African geothermal hit the headlines in July 2015, when, during President Obama's visit to Ethiopia, Ethiopian Electric Power and Corbetti Geothermal signed Ethiopia’s first independent power purchase agreement for up to 500 MW of geothermal power from the Corbetti geothermal source. Ethiopian Electric Power was also declared to be negotiating an agreement with Reykjavik Geothermal to develop an additional 500 MW in the Tulu Moye and Abaya areas. Little information has emerged since then however about how these projects will be implemented.

Kenya, on the other hand, provides a good example of how geothermal resources might and can be exploited. It was the first African country to utilise geothermal power 35 years ago and is the eighth largest geothermal electricity producer in the world. During the financial year 2014/15, KenGen completed the commissioning of geothermal power plants at Olkaria IV and Olkaria I (units 4 and 5), with a total installed capacity of 280MW.  KenGen’s investment programme to deliver 720MW by 2020 largely consists of the construction of geothermal power plants. The programme includes the construction of three new geothermal power plants, with a capacity of 140MW each, and Olkaria I Unit 6 with a capacity of 70MW.

In this article Richard Metcalf, partner at Norton Rose Fulbright and Paul Zakkour, director at Carbon Counts Ltd. examine the potential of the geothermal sector taking the lead from solar PV projects, and expanding across the continent. They also look at how issues such as a lack of public funding and a reluctance by the private sector to bear exploration risks, can hamper progress.

This article was co-authored by Paul Zakkour, Director at Carbon Counts Ltd and originally published in the July 2016 issue of Project Finance International.