Africa’s Rift Valley Geothermal Energy Investment Boom Heats Up

Africa’s Rift Valley Geothermal Energy Investment Boom Heats Up

An engineer releases steam at the KenGen Geothermal Energy Power station in Naivasha, Kenya, 2009. REUTERS/Antony Njuguna

East Africa’s boom in geothermal energy development is due to a huge influx of international funding and investment.

The East Africa Rift Valley, which stretches from the Gulf of Aden south to Northern Tanzania, contains vast geothermal energy potential but with the exception of Kenya, these resources are only just beginning to be tapped.

Geothermal energy in East Africa’s Rift Valley could provide up to 15,000 megawatts of electrical power according to the US-East Africa Geothermal Partnership. Kenya is one of the top 10 producers of geothermal energy in the world.

What’s changed in the region is that Ethiopia, Kenya and Tanzania as well as Uganda and Rwanda are seeing huge influxes of international funding for geothermal energy.

“Geothermal development in East Africa has the promise to be a model of environmentally sustainable energy development,” said Karl Gawell, executive director of the Geothermal Energy Association, in an AFKInsider interview. “With support from the countries involved, and the international lenders like the World Bank, the region is poised to make dramatic strides forward towards tapping its vast geothermal energy resource.”

Recently, Kenya established the Geothermal Development Co. Tanzania is forming a similar independent geothermal institution, and Uganda announced in January it will create a geothermal resources department within its Ministry of Energy and Mineral Development.

Kenya is one of the fastest-growing geothermal markets in the world and its government is building up its geothermal infrastructure, according to a September 2013 Geothermal Energy Association report. In fact, Kenya is set to become the global geothermal leader with about 1,000 megawatts under development and more than quarter of those under construction.

The consultancy firm Norton Rose Fulbright’s May 2013 report says the World Bank, African Development Bank, USAID, Icelandic International Development Agency and the Nordic Development Fund are making financing available to governments in the Rift Valley countries for geothermal development. That report notes the key to the success of geothermal energy in countries like Kenya is the government’s supportive geothermal laws and regulations.

With new funding available, geologic studies and exploration moved forward in Ethiopia, Rwanda, and Uganda in 2013, according to the Geothermal Energy Association. Rwanda and Tanzania each has an estimated geothermal potential of around 600-to-700 megawatts, though exploration has been slow. Financing was also announced for projects in Ethiopia and Tanzania, while projects in drilling and construction phases have moved forward in  Zambia.

Japan is also supporting the East African countries to develop geothermal projects with the Japan International Cooperation Agency providing technical assistance to Kenya, facilitating geological surveys in Rwanda, Uganda and Tanzania, as well as creating a development plan for Ethiopia.

Meanwhile, the African Union Commission, the German Federal Ministry for Economic Cooperation and Development, the EU-Africa Infrastructure Trust Fund and KfW have formed the Geothermal Risk Mitigation Facility to promote investment by allocating $62 million in grants for exploration and testing programs.

Kenya Leads The Pack

Just 16 percent of Kenyans have access to electricity, but Kenya’s government announced in November it wants to add 5,000 megawatts of electrical-power output by 2017 to foster economic growth.

To that end, the government is actively developing its geothermal resources, which already supply about 13 percent of Kenya’s electricity. About 296 megawatts of the more-than-1,000 megawatts of geothermal projects in development are under construction. When all the projects are completed, Kenya will lead the world and become the center of geothermal technology on the African continent. In fact, geothermal energy is expected to provide half of all the country’s electric needs by 2018.

Kenya’s state-run Geothermal Development Company is seeking investors to build three geothermal energy plants to produce 300 megawatts of power by 2018. But the terms are tough: investors would be expected to raise at least $400 million and the government won’t provide any risk guarantees. Instead, the government is encouraging developers to partner with organizations such as the World Bank’s Multilateral Investment Guarantee Agency.

Kenya Electricity Generating Company (KenGen) has 157 megawatts of geothermal energy capacity and is constructing a 280-megawatt geothermal power plant at Olkaria in Naivasha. Funded by the World Bank, the Chinese company Sinopec began the project in April 2012. It includes installation of 40 kilometers of pipeline to collect steam from numerous wells.

In November 2013, the African Union Commission through its Department of Infrastructure and Energy provided a $6-million grant to African Geothermal to help drill two exploratory wells at the Longonot geothermal site. And the Norwegian company Green Energy Group launched four geothermal energy plants and received an order for five more.

One innovative project was started in November 2012 when Kenya-based power utility KenGen began building 14 temporary geothermal plants with a total capacity of 65 megawatts. The company, which finished a pilot of a five-megawatt portable station in 2011, plans to use the portable geothermal stations in rural areas. What is notable is that construction of these portable power plants takes only six months compared to a full-size geothermal plant with typical construction time of four-to-10 years.

Ethiopia Thinks Big

Since Ethiopia announced a goal of being carbon-neutral by 2025, foreign investments in Ethiopia have skyrocked as international companies invest in a range of industries.

The Geological Survey of Ethiopia and the Japan International Cooperation Agency agreed to design a geothermal energy master plan. Launched this year, the project will also test the potential of 18 sites and assist in technology transfer and training of Ethiopians in Japan.

