Kenya Turns to Geothermal Energy for Electricity and Growth

 

In an effort to diversify its power supply and meet growing electricity demand, Kenya is looking to increase its use of geothermal energy sources (http://en.wikipedia.org/wiki/Geothermal_electricity). Tapping the abundant heat and steam that lurks underground to drive electric power plants offers a sustainable and long-term source of low-cost energy.

Kenya currently gets most of its electricity from hydroelectric projects. This is great until there is a drought, which there now is. With water resources low, the country has had to turn to fossil fuels to power electricity generators. This means relying on imported diesel, which is both expensive and polluting. It is also not generating enough electricity to keep up with demand.

Electricity blackouts have become common in the country and this is harming economic development. This is a particularly damaging setback in a country that has, in the last five years, gained a deserved reputation for its technological advances in mobile phone applications and Internet services – all needing reliable supplies of electricity.

Kenya is Africa’s largest geothermal producer and has geothermal resources concentrated near a giant volcanic crater in the Great Rift Valley with 14 fields reaching from Lake Magadi to Lake Turkana. There are also low temperature fields in Homa Hills and Massa Mukwe (http://www.gdc.co.ke/index.php?option=com_content&view=article&id=191&Itemid=163).

Kenya is expecting its gross domestic product (GDP) to grow by 10 per cent from 2012 onwards. The country hopes to become a middle income country by 2030.

Around 1,400 steam wells will be drilled by companies to meet these goals.

There are also many spin-off opportunities from tapping geothermal heat sources. These include using the steam heat for greenhouses growing plants, for cooling and heating buildings, and for drying and pasteurising foods.

Kenya is currently building a 52-megawatt (MW) geothermal project with funding from the United States government. It is also receiving US$149 million funding from the African Development Bank Group (AfDB) to build the Menengai Geothermal Development Project. This plant will be able to generate 400 megawatts of renewable electricity from the Menengai geothermal sources in the steam field located 180 kilometres northwest of the capital, Nairobi (http://www.gdc.co.ke/index.php?option=com_content&view=category&layout=blog&id=49&Itemid=137).

Speaking at a press conference this month, Gabriel Negatu, AfDB’s Regional Director, said he sees geothermal technology as an important driver of Kenya’s green growth ambition.

“Geothermal generation yields energy that is clean, affordable, reliable and scalable,” he said.

The Geothermal Development Company (GDC) (gdc.co.ke) is a state-owned company in Kenya and recently declared it had tapped steam with a well in the Menengai steam field. GDC started surface exploration in 2009 and has been using two drilling rigs to look for geothermal steam.

The Menengai Geothermal Development Project is slated to be completed by 2016 and will boost the country’s geothermal capability by 20 per cent. It is estimated to be able to power the electricity needs of 500,000 Kenyan households and power the needs of 300,000 small businesses.

Geothermal as a source of energy and electricity can help a country make big development gains. The best example is the Northern European island nation of Iceland. According to Orkustofnun (nea.is/geothermal), Iceland’s National Energy Authority, the country is a successful example of how a small, poor nation (Iceland was one of Europe’s poorest countries in the 20th century), shook off its dependence on burning peat and importing coal for its energy use. By 2007, Iceland was listed in the global Human Development Report as the country with the highest level of human development in the world. And one aspect of this success was the country’s ability to tap its renewable energy resources. Around 84 per cent of the country’s primary energy use comes from renewable resources, and 66 per cent of this is geothermal.

It is estimated Kenya could generate 7,000 megawatts of geothermal power and the Kenyan government is looking to increase the nation’s geothermal capacity from the current 198 MW to 1,700 MW by 2020 and 5,530 MW by 2031.

By David South, Development Challenges, South-South Solutions

Published: March 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Africa’s Consumer Market in Spotlight for 2011

While other parts of the world will spend 2011 worrying about their debt levels and how to spur economic growth, many factors are pointing to Africa potentially following a different story. A frenzy of activity has been building around Africa’s market opportunities and its growing middle class consumer population. Years of steady growth rates up to 2008 and the vast, untapped opportunities on the continent have sparked interest from investors and businesses alike.

