The African Development Bank (AfDB) and the Government of Djibouti have signed the funding agreements of 7.5 million dollars, for a geothermal exploration project in the region of Lake Assal, a local media reported on Monday.
The report monitored by the News Agency of Nigeria in Addis Ababa quoted the bank’s Regional Integration Director Alex Rugamba, as saying “the exploitation of geothermal potential in the Lake Assal region will enable the Djiboutian population to access reliable, renewable and affordable source of energy.“
Rugamba represented the Bank’s Vice-President, Infrastructure, Private Sector and Regional Integration, at the signing ceremony.
He said the financing scheme includes a grant and a loan from AfDB’s soft loan arm, the African Development Fund to the tune of 5.3 million dollars and 0.4 million dollars respectively.
It also included a grant of 1.8 million dollars from the Sustainable Energy Fund for Africa (SEFA), while the contribution from the AfDB and SEFA will be used to raise more financing to support independent geothermal electricity producers.
Speaking at the signing ceremony, Ali Yacoub Mahamoud, Djibouti’s Minister of Energy in charge of Natural Resources, commended the African Development Bank for “breathing new life into this 20-year old project.’’
The government is expected to take the lead on the first exploration and appraisal drilling phase, while the private sector will be responsible, for the second phase, which would include the production drilling, steam gathering system, electricity production and evacuation to the national grid.
NAN reports that geothermal development had boosted East Africa energy development during the past two years after attracting new financing schemes put in place by development finance institutions including the African Development Bank.
Djibouti’s Chief Renewable Energy Specialist, Youssef Arfaoui, said those innovative models would help overcome several risks associated with geothermal development, including exploratory drilling risk of hitting dry wells.
“By providing concessional finance at the early stage and high-risk activities mainly related to exploration and drilling, the African Development Bank paves the way for private investors to step in,“ Arfaoui said.
He said the AfDB had used that innovative model in 2011, for the Menengai Geothermal Development Project, supported by concessional financing of 150 million dollars.
“The Menengai project, once completed, will increase the energy supply in the country by an amount equivalent to the current consumption needs of 500,000 Kenyan households, 300,000 small businesses and some 1,000 GWh for other businesses and industries.
“At a much smaller scale, the Lake Assal geothermal exploration project will help expand geothermal development, by building regional capacities, to other Rift Valley countries in Sub-Saharan Africa such as Ethiopia, Uganda, Tanzania and Rwanda, which have considerable geothermal resource development potential.“
NAN learnt that Djibouti relies mostly on fossil fuels and some hydropower imports from Ethiopia whose major current generation capacity is situated in the country. (NAN)
