Industry Trend Analysis - Geothermal: Rapid Growth And The Dominant Power Source - JAN 2018

BMI View: Geothermal will continue to make a significant contribution to Kenya ' s power mix over the next decade, as the industry expands in line with strong government commitment to the sector. We expect geothermal power to account for around 45% of total electricity generation, and for geothermal capacity to expand to 1.7GW in 2026, from just over 1GW currently.

Kenya's geothermal sector will grow at a rapid pace over the coming decade - with capacity expanding by 60% between 2017 and 2026. Kenya's ongoing expansion of the Olkaria geothermal power plants, along with further developments, will boost total geothermal capacity to over 1.7GW by 2026. This is in line with government aims to achieve a geothermal capacity of 1,500MW by 2019, rising to 5,000MW by 2030. In fact, we have recently upwardly revised our geothermal capacity forecasts for Kenya given the higher than expected installation rates recorded over 2016. Kenya commissioned nearly 500MW of geothermal capacity over 2016, more than any other country globally, according to IRENA. As such, Kenya has emerged as a global geothermal outperformer, with the fourth largest domestic geothermal sector in the world in terms of capacity - as of 2016.

Top Geothermal Markets Globally
Total Geothermal Capacity By Country
f = BMI forecast. Source: EIA, IRENA, BMI

We expect Kenya to remain the fourth largest geothermal market globally over the coming decade, as government support for the sector remains robust and Kenyan utility company, KenGen, prioritises investment into the sector. KenGen has reportedly drilled 137 geothermal wells since 2007 and is set to bring two more 79MW steam turbines online at the Olkaria field in 2019. Furthermore, the company aims to bring 653MW of geothermal capacity online by 2022, more than any other type of generation capacity. KenGen is also receiving ongoing funding support from development banks and international financial institutions to help mitigate the financial risks when developing geothermal projects. These include the European Investment Bank (EIB) and the German Development Bank, KFW.

Geothermal Industry To Rapidly Expand
Kenya Geothermal Capacity And Contribution To Total Power Generation
e/f = BMI estimate/forecast. Source: EIA, IRENA, BMI

The impact geothermal will have on Kenya's power market is significant, considering that geothermal electricity has a high efficiency rating and is not intermittent like other renewable power sources. We expect geothermal electricity generation to account for 45% of total electricity generation in Kenya by 2026, alleviating power supply issues in the country and reducing the reliance on volatile hydropower output.