Kenya is planning to build a 300-megawatt (MW) geothermal power plant as part of an agreement to address an 8.4 billion Kenyan shilling debt owed to Germany according to a report shared by MOE on X.
This initiative represents Nairobi’s first debt-for-climate swap, where debt is forgiven in exchange for investments in climate-friendly projects.
As per reports by the African Development Bank (AfDB), Germany will cancel the debt if Kenya successfully completes the project.
In this arrangement, known as a debt-for-climate swap, Kenya will allocate the equivalent of €60 million (approximately 8.4 billion shillings) over several years to fund projects aimed at combating climate change.
The success of these projects will determine the extent to which Germany forgives the outstanding debt.
This strategy not only reduces Kenya’s financial obligations but also channels essential resources into renewable energy and sustainable agriculture, focusing on climate resilience.
A portion of the funds, €31 million (about 4.4 billion shillings), is earmarked for the development of the Bogoria-Silali Block geothermal field.
This project is crucial for expanding Kenya’s renewable energy capacity and stabilizing the national power grid.
The remaining funds will be directed toward climate resilience projects in agriculture, particularly to enhance food security and support youth employment in rural areas of western Kenya.
For instance, improving rural road infrastructure will provide better access for farmers to markets, thereby reducing post-harvest losses.
Germany is one of the few countries with an established bilateral swap program.
The idea is that if a country is indebted but not overindebted it can swap part of its debt for a commitment to invest the same amount in social-ecological transformation.
This benefits both the country that converts its debts and the global community.
In the case of a debt-for-climate swap, the two countries agree on specific climate change mitigation or adaptation projects that are implemented using the designated funds.
The debt service to Germany in that amount is only considered paid back once the projects have been implemented successfully.
This debt-for-climate swap aligns with both Kenya’s and Germany’s goals of advancing sustainability and reducing carbon footprints.
Kenya already sources over 90 percent of its power from renewable energies, and this initiative will further bolster its commitment to green energy.
Germany, on the other hand, strengthens its ties with Kenya while advancing its own climate agenda.
In a related development, Kenya has secured a €45 million (approximately 6.7 billion shillings) loan from Germany to increase the capacity of two geothermal power plants in Olkaria, Naivasha, by an additional 40 MW.
The loan will be used to expand KenGen’s Olkaria I Additional Unit 4, 5, and Olkaria IV power plants, raising their combined capacity from 300 MW to 340 MW.
The upgrade involves replacing the existing turbine rotor with new blades, resulting in an additional 10 MW for each unit.
This project underscores Germany’s commitment to supporting Kenya’s transition to fully embrace renewable energy.
Kenya currently generates over 90 percent of its electricity from renewable sources, with hydro, geothermal, and wind power as the primary contributors.
The country’s installed generation capacity stands at 1,904 MW, with hydro at 826 MW, geothermal at 799 MW, thermal at 253 MW, and wind at 25.5 MW.
This focus on renewable energy not only positions Kenya as a leader in green energy in Africa but also contributes to global efforts to combat climate change.
Kenya’s plan to build a 300 MW geothermal power plant as part of a debt-for-climate swap with Germany represents a step toward sustainable development.
By investing in renewable energy and climate resilience projects, Kenya aims to reduce its debt burden while contributing to global climate action.
This initiative highlights the potential of innovative financial mechanisms in addressing both economic and environmental challenges.
