it is constructed at new project site and operated for 25 years in below each case.
∙ Ordinary Case;
68
38 MW geothermal power plant at 1,700 USD/kW are constructed; and
In-house diesel generator are used for well developing during construction phase
∙ Rig Case;
28 MW geothermal plant at same cost as Ordinary Case and 10 MW W/H plant are
constructed; and
In-house diesel generator are used for well developing only before two wells were
developed
∙ Early Grid Connection Case;
28-MW geothermal plant at same cost as Ordinary Case and 10-MW wellhead plant are
constructed; and
In-house diesel generator are used for well developing during construction phase
5.3.3.2 Cost effectiveness of the proposed project (Base case)
The table below shows the tariff to meet the target EIRR, resulting from the project in accordance
with the conditions mentioned in the previous section.
Table 17 Outline of the feasibility study results
Contents Results
(Ordinary Case)
Results
(Rig Case)
Results
(Early Grid
Connection Case)
Target Equity IRR 12.0 % 12.0 % 12.0 %
Average Tariff 7.63 cent/kWh 7.33 cent/kWh 7.80 cent/kWh
- Capacity Charge 4.43 cent/kWh 4.17 cent/kWh 4.51 cent/kWh
- O&M Charge 1.20 cent/kWh 1.16 cent/kWh 1.28 cent/kWh
- Fuel Charge 0.00 cent/kWh 0.00 cent/kWh 0.00 cent/kWh
- Steam Charge 2.00 cent/kWh 2.00 cent/kWh 2.00 cent/kWh
(Source: Result of this present study)
5.3.3.2.1 Economic efficiency of the proposed project (sensitivity analysis)
On the basis of the above case as a base scenario, the effect on the tariff is evaluated by varying
typical parameters. Summarized results are as follows.
The tables below indicate an extent of typical parameter variation and associated tariff. An example
shown in the table below assumes mainly a scenario where the tariff is increased.
69
Table 18 Results of sensitivity analysis (Rig case)
(1) Initial cost (Base case: USD 70M) (2) Load Factor (Base case: 92%)
(3) O&M cost (Base case: 3%) (4) Subsidy (Base case: USD0M)
(5) Target EIRR (Base case: 12%)
3.96 4.51 5.07 5.624.43
3.123.28
3.453.62
3.20
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case x 85%
Base Case Base Case x 115%
Base Case x 130%
Ordinary Case (38MW)
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
70
Table 19 Results of sensitivity analysis (Early grid connection case)
(1) Initial Cost (Base case: USD 78M) (2) Load Factor (Base case: 92%)
(3) O&M Cost (Base case: 3%) (4) Subsidy (Base case: USD0M)
(5) Target EIRR (Base case: 12%)
(Source: Result of this present study)
3.60 4.17 4.75 5.324.43
2.993.16
3.333.49
3.20
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case x 85%
Base Case Base Case x 115%
Base Case x 130%
Ordinary Case (38MW)
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
4.65 4.40 4.17 3.97 4.43
3.30 3.23 3.16 3.103.20
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Base Case ‐10%
Base Case ‐5%
Base Case Base Case + 5%
Ordinary Case (38MW)
Tariff [cent/kW
h]
Other than CAPEX
CAPEX
71
6 Study of a GHG emissions reduction methodology and trial estimation of expected GHG emissions reductions based on the methodology
6.1 Outline
In existing feasibility studies (FS) for JCM projects to date, a draft MRV methodology for
geothermal power generation was studied based on ACM0002 “Consolidated methodology for
grid-connected electricity generation from renewable sources.” The following are the basic formulas
to calculate emission reductions, and these formulas based on ACM0002 were also used for the
MRV methodology to be studied in this present study.
