Listed power producer, Kenya Electricity Generating Company (KenGen) is eyeing a windfall from a planned sale of 287,416 certified emission reduction credits(CERs), the bulk of it from its Olkaria 1 geothermal power project.
A CER is equivalent to one tonne of carbon dioxide (CO2) and they are part of emission reduction efforts under the Kyoto Protocol.
KenGen said it has been issued with a total of 4,682,639 CERs from its six projects registered under the Kyoto Protocol’s Clean Development Mechanism (CDM) with some potential reduction emissions of 1.5 million of 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.
Going by global market estimates, KenGen could tap a tidy sum from the sale of the carbon credits after prices surged significantly on increased energy prices due to the war in Ukraine.
For example, the price of carbon permits on the EU Emissions Trading System, which is the world’s biggest carbon market, averaged about 95 Euros per tonne as of April 19, 2023 —meaning that KenGen could theoretically net an estimated Sh4billion from the sale of the 287,416 CERs if bidders settled on the EU spot rates.
The pricing of the KenGen CERs could however vary depending on the offers received when they are put up for auction. CERs prices vary with markets. For example, prices yesterday averaged $29.18(Sh 3,946.14) a tonne in California, Australia $38.35(Sh 5,186.48), China $8.12(Sh 1,098.15) and South Korea $9.66(Sh1,306.15).
Even going by the lower CERs prices outside the main EU market, KenGen would hypothetically still be guaranteed more than Sh320 million.
KenGen, the country’s largest electricity producer has an installed generation capacity of 1,904 megawatts(MW) from a mix of hydro, geothermal, wind, and thermal sources. Going forward, the company plans to increase green generation sources by venturing into solar, wind, and geothermal sources.
KenGen’s six initiatives registered under the CMD include; the optimisation of the Kiambere hydropower project, the redevelopment of the Tana hydropower station, and the 5.1MW grid-connected wind electricity generation at Ngong Hills.
Also under the scheme are the Olkaria II geothermal expansion project, the Olkaria IV geothermal project, and the Olkaria I units 4 and 5 geothermal projects.
The utility firm said the 287,416 CERs are available through the Kiambere hydropower project (27,776), Tana hydropower station (23,673), Ngong Hills wind power (35,967), and Olkaria I units 4 and 5 geothermal power (200,000).
The government in May 2021 said it aimed to set up an emissions trading system to allow companies and other bodies to buy emissions allowances as part of its efforts to limit the release of greenhouse gases.
