TECHNICAL ASSISTANCE - SMALL HYDRO DEVELOPMENT IN KENYA • Andrew Njoba • Team Leader, Clean Energy Promotion • KENYA ASSOCIATION OF

MANUFACTURERS • KENYA

Agenda

1 About KAM / DFID Clean Energy Promotion Program

2 DFID Program Activities

3 Why Climate Change Mitigation?

4 Policy – The Driver for Clean Energy Investment

THE KAM TECHNICAL ASSISTANCE PROGRAM

TECHNICAL ASSISTANCE PROGRAM

240MW

Generating

1,170 GWh of

electricity each

year

460,000 # of Kenyan Homes

Powered Per Year

Ready Project Pipeline:

▪ Began in 2012 ▪ Assisted 100+ Projects in East

Africa Project Pipeline includes:

▪ Installed capacity of 240MW ▪ Total Capex of $570 Million

CLEAN ENERGY PROMOTION - OBJECTIVES

Objectives:

▪ Catalyze Private-sector Investment

▪ Improve Policy Framework

▪ Reduce CO2 Emissions

▪ Job Creation

Specific Activities: 1.) Feasibility Studies 2.) Awareness Creation 3.) County Govertment Legislation Support 4.) Capacity Building

Concept Study

Pre-Feasibility

Establish Business

Need

Feasibility Study

Front End Engineering

Design

(FEED)

Develop Business

Case

Develop Procurement

Strategy

Develop Spec and Tender

Tender Selection and

Award

Financial Close

Establish Commercial

Arrangements

Detailed Engineering

Construction Management

Commissioning and Acceptance

Project Implementation

Commercial Operation

PROJECT DEVELOPMENT PROCESS

Pre-Development Phase

KAM Support

FEASIBILITY STUDIES SUPPORT

Technologies Supported: ▪ Small Hydros ▪ Solar PV ▪ Waste-to-Energy

Source: Ministry of Energy 7

POLICY – DRIVER FOR CLEAN ENERGY INVESTMENTS

8

POLICY – DRIVING INVESTMENT

POLICY – DRIVING INVESTMENT

RENEWABLE ENERGY – POLICY DEVELOPMENT

Market-based mechanisms – eg renewable energy auctions, certificate schemes, renewable

portfolio standards

Feed-in tariff/premiums

Mixed

Countries with auction or tender programmes

2000

6

POLICY – DRIVING INVESTMENT

RENEWABLE ENERGY – POLICY DEVELOPMENT

Market-based mechanisms – eg, Auctions, Certs, Portfolio standards

Feed-in tariff/premiums

Mixed

Countries with auction or tender programmes

2016

BNEF Summit, New York, 5 April

2016

7 Kenya FIT - 2008

POLICY – DRIVING INVESTMENT

$62bn

$175bn

$128bn

$88bn

$206bn $207bn

$274bn

$318bn $297bn

$272bn

$316bn $329bn

2012 2013 2014 2015

CLEAN ENERGY INVESTMENT ROSE WHILE OIL PLUMMETED

GLOBAL CLEAN ENERGY INVESTMENT VS WTI CRUDE SPOT 2004-15

$146/bbl

Record

investment

2004 2005 2006 2007 2008 2009

2010 2011

$37/bbl

Source: Bloomberg BNEF Summit, New York, 5 April

2016

1

POLICY – DRIVING INVESTMENT

14

15

POLICY – DRIVING INVESTMENT

Date - Q4, 2014 16

Kenya FIT - Project Pipeline (Dec’15)

Category Wind Biomass Biogas Small Hydro

Solar PV Geothermal TOTAL Total

Capacity (MW)

Plants in Operation 0 0 0 2 0 0 2

1

Projects With Signed PPA's

2 1 0 10 0 0 13

106

Projects with Initialled PPA's

2 0 1 1 0 0 4

158

Projects with Finalized PPA Negotiations

0 1 0 0 2 0 3

19

Projects with PPA's under Negotiations

2 1 0 2 7 0 12

323

Approved Projects with PPA Negotiations Yet to Start

1 1 1 14 1 0 18

225

Projects in Feasibility Study Stage

7 10 4 29 28 1 79

1,661

Total no. of Approved Projects

14 14 6 58 38 1 131

2,492

Total Capacity

(MW)

628

254

53

293

1,249

15

2,492

Source: Government of Kenya – Ministry of Energy & Petroleum 17

POLICY – DRIVING INVESTMENT

FIT Approved Projects – as of Q4’15

13

2,038

3,474

6,768

10,097

15,006

1,482

1,278

3,141

4,659

8,226

12,141

17,764

2009/10 2023/24

202

6/27

2029/30 2014/15

2018

/19

Peak Demand (MW)

