RENEWABLE ENERGY OPPORTUNITIES IN A SNAPSHOT

Prepared By for CONTENTS

The market ...... 3

The report ...... 3

Country overview ...... 4

The energy market ...... 5

The market ...... 6

Feed-in tariff ...... 8

Notable Renewable Projects and Success Stories...... 9

Key drivers of renewable energy development ...... 10

Key challenges ...... 11

About us ...... 12

Contact the Author ...... 12

Appendix I - List of completed and pending renewable energy projects ... 13

Cover image: warrenski/Flickr page 2 THE MARKET

Kenya’s renewable energy potential is unquestionable. Excellent wind, solar and geothermal resources alongside a government and business community committed to continuing industrial growth mean Kenya possesses the necessary attributes to pioneer large scale renewables in Sub-Saharan Africa.

Without the resources of many fellow African countries, and with renewables contributing significantly to existing installed capacity, Kenya’s forthcoming electrification is one in which renewables look set to drive.

Supporting electricity demand and proven renewable resources are a stable, pro-renewable and ambitious regulatory regime, as well as an investment community willing to back Kenyan renewable energy projects. Factors highlighted by an attractive feed-in-tariff of 20 years for renewables as well as the 3.6 Billion US Dollars invested into Kenya’s clean energy space from 2009-14. 3.6 BILLION US $ INVESTED INTO KENYA’S CLEAN ENERGY SPACE FROM 2009-14. THE REPORT

Ahead of the inaugural Kenya International Renewable Energy Congress to be held in Nairobi, Green Power Global have prepared this report to give a snapshot into the exciting opportunities provided by Kenya’s renewable revolution.

page 3 COUNTRY OVERVIEW

Estimated at $66 Billion USD Kenya has the largest GDP in East and Central Africa and the 7th biggest on the African continent, whilst its capital city Nairobi is widely recognised as the commercial hub of East Africa. Kenya has a population of 48 million people, the majority of which come from Bantu sub-groups and for whom agriculture is the major employer. Recent years have however seen a growth in the Kenyan service sector and a marked increase in the role of manufacturing, telecommunication and finance in driving GDP growth which sits at a steady 5-7% per year.

48 MILLION PEOPLE

NAIROBI CAPITAL US$ 66 BILLION GDP The launched on 10th June 2008 by then President Mwai Kibaki is the country’s development programme covering the period 2008-2030. The Vision’s goal is to realise Kenya’s objective to become a “newly industrialising, middle income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment”. Energy is one of 8 key sectors involved in the vision and critical to its fulfilment.

page 4 THE ENERGY MARKET

Kenya’s current installed electricity capacity is estimated at 2.4 GW, 1.5 GW of which is grid connected and 500mw of which has come on line since mid-2014. Approximately 75% of current installed capacity comes from renewable resources with hydro and dominant. The Least-Cost Power Development Plan 2013-33 has seen the setting of an ambitious target to raise installed electricity capacity to 22.7GW by 2033. The Ministry of Energy and controls energy policy, whilst approximately 70% of electricity is generated by quasi state company KenGen which is 70% state owned. Independent Power Producers in Kenya account for 28% of generating capacity. Since 1997 there have been 8 key players in Kenya’s electricity market:

33 The Ministry of Energy and Petroleum (electricity policy) 33 KenGen (Kenya Electricity Generating Company) (Publicly listed 70% state owned power producer) 33 Kenya Power and Lighting Company (KPLC) (owns and operates the transmission and distribution systems – 50.1% state owned) 33 Electricity Regulatory Commission (ERC) (deals with permits, licensing and recommendations on regulation) 33 Kenya Electricity Transmission Company (KETRACO) (constructs and operates the transmission infrastructure) 33 Geothermal Development Corporation (GDC) (SPV formed by the government to explore and realise geothermal power potential) 33 Rural Electrification Authority (REA)(concerned with electrifying Kenya’s off-grid and remote communities) 33 Independent Power Producers

Recent focus in the electricity market has centred on connecting more of Kenya’s population to the grid, of which it is estimated 50% currently have access. Notably KETRACO are currently constructing over 4,000 KM of high voltage transmission lines. Costing $1.3 Billion USD over the next 3-4 years the project will deliver electricity access to a sizeable number of Kenyan’s for whom affordable, readily accessible electricity was once a dream. 27 lines are involved in the electricity scale-up project, whilst it is also said that initial moves to develop infrastructure enabling the importing and exporting electricity at significant scale are being made.

