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Oxford Business Group

Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…

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Geothermal Energy At The Center Of Djibouti’s Renewable Transformation

Geothermal activity

Authorities in Djibouti are working to increase the share of renewables in the energy mix, with a particular focus on harnessing the country’s plentiful geothermal resources.

In early August Djibouti’s Office of Development of Geothermal Energy inked a memorandum of understanding with Japanese conglomerate Toshiba to develop some 50 MW of geothermal energy projects across the country.

Under the terms of the agreement, Toshiba will provide guidance for power plant operations and management, coordinate the development and supply of geothermal generation systems, and train local personnel.

This partnership dovetails with Vision 2035, Djibouti’s long-term development plan, which envisages a full transition from conventional thermal energy to renewable sources by 2020.

Promising geothermal resources

Despite its significant potential, concerted efforts to explore Djibouti’s geothermal sources are relatively recent.

In mid-2013 Djibouti raised $31m from the World Bank, the African Development Bank (AfDB) and other lenders for its Geothermal Power Generation project to conduct exploratory drilling in the Assal Rift.

A survey completed by the Japan International Cooperation Agency in 2014 identified a total of 13 potential geothermal sites, including Lava Lake at Asal-Fiale, as well as sites in Hanle-Garabbayis, Goubet and Gaggade, which together could produce at least 1 GW of electricity, according to press reports.

Harnessing this potential would represent a significant increase on Djibouti’s current installed generation capacity of around 120 MW.

At present, heavy fuel oil or diesel thermal power plants account for approximately one-third of the country’s energy mix, while the remaining two-thirds is supplied through a 150-MW interconnection line from neighbouring, hydropower-rich Ethiopia.

Electricity tariffs impact local business and industry

In addition to fostering greater long-term energy independence, authorities are looking for increased geothermal generation capacity to curb Djibouti’s electricity costs, which are among the highest in the world, according to the AfDB.

The price of electricity in Djibouti is $0.28 per KWh – significantly higher than the average of $0.14 in Africa, $0.07 in East Asia and $0.04 in South Asia.

High electricity tariffs, which comprise about 25 percent of business expenses in the country, also hinder the development of industry and manufacturing, which account for around 37 percent of energy consumption.

Related: Only Sentiment Matters: Why Oil Prices Are Heading Up Until November

According to the World Bank’s 2014 Djibouti Enterprise survey, 49 percent of participating companies rated access to electricity as the biggest obstacle to daily operations, and seven in 10 said they rely on generators.

While a 10 percent decrease in electricity tariffs announced in April will go some way towards resolving cost concerns, in the long term authorities are looking to the cost-saving potential of geothermal power.

The construction of geothermal power plants could reduce the cost of power generation by nearly $0.20 per KWh, according to the International Renewable Energy Agency (IRENA), which would bring Djibouti’s electricity prices in line with those in East Asia.

In addition, the replacement of Djibouti’s thermal stations with geothermal-powered facilities would allow the national electricity company, Electricité de Djibouti, to save an estimated $57m per year, Ali Yacoub Mahamoud, minister of energy, told local media.

Development fuels demand growth

Djibouti faces the dual challenge of high electricity costs and rising electricity demand, which is quickly outpacing local energy production and imports. Urbanisation and population growth, as well as a string of mega-infrastructure projects, have seen demand growth accelerate in recent years.

Electricity consumption in Djibouti has increased by 75 percent in the last decade, while production has expanded at a much slower rate, at around 5.7 percent per year for the last 40 years, according to the IRENA “Djibouti Renewable Readiness Assessment” report.

This upward trend is expected to continue, fuelled in large part by ongoing urbanisation.

Electrification remains largely concentrated in urban areas, where about three-quarters of the population lives. Some 61 percent of city residents are connected to the grid, compared to just 14 percent in rural areas, according to data from the International Energy Agency (IEA).

As Djibouti’s per capital energy consumption, currently at 33 KWh per year, moves towards the Africa average of more than 575 KWh per year, as per IRENA figures, peak demand will continue to rise.

The country’s peak annual demand was approximately 90 MW in 2014, but that figure is expected to more than triple to 300 MW by 2020, according to the IEA’s 2015 “World Energy Outlook”.

Tapping available resources, particularly low-cost alternatives such as geothermal, will therefore be key to meeting future energy needs.

By Oxford Business Group

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  • Oilracle on October 22 2016 said:
    ..."Geothermal Energy At The Center Of Djibouti’s Renewable Transformation"...

    How is the Earth's heat renewed?!
  • Nobody on October 22 2016 said:
    @Oilracle: geothermal is THE ONLY energy source that can cope with ALL ENERGY demands from ALL the ridiculous overpopulation that we have created on this planet. And this without destroying our environment the way coal/oil/gas burning does it, when undertaken at the volume the gross masses of people require it.
  • Oilracle on October 23 2016 said:
    Nobody on October 22 2016 said:

    1)..."overpopulation that WE have created on this planet."...

    Are you from India or China, nobody? What did you do there to explode the population?

    2)..." And this without destroying our environment"...

    How do you know, nobody, that accelerated cooling of the Earth's crust will not end up in much more stressed environment? And do not tell me that your religion priests-scientists know how much heat is inside our planet.
  • Somebody on November 04 2016 said:
    @Oilracle,
    In answer to your question, the Earth is nuclear powered. The heaviest elements have sunk to the core and they are radioactive. The heat generated causes a convection that drives continental drift and the Earth's magnetic field, without which, there would be no atmosphere and no life on Earth.

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