<Reference Emissions>
REy = RGPJ,y x RFgrid,CM,y
REy: Reference emissions in year y [tCO2/y]
RGPJ,y: Quantity of net electricity generation that is produced and fed into the grid as a result
of the implementation of the JCM project activity in year y [MWh/y]
RFgrid,CM,y: Combined margin CO2 emission factor for grid connected power generation in
year y calculated using the latest emission factor [tCO2/MWh]
RFgrid,CM,y = RFgrid,OM,y x 0.5 + RFgrid,BM,y x 0.5
RFgrid,OM,y: Operating margin CO2 emission factor for grid connected power generation in year
y calculated using the latest emission factor [tCO2/MWh]
RFgrid,BM,y: Build margin CO2 emission factor for grid connected power generation in year
y calculated using the latest emission factor [tCO2/MWh]
<Project Emissions>
PEy = PEFF,y + PEGP,y
PEy: Project emissions in year y [tCO2/y]
PEFF,y: Project emissions from fossil fuel consumption in year y [tCO2/y]
PEGP,y: Project emissions from the operation of geothermal power plants due to the release of
NCG in year y [tCO2/y]
PEFF,y = PFCi,y + NCVi,y
PFCi,y: Project consumption of fossil fuel i of the applicable equipment in year y [kl, t, 1000Nm3/y]
NCVi.y: Net calorific value of fossil fuel i (diesel, kerosene, natural gas, etc.) in year y [tCO2/y]
PEGP,y = ( wsteam,CO2,y + wsteam,CH4,y x GWPCH4 ) x Msteam,y
wsteam,CO2,y: Average mass fraction of CO2 in the produced steam in year y [tCO2/t steam] wsteam,CH4,y: Average mass fraction of CH4 in the produced steam in year y [tCH4/t steam]
72
GWPCH4: Global warming potential of CH4 valid for the relevant commitment period [tCO2/tCH4]
Msteam,y: Quantity of steam produced in year y [t steam/y]
Issues concerning the above calculation formulas are summarized below and no specific solutions
have necessarily been presented even in the previous feasibility studies shown in the table below.
Consequently, a study was conducted with an eye to solving the issues shown below in this present
study.
Since some geothermal power generation facilities in operation or under construction in Kenya
were registered as CDM projects with CER credits issued (Note) information on the relevant CDM
projects was referred to as needed in the study.
(Note) Olkaria II #3 (35 MW): Registered as a CDM project with CER credits issued, Olkaria I #4-5 (140 MW) and Olkaria IV
#1-2 (140 MW): Registered as CDM projects
Table 20 Major Issues in Main JCM Feasibility Studies on Geothermal Power Generation to Date
Country Period Sponsor Trustee Major issues of MRV methodologies
Indonesia FY2010 METI Mitsubishi
Corporation
∙ Emission factor calculation method in the connected grid
∙ Gases to be monitored ∙ Renewal of existing facilities,
renewal of output, etc. FY2011 NEDO Marubeni
Corporation / Mitsubishi Corporation
FY2011 NEDO Sumitomo Corporation / Fuji Electric
FY2012 NEDO Mitsubishi Research Institute
Philippines FY2010 METI Toshiba ∙ Emission factor calculation method in the connected grid
∙ Gases to be monitored, etc. FY2012 NEDO Ernst & Young
Sustainability Colombia FY2011,
FY2012 GEC Mitsubishi
Research Institute ∙ Emission factor calculation
method in the connected grid ∙ Dealing with suppressed demand ∙ Gases to be monitored, etc.
Kenya FY2013 GEC Pricewaterhouse Coopers
∙ Emission factor calculation method in the connected grid
∙ Gases to be monitored ∙ Reflection of Japanese
technology in eligibility criteria, etc.
Great Rift Valley (Particularly Djibouti, Ethiopia, and
FY2011, FY2012
NEDO Deloitte Touche Tohmatsu / Mitsubishi Heavy Industries / Mitsubishi
∙ Emission factor calculation method in the connected grid
∙ Gases to be monitored, etc.
73
Country Period Sponsor Trustee Major issues of MRV methodologies
Rwanda) Research Institute / Marubeni Corporation
Djibouti, Rwanda
FY2013 METI Deloitte Touche Tohmatsu
－
(Source: Based on various documents)
6.2 Eligibility criteria
In the eligibility criteria in CDM methodology ACM0002 related to this project, no particular
provisions are stipulated for the facilities and technology to be introduced.
Consequently, this present study checked the technical applicability to wellhead geothermal power
generation based on ACM0002 with the following two eligibility criteria as preliminary drafts. In
addition, from the perspective of reflecting the technical strength of Japanese manufacturers, a study
was conducted to revise the eligibility criteria as necessary.
Eligibility criterion 1: The project activity is installation of a geothermal power plant at
Kenya.
Eligibility criterion 2: Net electricity generated by the project activity is delivered to Kenyan
national power grid system.
As for eligibility criterion (draft) 1, it was confirmed that ACM0002 version 15.0 requires that the
baseline emissions should be deemed as the emissions from existing power plants for capacity
addition, improvement, restoration, or replacement. Since this project pertains to new construction, it
was decided to delete “capacity addition, improvement, restoration, or replacement” from the
eligibility criterion (draft) 1 in the interests of simplicity.
