Geothermal in Djibouti: a game changer?
I first landed in Djibouti in June 2012, barely a week after my appointment as World Bank Resident Representative.
In my very first meeting with a government official, I was asked about Bank support for geothermal power generation and the exploration needed to identify viable sources. I must admit, at the time, I was not very familiar with the technology. Nevertheless, I learned fast, given that, at every subsequent meeting I had, my government counterparts enquired about the status of a geothermal project that was under preparation.
Djibouti has been waiting for geothermal energy for almost 40 years. There have been several attempts to harness the country’s geothermal potential over the years, starting as far back as the 1970’s. Each attempt confirmed the presence of geothermal fluid, but neither the financial resources nor the available technology were ever adequate enough to confirm its commercial viability and fully develop the geothermal potential. That has now changed.
Geothermal is a green energy. It is clean, renewable, reliable and affordable. Unlike solar energy that can only be generated when the sun shines or wind energy that can only be generated when the wind blows, geothermal energy is available at any moment.
Geothermal power generation plants use fluids heated by the earth’s core to create steam which turns the turbines of a generator to produce electricity. Geothermal development is viable when the heat source is close enough to the surface of the earth to be tapped through drilling. This is often the case on the edges of tectonic plates, such as the East African Rift where Djibouti is located.
The cost of electricity is currently one of the main impediments preventing private sector development and economic growth in Djibouti. The country is fully dependent on imports for its energy needs. Power now comes either from hydroelectricity imported from Ethiopia or by burning imported heavy fuel oil in the local power plant. This translates into a very high price for the production and supply of electricity, which is then passed on to the consumer. Yet even with the high price, the current supply of electricity is insufficient for the demographic and economic growth of the country. While electricity is available in the capital city, remote regions and villages are still in the dark.
The geothermal project in Djibouti is now ready for launch, and it will be the first exploration of any kind financed by the World Bank in almost 20 years. Several donors have also come together to support Djibouti’s commitment, including the International Development Association (IDA), the French Agency for Development (AFD), the African Development Bank (AfDB), with additional funds from the Sustainable Energy Fund for Africa (SEFA), the Energy Sector Management Assistance Program (ESMAP), the Global Environment Facility (GEF) and the OPEC Fund for International Development (OFID). The fact that the exploration phase of the project is supported by public funds using donors’ grants and soft loans will reduce the total cost of the project by US$52 million. It will also allow for the production of electricity at 4 cents per KWH cheaper than if the project was financed by the private sector.
Here are some other numbers: currently, electricity is produced domestically at 24 cents per KWH. The project will contribute to lowering the cost of domestic production to 10 cents per KWH and will make the supply of energy more secure. Replacing Djibouti’s thermal generation capacities with geothermal would save the government power utility, Electricité de Djibouti (EDD) US$57 million per year. Given that EDD is a public company, these savings will significantly reduce the financial burden on the national budget posed by power generation.
There will also be environmental benefits. The project will reduce Djibouti’s carbon footprint by helping to offset eight million tons of CO2 emissions over a 30-year life cycle.
The main beneficiaries of the project, however, will be the citizens of Djibouti. They will benefit from lower electricity bills, which will result in higher purchasing power for households. A cheaper and more plentiful supply of electricity will also create opportunities for small enterprises, both enlarging the private sector and creating jobs. It will also help attract foreign investment, which is critical for the economic development of Djibouti.
One final but equally important dimension to the project will be the building up of technical skills and knowledge at key institutions and government agencies, such as the EDD, the Ministry of Energy and the Djibouti Center for Study and Research (CERD). As a result, Djibouti will develop the needed know-how to conduct its own geothermal explorations at other promising locations in the country, for example in Nord Goubet.
This month will mark my first anniversary in Djibouti, and I am very proud to see a project going forward that could have such a profound effect on my host country’s future. The World Bank has a number of projects in Djibouti focused on issues ranging from health, education and social safety nets to urban poverty reduction, rural community development and building resilience to climate change. They are all making a difference and contributing to the national effort of laying the foundations for inclusive and sustainable development. With its palpable transformational potential, this project stands out as a possible game changer for the country and all its citizens. Numerous challenges stood in the way of the geothermal project, but with the combined efforts of the government, the World Bank and its development partners, each was overcome. That same commitment I witnessed to get the project launched will, I am confident, propel it onwards to success.