FACTS ABOUT THE GEOTHERMAL DEVELOPMENT COMPANY (GDC) GEOTHERMAL DEVELOPMENT COMPANY UPDATES I. The GDC Geothermal Development Model The Geothermal Development Company (GDC) started operations in 2009 and is mandated to accelerate geothermal development in Kenya. GDC is developing several geothermal fields concurrently. These include Olkaria, Menengai and now Suswa and the Baringo-Silali Block. At inception, GDC came up with a geothermal development model that entailed the use of own drilling rigs and Kenyan drilling crew in order to accelerate the rate geothermal development and reduce the cost power. By using own rigs, GDC has reduced the cost of drilling by 46%. In addition, since inception in 2009, GDC has developed a total of 536MW of electricity, 280MW of which have been converted into electricity in Olkaria and added to the national grid. The GDC model envisions that projects will be undertaken as follows: a. Infrastructural Development The infrastructural development phase involves construction of main access roads, establishment of drilling water system and the construction of well pads and drilling fluid re-circulation ponds. These activities are undertaken by GDC. b. Steam Development GDC drills exploration, appraisal and production wells to produce steam. This segment of the project is financed and undertaken by GDC using GoK and donor funding. GDC also undertakes a feasibility study and constructs a network of steam gathering pipelines from the various wells to deliver steam to power plants. Currently GDC is constructing a steam gathering system in Menengai to supply steam to three power plants expected to be commissioned next year. c. Power Plant Construction The steam developed by GDC is provided to independent power producers who finance, build, own, operate and transfer the power plants for a predetermined period under the Build Own and Operate (BOO) structure. Already two 280MW two power plants have been constructed in Olkaria; these power plants are utilizing the steam developed by GDC. In Menengai three power plants have been awarded to three independent power producers; construction will be complete next year. d. Substation and Transmission In order to evacuate the power, Kenya Electricity Transmission Company (KETRACO) will construct transmission lines while KPLC will distribute to bulk and domestic consumers. REA connects electricity to rural areas. II. GDC’s Mandate a. Remove geothermal development upfront risks and reduce the cost of electricity • Help the government to develop strategies for the acceleration of geothermal development • Undertake infrastructural development including access roads to geothermal fields and water pipelines in the geothermal fields to facilitate drilling. b. Support Private Sector entry • Avail steam to IPPs/KenGen • Evaluate and recommend power plant technologies • Handle land, environment and community issues c. Support GoK to mobilize funds for geothermal development • Technical input -policies, strategies and regulations • Develop projects to a bankable stage (feasibility) • Engage investors and assess investment appetites d. Develop human capacity • Train engineers, technicians and scientists to enhance drilling capacity and thus support a dynamic industry e. Support and promote development of direct use of geothermal resource III. The Menengai Geothermal Project The Menengai Geothermal project is GDC’s flagship project. Drilling started in February 2011, prior to which GDC had undertaken infrastructural works including the contraction of 30km of access roads, 30km of water reticulation pipeline and development of well pads on which the drilling rigs sit. The Menengai project is being developed in phases Feasibility study undertaken by Electro Consult indicated that the 24m2 area delineated for Phase I of the project has the potential of 150MW. Already 25 wells have been drilled with a yield of 127.6MW of steam; among them is the first directional well that has yielded 30.6MW of steam. GDC has contracted three independent power producers (IPPs) to convert the steam developed by GDC into 105MW of electricity that will be connected to the national grid. GDC has already signed a Project Implementation Steam Supply Agreement (PISSA) with the IPPs who have also signed a Power Purchase Agreement (PPA) with the Kenya Power and lighting Company (KPLC). IV. The 105MW Power Plants Timelines and Status Activity Status Drilling - Drilling commenced in February 2011 - Drilling in progress with 4 rigs - 25 wells completed; 11 tested - 120 MW of steam equivalent realized/mined - 3 more rigs are being commissioned ESIA -Environmental impact assessment licence already obtained from NEMA Feasibility Study - Completed in April 2014 - The feasibility study undertaken by Electro