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Budding Geothermal Markets Light Up East Africa

By Climate Guest Contributor on September 9, 2012 at 9:21 am

"Budding Geothermal Markets Light Up East Africa"

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ThinkGeoEnergy, via Flickr

by Leslie Blodgett, via Renewable Energy World

When Jaime Merriman visited Kenya, she saw giraffes, but she was not on a wildlife tour. Merriman’s close encounter happened at Kenya’s geothermal facilities, where the striking animals were completely undisturbed as they grazed.

In fact, Merriman seems as in awe of the geothermal facilities as she is of the creatures.  After all, she asked to be assigned to geothermal energy in her role promoting U.S. exports to emerging economies for the U.S. Trade Development Agency (USTDA).

The export market for geothermal goods and services has noticeably expanded in recent years, and a January 2012 survey of Geothermal Energy Association (GEA) members showed that over 65 percent were exporting technology or otherwise involved in geothermal development abroad.

Africa represents an important new opportunity for U.S. geothermal firms.  While Africa has had its economic problems, it has seen strong economic growth over the past decade.  Real GDP has been growing at roughly 5 percent annually, making the continent among the world’s fastest growing regions.  This has been due at least in part to government efforts to diversify economies, spur employment, and encourage industrialization — all presenting a rising need for reliable electric power.

Geothermal company Power Engineers, which has been involved in geothermal work in Africa since 2000, has seen a significant level of outside development funding for the region from U.S. and other international development agencies, NGOs, and national development banks.

“The apparent competitive appetite of the national development banks to fund geothermal projects in the Rift area is a subject of keen interest,” company representatives Mike Long and Marshall Ralph wrote in an e-mail to GEA.

Kenya, the leader in geothermal development in the region, targets a GDP growth rate of 10 percent starting 2012, with electricity demand to grow in tandem through the Vision 2030 initiative.  Geothermal energy is also produced in Ethiopia, and other countries are increasingly interested.  Together, supportive government policies along with high-grade, largely untapped geothermal resources spell economic opportunity.

About 217 MW of geothermal energy have been developed and made available to communities on the African Continent, where energy is more expensive and less available than anywhere else in the world.  Most of this capacity,  or about 202 MW, is in Kenya, which has three power plants (Olkaria 1, 2, and 3) operated by the Kenya Electricity Generating Company (KenGen) and Ormat Technologies, and state-owned Geothermal Development Company (GDC) is currently drilling production wells at the site for Olkaria 4, a targeted 140-MW project.

But just 25 percent of the African population has access to electricity, and problems abound in the existing energy portfolio.  Biomass production has led to unwanted deforestation, and hydropower plants lack adequate resource due to climate-change-induced droughts, Meseret Teklemariam Zemedkun, Program Manager for the United Nations Environment Programme’s African Rift Geothermal Development Facility (ARGeo) initiative told GEA.

“Game-changers”

In recent years, Africa’s countries have seen increased dependence on expensive, imported petro-products and diesel supplies.  Oil-based fuels are increasingly expensive, and the East African economy is already battered by trade and subsidy practices employed by developed nations.

“Developing a geothermal power-based energy system allows the East African countries to have an indigenous generation system with a predictable supply and price,” said Long and Ralph.

Beyond the associated financial costs, African communities are sharply aware of the need to mitigate greenhouse gas emissions and other climate-related impediments, including deforestation by biomass production and the unavailability of hydro resources due to drought.

Expansion and further state-of-the-art geothermal facilities in Kenya and Ethiopia that are producing electricity today could be the best answer for those countries and others in the region.  Geothermal is indigenous, renewable, and available year-round providing base load power generation.  While African energy sources have been vulnerable to weather and climatic variations, geothermal has none of those problems.

Long and Ralph say that expanding the geothermal system to its ultimate capacity will allow countries such as Kenya to become net exporters to the region.

“The impact to economic growth, regional electrification, and price stability will be a game-changer for East Africa to transition from a donor-based economy to a truly emerging market,” they said.