Total Capacity (MW)

5,000

4,491

4,200

2,200

1,600

Geothermal

Fossil

Nuclear

Hydro Imports

Wind Hydro

17,754MW TOTAL CAPACITY MIX

263

Today’s Peak = 1,570MW Installed Capacity 2,298MW Demand is 30%-40% lag

National Plan to add 50%

of Renewables

KENYA – VISION 2030 ENERGY ROADMAP

Wind farms are a disaster

for the environment. They

kill the birds. They are very

expensive in terms of

energy. They're made in

China. Donald

Trump US Presidential Candidate Picture: Michael Nagle/Bloomberg

BNEF Summit, New York, 5 April

2016

28

TRUMP ON WIND TRUMP ON WIND

POLICY – DRIVING INVESTMENT

THE OPPORTUNITY – SMALL HYDRO DEVELOPMENT IN KENYA

20

Our Goal – Development of low impact Small Hydros

Example of a Run-of-the-River low impact hydropower system.

Low Impact Small Hydro Power Plants

21

SMALL HYDROs OPPORTUNITY

Study – Grid Connection

22

SMALL HYDROs OPPORTUNITY T&D IMPROVEMENTS

OUR VISION – INCREASE IN CLEAN ENERGY INVESTMENTS

Studies on River Nyamindi, Mt Kenya Basin Kirinyaga County, KENYA Scope of Works : ▪ Hydrology Studies ▪ Grid Connection Studies ▪ Economic Analyses ▪ Completed March, 2015

Gitie SHP – 2.2MW

Riamathakwa – 3MW Kiamutugu I – 3.3MW Kiamutugu II – 1.2MW

PROJECTS COMPLETED - 2015

PREFEASIBILITY STUDIES – SMALL HYDROS

Prefeasibility Studies – Mount Elgon Basin Western Kenya Scope of Works : ▪ Hydrology Studies ▪ Grid Connection Studies ▪ Economic Analyses ▪ Completed March, 2015

Nzoia River – 1MW

Suam River – 2MW

PROJECTS COMPLETED - 2015

PREFEASIBILITY STUDIES – SMALL HYDROS

Kleen Energy – 6.5MW Small Hydro Rupingazi River, Embu

Power Station Site

▪ Feasibility Study Completed – Q1’13

▪ EOI Submitted – Q2’13

▪ Other Pre-development work: 2013-2015

▪ PPA Signed – Q3’15

▪ Financial Close – Early 2016

▪ Construction – Late 2016

STUDIES COMPLETED

Kleen Energy Small Hydro Project

Kenya Power PPA Signing Ceremony – August 12, 2015

STUDIES COMPLETED

SMALL HYDRO – KTDA 5.8MW Gura SHPP

• EPC Contract awarded to VS Hydro Ltd on

26thJune 2012

• Contract completion date: March 2015

• Extended by 6 months to September 2015

• Expected annual generation: 27,300 MWh

PROJECTS UNDER CONSTRUCTION

SMALL HYDRO – KTDA 1.5MW Iraru

• Expected annual generation:

9,350,000kWh

• Expected completion date:

December 2016

PROJECTS UNDER CONSTRUCTION

SMALL HYDRO – KTDA 5.6MW

North Mathioya

• Expected annual generation:

28,400,000kWh

• Expected completion date:

Dec 2016

PROJECTS UNDER CONSTRUCTION

PROJECT RISKS

31

Risk Elements & Considerations

▪ Technology:

– Suppliers / track record

– Warranty

▪ Revenue:

– PPA structure (i.e., security of

revenue stream)

– Tradable credits (Carbon Mkts)

▪ Sponsors:

– Timeline Commitments

– Track record

▪ Construction:

– EPC / turnkey (i.e., structure)

– Contractor / track record

▪ Site control

– Land lease / license arrangements

• Easements

• Transmission/Distribution

▪ Permits

– Environmental

– Local issues (County)

▪ O&M / Asset Management:

– Contractor / track record

– Equipment/Service Warranties

– Transmission

– Incentives for good performance

▪ Regulatory:

– Change in law

32

PROJECT RISKS

Andrew Njoba Team Leader, DFID Clean Energy Promotion

Program KENYA ASSOCIATION OF MANUFACTURERS

sbsecc@kam.co.ke Tel: (0722) 201368