NAIROBI (Reuters) - Kenya plans to launch an open-ended green energy fund in the next fiscal year to step up generation of environmentally friendly energy, a senior government official said on Thursday.
A reliance on hydro dams for electricity in east Africa's biggest economy has often led to blackouts whenever rains fail and growing demand has stretched state utility firms and the infrastructure they have installed.
"To address those challenges, we are turning to green energy. Kenya cannot depend on hydro because of our climatic hydrology conditions," Geoffrey Mwau, economic secretary at the Ministry of Finance, told Reuters.
The official said the government was setting up an open-ended fund to help firms and other institutions to generate clean energy and manufacture energy-efficient light bulbs and other appliances.
The fund will lend to viable projects at concessional rates while the second will be a trust fund for training and research in a country that holds huge potential for renewable energy like geothermal, wind and solar.
"The loan facility will provide concessional loans to companies and other institutes that want to invest in green energy," he said, adding the money would be disbursed through approved commercial banks.
Target firms include large electricity consumers like cement makers and other large manufacturers. Athi River Mining, the country's third largest cement maker, is already installing power generation plants.
"The trust fund will help with technical assistance, development project proposals," he said.
The length of the facility is also indefinite, he said, adding the government was likely to commit about 2 billion shillings ($26.52 million) into the fund.
"The facility will be financed by the government of Kenya and a consortium of development partners... There is going to be money for that in the budget for the next financial year," Mwau said.
Donors who have already shown interest include the French International Development Agency, Germany's Kfw, World Bank Britain's DFID, and Japan's JICA, he added.
"Those are in already. They buy the idea. The government of Kenya will contribute at least 10 percent of the facility," the official said.
Mwau said the initiative, which was initially slated for launch by last month before a prolonged drought caused its delay, would help the country add 2,00O MW of electricity by 2012 besides other benefits.
"We are contributing to the reduction of greenhouse gases emissions so some of these projects will even earn carbon credits," he said.
He added the fund also had the potential to create jobs and improve the lives of the urban poor through their involvement in collecting refuse for energy generation.
"Using biomass and other solid waste, we can generate up to 600 MW in Nairobi," he said.
($1=75.40 Kenyan Shilling)
Editing by Ron Askew