Kenya is undoubtedly one of the world’s great geothermal success stories. The East African country has been generating electricity from geothermal sources in the Great Rift Valley since the 1980s. It now boasts the world’s sixth-largest geothermal power production capacity.
Geothermal power stations – like Kenya’s Olkaria IV, pictured above – function like a giant kettle. Water deep beneath the surface of the Earth is heated by hot rock or magma. When a well is successfully drilled, superheated steam rises uo the borehole to turn turbines and generate electricity. Kenya generates almost 50% of its electricity in this way.
And Kenya’s geothermal growth shows few signs of slowing down. Several new developments are planned or under construction, including a new 35 MW power station in Menengai that is set to become fully operational later this year.
But Kenya’s success with geothermal power – – which helps to reduce the still considerable amount of electricity that Kenya must import – has not been emulated by its neighbours.
Outside of Kenya, geothermal production in Africa remains negligible. Various drilling campaigns have taken place in neighbouring Ethiopia, but progress in unlocking geothermal resources has been painfully slow.
Even as the continent grapples to close its electricity shortfall, it remains to be seen whether governments are committed to unleashing their geothermal potential.
Cost conundrum
Generating electricity from geothermal sources is not feasible everywhere. It is typically commercially viable only in places where magma-heated water is available relatively close to the surface.
This is why the Rift Valley – where the African continent is slowly splitting into separate tectonic plates – is one of the best places in the world for tapping into geothermal energy.
But the Rift extends well beyond Kenya – in fact, it stretches from Mozambique in the south, branches into Zambia, Tanzania, Burundi, Rwanda, DR Congo, Uganda and Kenya, before running through Ethiopia, into Djibouti, and then into the Arabian peninsula. While the quality of the available geothermal resources varies across this region, the reasons why Kenya has surged ahead while its neighbours have lagged beyond have less to do with geology and more to do with government priorities.
Speaking at the International Renewable Energy Agency (IRENA) Assembly in Abu Dhabi in January, Tanzania’s energy minister Deogratius Ndejembi was surprisingly candid in explaining why the country remains tentative about developing its geothermal potential.
“In the long-term, it’s good to have geothermal,” he said. “But do I want to do it now? Probably not.”
The problem with geothermal power, Ndejembi said, comes down to its “capital intensive” nature. Drilling geothermal wells – much like drilling oil and gas wells – is very expensive, and there is no guarantee that drilling will succeed in confirming commercially viable resources. Alternative renewables such as solar and wind energy are much cheaper, and also quicker to deploy, the minister highlighted.
Dealing with risk
Sveinn Hannesson, CEO of Iceland Drilling – a specialist in drilling in super-hot geothermal environments – acknowledges that the high costs make geothermal energy challenging for low-income countries in Africa.
“It’s a very difficult case to make,” he says, noting the price per kilowatt hour of geothermal energy could be up to 10 times as high as that for solar energy. “We need to get the total cost of each kilowatt down by probably at least 25% and probably close to 50%.”
Hannesson also emphasises that there are always risks to geothermal exploration. For example, Iceland Drilling has conducted a drilling campaign in Djibouti that began in 2018. While this successfully tapped into a “lot of heat”, Hannesson says the site turned out to be insufficiently porous to allow steam to escape. So far, it has not been possible to harness power from these wells – though Hannesson notes that new techniques that resemble fracking for oil and gas might allow commercial development at the site in the future.
Zillah Malia, senior manager for climate finance at FSD Africa, a UK-funded development finance agency, points out that the cost of drilling a single exploratory well can be $5m.
In practice, she says, private sector companies will need support from governments before they take these early-stage risks.
“Because of the high capex, I believe initially the government has to take the lead in financing that infrastructure. That’s very important, because there has to be a proof of concept before the private sector or international investors also come in to invest. That is one of the things that worked for Kenya.”
Kenya, indeed, is unique in the region, having taken a long-term approach to developing geothermal power over decades. Malia highlights how sovereign guarantees have been crucial in addressing early-stage risk in Kenya, with overseas partners such as Germany’s KfW and Japan’s JICA providing support in some cases.
FSD Africa has developed a Geothermal Risk Transfer Facility in partnership with local insurance companies. The facility is intended to de-risk early-stage development by providing insurance coverage to mitigate losses from drilling wells that prove unviable.
In Kenya, Malia says the facility is now backed by a $40m capital pool, with at least 14 insurance and reinsurance companies participating. The ability to de-risk some of the early-stage drilling contributes to a “very good appetite” among independent power producers in the country, she says.
FSD Africa had originally also intended to provide a similar facility in Ethiopia, but was unable to secure sufficient uptake from local insurance providers.
The hope is that the de-risking facility in Kenya can provide a “proof of concept” that can demonstrate value to governments and financiers in countries like Ethiopia, Malia says.
Uncertain outlook
While geothermal is more expensive than solar or wind, the resource is also of a fundamentally different quality. Solar and wind are intermittent – and therefore require storage and back-up, at additional cost, to deliver a reliable power supply. Geothermal energy, by contrast, can be used as a source of baseload power.
Given that hydropower – while also a baseload energy source – is vulnerable to drought, geothermal stands out as a form of renewable energy that can deliver a truly reliable supply of power to the grid.
Indeed, despite its concern over the costs of geothermal, Tanzania is taking the first step towards developing its geothermal resources, with a goal of reaching 130 MW in capacity by 2030. “If we get guarantees, if we get funding, if we get grants for the early stages of exploration, then we can make headway,” said Ndejembi.
Ethiopia, meanwhile, boasts comparable geothermal resources to Kenya and is the only other African country that has a functioning (albeit small) geothermal power station. Consulting firm Rystad Energy said in 2023 that geothermal could account for one-fifth of the country’s power supply by 2050.
Several major geothermal projects are on the drawing board in Ethiopia, including the 150 MW Tule Moye scheme. All of these projects have an uncertain future, however, with various geological, security and financial factors interrupting development work.
Governments must ultimately decide whether the risk and cost of geothermal is justified by the benefits before bringing in private sector partners. The Ethiopian government has appeared undecided on this question, preferring instead to place its bets on hydropower.
For now, the reality remains that Kenya is the only African country where policy and regulation are firmly aligned behind geothermal development. Its neighbours still have a long way to go to emulate Kenya’s success.