Meanwhile, expansion of the Aluto-Langano Geothermal Power Plant to 70 megawatts was launched in December 2013 at a cost of more than $30 million with financial assistance from the government of Japan and the World Bank. Aluto Langano was launched in 1998 as a pilot project to test geothermal energy resources. Research confirmed that up to 100 megawatts could be produced from what is considered one of the highest-temperature steam fields in the country.

But it is Ethiopia’s latest project that is expected to be the largest geothermal facility in Sub-Saharan Africa.

In October 2013, Ethiopia signed a $4-billion deal with the U.S.-Icelandic company Reykjavik Geothermal to develop the 1000-megawatt Corbetti geothermal energy farm 124 miles south of Addis Ababa. It will be built in two phases with the first 500-megawatt phase to be completed in 2018 and the second in 2021. When completed, the plant will generate electricity both for local communities and for export as a source of income for the country.

“The Corbetti Geothermal Project will establish Ethiopia as a leader in the global geothermal industry,” Gudmundur Thoroddsson, CEO of Reykjavik Geothermal said in a press release. “Ethiopia has some of the best high temperature geothermal resources anywhere, and the Corbetti Project will be one of the lowest-cost and most technologically advanced geothermal facilities in the world.”

The Corbetti geothermal energy plant is also one of the first projects supported by U.S. President Barack Obama’s $7-billion Power Africa initiative to double energy access in sub-Saharan African and the USAID-sponsored Geothermal Risk Mitigation Facility will provide grant funding for exploratory drilling.

Power Africa brings significant resources and high-level support to the geothermal efforts in Africa, and we are working to encourage the U.S. geothermal industry to engage in their development,” Geothermal Energy Association’s Gawell told AFKInsider.

Tanzania

Tanzania’s over-reliance on hydropower has forced the government to look to geothermal energy and the country hopes to develop projects at 50 geothermal locations in the northeast, southeast coastal area, and the southwest. Tanzania is estimated to have 650 megawatts of geothermal energy potential, according to the African Development Bank.

The company, Geothermal Power Tanzania, already has plans to invest $350 million to explore the country’s southern steam fields and develop a 140-megawatt geothermal plant by 2018 in the Mbeya region.

Tanzania geothermal energy exploration was first carried out by the Swedish International Development Agency in the late 1970s. It wasn’t until 2008 that “a reservoir with significant geothermal potential” was identified in Tanzania, according to the Norton Rose Fulbright report. This find was the result of joint study by the Ministry of Energy and Minerals, the Geological Survey of Tanzania and Germany’s Federal Institute for Geosciences and Natural Resources.

Now Tanzania is adopting the Kenya-based state-run Geothermal Development Company game plan. In August 2013, Tanzania collaborated with the government of Kenya to explore geothermal energy sources in a bid to diversify its energy mix. As part of that agreement, Tanzania will reap the rewards of Kenya’s geothermal expertise, experience, and equipment. Japan also vowed in August 2013 to train 1000 Tanzanians on geothermal technology in 2014.

Other  Projects In The Pipeline

The Republic of Djibouti hopes geothermal energy can play a role in its energy goal of reaching 100-percent green energy by 2020 while reducing generation costs by 70 percent. The African Development Group and the Danish Sustainable Energy Fund for Africa have committed $7.5 million toward the $32-million Lake Assal geothermal energy project. In addition, the Djibouti government is also expected to chip in $500,000.

Rwanda is estimated to have geothermal potential of more than 700 megawatts, according to a 2011 Kenya Electricity Generating Company (KenGen) study, with Kinigi in the Musanze District, Gisenyi in Rubavu District and Bugarama in Ngororero District considered the best geothermal energy sites. In response, the Rwanda government began drilling three geothermal wells in July 2013 located at the slopes of Mount Karisimbi in Kabatwa Sector of the Nyabihu District.

Meanwhile, Uganda is commissioning geologic studies in the Nebbi, Hoima, Kasese, and Bundibugyo-Ntoroko districts. Seven companies have been chosen to explore these geothermal energy sites, including Katwe Geothermal Power Ltd., Gids Consult Ltd., Cozumel Energy Uganda Ltd., Moberge Finance Ltd., Clean Source Energy Partners, Pawakom International Ltd. and Ascot Associates.

The Japan International Cooperation Agency has also extended technical assistance to help assess the sites for future development.

The Regulatory Environment

The going may continue to be slow for investors and would-be investors in Rift Valley geothermal energy because of the nature of geothermal energy development. Geothermal energy is expensive, requiring large, risky initial investments.

The Norton Rose Fulbright report concluded: “Geothermal projects are challenging and have a long lead time, but for Rift Valley countries that have traditionally been reliant upon hydro-power to supply the bulk of their electricity needs, geothermal power represents an ideal source of renewable, dependable, competitively-priced base-load power.”

Nevertheless, the last 18 months have seen several governments take the first steps in creating the regulatory environment that will enable the development of geothermal resources of the Rift Valley.

“There are still some questions remaining about having the right legal and regulatory environment to entice the private capital needed to follow on the initial projects, but the question is not whether they will succeed but it is how far they will go towards achieving the potential of the resource,” Geothermal Energy Association’s Gawell told AFKInsider.