Geothermal Energy in Africa

Is "100% Indigenous" Energy Coming to Africa?

Written by Brian Hicks
Posted December 11, 2008

Africa doesn't need any more problems.

Cholera is spreading to epidemic proportions in Zimbabwe, Congo is aflame with civil war and UN officials say genocide in Darfur continues.

But there is a potential bright spot now developing, and it's 100% African...

The UN Environment Program (UNEP) is optimistic about geothermal energy in Africa, and so is Green Chip Stocks long-time holding Ormat Technologies (NYSE:ORA). 

It's a question of exportability.  Africa's natural endowment of oil, diamonds, gold and obscure minerals such as cassiterite have been more curse than blessing, largely because most of those resources are not consumed in Africa. Instead, they're shipped off to former colonial powers or emerging markets like China, where prices are set and margin pressure is set in motion.

So Africa's best bet for internal development is an energy type that can't be shipped overseas, and will benefit local residents first. 

"Geothermal is 100% Indigenous"

"Geothermal is 100 percent indigenous, environmentally-friendly and a technology that has been underutilized for too long," UNEP head Achim Steiner said on December 9.

In East Africa, Steiner says the steam power generated from drilling deep into the Great Rift Valley can jump-start local economic activity. From a hub in Kenya, current pilot projects will be expanded internationally.

Right now, Kenya only gets 1,000 MW out of 4,000 MW potential geothermal capacity, with most of the country's power coming from hydroelectric dams. In 2009, Kenya's domestic geothermal production is set to ramp up and spread into Djibouti, Eritrea, Ethiopia, Uganda and Tanzania.

New testing and drilling methods are already being introduced to Kenya under a million-dollar UN-funded project, and $17 million more has been alloted by the World Bank to expand into the other five countries.

Geothermal is "part of Africa's future," Steiner reiterated. We hope so, but there are some geopolitical sticking points to keep in mind.

Problems for Africa's Geothermal Energy?

Indeed, around the world the number of countries making use of energy from deep within the earth is expected to double from 20 to about 50 in the decade from 2000 to 2010. From 2004 to 2030, the UN Climate Panel says the geothermal piece of the world's energy production pie could more than quadruple.

But I can't gloss over the challenges of making Africa an underground energy hotbed.

First, the Great Rift Valley is as socially tumultuous as it is tectonically. Within the past year, the New York Times ran the headline "Ethnic Violence in Rift Valley is Tearing Kenya Apart." Members of the Kikuyu and Luo groups fiercely battled each other in the wake of a contested presidential election in January 2008, shaking political trust and doing damage to the country's image as one of Africa's most stable states.

If Kenya does establish itself as a pivotal energy provider for East Africa, will geothermal energy sites become strategic military objectives should violence flare up again? What about the sabotage and extortion that afflicts energy facilities from Nigeria all the way across to Somalia?

The list of countries that will get more geothermal exploration in 2009 notably excludes Sudan, an oil power whose name is mud in much of the international community, and Somalia, a failed state where foreign countries may soon have authority to pursue maritime pirates onto sovereign Somali territory without permission.

There's also the matter of water. Though Lake Victoria, the source of the Nile, is right on Kenya's western border, the north of the country is arid and droughts threaten millions of Kenyans every few years.

Kenya should have ample water to pump into geothermal wells from Lake Victoria and other waterways already used for hydroelectric dams. However, we have seen increasing scrutiny on water use across the renewable energy spectrum over the past year or two (high water intensity was a big nail in the coffin for corn-based ethanol, for example).

Leave it to Business

The UN has the global view necessary to put things in context and create political will. As for business, though, we'd rather see companies like Ormat take Kenya and the region to full geothermal capacity.

Good thing, then, that Ormat just announced the completion of a second phase in its pilot Kenyan geothermal plant.

According to the company's early December statement, Ormat's Olkaria plant will save 120,000 tons of imported oil and reduce average cost of electricity across Kenya. With 48 MW of base load capacity, though, Olkaria is only a drop in the bucket compared to what Kenya could produce.

Ormat's investment in that one project to date is over $150 million! Compare that to the UN's goal of $18 million, and you see why private enterprise will play the biggest role of all in developing Africa's geothermal energy.

We're keeping an eye on Ormat and other international geothermal projects. Check out Green Chip International today and gain access to full reports and updates as well as upcoming new recommendations.

Regards,

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Sam Hopkins