As for the advantage of Japanese technology, it is difficult to reflect specific performance
conditions because a specific technology must be selected in most cases in response to the various
conditions (such as temperature and pressure) particular to individual wells in the case of geothermal
power generation. Nevertheless, common desirable features of the geothermal power generation
technologies are (a) longer life (durability) and (b) extensive proven track record. Taking into
account the points above, we decided to add “The project activity employs a geothermal power
generation unit supplied by a company which has a proven track record to supply a geothermal
power generation unit which steadily operated for at least 15 years” to the criteria.
The Financing Programme for JCM Model Projects requires the operation of facilities for a period
equivalent to the Japanese “legal durable years,” which is 15 years for power generation facilities.
Since back-pressure facilities in the scope of this present study are not qualitatively different from
facilities using other systems (such as a condensate system) in terms of, for example, greenhouse gas
74
emissions, differentiation of systems under the eligibility criteria is not necessarily appropriate.
Eligibility criterion 1: The project activity is installation of a geothermal power plant at
Kenya.
Eligibility criterion 2: Net electricity generated by the project activity is delivered to
Kenyan national power grid system.
Eligibility criterion 3: The project activity employs a geothermal power generation unit
supplied by a company which has a proven track record to supply a geothermal power
generation unit which steadily operated for at least 15 years.
(Source: Result of this present study)
6.3 Relevant GHG
It was decided that this present study would basically follow the concept of project emissions
according to ACM0002.
ACM0002 determines (2)-1 fossil fuel consumption (PEFF,y) at the site and (2)-2 non-condensable
gases (PEGP,y) contained in the steam from the power plant as the project emissions (PEy).
Non-condensable gases in the geothermal reservoir normally include mainly CO2, H2S, and
hydrocarbons, particularly methane.
Table 21 Relevant GHG
GHS sources GHG Note(1)
Reference emissions
(2)-1 Substitute power source
CO2 Included Main GHG emission source CH4 Excluded Excluded for simplicity, conservative N2O Excluded Excluded for simplicity, conservative
(1) Project emissions
(2)-1 Fossil fuel consumption at the site
CO2 Included Main GHG emission source CH4 Excluded Excluded for simplicityN2O Excluded Excluded for simplicity
(2)-2Non-condensable gases contained in the steam from the site
CO2 Included Important GHG emission source CH4 Included Main GHG emission source N2O Excluded Excluded for simplicity (Note 2)
(Source: ACM0002)
Data required to calculate GHG are as shown in the table below.
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Table 22 Data required to calculate GHG
Item Items required to
calculate emissions (Draft)
Unit Monitoring method (MRV (Draft))
(1) Reference emissions
[M] [M] Quantity of net electricity generation
MWh/y - Pertaining to the income from electricity sales, the data of which are generally available
[M] Electricity CO2 emission factor
tCO2/MWh - (Combined margin)
(2) Project emissions
(2)-1 Fossil fuel consumption at the project site
[M] Fossil fuel consumption
t/y - It needs to be studied whether this item can be directly measured.
[P] [D] NCV (Fossil fuel)
GJ/t - It needs to be studied whether IPCC data, etc. are applicable.
[P] [D] Fossil fuel CO2 emission factor
tCO2/GJ - It needs to be studied whether IPCC data, etc. are applicable.
(2)-2 Non-condensable gases contained in the steam from the site
Concentration of CO2 contained in steam
- Direct measurement is presumed.
Concentration of CH4 contained in steam
tCH4/t - Direct measurement is presumed.
Amount of steam t/y - Direct measurement is presumed
Global warming potential (GWP) of CH4
tCO2/tCH4 - It needs to be studied whether IPCC data, etc. are applicable.
Note: [M] stands for items to be monitored; and [D] stands items for which default values may be used.
(Source: Result of this present study)
6.4 Estimation of expected greenhouse gas emissions reduction
6.4.1 Reference emissions
Reference emissions shall basically be CHG emissions from a power plant connected to the grid,
because electricity is to be fed into the grid in all of the scenarios assumed by potential users of the
facilities visited in the field study.
A specific method to calculate reference emissions was studied with reference to previous
JCM-related studies in addition to, for example, CDM methodologies.
