Geothermal Companies Vie for African Development Contracts
Jun 22, 2010 - Lauren Poole - renewableenergyworld.com
East Africa is famous for its national parks like the Serengeti, the continent's highest mountain Kilimanjaro, and its exceptional safaris, but now it's being celebrated by energy companies for its geothermal resources.
Most of Africa’s geothermal resources are located in its Rift Valley, one of the geologic wonders of the world. The Rift Valley spans roughly 3,700 miles (6,000 kilometers) across East Africa and runs through Kenya, Ethiopia, Djibouti, Eritrea, Tanzania, Uganda, and Zambia. It’s here that geologists observe firsthand how continents break apart and draw hot magma toward the surface. Scientists are studying the volcanic activity in the area for human hazard potential while power companies compete for the enormous geothermal resources created by the magma reservoirs.
Kenya has one the highest potentials for geothermal resources in East Africa. Current resource estimates by various companies and organizations range from 2,000 MWe (megawatts electric) to 7,000 MWe.
“For a long time, Kenya was dependent on hydro energy,” said James Kiiru, Commercial Attaché, Embassy of the Republic of Kenya. “The challenge is if there is no rain, the supply can’t be guaranteed, so the government is looking into alternatives sources of power.”
In the last few months, there has been keen interest by many American investors, especially in infrastructure projects, Kiiru said. Many of those investors are energy companies, including one of the largest energy companies in the United States, which he declined to name because negotiations are still underway.
“The government raised a substantial amount of money in the last few years to improve generating capacity to provide energy to rural areas,” Kiiru said. “Current projections are 120,000 new customers per year potential.”
The cost of electricity is high in Kenya. The average annual growth in electricity demand in Kenya is 6% and demand is expected to reach 15,332 GWh in 2025 according to the Kenya Investment Authority (KenInvest). Future transmission projects being planned or implemented include:
Kenya suffered an economic setback caused by the political unrest during the 2007 presidential elections, Kiiru said, which stalled some projects.
“We got out of that because Kenya is projected to have one of the highest growth rates for the country next year,” he said. “We are now ready to move forward with investment. There is a huge interest in Kenya by American companies, but they need to know where the opportunities are and about incentives. They need insurance that it is safe to invest here. Kenya is as good as any part of the world.”
Kenya was the first country to develop its geothermal resources. The Kenya Electricity Generating Company (KenGen) has built three plants -- Olkaria I (45 MW), Olkaria II (65 MW), and Olkaria III (48 MW) -- with its partner Ormat Technologies, an American company located in Nevada.
In February 2010, Ormat announced plans to further expand its Olkaria III power plant by up to 52 MW (from 48 MW to up to 100 MW). In March 2010, Kenya received a 23.4 billion shilling [about US $293 million] loan from Japan for another 140 MW at its Olkaria I plant. In April 2010, Kenya received a 7.5 billion shilling [about US $94 million] loan from the Export-Import Bank of China to drill geothermal wells for production of 140 MW of energy.
James Kiiru presented geothermal investment opportunities for Kenya at the Geothermal Energy Association’s Global Geothermal Showcase and Forum in Washington, DC last week.
Among the companies competing for geothermal resources in other areas of the Rift Valley are Mitsubishi Heavy Industries, a global manufacturer of geothermal power equipment, and Reykjavik Energy, which has developed geothermal energy projects in Iceland for decades. The two companies recently formed an alliance to jointly develop geothermal energy projects in Africa and other developing nations with an aim of capturing 50% global market share by 2014.
“The rough estimate of geothermal generation capabilities in Africa is several thousand megawatts,” said Eiríkur Hjálmarsson, Chief Press Officer for Reykjavik. “Those prospects are all located in the African Rift Valley.”
So far, only about 200 MW of geothermal power have been installed in Kenya and 4 MW in Ethiopia, said Hjálmarsson. The alliance with Mitsubishi is not linked to any specific projects, he said, but the company hopes further negotiations will accomplish that goal.
“In Djibouti, research had been going on for the last 30 years. Exploratory wells have been drilled that strongly imply the presence of an exploitable geothermal resource. However, no utilization has been commissioned as of yet. In Ethiopia, the history is similar, but 4 MW are already installed.”
Reykjavik Energy is currently implementing a contract with the government of Djibouti for a 50-MW geothermal power plant in the Assal Area, about 100 km from Djibouti City. In 2007, Reykjavik Energy entered into a Memorandum of Understanding with Ethiopia. That has expired, but there are still contacts between the parties.
“The total power requirement of the Djibouti market is about 50–70 MW with demand rapidly increasing,” he said. “Djibouti currently derives all its electricity from diesel generators, so power from geothermal plants in this country is intended for the general market. There are also large naval bases in Djibouti that generate their own electricity that are potential customers.”
One of the unique challenges to working in Africa is the lack of infrastructure, physical and social. In some places the absence of an electric grid is an issue, communication channels can be unclear and education and training is required for managing and operating prospective plants, he said.
About 100 students from Africa have completed the United Nation’s University Geothermal Training Program that has been operated in Iceland for three decades, he said. Recently, students from there have also attended a masters program at the Reykjavik Graduate School of Sustainable Systems.
Lauren Poole is a journalist and science writer based in Colorado. She worked for the National Renewable Energy Laboratory for more than a decade where she wrote extensively about solar and wind energy technologies and policy issues. She is co-founder of Flashy Green Communications <www.flashygreen.com>, a green communications company based in Denver.