Geothermal
The Insurance Regulatory Authority of Kenya (IRA) in partnership with the Ministry of Energy and Petroleum, State Department of Industrialization and East African Insurance Sector have announced a geothermal risk underwriting facility, a pioneer initiative in the whole continent.
The product is expected to fast-track and attract greater investments in green energy projects in Kenya and the region by lessening the financial risk associated with geothermal projects.
The facility will underwrite up to 2 million USD in the early exploration stages and its development has been supported by Financial Sector Deepening (FSD Africa) in collaboration with Parhelion Underwriting and Kenbright who are huge partners in the joint initiative.
Principal Secretary, State Department of Energy Alex Wachira noted that insurance cover for the risky geothermal exploration work is a great enabler for the country to exploit the geothermal power potential estimated at 10,000MW.
According to Wachira, the huge potential of geothermal energy makes it not only an energy source but also a driver of economic growth and sustainable development. He added that Kenya is endowed with vast geothermal resources and great progress has been made in tapping into this clean power.
“However, for us to fill the energy gaps, we need collaboration and investment between the public and private sectors,” reiterated the PS in a speech read on his behalf by a representative from the Department. Wachira emphasized that collaborations are a key step to harnessing and exploiting geothermal power to its maximum potential.
Speaking on the announcement, IRA Commissioner of Insurance Godfrey Kiptum lauded the facility as one that will deepen Kenya’s green energy credentials by spurring investments in the geothermal subsector, a form of energy in which the region holds great potential.
“The insurance sector plays a critical role in the social-economic development of any nation. I am proud that the insurance sector has kept innovation alive with products such as the geothermal risk underwriting facility,” he expressed.
Kiptum further explained that the insurance sector’s innovation enables greater private sector investment in geothermal energy. “It is also gratifying to note that this product will enhance green energy and sustainability of our economy,” added Kiptum.
FSD Africa Risk & Resilience Director Kelvin Massingham applauded the insurance sector for innovation and leading the way in supporting green energy transition in Africa expounding that ‘FSD Africa is committed to make finance work for Africa and have finance flow into green investments for a sustainable future.’
“We are proud to have worked with the State Department of Energy and Industrialization as well as the insurance regulator and the private sector in developing this facility that will de-risk upstream geothermal resource prospecting, enabling greater investments in green energy,” stated Massingham.
The de-risking facility announced will cover early-stage development drilling risks for investors in geothermal projects. This facility represents a critical step in creating a more favorable investment environment by mitigating the financial risks associated with these high-potential but high-risk projects.
This underwriting facility not only marks a significant milestone in Africa’s journey towards sustainable energy but also sets a precedent for future initiatives aimed at de-risking and supporting other high-impact sectors across the continent.
Kenya is already a leader in geothermal electricity, with a total installed capacity of 988.7 MW contributing 47 percent of the power on the grid. This places the country at rank sixth globally and first in Africa in terms of geothermal power development.