PRICING OF HOT WATER FROM A GEOTHERMAL RESOURCE FOR DIRECT USES

Energy from a geothermal resource can either be electrical or thermal. Kenya has been generating geothermal electrical energy for over thirty years but the use of thermal energy is not well developed. As a result of this use of geothermal electricity, a feed-in tarrif of 0.088 USD/kWh has been adopted in Kenya (Ministry Of Energy, 2012). However, there exists not tarrif for thermal energy in Kenya. With the establishment of the Menengai Geo-Industrial Park, thermal energy from the geothermal resource will be sold to the industries as an alternative to fossil fuels. Therefore, this energy should be priced so that it is competitive against the fossil fuels while at the same time ensuring GDC does not operate at a loss. Three possible methods of setting a price for the thermal energy identified are cost-plus, revenue equivalent pricing and pricing relative to the cost of competing alternatives (Friðriksson, 2016). Analysis of the demand for industrial process heat in the park resulted in the creation of three scenarios with a demand of between 6 MWt and 22 MWt. This energy would be obtained from hot geothermal water produced in the Menengai field. Since water is the energy carrying medium, a suitable tariff for the hot water was determined to have a floor of 2.39 $/m3 and a ceiling of 7 $/m3. The floor price was determined using the operating costs as the basis while the ceiling price was determined using the price of alternative sources of fuel for industrial applications.