Foreign direct investment (FDI) to developing economies rose by 10 percent in 2010 due to fast economic recovery and increasing South-South flows. Africa peaked in 2008 because of the resource boom and fell by 14 percent to US $50 billion in 2010 (UNCTAD). Rising FDI from Asia and Latin America has still yet to match the decline from developed countries – still the majority of FDI to Africa.

However, foreign direct investment to Africa had risen sixfold to US $58.56 billion between 2000 and 2009 (UNCTAD). The amount going to manufacturing and services has been growing, despite the slow down in 2009 because of the global economic downturn. Africa’s 11 largest economies are now being seen as the next to match Brazil and Russia, economic stars of the last few years.

The continent as a whole forms the 10th largest economy in the world. Of Africa’s more than 1 billion people, 900 million can be classified as part of the consumer economy. Out of this group, there is a third – approximately 300 million people – who make modest sums by Western standards, about US $200 a month, but have spare cash to buy things like mobile phones, DVDs and new clothes, or pay for better schools. They are the population that is overlooked when attention is focused only on the very poor living on less than US $2 a day.

This vast group is captured in the book Africa Rising by University of Texas professor Vijay Mahajan, which details the phenomenon of Africa’s middle class consumer society. He calls this group of middle class consumers “Africa 2,” with the desperately poor called Africa 3s, and the extremely rich Africa 1s.

This new group has expanded far beyond ruling elites and government workers. Many of its members work in the private sector, as secretaries, computer entrepreneurs, merchants and others who have benefited from consistent growth rates in many African countries.

The portion of African households with discretionary spending power rose from 35 percent in 2000 to 43 percent in 2008. The challenge will be to turn this wealth to the benefit of made-in-Africa businesses and to create stable, high-quality jobs to ensure this wealth effect lasts.

The new wealth effect can give Africa the tools needed to tackle its long-standing development challenges and lift more and more people out of poverty and misery while reducing dependence on foreign aid. And this can add rocket fuel to the surge toward meeting the Millennium Development Goals deadline in 2015 (http://mdgs.un.org/unsd/mdg/Default.aspx).

The rapidly rising profile of Africa is reflected by the prestigious business newspaper the Wall Street Journal recently running a series titled “Africa’s Growing Consumer Class Lures Multinationals” (http://online.wsj.com/article/SB10001424052748704720804576009672053184168.html).

Consulting firm McKinsey (http://www.mckinsey.com/) believes Africa’s billion citizens should be seen as consumers and says the continent’s growing number of middle-income consumers now outstrips India’s. It boldly claims consumer spending will reach US $1.4 trillion in Africa by 2020, up from US $860 billion in 2008. Consumer spending rose by 16 percent a year from 2005 to 2008 before the global economic crisis.

It is forecast that 220 million Africans now frozen out of this consumer wave will become consumers by 2015 if current trends continue.

The IMF believes the steady growth will continue, with 5.5 percent growth for the 47 sub-Saharan countries this year.

That’s the good news. But many African countries still rank at the bottom in the World Bank’s Ease of Doing Business survey (http://www.doingbusiness.org/rankings). Africa remains a logistical nightmare for companies. Poor quality roads, inadequate harbours and inefficient rail systems, all make it difficult to move goods around the continent and across borders.

This makes distribution in Africa costly. Companies also often have to import building supplies and equipment to construct factories and plants. Then there is the unreliable electricity supply. Unable to trust local power supplies, many companies use their own electricity generators.

If handled right, new brands and companies are set to join African global success stories like Mo Ibrahim (http://en.wikipedia.org/wiki/Mo_Ibrahim), who founded the mobile telecommunications company Celtel.

Some of the new success stories include African companies pairing up with global firms as they seek local knowledge and experience. This will be a substantial opportunity for companies wise enough to organise themselves for global competition. In 2010, Sweden’s Electrolux – one of the world’s largest makers of home appliances – bought Egypt’s Olympic Group (http://www.ameinfo.com/145039.html), a North African powerhouse for household goods.