For example, the “Tool to calculate the emission factor for an electricity system (ver.4), Option IIb”
for CDM allows the inclusion of off-grid power plants as the grid emission factor under certain
conditions. Particularly in the case of the LDC, it is approved to deem the quantity of off-grid
electricity generation as 10% of the quantity of grid electricity generation to determine the emission
factor as 0.8 tCO2/MWh for each margin.
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In addition, according to the previous JCM-related studies,1 hydropower accounted for most of
the grid power sources, and therefore, where it was difficult to evaluate the reduction effect by
geothermal power generation, some host countries proposed limiting the baseline evaluation to
power sources contributing to stabilization of the power supply (such as fossil fuel, nuclear power,
and geothermal power) based on the fact that hydropower accounted for 50% or more of the supply
power capacity (see Candidate (2) in the table below). This is because the development of power
sources that are not affected by the weather is considered to be important in such countries from the
perspective of sustainability.
Table 23 Concepts for setting the baseline scenario
Candidate Baseline Breakdown of emissions References Merits/demerits (1) Grid power plant - Emissions from all power
sources connected to the grid
ACM0002 -Disadvantageous for the country where the grid power source is mainly hydropower and the electrification rate is low.
(2) Grid and off-grid power plants (Using the default value) * Conditions for a host country: LDC, etc.
- Emissions from all power sources connected to the grid - Emissions from off-grid power plants (10% of each margin, Emission factor: 0.8 t-CO2/MWh)
Tool to calculate the emission factor for an electricity system (ver.4), Option IIb
- Kenya is out of the scope of application. - Calculation is easy. - Potentially an excessively conservative approach
(3) Grid and off-grid power plants (using actual data)
- Emissions from all power sources connected to the grid - Emissions from off-grid power plants (actual data)
Ditto, Option IIa - It is difficult to obtain data for off-grid power plants.
(4) Stable (base load) power source connected to the grid. (“minimum service level” under “suppressed demand”) * Conditions for a host country: Country where hydropower accounts for 50% or more of the supply power capacity
- Emissions from stable power sources connected to the grid (Applicable sources for Ethiopia are thermal and geothermal power; however, neither of them are in operation now.)
Guidelines on the consideration of suppressed demand in CDM methodologies
- Since hydropower accounts for 48% of the grid power sources in Kenya, whether the criteria can be met is uncertain.
(Source: Reference documents and result of this present study)
1 NEDO (2012) “Global Warming Mitigation Technology Promotion Project: Project Development Study for Geothermal Generation in the Great Rift Valley,” etc.
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In the case of Kenya, the reference emissions were determined to be the emissions from grid power
plants mainly because Kenya is no longer an LCD as specified by the CDM tool, and hydropower
accounts for 48%, which is slightly lower than the stipulated 50% of grid power sources. To be
specific, it was decided to calculate the emission factor without off-grid power plants taken into
consideration using the “Tool to calculate the emission factor for an electricity system: Initial version
released in October 2007” and subsequently multiply it by the quantity of electricity generation fed
into the grid as a result of the project’s activities to calculate the emission factor of the grid.
For the emission factor, it was decided to use the combined margin (CM) value calculated based on
the operating margin (OM) value and the build margin (BM) value.
To estimate the emission reductions in this present study, based on the investigation in the
preceding study2 and with reference to actual cases in the previous JCM-related studies, particularly
for items with a calculation period on an ex-post basis, conservative values were set based on the
values shown in the PDD and monitoring report of the latest geothermal power generation CDM
project in Kenya.
The above study calculated the assumed emission factors according to two scenarios—the power
development plan (5000+ MW plan) in Kenya, and the tool to calculate CDM emission factor—and
proposed to use the scenario with a lower emission factor from a conservative perspective. The
present study supported this method and adopted 0.4488 (tCO2/MWh) as the BM default value.
Table 24 Monitoring items to calculate the reference emissions
Monitoring item Calculation
period Basis of estimate of emission reductions
Quantity of electricity generation fed into the grid
ex-post PDD and monitoring report of the latest geothermal power generation CDM project in Kenya
Combined margin (CM)
― ―
Operating margin (OM) ex-post PDD and monitoring report of the latest geothermal power generation CDM project in Kenya
Build margin (BM) ex-ante Default value
(Source: GEC (2014a) Feasibility Study for JCM project in Fiscal Year 2013 - Geothermal Generation)
The CM was calculated using the equation CM = 0.5 * BM + 0.5 * OM in the same manner as for
the highest OM 0.655 (tCO2/MWh: Corner Baridi Wind Farm) among the CDM geothermal power
generation projects whose registration was requested by 2014.
