The Insurance Regulatory Authority of Kenya, Ministry of Energy and Petroleum, State Department of Industrialisation and East African Insurance Sector (ICEA Lion, Kenya Re, Old Mutual, GA and Mayfair) have announced a geothermal risk underwriting facility.
The facility will underwrite up to US$ 2 million in early project development with amounts exceeding the amount being externalized i.e. covered by external re-insurance.
“The insurance sector plays a critical role in the social-economic development of any nation. I am proud that insurance sector has kept innovation alive with products such as the geothermal risk underwriting facility, that enable greater private sector investment in the geothermal energy. It is also gratifying to note that this product will enhance green energy and sustainability of our economy” IRA Commissioner of Insurance Godfrey Kiptum.
Principal Secretary, State Department of Energy Alex Wachira noted that insurance cover for the risky upstream geothermal exploration work is a great enabler for the country to exploit her vast geothermal potential estimated at 10,000MW.
“The huge potential of geothermal energy makes it not only an energy source but also a driver of economic growth and sustainable development. Our country is endowed with vast geothermal resources, and great progress has been made in tapping into this clean power. However, for us to fill the energy gaps, we need collaboration and investment between the public and private sectors” explained the PS.
To drill a geothermal well requires on average US$ 5 million, with significant risk of missing geothermal resource after drilling. Most commercial debt is shy to cover this phase, yet its critical and quite upfront in development of geothermal energy. Kenya is already a leader in geothermal electricity, with a total installed capacity of 988.7 MW contributing 47% of the power on the grid.
This places the country at rank sixth globally and first in Africa in terms of geothermal power development. However, the country still holds massive geothermal potential, estimated at 10,000 MW.