“In a more general way, we imagine that the rapid development of geothermal resources in the Rift region will be an effective light-speed training ground for Rift-area government officials and regulators in the incorporation of private and global capital into the local infrastructure,” the two experts on geothermal energy in Africa added.

UNEP’s African Rift Geothermal Development Facility

The ARGeo initiative underwrites geothermal drilling risks and is designed to address barriers and facilitate investment in geothermal power production in six African Rift countries: Kenya, Eritrea, Djibouti, Ethiopia, Tanzania, and Uganda.  In an e-mail to GEA, representatives of geothermal company Power Engineers talked about the ARGeo initiative and its beginnings.

Funded by the Global Environment Facility, ARGeo is set up to support a regional network and provide technical assistance focused on surface investigation, risk minimization, policy frameworks, and bankable proposals to local or international financing sources, according to the UNEP Web site.  Additional co-financing is provided by BGR (Germany) and ICEIDA (Iceland).

ARGeo officially launched in 2010, but the Power Engineers representatives remember its origins, not long after they began working in the region.

“Starting around 2002, in the midst of the aftershocks of the 9/11 attacks, KenGen hosted a start-up conference with a focus towards developing an East African geothermal collaborative,” Long and Ralph told GEA.

That first KenGen conference led to a series of semi-annual ARGeo Conferences (African Rift Geothermal Conferences) that are supported by academics and officials from Kenya’s neighbor nations of the African Rift Area.  Long and Ralph noted the ARGeo Conferences are “substantial and well-attended.”

“At least one previous ARGeo Conference took place in Uganda, hosted by a very active group of geothermal energy advocates there,” they said.

Kenya’s progress

Power Engineers, with headquarters in Hailey, Idaho, has more than 400 MW of efficient, clean new geothermal generation in Mexico, Kenya, Costa Rica, Iceland, the U.S., Indonesia, and the Philippines, according to its Web site.

When the company began working on the Olkaria geothermal site in 2000, very little new geothermal generation had been developed in Kenya and East Africa, Long and Ralph told GEA.   “Olkaria 1 had been in operation for nearly 15 years without further generation development, and the binary unit in Ethiopia, at Aluto Langano, was having operation problems.”

“Since our first involvement in Kenya, KenGen has successfully installed three 32-MW high efficiency steam turbines.  These units increased the installed generation capacity of Kenya by approximately nine percent and the routinely available baseload by a percentage substantially greater than that,” they said.

In terms of policy support, countries worldwide are increasingly turning to feed-in tariffs as a mechanism to develop geothermal energy.   Kenya and Uganda both have tariffs for geothermal energy, though the tariff in Kenya is a price ceiling rather than a minimum price, and final payment per kilowatt-hour is negotiated.

Geoscientists have identified at least 20 sites for high-temperature development in Kenya, and ongoing geothermal projects are expected to provide an additional 1,650 MW in the next six to seven years, according to Paul Ngugi, representing GDC at a GEA event.

GDC was established in 2004 to fast-track geothermal resource development with an ultimate goal of reservoir development to support 5,000 MW of geothermal.   The state-owned company conducts up-front exploration and drilling with its own geothermal drilling rigs.  GDC assumes a significant portion of the risk associated with geothermal development, and is then able to open up geothermal resources to the private sector for further development.

Power Engineers notes the private sector involvement, which debuted in the Kenya geothermal fleet with Ormat Technologies’ initial binary plant installation at Olkaria 3, is now substantial.

“The IPP evolution in Kenya and other Rift nations is a clear sign of the growing prevalence, in the Rift area, of global interest in supporting power plant finance and operation,” they said.

Rift-area efforts

While efforts thus far in Kenya and Ethiopia are remarkable, much greater potential for extensive geothermal use exists throughout the East African Rift System, and scientists have only barely scratched the surface.  Estimates of known potential in the region range between 10,000 and 20,000 MW.  The area extends about 6,500 km from the Dead Sea to Mozambique, including much of the geology throughout the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mozambique, Rwanda, Tanzania, Uganda, and Zambia.

