Demand for power in EA creating 'substantial' opportunities for investors

A geothermal plant. PHOTO | FILE  NATION MEDIA GROUP

In Summary

• The governments of Kenya, Rwanda, Tanzania and Uganda have prioritised energy development and diversification with the main focus on electricity generation, transmission and distribution
• The report observes that private companies have an opportunity to come in a Build-Operate-Transfer (BOT) arrangement

By JAMES KARIUKI
More by this Author

Rising demand for electricity in East Africa has created power generation opportunities for multinational energy firms with governments licensing various projects to increase their ability to produce power.

An investors’ guide to East Africa’s energy sector describes the energy sector as lucrative since the demand for electricity is growing at approximately 5 percent annually.

The governments of Kenya, Rwanda, Tanzania and Uganda have prioritised energy development and diversification with the main focus on electricity generation, transmission and distribution to all parts thereby enabling their people to have access to electricity for use in various economy-inclined initiatives.

“East Africa has the lowest access to electrical power and smallest per capita generation, as compared to the other regions in the African continent. The demand for electricity in East Africa and the potential for development of power infrastructure creates substantial opportunities for investors, globally,” says the expansive report prepared by UK firm Research and Markets.

It observes that East Africa's infrastructure development lags behind that of the Southern African region and that of West Africa but challenges of financing make it even harder for the countries to exploit the large potential for harnessing water, coal and underground hot gases for electricity generation.

The report observes that this provides a crucial opportunity for private companies to come in a Build-Operate-Transfer (BOT) arrangement or through loans by equity funds that help governments fund exploitation ventures.

BY-PRODUCTS

In Kenya, several projects for geothermal power exploitation are ongoing at Longonot, Olkaria and Menengai Crater in Nakuru county where they expect to add about 280 megawatts soon. The ventures have also seen notable by-products being produced like the planned sulphuric acid plant at Menengai and the upcoming medicinal spa in Naivasha. (READ: Geothermal plants to ease pressure from bills)

Menengai Crater, a dormant Volcano covering an area of approximately 90 square kilometres has a capacity to generate 1,000 megawatts at minimal costs since all it requires is sinking of pipes several kilometres under to tap the hot gases that are piped to generation plant for the process to kick off. (READ: The 5,000 megawatt question)

The report notes that inter-government partnerships like the planned Kenya-Ethiopia electricity project as well as ongoing electricity generation projects have become a real business issue “and not just a development agency issue”.

“There exists potential for intraregional energy and trade integrations and this will create opportunities to reduce costs for manufacturers as well as homes and ensure greater reliability and sustainability of power supply throughout the region.”

The UK firm called for enhanced all-out investments by governments in cross-border interconnections to expand electricity trade notably the Gibe III project in Ethiopia that is expected to generate enough electricity at a much lower cost for export to Kenya.

“If cross-border interconnectors develop and ensure more power flows more readily across the region, then they could position Ethiopia, Rwanda, Sudan, Uganda and Tanzania as net exporters of electricity, while Kenya and Burundi could operate as net importers,” it says.