Country to Set Up $2 Billion Energy Fund

Nov 30, 2009 - The Nation/All Africa Global Media - Nairobi

Kenya will with the support of donors set up a $2 billion (Sh150 billion) revolving fund to lend those investing in climate-friendly green electricity generating projects. The Ministry of Finance said World Bank, French Development Agency, KfW of German and African Development Bank had agreed to help the government set up the fund.

Finance permanent secretary Joseph Kinyua said the money will be lent to the private sector to invest in commercially viable geothermal, solar and wind electricity production projects. He said the aim is to scale up investment in renewable energy sources that have low carbon emissions to provide affordable power.

It will also reduce reliance on drought prone hydro and expensive fossil fuel electricity generation modes. Speaking in Nairobi during the green electricity conference, Mr Kinyua said the government in this year's budget allocated Sh500 million for lending to small and medium enterprises to invest in renewable energy production.

Kyoto Protocol

The PS said the government is considering granting of sovereign guarantees to independent power producers. Mr Kinyua said that Kenya is negotiating for clean development mechanism funds of the Kyoto Protocol to benefit from carbon trading through reduced emissions.

Energy permanent secretary Patrick Nyoike said Kenya is committed to enhancing green projects output as geothermal, biomass and wind-based power systems are much cheaper than fossil fuel plants. He said the country will implement green energy power generation projects with capacity of 2,000 megawatts by June 2012 through mobilising technical and financial resources to expedite construction and commissioning.

Mr Nyoike said the government will continue to undertake resource assessment and provide results to private investors. Already, wind resource assessment for 33 sites is in progress and a survey of 14 small hydro sites will start in January 2010, he said.

At the same time, the government is developing a plan that will see Kenya attain a green economy status by the year 2020 using electricity generated from climate-friendly projects with low carbon emissions. Prime Minister Raila Odinga speaking at the same event said Kenya's plan entails increased investment in renewable energy sources.

He said the government will allocate more resources and even borrow on commercial terms to develop geothermal fields as Kenya has to produce power with reasonable tariffs that translate to reduced costs to end users. Mr Odinga said the government has received attractive proposals of a combined capacity of over 1,000 megawatts but the high cost associated with developing wind, solar and bio-mass hinders the potential of such sources.

United Nations Environment Programme said although Kenya has great potential for green energy, its weakness lies in formulating the right policies and commitment to harness fully the resources. Executive director Achim Steiner said the cost of green energy has been tumbling and in 2008 more was invested in wind, solar and geothermal globally in the sector than in oil and gas generation.

French ambassador to Kenya Elisabeth Barbier said Kenya has made progress in electricity supply. She, however, noted that connection rates remains low with 20 per cent of households in urban areas and 10 per cent in rural accessing power.