There has been strong support for geothermal development among African governments.

“In parallel with Kenya, a regional transmission grid is being developed and Tanzania, Ethiopia, Rwanda, and Uganda have active processes underway to increase geothermal potential,” noted Long and Ralph.

And ARGeo’s representative, Zemedkun, notes the need beyond Kenya and Ethiopia is great.  Djibouti and Eritrea have no other known indigenous energy resources except potential for geothermal energy, and both nations currently rely 100 percent on imported fuels.

Djibouti has been actively working to develop geothermal prospects and has entered drilling stages, while Rwanda is working aggressively in the Karisimbi area and could soon be ready to start development.  Tanzania and Uganda have identified prospect areas, and other countries in the region are still in stages of conducting inventory of hot springs.

“Win-win opportunities”

Leaders from several African countries and U.S. agency officials were present at the GEA’s International Geothermal Showcase in May 2012 to discuss the work already underway in the region and seek shared answers for the future.  A common theme was the need to adopt a regional approach to geothermal energy through synergy of ongoing efforts.

Several U.S. government agencies are involved in aiding U.S. companies to find increased opportunities for contribution to renewable development abroad.  Ngugi told GEA event attendees that USTDA aided GDC in its infancy.

“We hold USTDA dearly; they believed in us when we were very young,” Ngugi said.

GDC now works aggressively in the sector, with a plan to drill about 100 wells in the next three years and raise about US$1 billion, generate about 1,400 MW in the next five years, and take this up to about 600 wells and $US2.6 billion in the next 10 years.

Jeff Humber, director of the Africa Infrastructure Program at the U.S. Agency for International Development (USAID), works to connect U.S. companies with opportunities in East Africa.

“The geothermal opportunities that exist in this region are really quite substantial,” he said.

USAID is very supportive of geothermal energy as an answer to challenges in the region, Humber added.

“It’s a win-win opportunity for both American companies as well as East African governments.  It’s our goal through various measures to get the knowledge of the U.S. geothermal companies to East Africa.”

In response to interest by U.S. geothermal companies to connect with African governments and develop clean, renewable, alternative sources of energy, USAID and the GEA signed a MOU agreement in June to assist East African countries with capacity building and expanding geothermal markets, while also creating opportunities for U.S. companies to develop or build on relationships, increase exposure, and initiate new business in the region.

“America is a leader in geothermal energy technology, and the utilization of this type of clean energy is relatively un-tapped in Africa.  This partnership offers tremendous opportunities for U.S. geothermal companies to become major players in East Africa,” said Michael Curtis, Acting Deputy Assistant Administrator for Africa, USAID.

“This partnership is not just between USAID and GEA, but between America and the people of East Africa.  Developing the tremendous, virtually untapped geothermal resources of East Africa will have huge benefit to the region, and U.S. firms have the expertise and experience to help.  Together, we can get the job done and bring clean, reliable power to millions of people,” said Karl Gawell, GEA Executive Director.

Perhaps this new partnership could help guide the much-needed synergy for energy infrastructure in East Africa, and brighten the dark horizon for that other 75 percent of Africans.

“The Rift nations now have the opportunity to learn that multi-decade lesson very quickly. The Rift area is experiencing an acute case of push and pull in its geothermal resource development.  The area has spectacular geothermal resources — heat of staggering quality and extent — and the nations perched above it are acutely strained to supply their growth in load and demand for load,” said the two representatives of Power Engineers.  “That is the situation — push and pull — that most sharply stimulates brisk thinking and inspired problem-solving in resource development.”

The fourth African Rift Geothermal Conference will take place this November in Nairobi.

Leslie Blodgett is an editor for the Geothermal Energy Association’s weekly newsletter. This piece was originally published at Renewable Energy World and was reprinted with permission.

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One Response to Budding Geothermal Markets Light Up East Africa

  1. Merrelyn Emery says:

    Why do I get a nasty feeling that this is more about US companies making money than fixing climate change or helping out the neighbours? Too many spotty leopards in the S hemisphere? ME