| Abstract |
Public Private Partnerships (PPP) models have become increasingly important drivers of promoting renewable energy growth in Kenya over the last decade with government facing increasingly constraint budgets. These PPP models are now gaining traction in Kenya’s geothermal resource development with geothermal projects of over 2,000MWe already approved for implementation and with 245MW at advanced stages of implementation by Geothermal Development Company and Kenya Electricity Generating Company. These entities intend to sell the steam under PPP steam supply contracts, a separate business from steam conversion. Kenya’s current geothermal Feed-In-Tariffs tariff for power plants capacity of between 35-70MW is US $ 0.088 kWh, with 20% Percentage escalable portion of the Tariff for the first 12 years and 15% thereafter, while for geothermal plants larger than 70MW is subject to power purchase agreements negotiations between the off-taker, and Energy and Petroleum Regulatory Authority (EPRA). However, the policy considers consolidated tariff at the off-take delivery point for both the energy conversion and steam payment with no explicit steam tariff rate for steam payment. With expected growth of PPP projects, computation of steam tariff charge rate that is cost reflective and consider PPP entry point would provide better basis for investment decision. The objective of this paper therefore is to estimate the costs and propose an appropriate optimal levelized Steam charge tariff for hypothetical 70MW geothermal project plants under PPP framework using a simplified MS excel-based financial model using concessionary debt under three Cases: 1. Steam tariff at the well (considers drilling costs and O&M well costs only; Case 2. Steam tariff at the well wellhead point considering all the costs at the well (drilling costs including drilling of 15% excess steam, and infrastructure costs (roads and water system), early development costs, operations and maintenance costs and decommissioning costs but excluding interconnection the fluid collection and reinjection system cost. Case 3. Steam tariff at the power plant boundary (all drilling costs in case 1 and 2 and including the fluid collection and reinjection system costs). The analysis found the estimated optimal levelized geothermal steam tariff range of between 1.94 - 5.45 US cents/kWh depending on the PPP development model adopted. Sensitivity analysis carried out to determine the effects of commercial debt rate on the steam tariff found that the cost of debt, return on equity, drilling costs have a direct relationship on the steam tariff while power plant size have indirect effect. The level of sensitivity of the steam tariff varies with most parameters. From this analysis, the levelized steam tariff can be optimized by utilizing concessionary funding and self-drilling using own rigs |