In Summary
  • The report prepared by Ernst & Young’s (EY) Global Cleantech says falling technology costs make Kenya, Ethiopia, Indonesia, Malaysia, and Uruguay the countries to watch in the next decade.
  • Policy uncertainty in particular was blamed for reducing investor appetite across many markets.

The potential of geothermal fields to generate 6,000 megawatts and favourable policies in Kenya are attracting investments worth billions of shillings from around the world.

A just-released market analytical report dubbed, Ernst Young’s Latest Renewable Country Attractiveness Index (RECAI) says ongoing investments in Kenya on geothermal exploitation are playing a critical role in shaping the renewable energy landscape.

Kenya’s need for affordable energy, availability of significant natural resources, and favourable energy policy also seem to be fuelling investor demand.

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The report prepared by Ernst & Young’s (EY) Global Cleantech says falling technology costs make Kenya, Ethiopia, Indonesia, Malaysia, and Uruguay the countries to watch in the next decade.

“Despite an 11 per cent dip in global investment in 2013, an abundance of opportunities in new markets, new technologies, and new sources of capital all signal brighter times ahead,”, notes the report.

Kenya, the largest user of geothermal power in Africa, is leading the pack in exploration activities at Ol Karia, Longonot, and Nakuru’s Menengai crater, a dormant volcano. The projects are being carried out under public-private partnership arrangements. Olkaria is already generating 110MW while Menengai is producing 100MW.

Other ongoing energy-related investments include the Ngong, Kinangop, and Turkana wind projects. These projects are environment- friendly, sustainable, and cost-effective compared to the hydro-power sources that rely on availability of water. When water levels drop generation slows down, leading to power rationing.

But continued success in geothermal exploration saw Kenya Power chief executive officer John Chumo assure Kenyans that rationing was a thing of the past as Kenya would soon see more steady power supplied to the national grid from Olkaria and Menengai geothermal centres.

EY’s Global Cleantech leader Gil Forer observes that 2013 saw a fall in global investment due to emerging challenges in the renewables. Policy uncertainty in particular was blamed for reducing investor appetite across many markets.

The report by EY, a global leader in assurance, tax, transaction and advisory services, says that governments and businesses will need to consider the value put in the energy sector’s resilience in light of the industry’s historic inability to absorb economic, political, and environmental shocks.

“Governments should depoliticise the energy debate in order to support stable and long-term policy measures, undertake a transparent and objective assessment of the value of energy to determine the most resilient energy mix and embrace centralised energy planning to counter the uncertainty of the market while still fostering private sector participation,” it says.

Being a capital intensive sector, the report says, creative solutions and new conduits of capital must be identified to open up the finance markets and bridge the gap between investors and projects.
It adds that emerging markets such as Kenya, which have embedded renewables as a core part of their energy strategy to stimulate economic growth, will greatly rise in 2014. The strategy by governments, it adds, must appreciate that investors have a major role to play in addressing their own energy risks-commodity price exposure, business continuity, and regulatory compliance.
“This should prompt increased focus on energy mix optimisation that transcends the politics of the boardroom and identifies opportunities for reduced energy consumption,” the report says.