ENERGY SECTOR LANDSCAPE

The East African Rift countries and the Comoros Islands are endowed with several sources of energy for which distribution and potential vary significantly from country to country. A government’s decision to render support to a given energy resource – e.g. geothermal – is influenced by many factors, including its availability and competitiveness in relation to other energy sources. Therefore, it is imperative to discuss the place of geothermal in the context of the wider energy landscape in the region. To this end, the following sections provide an overview of the energy landscape for the 13 EARS countries: Burundi, Comoros, DRC, Djibouti, Eritrea, Ethiopia, Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda and Zambia.The chapter also discusses the specific niche of geothermal in the energy mix and economic development of the region.

Macroeconomic overview

The countries of the East African Rift region experienced the most vigorous economic growth in Africa in 2018. The recorded average regional gross domestic product (GDP) growth rate of 6.2% was higher than the African average growth rate of 3.4% and the global average growth rate of 3.2%. This growth was mostly driven by rising government spending on infrastructure and growing domestic demand for commodities and services, mainly in Djibouti, Ethiopia, Kenya, Rwanda, Tanzania and Uganda (UNECA, 2019). The GDP per capita for the region varied substantially among the countries, with Burundi reporting values below USD 1000 (US dollars) while Djibouti and Kenya were above USD 4 000 in 2019.

Overview of the regional energy sector institutions and initiatives

Regional organisations and governments in Africa have established several regional initiatives and programmes to support energy development. These include power generation and transmission, promotion of sustainable energy, and capacity development.

Overview of energy trends

According to AFREC data, domestic production of fuels in the East Africa Rift countries was estimated to grow on average by 3.5% annually between 2013 and 2018, while electricity generation grew on average by about 4% annually between 2013 and 2017.Charcoal accounts for the largest share of domestic fuels in the region. Other sources of domestic fuels include coal, crude oil and natural gas. The power sector is dominated by renewables, with hydropower being the main source. In 2019, the share of grid-connected capacities for hydropower, geothermal and fossil fuels were 69.4%, 4.2% and 19%, respectively.

Grid-connected electricity generation capacity

Electricity production in the region was mainly by hydropower sources in all the countries except Comoros, Djibouti, Eritrea and Tanzania, where fossil fuels dominated production.

Off-grid power systems in the East African Rift countries
Off-grid systems are rapidly growing around the world, and in the process are contributing to the achievement of universal access to modern sources of energy (SDG 7).

In the period 2010-2019, the installed capacity of off-grid power in the region grew on average by about 12.7% annually, from about 200 MWe. Solar PV solutions had the strongest growth, averaging about 33% annually, while non-renewables and bioenergy averaged about 12%.

Electrification rate The rate of access to electricity in the East African Rift region varies significantly across countries. According to the United Nations Statistics Division (UNStats), in 2017 Burundi had the lowest rate nationally of access to electricity in the region at 9%, and Comoros had the highest rate at 80%. Other than Comoros, Djibouti (at 60%) and Kenya (64%), the national electrification rate in all the other countries in the region was below 50%.

Role of geothermal energy

The geological context of the EARS provides better resource characteristics than for many
other geothermal resources.This is because the EARS is located in a tectonically active zone characterised by a spreading crust and volcanic activities.

One major strength of geothermal energy is that it can be used for multiple applications including direct use of heat, electricity generation, and utilisation of other by-products like recovered mineral elements. This holistic utilisation of geothermal resources, including in other sectors such as agri-food, industries, etc., results in a multiplier effect for social and economic
transformation, thereby helping governments meet key development objectives.

STATUS OF GEOTHERMAL DEVELOPMENT AT REGIONAL AND COUNTRY LEVELS

The status of geothermal development in the region for both electricity and direct use is briefly
discussed in this chapter. This includes an analysis for the following selected countries: Comoros, Djibouti, Ethiopia, Kenya, Tanzania, Uganda and Zambia. The chapter also describes the barriers to the uptake of geothermal energy in each of these countries.

Regional overview
The total installed electricity capacity from all energy sources in the East African Rift countries
is about 20 GWe. The contribution of geothermal energy to this is about 900 MWe, with all the
existing installed geothermal power plants located in Kenya and Ethiopia.

The 8.5 MWe (7.3 MWe net) pilot power plant in Aluto-Langano geothermal field in Ethiopia was commissioned in 1998. The plant broke down in 2003 and was partially repaired in 2006 but fell into complete disrepair in 2015 due to plant maintenance challenges. Ethiopia has plans to reactivate the Aluto-Langano power plant and expand generation initially to 70 MWe and to a total of about 690 MWe by 2025 (Kebede and Woldemariam, 2018). In parallel, IPPs have completed detailed surface studies and drilling operations started in Tulu Moye in March 2020, while the drilling contract for at Corbetti is expected to be awarded in the last quarter of 2020.