Most indicative of a clear and active campaign to improve grid infrastructure and access to electricity, as well as growing electricity demand and effective government support, has been KPLC’s 11.24% rise in pre-tax profits for year ending June 2015. KPLC cited increased sales as a result of improved distribution efficiency and tariff reviews starting in 2013 as the key factor in its profit rise. page 5 THE RENEWABLE ENERGY MARKET

Ranked second behind only South Africa for clean energy investment in Africa and sixth globally Kenya’s renewable energy potential is vast. Already the world’s 8th largest producer of geothermal energy, Kenya too possesses ideal conditions to exploit wind and solar resources for . Vast resources and available capital for project development are supported by a pro-renewable political climate where renewable energy policy is both favourable and stable. With a 20 year feed-in-tariff for renewable resources established, as well as a zero rating of export duty and a removal of VAT on renewable equipment, the Kenyan government are actively facilitating renewable energy growth at utility scale, C&I scale and as an off-grid solution.

Geothermal power has long been synonymous with Kenya’s renewable energy sector and this shows no sign of changing any time soon. The Geothermal Development Company (GDC) is a government founded SPV designed to fast-track geothermal power development. With $2.68 Billion USD of funding over 10 years the GDC will remain critical to Kenya’s aims to realise its geothermal potential. These aims are lofty too - the National Energy Policy estimates Kenya’s geothermal potential at 10GW and is targeting 5.5GW of this to be on-line by 2030. Plagued with corruption allegations in recent years it is now hoped that the GDC is turning itself around to become a positive force in Kenya’s geothermal development.

Kenya is one of the global rising stars for development. Home to Africa’s largest wind power project (the *Source: UNEP: Kenya Country Report 310mw Lake Turkana Wind Farm) page 6 as well as a further 900mw in development or online, Kenya is striving to ensure its good wind resources play a significant role in its energy growth. Though recent projects have faced delays and barriers to development in the shape of resistant local communities (e.g. the 60mw Kinangop Wind Farm), the National Energy Policy is expecting 3GW of wind to be realised by 2030 and 1GW by 2020.

Kenya’s solar industry is in many respects more in its infancy than that of wind and geothermal, yet is also arguably that with greatest potential. In particular with regards to its ability to deliver cost-effective electricity to those off the grid as well as supplying the grid. Solar mini-grids, home solar kits and solar – diesel hybrid systems are all being actively promoted as electricity solutions for Kenya’s more remote communities. Meanwhile the first solar system with a PPA to supply electricity to the grid under the current FiT was realised in 2015 in the shape of the 600kW project at Strathmore Business School in Nairobi.

8th LARGEST PRODUCER OF GEOTHERMAL ENERGY

IDEAL CONDITIONS TO EXPLOIT WIND AND SOLAR RESOURCES

page 7 FEED IN TARIFF

The current FiT for renewable energy can be viewed below. Whilst there have been some suggestions that the rate does not do enough to make utility scale solar commercially viable it does signify an active and consistent approach by regulators to promote renewable energy.

FIT FOR PROJECTS LESS THAN 10MW INSTALLED STANDARD PERCENTAGE MAX DURATION FIT ESCALABLE CAPACITY CAPACITY PORTION OF (MW) (USD$ / KW/H) THE TARIFF (MW)

WIND 0.5 - 10 0.11 12% 10

0.5 0.105 HYDRO 8% 10 10 0.0825 20 BIOMASS 0.5 - 10 0.10 15% 10 Years

BIOGAS 0.2 - 10 0.10 15% 10

SOLAR (GRID) 0.5 - 10 0.12 8% 10

SOLAR (OFF-GRID) 0.5 - 10 0.20 8% 1

FIT FOR PROJECTS MORE THAN 10MW INSTALLED STANDARD PERCENTAGE MAX DURATION FIT ESCALABLE CUMULATIVE CAPACITY PORTION OF CAPACITY (MW) (USD$ / KW/H) THE TARIFF (MW)

