PUBLIC PRIVATE PARTNERSHIP - HOW CAN PPP DELIVER BETTER SERVICE

THE CHALLENGE OF RELIABLE AND COMPETITIVELY PRICED ELECTRICITY IN KENYA

1.0 INTODUCTION

The electric power sub-sector has experienced significant growth in demand for electric power over the last seven years in tandem with the increased economic activities. Currently, the demand for power in Kenya is ahead of supply, and further, cyclic drought conditions pose a challenge to power supply given the dominant nature of hydro sources that account for over 55% of all electricity supply. This creates a sharp national focus on the Electric Power Sub-Sector.Kenya has a geothermal potential of 10,000 MW found in fields situated in country`s Great Rift Valley only 588 MW has been developed to generate electricity todate the country relies heavy on hydro power and thermal diesel plants.

The exploratory activities commenced in 1956, and the first geothermal power station in Africa, the Olkaria I 45MW was commissioned between 1981 and 1985. The Government of Kenya commenced extensive drilling at the Olkaria field in 2006.

2.0 Benefits of Geothermal Power

The benefits of a geothermal projects is that they result in: • Provision of reliable base-load electricity supply. • Reduced country reliance on imported fossil fuels and on weather-dependent hydro.

• Reduced cost of electricity to improve economic competitiveness of Kenya. • Increased electrification access. • Mitigation of climate change.

• Reduced poverty. 3.0 PPP Opportunities

The competing needs for government resources and the heavy capital outlay for power plants, this creates an opportunity for the government to partner with private investors under different models to develop the plants and provide reliable and competitively priced electricity to its citizens.

4.0 Why PPP?

Why would PPP be the best way to implement the geothermal projects?

5.0 Risk Allocation and payment mechanisms

The government would be mandated to continue drilling and providing the steam to cover the exploration risk that cannot be covered by the private investor.

6.0 How to attract private investors

i. Spearheading establishment of a legal, regulatory and Institutional framework for IPPs;

ii. Ensuring adherence to International Best Practice in setting up IPP Projects;

iii. Endeavoring for liberalized markets;iv. Waiving fees, costs and other payments which would

otherwise have to be paid by the Project Company to a public sector entity;

v. Ensure availability of fuel, or indemnity against unavailability of fuel;

vi. Guarantee buy-out of the project by the utility in specified situation.

7.0 Conclusion

With a well prepared and well structured project the PPP would be the best way for Kenya to utiliza the great geothermal resource and provide the much needed realiable and competitevly priced electricty.