Consult indicated that the 24m2 area delineated for Phase I of the project has the potential of 150MW. Already 120MW of steam has been proven. -Feasibility study for the next phases to be undertaken Steam Gathering System - GDC has awarded H. Young a contract to design and build a steam gathering system to supply steam to the 3 power plants. The contract is underway - Currently the design of steam pipeline has been completed and construction commenced 3 Power Plants (105MW) Contract Award: GDC awarded the contracts for the 3 power plants ( 35MW) in September, 2013 The Three independent power producers are: Sosian Energy; Quantum East Africa and Or Power 22. Negotiations for Steam supply (GDC and IPPs) 2 weeks • Commencement: Oct 2013 • Completion: Oct 2013 Negotiations for Power purchase - PPA (KPLC and IPPs) 5 months • Commencement: Nov 2013 • Completion: April 2014 PPA approval 2 months ERC reviewed and approved the PPA between May –June 2014 Harmonization and incorporation of ADF PRG into the PISSA and PPA October 2014 GDC signed the final PISSA with IPPs on October 29, 2014 GDC handed over the power plant sites to IPPs on 27th Nov 2014 Partial Risk Guarantee contracts Finalization and initialization of ADF September 2014 Generation Licenses Application for generation license 2 Months (August – September 2014) Projected completion date December 2015 IV. Facilitation of private sector entry into geothermal development • GDC’s mandate is accelerate geothermal development in Kenya. GDC has done so by de-risking geothermal development and has thus made investment in geothermal energy attractive to the private sector who had hitherto not actively invested in geothermal energy. • GDC now focuses on drilling geothermal wells to harness steam and sell the steam to IPPs for conversion into electricity. By working together with IPPs GDC is fast tracking geothermal development. This way GDC does not need to tie down funding in building power plants when there are investors willing to do so. This strategy will remove the risks that had been a deterrent to the private sector. V. How has GDC utilized the funds obtained from the government and development partners? Item Expenditure 1. Purchase of 7 drilling rigs Kshs. 18.5 Billlion 2. Drilling materials for 100 wells Kshs. 10 Billlion 3. Drilling of 38 geothermal wells in Olkaria Kshs. 20 Billion 4. Drilling of 25 geothermal wells in Menengai Kshs. 7.9 Billion 5. Infrastructure development: 30Km access roads; 30Km water reticulation pipeline; drilling pads Kshs. 3 Billion Total Kshs. 59.4 Billion V. Has GDC Started to Generating Power? • Currently 2 power plants in Olkaria are generate 280MW using the steam developed by GDC. • In Menengai three contractors (Sosian Energy; Quantum Power East Africa and Ormat) will put up three power plants (each 35-37MW) to convert 100MW of steam into electricity which will be connected to the national grid by December 2015. VI. How does GDC compare to other geothermal projects globally It takes more than 10 years from the commencement of drilling to connect geothermal power to the national grid. GDC has reduced the time taken from commencement of drilling to the time electricity is delivered to the national grid by half. o In Olkaria, GDC started drilling in 2009-2010. To date 280 MW has already been converted into electricity in a record 5 years. o In Menengai GDC started drilling in 2011 and by December 2014, a total of 100MW will be added to the national grid within a record 4 years. o This time reduction is in line with the GDC mandate of accelerating geothermal development in Kenya. • GDC’s innovative model allows the participation of the private sector in an almost risk free venture given that the investors are assured of raw materials (steam) and a ready market (by the national electricity off taker). With this assurance, more investors are now bidding to participate in geothermal development unlike the way it was before GDC’s inception. • This model has been hailed by financiers and regional heads of state as a global pacesetter, and is being adopted in the other countries within the Eastern Africa region. • In 2013 year, AfDB declared GDC a center of excellence in geothermal development. VI. Impact of GDC’s Projects • The successful development of the Menengai, Baringo-Silali and Suswa projects will contribute towards reducing the cost of energy, and thus help lower the cost of doing business in Kenya. • The projects will positively impact the lives of local communities by providing employment and business opportunities, particularly to the youth. • The project will create opportunities for the private sector to participate at various stages.
Posted on: Tue, 13 Jan 2015 07:09:56 +0000
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