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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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Djibouti Looks To Tap Its Geothermal Potential

In July 2017 Djibouti secured $27m in funding from the Kuwait Development Fund for the development of the Gale-Le-Koma geothermal project in the Lake Assal region. The funding deal came on the back of a two-week technical and financial evaluation of the site.

According to a statement from the Djibouti Office for Geothermal Energy Development (Office Djiboutien de Développement de l'Energie Géothermique, ODDEG), the loan will help to underwrite the drilling of eight production boreholes and two re-injection boreholes for a new geothermal power plant, which is set to come on-line in 2021. The plant will have an initial capacity of 15 MW, with the potential for a total capacity of 50 MW following completion of the final phase in 2025.

The Gale-Le-Koma project is far from the only geothermal project in the small 900,000-person country. The Kuwait Development Fund loan came a month after state-owned utility Electricité de Djibouti (EDD) signed an exploration contract with Iceland Drilling Company for the drilling and testing of two 2500-metre geothermal exploration wells, and two optional wells in the Fiale Caldera area of Lake Assal.

The Fiale Caldera drilling is a component of the World Bank’s $27.8m Geothermal Power Generation project, which was launched in mid-2013 to assess the commercial viability of geothermal power production in Lake Assal through an assisted drilling programme. Several other development finance institutions are participating in the financing, including the African Development Bank, the Overseas Private Investment Corporation, the French Development Agency and the International Development Association.

Geothermal highest potential source of energy

The projects at Gale-Le-Koma and Fiale Caldera are part of a broader push by the government to develop the geothermal potential in Lake Assal and other regions of the country. In 2014 a study by the Japan International Cooperation Agency identified 13 geothermal sites for potential development – at Lake Assal; Hanle-Garabbayis in the Afar region; North Goubet; and Gaggade in the Dikhil region – which could collectively add at least 1 GW of generation capacity. This puts geothermal as Djibouti’s highest potential source of energy, ahead of both solar and wind. Related: $60 Oil Could Revive The Eagle Ford

However, it is not only development financing behind the country’s nascent geothermal segment. In August last year ODDEG signed a memorandum of understanding with Japanese industrial conglomerate Toshiba for the development of 50 MW of geothermal power projects across the country. As a part of this partnership, Toshiba will assist in the development and supply of generation equipment, and the training of personnel at power plants.

Enhancing energy security through renewables

Developing geothermal potential is central to achieving the government’s goal of relying entirely on clean energy by 2020, a key component of the country’s Vision 2035 economic strategy. Currently, Djibouti depends on imported hydropower from Ethiopia to meet roughly two-thirds of its domestic energy needs, but with Vision 2035 forecasting an increase in demand to more than 230 MW within three years – up from 121 MW when the plan was launched – the need for more domestic production is clear.

Furthermore, given that Djibouti currently relies primarily on four heavy fuel and diesel power plants for its own domestic generation – which combined have a capacity of 126 MW, but often produce far less – shifting to renewables will also help the country realise its target of reducing greenhouse emissions by 40 percent by 2030.

Multiple clean energy sources pursued

Geothermal is only one method of generation that the government is exploring, however. Djibouti, which benefits from both steady, frequent winds and high insolation rates, is also looking to encourage solar and wind generation. Related: Citi: An Oil Supply Squeeze Is Inevitable

In June 2015, for example, Ali Yacoub Mahamoud, then-minister of energy, signed a memorandum of understanding with Shanghai Electric for the construction of another 60-MW wind farm, to be completed in two, 30-MW phases.

Of greater note is the country’s push to boost solar generation. In January last year Switzerland’s Green Enesys broke ground on a 300-MW solar plant, located in Grand Bara, south of the capital. The project is the Swiss company’s largest to date, according to media reports, and it will be built in six, 50-MW phases at a total estimated cost of $360m. The renewables firm will undertake construction, financing and operation of the plant, and sell electricity to EDD under a power-purchasing agreement.

By Oxford Business Group

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