Accordingly, 0.552 (tCO2/MWh) was used for the CM value. 2 PricewaterhouseCoopers Co., Ltd. “FY2013 Joint Crediting Mechanism (JMC) Feasibility Study Report ‘Expansion of Geothermal Project’ (Kenya)”
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6.4.2 Project emissions
As project emissions, it was determined to count the following in the same manner as
ACM0002.
- CO2 emissions caused by fossil fuel combustion for the geothermal project using fossil fuels for
power generation
- CO2 and CH4 emissions derived from NCG contained in steam used for geothermal power
generation
Formulas are as follows:
PEy = PEFF,y + PEGP,y
PEy: Project emissions in year y [tCO2/y]
PEFF,y: Project emissions from fossil fuel consumption in year y [tCO2/y]
PEGP,y: Project emissions from the operation of geothermal power plants due to the release of
NCGs in year y [tCO2/y]
PEGP,y = Ms.y * (Wmain.CO2 + Wmain.CH4 × GWPCH4)
Ms.y: Steam generation quantity per year (t/y)
Wmain.CO2: Mass fraction of CO2 contained in steam (tCO2/t）
Wmain.CH4: Mass fraction of methane contained in steam (tCH4/t)
GWPCH4: Global warming potential of methane (Default = 21)
To estimate the emission reductions in this present study, with reference to actual cases in the
previous JCM-related studies, particularly for items with a calculation period on an ex-post basis,
conservative values were set based on the values shown in the PDD and monitoring report of the
latest geothermal power generation CDM project in Kenya.
Table 25 Monitoring item to calculate the project emissions
Monitoring item Calculation period Basis of estimate of emission reductions Fossil fuel combusted for geothermal power generation
ex-post PDD and monitoring report of the latest geothermal power generation CDM project in Kenya
Non-condensable gases (NCG)
ex-post PDD and monitoring report of the latest geothermal power generation CDM project in Kenya
(Source: Elaborated based on GEC (2014a) , Feasibility Study for JCM project in Fiscal Year 2013 - Geothermal Generation)
79
During the site visit for this present study, the potential user of the Japanese well-head generation
unit confirmed that they can monitor the fossil fuel used in the project and the non-condensable
gases without any difficulty.
6.4.3 Results of trial estimation of expected greenhouse gas emissions reduction
The GHG emissions reduction was estimated as the difference between reference emissions and
project emissions. The results are outlined in the table below.
Table 26 Trial estimation of expected emission reductions
Indicator Explanation Value Unit Basis
RGPJ,y Assumed annual
amount of power
supplied to the
grid
72,532 MW/y Conceptual design in this
present study
RFgrid,CM,y Grid emission
factor (CM)
0.552 tCO2/MWh Refer the previous section in
this present study
Rey Annual reference
emissions
40,037 tCO2/y RGPJ,y * RFgrid,CM,y
Ms,y Annual steam
consumption
610,081 t/y Conceptual design in this
present study
Wmain.CO2 CO2 concentration 0.004245 tCO2/steam Monitoring Report of CDM
Olkaria II Geothermal
Expansion Project
Wmain.CH4 CH4 concentration 0.000003 tCH4/steam
GWPCH4 GWP of CH4 21 tCO2/tCH4 IPCC
PEFF,y Annual emission
by fossil fuel
0 Conceptual design in this
present study
PEy Annual emission
by the project
2,628 tCO2/y Ms.y * (Wmain.CO2 +
Wmain.CH4*GWPCH4)
+PEFF,y
ERy Annual amount of
CO2 reduction
37,409 tCO2/y c – i
（Source: Result of this present study）
It is said that geothermal power generation potential in Kenya is more than 10,000 MW. If it is
assumed that the power generation unit proposed in this present study is applied for all the potential
in Kenya, the expected emission reduction could reach approximately 37,409,000 [tCO2/y].
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7 Policy recommendation to promote introduction of small-scale geothermal power generation facilities and formation of JCM projects
7.1 Risks and barriers to the introduction of small-scale geothermal power
generation facilities
This present study identified and analysed the main issues in the Kenya geothermal power
generation project through research of the literature and field study, particularly from the perspective
of supplying small-scale geothermal power generation facilities from Japan, as follows.
Subsequently, a study was conducted on the policy recommendations so that both Japan and Kenya
could profit on a win-win basis as part of measures to solve such issues.
