14 October 2013 – In September 2013, Ethiopian prime minister Hailemariam Desalegn and deputy prime minister Michael Debretsion announced the first independent power project in Ethiopia’s history. The 1,000 MW Corbetti geothermal plant will be built in two 500 MW stages and is expected to be the largest geothermal facility in Africa, at a cost estimated at US$4 billion over an eight to 10 year construction period. Reykjavik Geothermal, a US-Icelandic private developer, will build and operate the power plant, located at Corbetti Caldera, considered a top geothermal resource by the team of Icelandic and Ethiopian geoscientists that have investigated the region.

The Corbetti project is part of the Power Africa Initiative announced by President Obama which seeks to add more than 10,000 MW of efficient electricity in six priority countries in sub-Saharan Africa. A key thrust of the Power Africa strategy is to accelerate the development of the vast and renewable geothermal potential in the Rift Valley which extends through both Ethiopia and Kenya. Corbetti was identified early on by USAID as a priority transaction that could showcase the Power Africa model; combining private sector expertise and investment with US government tools to mitigate risk and build local government expertise. USAID technical advice at the transaction level has been instrumental in moving the Corbetti project towards agreement. At the same time, the USAID-sponsored Geothermal Risk Mitigation Facility (GRMF), funded by KfW and managed by the African Union, will provide the Corbetti project with grant funding to defray the costs and risk of exploratory drilling.

The Corbetti agreement is also a significant signal to the private sector and international investors that the Ethiopian energy sector is looking at new generation models beyond the dominant role that the public sector has played until now. This is also a critical objective of Power Africa; compelling African governments to institute appropriate reforms to create the right enabling environment for private sector activities.

Reykjavik expects the first 10 MW of power to be on-line in 2015, with an additional 100 MW in 2016, and the balance of the first phase 500 MW on-line in 2018.        

Launched with six partner countries, Power Africa employs a transaction-centred approach that provides governments, the private sector, and donors with incentives to collaborate on near-term results and systemic reforms that facilitate future investment.