WIND 10.1 - 50 0.11 12% 500

20% for first 12 GEOTHERMAL 35 - 70 0.088 500 20 years and 15% after

HYDROPOWER Years 10.1 - 20 0.0825 8% 200

BIOMASS 10.1 - 40 0.10 15% 200

SOLAR (GRID) 10.1 - 40 0.12 12% 100

page 8 NOTABLE RENEWABLE PROJECTS AND SUCCESS STORIES

SOLAR The Strathmore University 600kW solar PV project marks a huge stepping stone for progress in Kenya’s solar industry. Whilst off-grid and C&I solar have for some time been accepted as cost-effective energy solutions there had been doubt about the commercial viability of grid- connected solar. In securing a PPA in 2015 under the current FiT of $0.12 USD per kilowatt hour Strathmore University are selling 250kW of their produced electricity to the grid. Comprised of 30 inverters, 2,400 panels and 1,200 optimizers the project serves as a beacon of progress for Kenyan solar.

GEOTHERMAL The 140MW Akiira Geothermal Limited Project in Naivasha near Nairobi is expected to be fully operational by the end of 2017. Once it is finished Akiira will be the first private sector greenfield geothermal development in Sub- Saharan Africa, marking a significant breakthrough for Kenya’s geothermal sector. Technical expertise is brought to Akiira by Ram Energy who also have a stake in the project, whilst the two main financial backers are Centum Investments Company and Frontier Investments. Pursued in two 70MW phases geothermal exploration risk for the project has been provided by Munich RE.

WIND The 310MW Lake Turkana Wind Power project is the largest wind project in Africa and the jewel in the crown of Kenya’s evolving renewable energy sector. The project is being developed by a consortium of shareholders including KP&P BV Africa, Aldwych International Limited, Vestas Wind Systems, Norfund, IFU and Finnfund. Debt financing of the project is being provided by the African Development Bank alongside Nedbank Capital and Standard Bank. Once completed the project will use 850kW Vestas turbines.

page 9 KEY DRIVERS OF RENEWABLE

zz Excellent solar, wind and geothermal resources zz 5.5GW of geothermal targeted by 2030 zz 3GW of wind targeted by 2030 zz 500MW of solar targeted by 2030 zz Ranked second for clean energy investment in Africa behind only South Africa zz Steady GDP growth of 5-7% per year, industrialisation and increased electricity demand zz Kenya 2030 Vision: Providing a high quality of life to all its citizens by 2030 in a clean and secure environment zz Active commitment to connect more of the population to the grid zz 20 year Feed-in-Tariff for wind, solar, geothermal, hydro, biogas and biomass zz Geothermal Development Company fast-tracking geothermal development zz Zero rated import duty and removal of VAT from renewable energy equipment zz Clear commitment by government and regulators to renewable energy zz Stable and favourable renewable energy policy zz Over 4000 km of high voltage transmission infrastructure to be built in the next 3-4 years at a cost of $1.3 billion USD zz 22.7GW of installed capacity targeted by 2030, up from 2.4GW today zz Existing familiarity with and acceptance of renewable energy – RE mix estimated at 75% of current capacity (including large hydro)

page 10 KEY CHALLENGES

Following over 40 in-depth interviews with the domestic and international renewable energy community we have identified this initial list of challenges and areas of interest: zz Finance – getting the money for projects and harnessing capital from a range of sources zz Electricity demand – for more growth and a larger grid we need not just more people connected to it but more demand zz The high risk nature of geothermal exploration and the role of the GDC zz A good pipeline and healthy targets for wind power, but a backdrop of land access and local community issues zz The great off-grid potential for solar and potential for utility scale grid connected solar to take off zz Currently only 1 company can sell power to the consumer - KPLC zz Finding and working with local partners to realise bankable projects zz Navigating government and regulatory infrastructure zz Physical infrastructure and its ability to facilitate large scale renewable energy development zz Making the FiT work for commercially viable projects zz Commercial and industrial power users and their appetite for distributed renewable energy projects zz The challenges in identifying 7 day power users and finding solutions for those with variable demand zz Delivering clean and affordable electricity to off-grid communities zz Residential scale solar power zz Getting the first wave of utility scale projects on-line zz Intermittency in electricity supply zz Enhancing and leveraging from local expertise (both technical and financial) zz Lack of grid connection in remote areas

page 11 ABOUT US

Green Power is the market leader in renewable energy conferences. Our portfolio of events includes market leading large scale conferences.