7.1.1 Political risk
7.1.1.1 Exchange risk
Generally in the geothermal power generation business, there is a risk to the amount of income
from the sale of electricity associated with exchange rate fluctuations, particularly from the
standpoint of IPPs. Exchange rate risk related to income from the sale of electricity is not something
faced by suppliers of facilities, but it has a significant impact on the evaluation of business
profitability of facilities. As a measure to reduce the risk on the IPP side, even if the amount of FIT is
denominated in USD, in some countries actual payment is made in the local currency equivalent to
the USD amount.
In the case of Kenya, 8.8 cents/kWh is set as the FIT price for geothermal power generation, and
this is paid to IPPs with an output of 35 MW or more in USD, which is a consolidated price
including steam and power transmission costs. During the initial 12 years, escalation is applied to
20% of the FIT price corresponding to the CPI and subsequently to 15% of the FIT price in line with
the CPI. It is reported that the payment is not made in the local currency (Kenyan shillings) but in
USD.
Consequently, the exchange rate risk possibly faced by IPP is relatively insignificant in Kenya.
7.1.1.2 Legal process risk
Included in permits and licenses pertaining to geothermal power generation projects in Kenya are
development rights, environmental impact assessment and licenses to use land and steam, and
application for electricity tariffs, which are faced not by the supplier of facilities but by power
producers such as IPPs. Construction work in national parks in Kenya must comply with the rules of
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Kenya Wildlife Services (KES).
7.1.1.3 Procurement In Kenya, the Public Procurement and Disposal Act, 2005 applies to procurement by the
government and state corporations within the meaning of the State Corporations Act.
The purposes of the Act are (a) to maximise economy and efficiency; (b) to promote competition
and ensure that competitors are treated fairly; (c) to promote the integrity and fairness of those
procedures; (d) to increase transparency and accountability in those procedures; and (e) to increase
public confidence in those procedures. The Act is basically applicable where government agencies
and state corporations in Kenya procure geothermal power generation facilities.
The Act is undoubtedly expected to have favorable effects, such as prevention of corruption,
although it may eventually sacrifice flexibility in procurement procedures with, for example, the use
of open tendering, which is required as a general rule.
Where geothermal power generation facilities are procured through open tendering, the equipment
to be contracted cannot be determined until the bidding process completes. This means that the
consultation among the related parties for application of JCM project registration from the early
period on the assumption of the introduction of Japanese equipment is quite difficult. Moreover, in
the open tendering, more emphasis is likely to be placed on price as a criterion for selecting facilities,
which is more advantageous for the inexpensive products of emerging countries, with the high
quality boasted by Japanese companies being less likely to be adequately evaluated.
7.1.2 Natural disaster risk
Drought and flooding are typical natural disasters in Kenya. Needless to say, however, the natural
environment varies for each project site and therefore the natural disaster risk must be evaluated for
each project site.
7.1.3 Commercial risk
7.1.3.1 Resource supply risk The fundamental resources for geothermal power generation are steam. Generally speaking,
success or failure in a geothermal power generation project depends on whether sufficient steam can
be obtained from excavated wells; however, it is only after excavation that the question of whether
steam can actually be discharged can be finally answered. Since excavation requires substantial costs,
geothermal power generation has a significant resource risk at the development stage unlike other
power generation projects.
However, since existing wells from which not enough steam for large geothermal power generation
has been discharged even though they were excavated (so-called “missed wells”) are assumed to be
used for small-scale geothermal power generation facilities covered by this present study, the raw
material supply risk can be mitigated relatively easily.
7.1.3.2 Sponsor risk Generally, the sponsor’s credit capability is very important for obtaining financing. In case of
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Kenya, even though facilities are sold to state corporations, they don’t have necessarily enough
financing capacities to acquire the Japanese facilities. When facilities are sold to new local IPPs, it is
undoubtedly required to perform a through credit check.
7.1.3.3 Technology risk
(i) Power generation system
The technology for a Japanese small-scale power generation facilities is already established and the
risk in the technology itself is extremely low.
(ii) Non-condensable gases
Non-condensable gases are contained in the geothermal steam used for power generation, which
can be a factor that decreases power generation efficiency. They can also increase the cost of power
generation because components dissolved in the hot water may be deposited inside the piping, wells,
and other areas, causing clogging. Accordingly, to proceed with geothermal development, it is
desirable to conduct an adequate study on not only physical factors, such as the temperature and
pressure of the reservoir, but also the chemical properties of the fluids produced, through a discharge
test of the wells surveyed for geothermal power.