In the Ivory Coast, Nouvelle Parfumerie Gandour (http://www.npgandour.com/english/index.html) – makers of perfume, cologne, cosmetics and talcs – is an African cross-border success story. It has factories in Ivory Coast, Senegal, Morocco and Cameroon. Thirty percent of its profits come from exports, some of which are to the United States and Europe.

Sonatrach (http://www.sonatrach-dz.com/NEW/) in Algeria is the largest oil and gas company in Algeria and Africa. Is using its base in oil and gas exploration, production, pipeline transportation and marketing of hydrocarbons and by products, to move into other areas. It is increasing its investments in power generation, new and renewable energies, water desalination, and mining exploration and exploitation. Looking to grow its business with 30 percent coming from exports by 2015, it has spread across Africa ( Mali , Niger , Libya , Egypt ), to Spain , Italy , Portugal , United Kingdom , Peru and the United States.

Marwa (http://www.marwa.es/) from Casablanca, Morocco, is an African fashion success story. The brand started by Karim Tazi in 2003 began with just two stores in Casablanca and Rabat. It identified the niche of very fashionable but good quality and inexpensive clothing. It blends international trends with subtle influences from Moroccan tradition. Its prices hover between six euros for a t-shirt and 100 euros for a coat. It has successfully created a Moroccan high-street fashion look that can be exported. It has opened a branch in Zaragoza, Spain and is expanding to Riyadh, Saudi Arabia, Paris, France, Beirut, Lebanon and Istanbul, Turkey.

A survey by consultants AT Kearney (http://www.atkearney.com) found eight out of nine West African subsidiaries of global consumer goods companies discovered quicker revenue growth than their parent companies.

All this new wealth and growth provides substantial opportunities to African brands to build their businesses and markets. The big issue will be who will rise to the occasion and who will be clever enough to learn from existing African brands that are already thriving and have shown the way.

Two trends will also power this growth: urbanization and large youth populations. Africa’s youthful, urban population has already been reached by the telecoms sector through the rapid growth of mobile phones. More than 500 million subscribers have been signed up since 2000 (Informa Telecom and Media), a user base greater than the entire US population.

“By 2040, the continent will be home to one in five of the planet’s young people and will have the world’s largest working-age population,” according to Charles Roxburgh and Susan Lund, authors of a study for the McKinsey Global Institute.

“If Africa can give its young people sufficient education and skills, they could be a substantial source of consumption and production in years ahead.”

By David South, Development Challenges, South-South Solutions

Published: January 2011

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Mobile Phones Bring the Next Wave of New Ideas from the South

 

Informa Telecoms and Media estimates mobile networks now cover 90 per cent of the world’s population – 40 per cent of whom are covered but not connected.

The rapid growth in take-up has made mobile phones the big success story of the 21st century. With such reach, finding new applications for mobile phones that are relevant to the world’s poor and to developing countries is a huge growth area. It is estimated that by 2015, the global mobile phone content market could be worth over US $1 trillion: relegating basic voice phone calls to just 10 per cent of how people use mobile phones.

Leonard Waverman of the London Business School has estimated that an extra 10 mobile phones per 100 people in a typical developing country, leads to an extra half a percentage point of growth in GDP per person.

The experience of the US $100 laptops from the One Laptop Per Child Project (OLPC) offers an important lesson on making technology work for the poor: the business model has to come first. In the case of OLPC, the big computer manufacturers are already offering low-cost laptops with extensive software and other support: and out-selling OLPC. And it is mobile phones that are proving how fast take-up can be if users are willing to pay for the service on offer.

A new report by the DIRSI (Regional Dialogue on the Information Society) on mobile phones and poverty in Latin America and the Caribbean, unearths the strategies the poor use to access and use mobile telephony, and the main barriers to increasing usage. It also looks at how mobile phones have improved the lives of the poor.

The poor use them to strengthen social ties, increase personal security, and improve business and employment opportunities. Few share their phones and most own them. The only exceptions are Colombia and Peru, where the incentive is to share ownership. Most importantly, the study found that mobile phones are not a luxury good, but the most cost-effective solution to many problems.

