Ethiopia inks its first ever power purchase agreement with private companies in an attempt to triple the nation’s electricity generation capacity to 17,000MW by 2020. The pact will enable developers to start Africa’s largest geothermal projects with an investment capital of four billion dollars.
Azeb Asnake, CEO of the Ethiopian Electric Power (EEP), Admasu Nebebe, state minister for Finance and Economic Cooperation (MoFEC), Sileshi Bekele (PhD) minister of water,irrigation and Energy, Emmanuel Birba, project manager of Meridiam and general manager of the TM Geothermal Operations Company, and Gudmundur Thorodosson, CEO of Reykjavik Geothermal (RG), have signed the implementation agreement in a ceremony held at Sheraton Addis on December 19, 2017.
“It is a key step taken towards reliable and accessible power for our country’s economic development,” Sileshi said, while addressing the diplomats and officials of various ministries attending the ceremony.
The agreement was realised two years after EEP and Corbetti – a project funded by RG, Iceland Drilling, African Renewable Energy Fund and InfraCo Africa- agreed to develop a 500MW pure geothermal power generating plant in Corbetti Caldera, 250Km south of Addis Abeba, in the Oromia regional state.
“It is an achievement for the country as it has been studying its geothermal potential for almost half a century,” Admasu added.
The first agreement was signed during Barack Obama’s, former president of the United States (US), visit to Ethiopia back in 2015. It was backed by Power Africa Initiative, African Development Bank (AfDB), and significant support and subsidy from the government of the United Kingdom (UK).
RG, having a 28pc stake in Corbetti, was the first to incept the project six years ago after a geological survey of Ethiopia discovered that Corbetti Caldera had ample resources for geothermal power generation.
Being one of the renowned developers of geothermal power, RG has a presence in 20 countries including Ethiopia, Mexico and the Caribbean (St. Vincent).
Later RG, in its project at Corbetti, was joined by Iceland and Berekely, which owns more than half of the company.
The newly signed pact will enable RG and its partner, Meridiam, to generate similar amounts of power from Tulu Moye and Abaya geothermal projects. RG, along with its partner, has expended 3.3 billion Br to conduct research and feasibility studies.
All such projects are located along the longest rift valley in the world, East African Rift Valley, an area endowed with the capacity of generating 15,000MW of geothermal power.
Both projects are expected to be completed in eight years. The developers are allowed to operate the plant only for 25 years. In the concessional period, the government will pay Corbetti 0.069 dollars for a kilowatt-hour of electric power, almost equal to the subsidised tariff the country is currently charging.
In the first phase, the plant will begin generating power by the end of 2019, whereas the second one is expected to be completed in 2025, concurring with Ethiopia’s plans to transform into a lower middle-income country.
The project’s implementation coincides with the aggressive expansion of industrial parks by the government, expected to reach 15 over the next three years, of which seven are already operational. Upon completion, these projects alone need 2,000MW of power, almost half of the present annual capacity of the nation.
“The new project reveals that the country is on the right path to ensure adequate power supply for the industry sector- the backbone of the economy,” said Azeb, who heads EEP.
The demand for electricity is growing across the country. In the past fiscal year, over 12 billion kWh of electricity was generated, twice the amount registered half a decade ago. In the same period, the capacity of producing power has doubled to 4,300MW.
Yet, despite the bulge in capacity, the average electricity coverage in the nation is only 55pc, where eight percent and 93pc of urban and rural households have access to electricity, respectively.
“Relying heavily on the public funds and borrowed money to address the existing infrastructure gap, including power, will drive the already rising debt to gross domestic product (GDP) ratio,” said Tigabu Atalo, power, energy and infrastructure consultant. “Thus, the geothermal development agreement is the right action taken by the government before it’s too late.”
Although Ethiopia has the potential of producing geothermal power in the central parts of the rift valley and Afar Depression, no projects have been realised yet; Corbetti being the first attempt.
Unlike Ethiopia, neighbouring Kenya has a notable record in geothermal project development. Its geothermal output has surged by 12 folds to 533MW.
Source: Addis Fortune News paper, Dec 24, 2017