In the main geothermal zones, such as Olkaria and Menengai, the ratio of the volume of
non-condensable gases to that of steam has so far been observed as being relatively low.
7.1.3.4 Completion risk Where geothermal power generation facilities are supplied from Japan, it is necessary to carefully
proceed with the construction work through a reliable EPC contractor. According to the field study
results, local EPC contractors capable of undertaking the construction work have already been
fostered on the facilities purchaser side.
7.1.3.5 Operation risk Outsourcing the operation to a local company is a workable option. In particular, the electric power
corporation KenGen has many years of experience in geothermal power plant operation.
7.1.3.6 Off-take risk
If geothermal power is used as a grid power source, the off-taker is Kenya Power. In the case of
geothermal power generation in Kenya, the expectation would be to apply for the Feed-in Tariff
(FIT) Scheme. Generally, the parties concerned in PPA negotiations are basically a power producer
and an off-taker, such as KPLC, and the ERC receives the negotiation results and evaluates them
from the perspective of a regulatory authority.
The small wellhead power generation facilities covered this time are characterized by the effective
utilization of wells sequentially excavated at the power plant construction stage Since this
contributes to the economic development of the country from the perspective of the effective
83
utilization of resources and improving the demand and supply balance of electricity, it is desirable
that small wellhead power generation is appropriately handled in the FIT. However, the current FIT
covers geothermal power generation facilities of 35 to 70 MW (see the tables below) and there is
concern that small-scale production of electricity achievable by wellhead power generation facilities
may not be included in the scope of application of the FIT.
Table 27 FiT Values for Small Renewable Projects (Up to 10 MW of Installed Capacity) Connected to
the Grid
Power source Installed capacity (MW)
Standard FIT (USD/kWh)
Percentage Escalable portion of the Tariff (%
Min. capacity (MW)
Max. capacity (MW)
Wind 0.5-10 0.11 12 0.5 10Hydro 0.5 0.105 8 0.5 10 10 0.0825 Biomass 0.5-10 0.10 15 0.5 10Biogas 0.2-10 0.10 15 0.2 10Solar (Grid) 0.5-10 0.12 8 0.5 10Solar (Off-grid) 0.5-10 0.20 8 0.5 1
(Source: Feed-in-Tariffs policy for wind, biomass, small hydros, geothermal, biogas and solar, 2nd revision, December, 2012,
Appendix 1)
Note by author: No information on geothermal power generation is available.
Table 28 FiT Values for Renewable Projects above 10 MW of Installed Capacity
Power source
Installed capacity (MW)
Standard FIT
(USD/kWh)
Percentage Escalable
portion of the Tariff (%
Min. capacity (MW)
Max. capacity (MW)
Max. Cumulative
capacity (MW)
Wind 10.1-50 0.11 12 10.1 50 500
Geothermal 35-70 0.088 20 for first 12
years and 15
after
35 70 500
Hydro 10.1-20 0.0825 8 10.1 20 200
Biomass 10.1-40 0.10 15 10.1 40 200
Solar (Grid) 10.1-40 0.12 12 10.1 40 100
(Source: Feed-in-Tariffs policy for wind, biomass, small hydros, geothermal, biogas and solar, 2nd revision, December, 2012,
Appendix 2)
7.1.3.7 Related infrastructure risk
Geothermal resources are generally discharged in a hinterland, making it difficult to secure a
transportation route for materials and equipment for construction work. Infrastructure risk must be
84
assessed for each site; however, for geothermal fields A and B, which were visited in this present
study, there were no major problems in the transportation route because excavation is already in
progress.
However, where wells are being newly used for power generation, securing a means of power
transmission undoubtedly becomes an issue. In the field study, it was actually confirmed that there
were not a few wells that had been excavated but had been left unused because the power
transmission line for the power generated at the wells was located in a remote area and had not been
developed. While small power generation facilities are effective for sequentially utilizing such wells,
it is necessary to extend a power grid to a local substation and increase the capacity of the substation
when needed in order to utilize the electricity as a grid power source.
7.2 Policy recommendation to mitigate or remove the risks and barriers
Concerning the various risks and barriers examined in the previous section, the requirement of open
tendering by the state corporation as principal (7.1.1.4) , the limited capacity of the sponsor for
acquisition of financing (7.1.3.2) and the minimum installed capacity of geothermal power plan
applied to FIT (7.1..3.6) are identified. The policies to reduce or eliminate those risks are analised
and proposed to the Kenyan authorities during the field survey.
