Geothermal Energy Development in Africa Heats Up

East Africa’s geothermal energy development is experiencing a boom, thanks to major international funding and investment.
Published: Thu 27 Feb 2014

The East Africa Rift Valley, which stretches from the Gulf of Aden south to Northern Tanzania, contains vast geothermal energy potential which has yet to be harnessed, with the exception of Kenya.

Kenya, one of the top 10 producers of geothermal energy globally, has one of the fastest-growing geothermal markets in the world and its government is very involved in building up its geothermal infrastructure. In fact, the country is set to become the global geothermal leader with about 1,000MW-more than a quarter of those are already under construction. Kenya hopes to be the world’s leading exponent of geothermal power by 2023.

East Africa’s Rift Valley has the potential to provide up to 15,000MW electricity. International funding is seeing the development of geothermal energy take off in Ethiopia, Kenya, Tanzania, Uganda and Rwanda.

Geothermal development in this region will provide much-needed environmentally sustainable energy development.

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.

Investor confidence

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 finance available to governments in the Rift Valley countries for geothermal development. The report indicates that the key to attracting this investor confidence comes from the government’s supportive geothermal laws and regulations.

Thanks to a boost in funding, geologic studies and exploration has progressed in Ethiopia, Rwanda, and Uganda. Rwanda and Tanzania each has an estimated geothermal potential of around 600-to-700MW.

Financing was also announced for projects in Ethiopia and Tanzania, while projects in drilling and construction phases have developed further in Zambia.

Japan is also supporting the East African countries to develop geothermal projects-the Japan International Cooperation Agency is providing creating development plans, providing technical assistance and facilitating geological surveys in the region.

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 US$62 million in grants for exploration and testing programs.

Overcoming challenges

Geothermal projects are challenging. The energy is expensive and requires large, risky upfront investments.

With a prospecting success rate of between 10% and 40%, and a drilling cost of between €20 – 28 million for a 5 MW well capacity in Germany, initial capital outlay – which accounts for almost 50% of the project cost – is significantly higher than that of other renewable energy sources.

Drilling risk is still perceived as the highest risk element. Drilling costs are estimated to be between US$650 and US$1200 per meter drilled in East Africa, depending on the circumference of the well. Drilling costs also vary depending on remoteness of location and because of a shortage of locally available equipment and specialized drilling knowledge.

The creation of a regulatory environment that will enhance investor confidence is also a major challenge that must be overcome as quickly as possible.

Because of the high-risk exposure, most investors are reluctant to get involved in geothermal development at this stage of the project. However, once the resource is confirmed, bringing partners on board for the final development is significantly easier.

Key points to consider when pursuing geothermal power projects:

 

  • Government support is essential for the development of geothermal resources, and geothermal should be part of the national development plans for all countries along with the Rift Valley System.
  • Another issue is the shortage of technically skilled utility staff within the various countries making up the Rift Valley system and suggestions (and commitments of finance) have been made for a regional training centre, hosted in Kenya, to build human capacity.
  • Appropriate and new technology needs to be explored in order to maximize geothermal usage – this includes hybrid systems and well-head generation modules.
  • Financing of exploration must be supported by regional governments in order to fast track the development of geothermal in the region.

But, once these challenges have been overcome, the Rift Valley countries, which normally rely on hydro-power to supply the majority of their electricity needs, can look forward to tapping into the potential of geothermal power which provides an ideal source of renewable, reliable, sustainable and competitively-priced base-load power.