Some 250 million Indians today have mobile phones. Many of them are people who make just US $2 or US $3 a day. More and more are getting access to computers and the internet, even in villages.

India’s Mapunity is pioneering ways to reduce the stress and anguish of the daily commute to work – something that seriously erodes people’s quality of life and affects their health. Owner Madhav Pai is using SMS technology to improve transportation in Bangalore by providing the Bangalore Traffic System’s information on bus routes, locations and congestion – all in real time – to mobile phones. The service is free for subscribers to Airtel, and at a small cost for others.

The service works by collecting information on cell phone signal density to build up a map of congestion at different intersections in the city. Tracking congestion has had two benefits: it not only shows where the trouble spots are, it has also enabled mobile phone companies to know where to place extra relay towers to boost capacity and reduce network overload.

This technology effectively turns the mobile phone into a GPS (global positioning system) mapper, with real-time updates.

The company is incubated at the N S Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management, Bangalore.

In Nairobi, Kenya computer science graduate Billy Odero’s MoSoko uses an SMS text bulletin board system for buying and selling via mobile phones. He got the idea when he had to move out of his university dormitory and needed to sell things to the other students. He was also interested in finding an apartment to share with other newly graduated students somewhere downtown. Tired of sifting through irrelevant ads on bulletin boards, Billy developed an SMS bulletin board system to help connect buyers and sellers in Nairobi. Sellers text into the MoSoko SMS gateway with information regarding the type of item they would like to sell (a bicycle, TV, couch), their location, and the asking price for the item. This information is stored in a database and can be easily accessed via SMS by potential buyers.

More ingenuity can be found in Fultola, Bangladesh. A modest internet café with just four workstations it may be, but remarkably all four can access the internet: through just one mobile phone. This is all possible because of something called an EDGE-enabled (Enhanced Data Rates for GSM Evolution) mobile phone. One of the computers acts as a web server, while the other three workstations are connected to a small device no larger than a cigarette packet. All of this is wireless and possible because of the EDGE-enabled Motorola clamshell mobile phone using a USB cable connection to the server. The project is being supported by the Ndiyo Project, Grameen Phone and Grameen Telecom.

People use the internet centre to keep in touch with relatives, check market prices, and seek job opportunities or access government websites. The project was co-ordinated by a team working for the GSM Association, the global confederation of mobile phone operators. The aim was to explore the extent to which mobile networks could provide Internet connectivity in developing countries, and to demonstrate the extent to which mobile telephony can increase access to online resources.

In Ghana, mPedigree uses mobiles to fight counterfeit drugs. The plague of counterfeit medicines in Africa kill thousands, and it is estimated between 10 and 25 per cent of all drugs sold in the developing world are fakes (BASCAP – Business Action to Stop Counterfeiting and Piracy). And in Africa, this may be over 50 per cent (USFDA).

mPedigree founder Ashifi Gogo started his company to use mobile phones to protect people against counterfeit drugs and vaccines. “Buying medicine here is like Russian roulette,” said Gogo. “I don’t want people to have to choose between a drug that’s safe and more expensive and a drug that’s cheap and not genuine. Those choices shouldn’t be there.”

Ghanaian Gogo (also a graduate of Dartmouth’s Thayer School of Engineering), lets consumers send an SMS to mPedigree to verify if a drug is legitimate while they are thinking about buying it in the drug store or the street market. The consumer types in the serial number found on the drug’s packet to a short code (a five-digit number similar to the ones used to top-up mobile phone credits). The consumer then receives an SMS response verifying the drug’s authenticity.

To publicise the service, mPedigree advertises in parallel with existing drug promotion campaigns by legitimate pharmaceutical companies. It is also getting publicity help from the local mobile phone provider, Mobile Content in Ghana.

Gogo hopes to expand the service to Nigeria and Mozambique – and eventually the rest of Africa.

Gogo is really enjoying the whole experience of setting up this business: “It’s fun!” he said. “It just feels so good doing this work.”

By David South, Development Challenges, South-South Solutions

Published: December 2007

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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