Figure 34 Principal risks related to diffusion of the well-head geothermal generation unit
(Source: Elaborated by MHIR based on the result of this present study)
Potential participants in the JCM
Project implementer
Local government
Sponsor
EPC/Manufacturer (JP)
Joint committee
Raw material supplier
Off‐takerLender
Operator
Third party
Limitation on the FIT
Open tenderingFinance
acquisition
85
7.2.1 Avoidance of public tender under the public procurement law
In case that facilities are sold to, for example, a state corporation, open tendering is a common
practice. Where geothermal power generation facilities are procured through open tendering, the
equipment to be contracted cannot be determined until the bidding process completes. This means
that the consultation among the related parties for application of JCM project registration from the
early period on the assumption of the introduction of high-quality equipment is quite difficult.
In this respect, the Kenyan authorities including the state corporation commented that for those
equipments procured with the finance of development assistance from a foreign government the
procurement guideline of that government is applied and in some cases, the direct contracting could
be permitted.
7.2.2 Recognition of financing menu
The subsidies of the Japanese government such as the one of NEDO and of the Ministry of
Environment for JCM projects could be expected to be useful for the entities without enough
financing capacity. In this present study, the registration of the project as the JCM project and the
application for the JCM subsidy are recommended to the potential buyers of the Japanese well-head
geothermal power generation facility.
7.2.3 Reduction of minimum installed capacity for geothermal power generation
applied for FIT
Currently the requirement of minimum installed capacity for geothermal power generation
applicable to FIT is 35 MW which is significantly higher than that for other renewable energy power
generation.. Power generation using small-scale geothermal power generation facilities, normally
with a capacity of about 5 to 10 MW, is considered to be out of the scope of the FIT, which may
potentially be an obstacle to wider use of small-scale geothermal power generation. In fact, “power
purchase agreements for mobile well heads”the existing power purchase agreements concerning
small power generation facilitieswere concluded by KenGen; the FIT was not applied, but
negotiations were undertaken to conclude the above agreements.
Based on the concerns above, a proposal was made to lower the limit of installed capacity for
geothermal power generation applicable to FIT based on the hearings to the Kenyan governmental
agencies during the field study. Consequently, a wide range of responses were received from them
as follows:
i) Since 8.8 cents/kWh is the ceiling price even in the FIT, a lower price, if proposed by a
tenderer, can be applied.
86
ii) A lower limit of 35 MW is not specified and the price is 8.8 cents/kWh for all projects,
including small ones.
iii) A price of 8.8 cents/kWh in the FIT is applied to power generation of 35 MW or more.
However, the FIT applies to even small-scale geothermal power generation if the total
output of all units reaches 35 MW, even if the output of a single unit is 5 MW. While the
necessity of the FIT for small-scale geothermal power generation is understandable, it is
also important to promote economies of scale. The FIT price is reviewed every other year.
iv) The FIT applies up to 70 MW with no lower limit. A lower limit of 35 MW, if specified in
an official document, is an error, which will be reported to the Director for correction.
Of the above, paragraph iv) is the most reliable because this was indicated by the geothermal
department of the Ministry of Energy and Petroleum. As mentioned above, the person in charge
responded to us, saying that this matter will be reported to the Director for correction. We will
continue to follow up the progress of the correction.
7.3 Visit of the host country’s administration officials to related facilities in
Japan or holding seminars for them
The visit of the host country’s administration officials to the related facilities in Japan and holding
seminars for the host country’s administration officials were conducted as shown in the table below.
Table 29 Summary of the visit of the host country’s administration officials to related facilities in Japan
or holding seminars for them under this present study
Date Description Venue
Sep. 2014 Factory visits were made to Japanese manufacturers
when the Kenyan officials related to geothermal
development visited Japan
Around Tokyo, Japan
Feb. 2015 Presentation of the proposal for the introduction of
geothermal power generation unit and for the
application of JCM project registration
Nairobi, Kenya
************************
Ministry of Economy, Trade and Industry, Japan
Joint Credit Mechanism Feasibility Study on Introduction of Small-scale Geothermal Power Generation Unit to the Republic of Kenya
Report
March 2015
Environment & Energy Division II, Mizuho Information & Research Institute, Inc.
2-3 Kanda-nishiki-cho, Chiyoda-ku, Tokyo 101-8443, Japan Tel: +81-3-5281-5457 Fax: +81-3-5281-5466
URL: www.mizuho-ir.co.jp/english/
