22 July 2013 – A new project supported by the African Development Group (AfDB) plans to exploit the geothermal potential in the Lake Assal region to enable Djiboutian population’s access to a reliable, renewable and affordable source of energy.
 
Currently Djibouti relies mostly on fossil fuels and some hydropower imports from Ethiopia. The majority of the country’s current generation capacity is situated in Djibouti City. The existing power stations are old, polluting and expensive to operate.  In addition, fuel imports are expensive and require important foreign-currency expenditure.

As a consequence, only half the population of the country has access to electricity due to high tariffs. Djibouti is however blessed with substantial geothermal potential, capable of meeting the country’s energy needs and possibly exports to neighbouring countries, while reducing CO2 emissions from thermal electricity generation.

The geothermal exploration project in the Lake Assal region is structured as a public private partnership, where the government of Djibouti is taking the lead on the first exploration and appraisal drilling phase. The private sector will be responsible for the production drilling, steam gathering system and electricity production and evacuation to the national grid.

In collaboration with the World Bank, the AfDB group has structured the financing of this project. The first phase will cost about US$32 million. The AfDB board approved a US$7.5 million financing from the African Development Fund and the Sustainable Energy Fund for Africa (SEFA), a Danish funded initiative implemented by the AfDB.

The AfDB and the World Bank have jointly mobilised different donors to co-finance the project: the Global Environment Facility (GEF), OPEC Fund for International Development (OFID), Agence Française de Développement (AFD) and the Global Geothermal Development Plan (GGDP) through Energy Sector Management Assistance Program (ESMAP).

The AfDB  alone has mobilised from its own resources: US$5.31 million grant from the African Development Fund (ADF), a US$0.4 million loan from the ADF, and US$1.8 million from SEFA. The government of Djibouti will also make a contribution.

The contributions from the AfDB and SEFA will be used to continue to raise more financing and will serve as a catalyst to rally independent geothermal electricity producers. Specifically, SEFA funds will finance the recruitment of a geothermal consulting company that will  be responsible for the technical management of the project and for preparing the power plant’s feasibility study.

The current project seeks to replicate the innovative model adopted in Kenya where the AfDB approved, in 2011, the Menengai geothermal development project. For this project concessional funds were provided by development financing institutions, such as the AfDB and the Climate Investment Funds (CIF) hosted by the AfDB, to finance the drilling exploratory phase of the project.

Drawing from the Menengai experience and tapping into the East African Rift valley geothermal potential, the AfDB has also been working on a series of small-scale geothermal units, adapted to the specific context of each country. In Ethiopia, the AfDB is playing a leading role in defining a geothermal roadmap. In Tanzania, it is leading the scaling up renewable energy programme which includes the financing of a geothermal development project. In the Comoros, the AfDB is also working to develop a 20 MW geothermal plant matching the needs of the archipelago.