Out-Law News 1 min. read

Ethiopia signs power purchase agreement with geothermal developers


Ethiopia’s state power utility has signed a deal to buy the first electricity to be generated by the Corbetti geothermal facility, which is under development in the south of the country.

Ethiopian Electric Power (EPP) signed a power purchase agreement with the Corbetti Geothermal Company for the initial 500 megawatts (MW) of electricity to be generated, project partner Icelandic-US private developer Reykjavik Geothermal Ltd (RG) said.

EPP chief executive officer Azeb Asnake said at the agreement’s signing ceremony in Addis Ababa on 27 July that Ethiopia hopes the project will eventually be part of an inter-connected power distribution system serving other countries in the region.

Under an agreement with Ethiopia’s government, RG is building the facility in two phases (4-page / 1 MB PDF). The first phase, at a cost of $2 billion, aims to seen the initial 500 MW being brought on line by 2020, followed by a further 500 MW from the second phase in eight years.

According to RG, the total cost of the project is $4bn, assuming 25% equity financing and debt financing of 75%.

RG said the project is designed to support Ethiopia’s aims of having a total installed domestic electricity generating capacity of 37,000 MW by 2037 and becoming “a major power exporter”.

An $8 million grant contract to support the drilling of two wells in the first phase was signed last year by the African Union (AU) and RG. The grant was awarded under the AU-led ‘geothermal risk mitigation facility’, which is designed to encourage public private investment and financial support for geothermal exploration in East Africa. The grant was approved at an international donor meeting in Iceland last year hosted by the AU Commission and the International Development Bank.

The project plans to utilise geothermal energy from three different resources (4-page / 1MB PDF) at Corbetti, Tulu Moyer and Abaya.

RG said previously that when complete, the project will represent the largest foreign direct investment in Ethiopia. The company has acquired geothermal exploration licences covering an area of more than 6,500 square kilometres in what is known as the Southern Lakes District of the Central Main Ethiopian Rift. Within that area, RG said its scientists had “pinpointed an area of 200 sq km in which high temperatures up to 350C (662F) have been identified”, indicating a potential of 500-1,000 MW.

“Ethiopia has a rapidly growing economy,” RG said. “The shortfall in the power sector has been identified as a major impediment to the continued growth of Ethiopia. The untapped geothermal resources of Ethiopia are plentiful and accessible. Developers can quickly improve indigenous infrastructures and boost local economies while utilising environmentally sound best practices and technologies. The project ties with Ethiopia’s ambitious plans to become a carbon-neutral economy by 2025.”

In 2013, Norway agreed to provide Ethiopia with $13 million, through the World Bank’s BioCarbon Fund, to help the country’s carbon neutrality programme.

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