The Kenyan electricity market and bitcoin mining seem to be natural allies: the country has a vast surplus of geothermal energy and an even larger untapped reservoir – but the expansion of the electricity grid has so far failed due to a lack of investment.
Kenya is the African pioneer of geothermal energy production. This is largely due to energy producer KenGen, which is tapping the geothermal wells gushing from the extremely volcanically active Kenyan part of the Great Rift Valley.
Now the energy producer is offering its surplus electricity to bitcoin miners. They had already asked for it, now KenGen is coming towards them. Quartz Africa reports this with reference to a media report that is behind a paywall.
KenGen wants to locate the miners in an energy park located at the company’s largest geothermal facility, in Olkaria , a good 120 kilometers from the capital Nairobi. The park offers excess electricity, which flows very stably thanks to its proximity to the source.
However, further specific details are not yet known. It is assumed that the miners who take the electricity are from the USA, Europe or China, since Africa itself does not have its own mining industry.
The plan is quite interesting if it comes to fruition. A look at the Kenyan electricity market shows this.
The Kenyan electricity market in figures
According to a press release from KenGen, Kenya’s electricity demand hit a new record in May 2022: 2,051 megawatts. For comparison: Germany needed 221.3 gigawatts in 2020, i.e. around a hundred times as much. However, as of 2018, only 9 percent of Kenya’s total energy requirements are covered by electricity. The rest is mainly made up of wood (68 percent) and petroleum.
As the largest electricity provider in Kenya, KenGen meets around two thirds of the demand. A good 80 percent of the electricity fed into the grid comes from renewable sources , of which hydropower continues to make up the largest share at 826 megawatts. However, the main driver of growth is geothermal energy. Since 2014, their capacity has increased from 230 to 713 megawatts, and KenGen plans to bring another 83 megawatts online soon. In addition, wind power has experienced a strong expansion since 2018.
Although access to electricity has been growing rapidly in rural Kenya since 2010, it was still below 60 percent at the time of the last survey in 2017. In the medium term, the demand for electricity is therefore likely to continue to grow.
The potential of geothermal energy in the region is far from exhausted. According to one estimate, 20,000 megawatts of geothermal energy are still lying idle in East Africa around the Great Rift Valley. These are spread across numerous countries, from Ethiopia to Congo, although Kenya alone has a potential of 10,000 MW. The “Geothermical Development Company” is currently exploring at least 9 additional wells, several of which are ready for exploitation.
As far as energy supply is concerned, Kenya is in a very comfortable situation: The country already has a strong hydroelectric power base, a gigantic reservoir of geothermal energy sources, and a large, untapped potential for photovoltaics and wind power.
But the problem is that the demand for electricity is growing more slowly than the supply. In 2019, for example, Kenya already had a grid capacity of 2,732 megawatts, while the consumption peak that was only recently reached is almost 700 megawatts (0.7 gigawatts) lower. For comparison: The Bitcoiner miners consume between 5.9 and 26.46 gigawatts , depending on the estimate .
This excess supply meant that the two major buyers, Kenya Power and Lighting Co. Ltd., suspended signing new contracts with suppliers in 2019. This blocked more than 2,240 megawatts that were supposed to be developed.
The providers hope that the Kenyan National Electrification Strategy initiated in 2018 will further expand access to electricity and thus increase the demand for electricity. According to the strategy, every household should have access to electricity by 2022. The challenges are (or were) the high cost of the power grid to be built and a lack of access to investment capital.
Since the expansion of the grid is obviously difficult, Kenya relies to a large extent on renewable mini-grids or off-grid photovoltaic systems. This is a good bridging solution, but should be replaced by the more stable supply from the grid in the long term.
From all of the above, it should be clear that bitcoin mining and geothermal energy are natural allies in Kenya: the excess geothermal energy can help bitcoin go “greener” without, as skeptics like to say, green energy not being available elsewhere Are available. These are surpluses waiting to be connected to the grid.
At the same time, bitcoin mining can help energy provider KenGen market its surplus energy. This brings in money for the company, which is fundamentally helpful in a developing country and can perhaps help to solve the investment backlog for the expansion of the electricity grid. Bitcoin mining could also motivate KenGen to extract more of the available geothermal energy and position itself as an industrial site with cheap and surplus energy.
A smart policy could steer mining in such a way that at least part of the profits flow into investments in infrastructure, such as the power grid. In any case, KenGen’s push is a good start in this regard.