KenGen Targets Windfall from Sale of 287,416 Carbon Credits

Kenya Electricity Generating Company (KenGen), a publicly traded power provider, anticipates a windfall from its planned sale of 287,416 CERs, the majority of which will come from its Olkaria 1 geothermal power project.

A CER is equal to one tonne of carbon dioxide (CO2), and they are a component of the Kyoto Protocol’s attempts to reduce emissions.

According to KenGen, its six projects registered under the Clean Development Mechanism (CDM) of the Kyoto Protocol have generated a total of 4,682,639 CERs, with a potential reduction in emissions of 1.5 million carbon equivalent per year.

“The projects have been issued with a total of 4,682,639 CERs from the second commitment period of CDM under the Kyoto Protocol. Out of these, the available CERs for sale under this tender is 287,416” the company said as it invited buyers of the CERs.

According to estimations from the worldwide market, KenGen might make a tidy profit from the sale of the carbon credits after their cost considerably climbed along with energy costs as a result of the conflict in Ukraine.

For instance, the price of carbon permits on the EU Emissions Trading System, the largest carbon market in the world, averaged about 95 Euros per tonne as of April 19, 2023. If bidders agreed to the EU spot rates, KenGen could theoretically make an estimated Sh4 billion from the sale of the 287,416 CERs.

However, the cost of the KenGen CERs may change based on the bids that are made when they are placed up for auction. Prices for CERs change as markets do.

As an illustration, prices yesterday averaged $29.18 (Sh 3,946.14) per tonne in California, $38.35 (Sh 5,186.48) in Australia, $8.12 (Sh 1,098.15) in China, and $9.66 (Sh 1,306.15) in South Korea.

KenGen would theoretically still be guaranteed more than Sh320 million, even accounting for the lower CERs prices outside of the primary EU market.

The biggest electricity generator in the country, KenGen, has an installed generation capacity of 1,904 MW from a combination of hydro, geothermal, wind, and thermal sources.

The corporation intends to expand its use of renewable energy sources in the future by exploring geothermal, wind, and solar options.

The improvement of the Kiambere hydropower plant, the renovation of the Tana hydropower facility, and the 5.1 MW grid-connected wind energy production at Ngong Hills are among KenGen’s six projects included under the CMD.

The Olkaria II geothermal expansion project, the Olkaria IV geothermal project, and the Olkaria I units 4 and 5 geothermal projects are all included in the plan as well.

According to the utility company, the 287,416 CERs are available from the Olkaria I units 4 and 5 geothermal power plant (200,000), Ngong Hills wind power (35,967), Tana hydropower station (23,673), Kiambere hydropower project (27,776), and Tana hydropower station.

As part of its attempts to control the discharge of greenhouse gases, the government stated in May 2021 that it intended to establish an emissions trading system that would enable businesses and other organizations to purchase emissions allowances.