NAIVASHA, Kenya, Aug 11 (Reuters) - For Maasai tribesman Charles Kamami, Kenya's drive to boost its geothermal capacity spells environmental destruction which threatens his pastoralist way of life.
But for east Africa's largest economy, geothermal energy could be a saviour as it struggles to increase power generation to keep up with soaring demand driven by years of robust growth.
With proven potential of 7,000 megawatts, geothermal energy from Kenya's geologically active Great Rift Valley forms the cornerstone of a government scheme to double total energy production by 2018.
That's key to luring foreign investors. According to a recent World Bank report, the price of electricity is a leading factor in making Africa uncompetitive, relative to other emerging economies like India and China.
"The problem in the past has been the expense of geothermal energy generation," said Nick Nuttall, spokesman for the United Nations Environment Program, by telephone from Britain.
Nuttall said that when oil prices spiked above $140 a barrel this summer, people began to look at geothermal energy "with new eyes". Oil has since come off its highs, to trade around $120 a barrel.
Kenya produces 130 MW of power from geothermal sources in three sites in the Rift Valley. A new plant is being built in Hell's Gate National Park to increase capacity by 35 MW.
The energy is produced by trapping steam released by hot rocks with water reservoirs deep in the earth and using it to power turbines. Geothermal power is seen as one of the most reliable and comparatively cheap renewable energy sources.
But Kamami is worried about the environmental cost of the new development.
"It has damaged many things," he said in the safari park which is scarred by a sprawling network of pipes and pylons.
"The pipes affect the migration of wild animals and where we can graze our cattle," he said, raising his voice above the drone of drilling on a nearby hillside.
"Now, they are drilling wells on either side of our valley, it scares off the animals. Also the vegetation has changed," he said. Some of the plants the Maasai use for medicine no longer grow in the area, he said.
Balancing environmental and livelihood concerns with Kenya's development needs is a difficult process. However, geothermal energy has obvious advantages over fossil fuels, blamed for contributing to greenhouse gas emissions and climate change.
"The huge benefits, of course, are that you are getting indigenous electricity which doesn't rely on expensive oil imports," Nuttall said. "The other benefit is that you don't get any CO2 emissions."
OFF THE GRID
Many African countries, including economic powerhouse South Africa, face serious supply challenges which have caused debilitating power outages from Senegal's Dakar on the Atlantic Coast to Tanzania's Dar es Salaam on the Indian Ocean.
The International Energy Agency says Africa needs to spend an estimated $560 billion by 2030 to generate an additional 260,000 MW of power.
Kenya gets 60 percent of its electricity from dams, 30 percent is fuel-generated and the rest comes from geothermal -- but the total is not enough.
Kenyans use up 1,050 MW of electricity at peak hours, just 50 MW shy of the country's maximum capacity, and demand is growing 8 percent annually.
Blackouts across the country are frequent: in its report, the World Bank said that Kenyan firms suffered 7 percent losses in sales due to power disruptions in 2007.
And around 80 percent of Kenyans are not even linked to the electricity grid. Kamami is among them.
A rickety aerial protrudes from his cow dung-clad hut in the Hell's Gate park like a banner of modernity. Despite his semi-nomadic lifestyle, he keeps up to date with international news via his black-and-white TV which runs off a car battery.
This is the reality that officials at the Energy Ministry in the capital Nairobi want to change.
"We have intensified exploration of geothermal resources because we want to find a way to bring the cost of power down and hopefully bring in investors ... By 2030, at least 80 percent of Kenyans will have power," said Alfred Odawa, chief geologist at the Energy Ministry.
Henry Rotich, an engineer at the ministry, said 20 percent of Kenya's power would be geothermal by 2018.
Sorting out Kenya's power problems is particularly pertinent as the country's 2.393 trillion shilling ($36 billion) economy struggles to get back on its feet after a contested December election led to days of violence in which more than 1,500 people were killed and another 300,000 were displaced.
Inflation stands at around 26 percent, the key tourism sector is still stunted and the economy contracted 1.3 percent in the first quarter compared with 7.7 percent growth in the same period a year ago.
The economy grew 7 percent last year, compared to 6.4 percent in 2006. But it is expected to nearly halve to about 4 percent this year due to the post-election crisis and inflation.
In June, World Bank economist Giuseppe Iarossi urged the Kenyan government to develop its poor infrastructure, particularly power generating capacity, to attract investment.
Iarossi said a competitiveness assessment carried out last year by the bank showed the biggest indirect cost to firms operating in Kenya was from disruptions to power supply.
Attracting foreign investors will be especially hard since electricity prices rose 21 percent at the beginning of July. The Kenya Regulatory Commission slashed electricity subsidies, saying it needed to ensure improvements in quality and supply.
Kenyan industrialists regularly complain that the cost of electricity is too high but officials at main power provider Kenya Electricity Generating Company (KenGen) say the country is still expanding its capacity.
Eddie Njoroge, managing director of KenGen and head of the Union of Producers, Transporters and Distributors of Electric Power in Africa, told Reuters in June that the continent's electricity producers could raise investment funds by developing clean energy that allows them to sell emission credits.
By focusing its expansion plans on geothermal, Kenya is also fitting into a world trend, according to the United Nations.
The U.N.'s Climate Panel says geothermal energy could provide 2 percent of total global energy production by 2030 at an estimated cost of $20-80/MWh. That compares to less than 0.4 percent of global energy production in 2004.
The Climate Panel says solar power costs an estimated $50-180/MWh.
But geothermal is not Kenya's only energy project.
KenGen also plans to produce 5 MW from wind turbines on hills near Nairobi and is studying another 12 potential sites. The country is also in talks with neighbouring Tanzania to import compressed natural gas.
In northern Kenya, 11 companies are undertaking seismic and geological surveys for oil, and they say initial tests show the geology is appropriate for oilfields. They plan to start drilling next year.
The companies include China's CNOOC and firms from Britain, Australia and Kenya, according to the energy ministry.
"You find the same geological formations in southern Sudan, where there is a lot of oil," said Odawa.
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