Kengen Bundle of Projects: Olkaria, Kiambere, Tana

Project Description
OLKARIA: A third generation unit will be added to increase the capacity of the existing Olkaria Geothermal Power Plant in Olkaria, Kenya, from 70 to 105 MW, with an estimated additional annual generation of 276 GWh. By using the geothermal resources of Olkaria to generate electricity, the project will displace electricity produced by fossil-fuel-powered plants in the electricity grid equivalent to 150,000 tCO2e per year. The CDCF will purchase emission reductions from the project totaling 900,000 tCO2e from the start of project commissioning through December 2014.

KIAMBERE: Kiambere is the fifth power station in the Seven Forks Cascade in River Tana Basin. It is the second largest hydropower station in the cascade and situated on the lower part of the Tana River, which is the largest river in Kenya, nearly 1,014 kilometers long. The Kiambere plant was commissioned in 1988 with a capacity of 144 MW. As it is currently fed by water from the lower dam on the Tana, the plant runs mostly as baseload. The project is located in a rural area. The net additional effect of this upgrading is an increase in output of 20 MW with an estimated annual incremental generation of 60 Gwh. The CDCF will purchase emission reductions from the project totaling 215,000 tCO2e by December 2014.

TANA: The Tana Power Station lies just upstream of the confluence of the Tana and Maragua Rivers at the end of the Masinga Reservoir. The power plant is about 120 kilometers north of Nairobi, close to the main Thika/Sagana Road. The project entails the redevelopment of the Tana power station with new generations generating 130.3 GWh. The replacement project will send an additional 71.5 GWh per year to the Kenyan grid. The CDCF will purchase emission reductions from the project totaling 226,000 tCO2e from the start of project commissioning through December 2014.

Current Context
Power demand in Kenya has risen considerably owing to the country’s improved economic growth over the last two years. The recorded peak demand leaves a reserve margin between supply and demand far below the recommended 15 percent to allow for any plant outage, which is required during maintenance. Moreover, in recent years, Kenya has experienced severe droughts that have led to low water levels in the reservoirs affecting power generation negatively. Demand is projected to rise at an average of 150 MW per year. With this rising demand, the reserve margin will continue to drop significantly, leading to power rationing during peak hours.

KenGen (Kenya Electricity Generating Company Ltd.) is the major supplier of electricity in Kenya, contributing about 85 percent of all power consumed in the country. In the absence of the Olkaria geothermal project, KenGen would install medium-speed diesel as a source of power, thereby increasing emissions of carbon dioxide and sulfur oxides to the atmosphere. KenGen is also stepping up its capacity expansion program to keep up with the rising demand as well as to mitigate any adverse hydrological phenomena that might recur in the future. The targeted communities are the local Masai, Luo, and Kikuyu communities living in the vicinity of the plant. Currently communtieis have to travel over four hours a day for water, and schooling facilities are distant and adequate. There is also a need for local health services, currently availalbe only in Naivasha, a city which has been deeply affected by recent turmoil in Kenya. The influx of refugees will put a severe strain on already limited resources.

Both Tana and Kiambere are part of the Seven Forks Cascade in the River Tana basin. This area has suffereed severe drought and is poorly served with education and health services. The upgrading of both facilities will increase electricity available to the local areas.

Community Benefits
A community benefits plan additional to the main project was prepared at the initiative of the CDCF. In the interest of targeting community benefits in a cost-effective manner to those who could benefit the most, the CDCF agreed that the community benefits payments made for emission reductions for the three of the four projects planned in the CDCF KenGen bundle (Olkaria, Kiambere, Tana – Eburru will have a later plan once status of project is confirmed) could be, within specified limits, fungible. The affected communities in each project area must benefit from at least one community development activity. Should there be surplus funds, these could be applied to other communities in the KenGen area of influence. In other words, the benefits could either:

• be applied through a combination of funds for a larger project in a central location (such as a boarding school or a mobile clinic that could be used by several communities in the Tana River catchment area, benefiting inhabitants of both Tana and Kiambere);
• be placed in a joint fund from which funds could be drawn for projects depending on priorities (for example, provision of medicines in case of a malaria or cholera outbreak, as happened in 2006 after the floods along the coast); or
• be allocated to augment accelerated implementation of ongoing KenGen community benefit programs or self-financed community initiatives.

While still under discussion, depending on the time frame in which the sponsor will receive community benefit payments, deliverables could include the following:

Olkaria:

Kiambere:

Tana:

Time Frame: 2007-2009

Community Benefits Budget: Olkaria, $225,000; Kiambere, $215,000; Tana, $226,000

Monitoring Plan: KenGen will provide an annual report on the progress that has been made in the implementation of the community benefits plan during the previous calendar year. The report will include a detailed description on the status of implementation of activities that create the local community benefits.