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Geothermal Risk Mitigation Facility East Africa – a Progress Report, African Union

Geothermal well at Menengai, Kenya (source: flickr/ ScientificDrilling)
Alexander Richter 17 May 2018

A first progress report for the African Union, draws a positive picture of the success of the Geothermal Risk Mitigation Facility (GRMF), a financial tool to help push geothermal development in East Africa.

In a meeting of the Permanent Representatives’ Committee of the African Union in Addis Ababa, a First Progress Report of the Chairperson of the Commission on the Geothermal Risk Mitigation Facility was given. The report can be downloaded here (pdf).

In 2012, the Commission, with support from the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Union (EU)-Africa Infrastructure Trust Fund (EU-Africa ITF), via KfW Entwicklungsbank (KfW), established the Geothermal Risk Mitigation Facility, as a financial tool for supporting geothermal energy development in Eastern Africa. The GRMF is hosted and managed by the Commission, with an initial capital of euro 50 million, of which euro 30 million from the EU-Africa ITF and euro 20 million from BMZ. Additionally, the United Kingdom Department for International Development (DFID) contributed GBP 47 million in 2014 which was reduced to GBP 39 million in 2017. The Commission is also contributing around half a million US dollars annually for staff salary and the monitoring of
the GRMF operations.

The objective of the Facility is to encourage public and private investors, as well as public private partnerships, to develop geothermal prospects for power generation in Eastern Africa, by providing grants for two types of activities: (i) surface studies to determine the optimal location of exploration wells; and (ii) drilling exploration wells and testing of reservoir, as well as the physical infrastructures (access road, electricity and water supply) related to the two activities. This encourages further geothermal investments and improve access to equity or other funding sources and, thus, play a catalytic role in establishing geothermal energy as a strategic option in power expansion planning in Eastern Africa.

Under the GRMF program, the first application round in 2012 targeted five (5) countries as pilot phase: Ethiopia, Kenya, Rwanda, Tanzania and Uganda. Starting from 2013, the application rounds were expanded to include more countries, namely Burundi, The Comoros, Djibouti, the DRC, Eritrea and Zambia.

The report provides an Implementation Status of GRMF and Application Rounds Outcomes.

First to Fourth Applications Rounds (AR1 – AR4)  – the table in Annex I below summarizes the projects and grants awarded, disbursements and implementation status in all the Application Rounds of the GRMF grant till to date. So far, GRMF has awarded grants to 26 projects
qualified in the first four application rounds from 2012 to 2016. The total awarded grants amounted to about USD 80 million.

The twenty-six (26) projects awarded grants are located in six (6) different countries, with a planned power plant capacity of approximately 2,900 MW and grant volume of USD108 million. The planned investment volume by geothermal developers is estimated to USD 9.3 billion. The table in Annex II shows the estimated resource potential, the planned power plants capacity, grant volume and planned investments for the first four application rounds.

In the conclusions and recommendations, it is reported that the Geothermal Risk Mitigation Facility Program remains one of the successful projects in the Commission, despite some challenges mentioned within the report. Much progress continues to be made by the developers in preparing their GMRF grant applications and in complying with the GRMF requirements.

The Commission will continue to work with development partners to improve the capacity and expertise of interested Member States and mobilize more financial resources to meet the increased interest in geothermal energy development as witnessed by the growing number of projects that are submitted for grant awards. It is critical that Member States put in place the appropriate institutional, legal and regulatory frameworks, in order to attract more private investors and allocate adequate resources to the Commission for the expansion of this Programme to other AU countries.

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NOTE: an earlier version of this article contained a screenshot from the African Union report which provided for Annex III a total of possible grants of 3m USD, this has been corrected to 43.6 m USD. This is the correct amount as pointed out by the Local Fund Manager for the GRMF by email, May 22, 2018.

Source: African Union