Status by country
Comoros Hydropower and fossil fuels are the only grid-connected sources of electricity in the Comoros Islands. The installed capacity of fossil fuel-based sources remained constant during the period 2010-2019 at 21.6 MWe, and similarly, hydropower capacity remained unchanged at
1.4 MWe.

As of 2020, there are no geothermal fields in operation in Comoros. Yet the government
has shown commitment towards geothermal exploration and development despite the limited
financial resources available in the country.

POLICIES, REGULATIONS AND INSTITUTIONAL FRAMEWORKS

Supportive policies and conducive regulatory environments are critical for the development and implementation of geothermal projects. This chapter will provide an overview of the policies, regulations and institutional frameworks in Comoros, Djibouti, Ethiopia, Kenya, Tanzania, Uganda and Zambia with the objective of assessing each country’s status as well as identifying possible gaps and good practices.

Status by country
Comoros Geothermal development in Comoros has been slowed down partly by the absence of an energy policy, strategy and institutional and legislative framework. Prefeasibility studies indicate that geothermal development in Comoros would lead to the generation of cheaper electricity, because most of the electricity generated in the country currently is expensively priced and comes from fossil fuel plants.

Lessons learned and perspectives

For many of the countries in the region, hydropower or fossil fuels are the main sources
of electricity. With the cost of generation (LCOE) from renewable technologies dropping and the world embracing renewable energy technologies, the countries of the region have started looking at all options available for a sustainable energy mix. In Kenya, geothermal has been positioned as the main source of electricity for the country in the short- and medium-term (2030), while solar and wind generation are also expected to grow. Other countries like Djibouti have developed long-term energy plans with clear perspectives for growth and investment in geothermal energy. Therefore, long-term and stable energy mix plans
for countries may be considered as a critical first step allowing for mainstreaming of geothermal as an important energy source.

GEOTHERMAL FINANCING AND DEVELOPMENT MODELS

This chapter presents the main risks associated with geothermal energy projects in the EARS region and discusses how development models, strategies and instruments for financing geothermal projects have evolved over time. The section also presents the advantages and disadvantages of the various options and identifies lessons learned and possible strategies to improve the financial viability of geothermal projects.

Introduction to geothermal project financing and risks

Equity investors in geothermal projects in the East African Rift countries typically require an internal rate of return (IRR)7 exceeding 15%, and development finance institution (DFI) lenders will charge interest rates between 6% and 8%. Commercial lenders have yet to participate in the EAR geothermal market, and their current risk aversion may result in unattractive interest rates. Geothermal projects require high upfront investments, and thus the cost of finance is an important consideration to assess their viability and competitiveness.

It can be observed that the success rate of drilling the first five (exploration) wells has substantially increased from around 45% in the 1960s to around 85% in the 2000s.

Financing options
The financing options available for geothermal projects include public sources, grants and
concessional finance, complemented by technical assistance from support programmes. The
following section provides an overview of how the above options have been applied in the context of geothermal development in the region.

Innovative financing to address gaps

Stakeholders involved in the consultation process to develop this study indicated that existing direct finance and risk mitigation options available in the region – for example, from the GRMF – have played a major role in supporting geothermal development and attracting investors to the region. However, several experts pointed out the need for additional risk mitigation support.

Geothermal development models

As analysed in the previous sections, most of the EARS countries are currently involved in early stage geothermal development, mostly using public funds to confirm resource occurrence, type and quality before inviting private sector participation.This approach is credited with helping to reduce risks and keeping tariffs low.

Lessons learned and perspectives

Discussion of the financing options, including risk-mitigation schemes, and of development models that have been used in the region has made clear that the selection of a business model is not a definitive or static decision.

ENABLING UPTAKE OF DIRECT USE APPLICATIONS

Direct use is the most efficient utilisation of the geothermal resource because the energy is used in situ without conversion to electrical energy.

Quantifying potential and benefits

The main objective of geothermal developers in the countries of the EARS has been predominantly electricity generation from high-temperature fields. However, the high-temperature resources occur only in isolated places which have central volcanos,
and within only a few countries of the eastern branch of EARS.

HARNESSING DIFFERENT RESOURCE TYPES AND SELECTING EXPLORATION METHODS

Exploring and proving the existence of a geothermal resource is a crucial phase in any geothermal project. The selection of appropriate methods for exploration is therefore designed to maximise the chances of resource discovery in this risky, capital-intensive drilling phase. As such, the exploration phase requires a multi-disciplinary approach involving geological, geophysical and geochemical techniques.

Geothermal resources across the region

Fault-hosted geothermal systems

Fault-hosted, or controlled geothermal systems are also referred to as “conduction-dominated
geothermal play types” by Moeck and Beardsmore (2014) and are commonly characterised by limited convection of fluids within the reservoir.

This, therefore, implies a different strategy for the exploration of the resources in the fault-hosted systems. Geological mapping is undertaken using standard techniques; however, structural mapping and interpretation of fault kinematics are paramount (Faulds and Hinz, 2015).

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