07 May 2019

New Legislation to Ease Geothermal Investment Submitted in Ethiopia

07 May 2019   

Well on site of Aluto Langano geothermal plant, Ethiopia (source: ThinkGeoEnergy, creative commons)

A new bill designed to ease registration and licensing processes for geothermal development has been drafted by the Ethiopian Energy Authority and submitted for approval to the Council of Ministers. Among the parties involved in drafting the bill are Ethiopian Electric Power, the Ministry of Water, Irrigation, and Energy, regional energy bureaus, environmental bureaus, revenue bureaus, foreign companies, and various donors.

Resource classes and stage-wise licensing

According to the drafted bill, geothermal resources will be classified into two categories depending on their energy capacity. Grade One resources are those that can be used to generate power, while Grade Two resources are those that are primarily used for agricultural, industrial, medical, and recreational purposes.

Three different licenses will also be granted for different stages of geothermal development. A reconnaissance license will be given for the initial stage, which will have a validity of two years and is non-renewable. An exploration license gives developers a five-year period to do exploration works with the option of renewing in two-year increments. Finally, wellfield development licenses will be issued for 25 years or production concession with an option to extend for a period yet to be announced.

The proposed bill is meant to provide incentives to geothermal developers. Tigbu Atalo, a power and energy consultant with over a decade of experience in the industry, says that geothermal development is risky, capital intensive, and requires advanced technology. This is a sentiment echoed by Tesfaye Kassa, director for the Geothermal Resource Development Licensing and Administration. “Unlike other explorations, geothermal is capital intensive but runs with minimal cost as a sustainable energy source,” said Tesfaye.

Harnessing the geothermal potential of Ethiopia

According to estimates from field studies, Ethiopia has the potential to generate up to 10,000 MW of electric power from geothermal sources. However, fifty years of geothermal exploration efforts have only resulted in ten companies receiving development licenses so far. Two of these licenses were given to Ethiopian Electric Power (EEP) for the resources at Aluto Langano and Alalobat at Tendaho in the Oromia and Afar regional states.

Tulu Moye Geothermal Operations and Corbetti Geothermal have signed power purchase agreements (PPA) with EEP, and are expected to commence drilling soon. Each project has the potential to generate up to 500 MW of energy.

OrPower Twelve Incorporated, UK-based Cluff Geothermal PLC, and Reykjavik Geothermal Consulting all hold licenses for exploration in different regions of Ethiopia and are currently in negotiations with EEP to sign a PPA.

A geological survey of Ethiopia has identified 24 sites across the Rift Valley that have potential for generating geothermal energy.

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