EU, AU set to catalyze geothermal development in Eastern Africa

Source:Xinhua Published: 2012-10-11 10:44:23

The European Union (EU) and the African Union (AU) have come up with an initiative to catalyze geothermal development in Eastern Africa and other parts of the African continent.

The innovative mechanism, Geothermal Risk Mitigation Facility (GRMF) provides grants to investors to reduce costs and risks.

GRMF provides public and private sector developers with partial grants for surface studies leading to drilling and for reservoir confirmation drilling to mitigate the risk associated with geothermal resource exploration.

A two-day stakeholders' meeting was organized at the AU Conference Center in Addis Ababa, Ethiopia, on Wednesday to deliberate on the GRMF and development of geothermal resources in Africa.

AU said the meeting provides information about GRMF to potential investors, including the main processes such as prequalification application round, evaluation grant agreement, and grant provision.

It was noted that the AU Commission, German Ministry for Economic Cooperation and Development (BMZ), the German Development Bank (KfW), and the EU-Africa Infrastructure Trust Fund (Trust Fund) have agreed to establish the GRMF, which initially supports projects in five Eastern African countries.

The Facility, funded at 50 million Euros ($65 million) of which 20 million Euros ($26 million) from BMZ and 30 million Euros ($39 million) from the Trust Fund, and is now in place and hosted and managed by the AU Commission.

Ethiopia, Kenya, Rwanda, Tanzania, and Uganda are the five initial target countries of the project in Eastern Africa.

Speaking at the opening of the workshop, Gary Quince, Head of EU Delegation to AU, said the 50-million Euro facility aims to encourage public and private sector investment by providing grants to cover part of the initial costs in the five pilot countries.

Quince, particularly told Xinhua that the project provides grants to investors who face risks working on geothermal development.

"The idea is to provide grants to investors who are undertaking studies then drilling to find the good sites for geothermal power stations. The work carries quite a lot of risk; very often they drill and they don't find the steam necessary for investment in the power stations. So, by reducing the costs we have to cover some of the risks," said the Head.

"There is enormous potential for further geothermal energy development along the Rift Valley. However, exploration costs are high and can give zero return if the exploration surveys and drilling do not produce good results. Returns on investments in geothermal power are not as quick as those in fossil fuels," he said.

"We have been able to come up with an innovative mechanism which will help to support these initial high costs and reduce the risks associated with surface studies and exploratory drilling," he stated.

The Head also encouraged energy investors to work with the AU Commission, governments and power utilities to take full advantage of the opportunities offered by the GRMF.

It was also noted on the occasion that GRMF would support geothermal projects in five countries and others may become eligible for the funding in later phase if additional funds become available.

Rhoda Peace Tumusiime, AU Commissioner for Rural Development and Agriculture, noted that the AU Commission is seeking other sources of finances and capabilities to support geothermal exploration, development, and utilization in other African countries.

She revealed that there are more countries which expressed interest for the program other than the five pilot countries.

"The GRMF will for the initial and pilot phase support projects in five countries, namely Ethiopia, Kenya, Rwanda, Tanzania, and Uganda. The AUC is seeking other sources of finance and technical capabilities to also support geothermal exploration, development, and utilization in other eight countries, Burundi, Comoros, Djibouti, DR Congo, Eritrea, Malawi, Sudan and Zambia," she said.

"More countries such as Mozambique and Egypt have already expressed interest to join this program, and have been invited to participate in this meeting," she added.

Hanno Spitzer, German Counselor for Regional Development and Cooperation (BMZ), and Klaus Gihr, Representative of KfW Regional Office, expressed pleasure and pride to support the project which they are optimistic for to contribute to the geothermal development in the region.

It was also noted on the occasion that the Eastern African Rift System (EARS) has a potential of generating over 15,000 MW power.

However, the resource is currently used to a limited extent in the EARS.

The speakers said Kenya is tapping the geothermal potential in a significant scale, where geothermal power accounts for 10 percent of national electricity generation with plans to boost to 25 percent by 2017.

The two-day Meeting allows key decision and policy makers to get insight into the potential resources, how that potential can be developed and how the GRMF program will contribute towards meeting future investments in geothermal energy into the broader context of regional energy sector development including providing a balance for the seasonality of hydropower.

Posted in: Africa

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