ETHIOPIA: Bill to encourage private investment in geothermal energy

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ETHIOPIA: Bill to encourage private investment in geothermal energy ©Jen Watson/Shutterstock

The Ethiopian Council of Ministers is currently considering a legislative proposal to encourage independent power producers (IPPs) to invest in geothermal energy production. The new legislation, pending approval, would come at a time when the country is just beginning to exploit its geothermal potential.

A new wind is blowing over the geothermal energy sector in Ethiopia. The Ethiopian Energy Authority has just submitted a draft law to the Council of Ministers for approval. It concerns the facilitation of registration and licensing of geothermal project development permits.

In concrete terms, this bill recommends classifying geothermal resources into two categories based on their energy capacity. Tier 1 resources are those that can be used to generate electricity. Category II includes geothermal resources used in agriculture, industry or the medical sector.

Three different licences will be granted corresponding to the different stages of the geothermal energy exploitation process. For the initial phase, a two-year non-renewable recognition licence will be issued. In order to carry out exploration work, an exploration permit will be granted to the proponents for a period of five years with the possibility of renewal in two-year increments. Finally, well-field (steam) development licences will be issued for 25 years or a production concession with an option to extend for an unspecified period.

Untapped potential

The bill has every chance of being validated by the Council of Ministers since the Ethiopian government is in favour of the development of renewable energies and geothermal energy in particular. Ethiopia could produce up to 10,000 MW of electricity from this green energy source. In fact, geothermal projects have already been launched in several localities in this East African country. In March 2019, Kenya Electricity Generating Company (KenGen), Kenya’s largest electricity producer, and the Chinese company, Shandong Kerui Oilfield Service Group, signed a contract with Ethiopian Electric Power (EEP), the public company responsible for electricity production and distribution in Ethiopia. The two companies plan to produce 70 MW of electricity as part of the Aluto-Langano geothermal project in central China. Other projects are also underway in Tendalho (10 MW), Tulu Moye (560 MW) and Coberti (500 MW).

If the law proposed by the Ethiopian Energy Authority is validated by the Council of Ministers and passed in the House of Peoples’ Representatives and the House of Federation, then Ethiopia will join Kenya, which has opened up geothermal energy production to IPPs. This policy has helped to strengthen Kenya’s position as the leading current producer of geothermal energy in Africa with an installed capacity of 700 MW.

Jean Marie Takouleu

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