Viewpoints | Mar 21,2020
April 4 , 2020
By FASIKA TADESSE ( FORTUNE STAFF WRITER )
Two geothermal power companies signed a power purchase (PPA) agreement with the government to supply electric power for 0.069 dollars a kilowatt-hour (kWh).
Developers of the Corbetti and Tulu Moye geothermal projects signed the PPA with Ethiopian Electric Power and an implementation agreement (IA) with the ministries of Water, Irrigation & Energy and Finance last Tuesday, March 31, 2020, during a ceremony held at Hyatt Regency Hotel on Africa Avenue.
Estimated at investment of 1.2 billion dollars, the two projects collectively will generate 300MW of electric power from a geothermal source. The plants are the first geothermal projects for the country to enter power purchase and implementation agreements under a PPP arrangement.
The two projects will be developed through public-private partnerships between the two companies and the government. The partnerships between the two parties lasts for 25 years, and the companies will hand over the projects to the government when the contract lapses.
Both will be executed in two phases, and the first phase of the projects, which will have an output of 100MW of energy, is expected to be live in 2023. The projects are located along the East African Rift Valley, an area endowed with the potential of generating 15,000MW of geothermal power.
"I hope more international companies will see these [agreements] as a signal of Ethiopia's commitment in attracting private sector investment in the energy sector and other infrastructure developments," said Ahmed Shide, minister of Finance.
Tulu Moye Geothermal Operations Plc, owned by a Paris-based investment firm Meridian SAS and the Iceland Geothermal Development Company Reykjavik Geothermal, started the first phase of drilling a month ago. The Kenya-based company KenGen was hired for the drilling that will generate 50MW of power in Iteya Geothermal Site in Arsi Zone of Oromia Regional State.
Established three years ago, Tulu Moye Geothermal Operations is partially funded by the Geothermal Risk Mitigation Facility for Eastern Africa and the United States Trade & Development Agency. It is expected to generate 150MW of energy by 2025.
Corbetti - a 10-year-old project funded by Reykjavik Geothermal, Iceland Drilling, African Renewable Energy Fund and InfraCo Africam, will be drilling at a site located in Corbetti Caldera, 250Km south of Addis Abeba, in the Oromia Regional State.
The power purchase and implementation agreements of the two projects, which are designed to generate 500MW each, have been signed previously. However, the capacity of both projects was downscaled, and negotiations were also revised.
The ministries, which have signed the agreement with the two companies, will table the agreement and the project documents to the Council of Ministers for approval.
Ethiopia has the potential to generate 10,000MW of energy from geothermal sources. Aluto-Langano Geothermal Plant has been the country's lone operational geothermal plant for the past 22 years, generating seven megawatts of electricity from the two small wells it has.
Located on the Aluto volcanic complex of the Ethiopian Rift Valley close to the eastern mountain between Lake Langano and Ziway, 200Km southeast of the capital, the plant will be able to generate 75MW of energy from eight wells when the planned expansion is completed.
"Geothermal enhances our energy security by providing constant output power to support industrialisation and continued economic growth," tweeted Prime Minister Abiy Ahmed (PhD).
Power Africa, a United States initiative, has been assisting the government since the start of the negotiation in 2013. It has been providing legal, technical, project finance and capacity-building support.
Last December, the government signed power purchase and implementations agreements for the first industrial-scale solar park that will be developed through PPP. The 20-year power purchase agreement was signed with Saudi Arabian energy company, ACWA Power.
ACWA will develop two 125MW solar photovoltaic (PV) projects in Afar and Somali regional states with its own financing. ACOA will sell the power it generated to the EEP at 0.025 dollars a kilowatt-hour, the cheapest rate out of all the projects.
PUBLISHED ON Apr 04,2020 [ VOL 21 , NO 1040]
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