Since 2003, over 22,000 delegates from over 152 countries have attended over 200 conferences, exhibitions, workshops and training courses providing strategic business intelligence to the renewable energy and sustainability industries. Our expertise lies in producing high quality, interactive conferences that provide ample networking opportunities for delegates, sponsors and partners.

Global reach: We have successfully run events in 35 countries to date including the UK, USA, Singapore, Hong Kong, Germany, France, Spain, Italy, Portugal, Denmark, Austria, Switzerland, Belgium, The Netherlands, South Africa, India, Brazil, Mexico, Turkey, Mozambique, Ghana, Tanzania, Algeria, Morocco, Czech Republic, Argentina, Thailand, Hungary, Indonesia, Malaysia, Romania, United Arab Emirates.

CONTACT THE AUTHOR: This report was produced in April 2016 by

Robert Wilson Director – Emerging Markets Direct Dial: +44 (0)20 3384 6210 Email: [email protected] Web: www.greenpowerglobal.com

page 12 APPENDIX I LIST OF MAJOR COMPLETED AND PENDING RENEWABLE ENERGY PROJECTS

REGION PROJECT NAME SIZE DEVELOPER INDUSTRY STATUS / STATE / SPV MW / INVESTOR / LOCATION

KP&P Africa B.V. and Aldwych Internation- al co-developers, 5 more shareholders Construction - Vestas, KLP Norfund Lake Turkana Wind Lake Turkana 310 commenced Investments, Danish WIND Power Project (NW) October 2014 Investment Fund for Developing Coun- tries, Finnish Fund for Industrial Cooperation, Sandpipper Limited

Frozen - local Nyandarua County Africa Infrastructure 60 WIND opposition Central Kenya Fund II

WIND Ngong Hills Wind Farm 5.1 Operating

WIND Isiolo Wind 150

WIND Marsabit Wind 50

WIND Oisuwa 33

Centum Investments, Early Ram Energy, Akiira One Geothermal 140 mw GEOTHERMAL construction Rift Valley Marine Power, Company Limited (potential) /drilling Frontier Investment Management

Kipeto 70km sw of Wind e WIND 102 Nairobi

Nithi Project (Lubilia Late stage MINI HYDRO 5.4 Kawembe) development

Wind for Prosperity Kenya Off - Grid WIND Hybrid Power Project

Olkaria III Nakuru Operational Ormat GEOTHERMAL 110 County

page 13 Nakuru Olkaria I Operational Kengen GEOTHERMAL 185 County

Olkaria II Operational Nakuru Kengen GEOTHERMAL 105 County

Nakuru Olkaria IV Operational Kengen GEOTHERMAL 140 County

Nakuru Olkaria V Operational Kengen GEOTHERMAL 140 County

Garden SolarCentury 858kwp Operational Nairobi SOLAR City /Garden City

Pre-finance Greenmilenia Isiolo 40 Isiolo SOLAR development Energy

Changoi, Bornet Solar Century and Williamson Tea 1 Operational SOLAR Country Williamson Tea

Mini Grids in Powerhive and 1 In development Kisii and Nyamira SOLAR Western Kenya Enel Green Power

CJIC (China Jiangxi Garissa Solar Park 50 In development Garissa Group for International SOLAR Economic and Techni- cal Cooperation Ltd)

Early stage Longonot 140 Rift Valley Agil GEOTHERMAL development

SOLAR 1 Development Rumuruti Kenergy

70mw Kengen GEOTHERMAL Olkaria 1 expansion (140-210) Under appraisal

GEOTHERMAL Oiserian Flowers 2 MW Operational Oserian

Strathmore SOLAR Strathmore university 0.6 Operations Nairobi University

page 14 Nairobi, Kenya

SHOWCASING KENYA’S VAST RENEWABLE ENERGY POTENTIAL COMMERCIAL & INDUSTRIAL AND UTILITY SCALE, ON AND OFF GRID

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