HomeRegional NewsEast AfricaEthiopia breaking ground in geothermal vision

Ethiopia breaking ground in geothermal vision

Ethiopia currently has an electricity access rate of 45%, with 11% of its population already having access through decentralised solutions. Though the country is heavily reliant on hydropower, government plans to exploit 1,000MW of geothermal potential by 2030.

This article first appeared in ESI Africa Issue 3-2020.
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Ethiopia started long-term geothermal exploration in 1969. Since the late 1970s, geoscientific surveys mostly comprising geology, geochemistry, and geophysics, were carried out, from south to north, leading to prospective projects at Abaya, Corbetti, Aluto Langano, Tulu Moye and Tendaho (Teklemariam and Beyene, 2005).

The explored prospects in the country are at various stages of exploration and include:

  1. more advanced prospects where exploration drilling has been conducted (Aluto Langano and Tendaho),
  2. prospects where surface exploration is relatively at a higher level (Abaya, Corbetti, Tulu Moye and Fentale and Dofan), and
  3. prospects where surface exploration is at a lower level and warrants further exploration (Kone, Meteka, Teo, Danab, L. Abe and Dallol).

Let’s explore two projects that have made the most progress. Corbetti and Tulu Moye, located in the Rift Valley, are expected to produce a combined 1,000MW of power when they reach full completion. In 2017, the government signed a $4 billion contract for the construction of Corbetti.

“No doubt the success of this effort will have a significant impact on the country’s future economic well-being,” noted former chief executive of Ethiopian Electric Power (EEP), Azeb Asnake.

The equity investors in the Corbetti project include the Paris-based asset manager Meridiam, Africa Renewable Energy Fund, and InfraCo Africa – funds that focus on infrastructure investment.

To raise further capital for the geothermal project, in 2018 InfraCo Africa signed a shareholder agreement with Berkeley Energy, committing $30 million of equity investment to the geothermal project. The project will be operated by the developers for a period of 25 years. To manage the early stage development risks and costs associated with being a pioneer, Corbetti will be developed in multiple phases.

The first phase, wholly equity funded, will drill up to six exploratory wells and build a small power plant. This initial phase will demonstrate the viability of the geothermal resource and the Power Purchase Agreement (PPA), enabling the project to raise further investment.

The second phase will raise debt financing to drill a further 9-13 wells and construct a 50-60MW commercial-scale power plant and facilities. Totalling 150MW, the full Corbetti programme will enable the government to meet 18% of its ambition to generate 840MW from geothermal sources by 2025.

In March 2020, the project’s investors signed a PPA and implementation agreement with the government of Ethiopia and EEP. The signings allow the project to move into the next phase of implementation, and to commence the drilling programme. InfraCo Africa’s CEO, Gilles Vaes, said: “We remain committed to developing geothermal power in Ethiopia during these challenging times and are excited to be taking the next steps together and in close partnership with EEP and the government of Ethiopia, to realise this ambitious project.”

The project developers have also committed to extending the plant’s development impact by adding ‘bolt-on’ water initiatives, where possible.

Progress has been steady on the Tulu Moye geothermal power project. Also in March 2020, the AfDB endorsed a decision by the Trust Fund Committee of the Clean Technology Fund (CTF), one of two funds within the Climate Investment Funds (CIF), to extend a $10 million concessional senior loan for the development of this project.

“We welcome the participation of CTF in this project. These concessional resources will be instrumental in helping the country to diversify its energy mix by facilitating the deployment of renewable energy technologies while supporting Ethiopia in meeting the targets under its National Electrification Plan 2.0,” said Anthony Nyong, the director of climate change and green growth at the Bank.

The Tulu Moye project entails the design, construction, commissioning and operation of a 50MW geothermal power plant under a Build, Own, Operate and Transfer scheme. The project will include a sub-station and an 11km transmission line.

Antony Karembu, the principal investment officer and renewable energy specialist at the AfDB, noted that as one of the first geothermal IPPs in the country, CTF will leverage climate finance options in mobilising private sector operators for the project.

The CTF funds will be drawn from the Dedicated Private Sector Programme III designed to provide risk-appropriate financing for high-impact, large-scale private sector projects in clean technologies. ESI