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East Africa – a promising market for European companies in the geothermal sector

published on July 3, 2025

Africa, the second largest continent, measures more than 30 million square kilometers – an area so large that even with modern technology, be it Apple Maps or Google Earth, it is difficult to realize the dimensions. The Congo alone is larger than Germany, France, Spain and Norway combined, China and India together are less than half the size of Africa and the United Kingdom is just the size of the island of Madagascar (Mapped: Visualizing the True Size of Africa – Visual Capitalist).

This vast area harbors huge resource deposits. While North Africa and countries such as Nigeria are important players in the global oil and gas trade (Öl- und Gasindustrie in Nigeria – Größe, Anteil & Unternehmen), Africa's presumed geothermal resources are known (Bundesverband Geothermie: Afrika), but have hardly been tapped. Geothermal energy as an energy source impresses with its climate friendliness, base load capability and resilience. It can be used directly as purely thermal energy or to generate electricity.

The potential of geothermal energy is particularly high in East Africa, in the so-called Rift Valley. The drifting of earth plates and the resulting active tectonic area are ideal conditions for the effective use of geothermal energy (Thermal structure of the African continent based on magnetic data: Future geothermal renewable energy explorations in Africa – ScienceDirect).

Europe and Africa – a changing historical and economic partnership

The relationship between Europe and Africa is characterized by a long and complex history of colonialism, trade and diplomacy. Today, this relationship is increasingly transforming into a strategic partnership based on mutual interests. The goal of global sustainability driven by Europe and Germany in particular, as well as the critical energy and mineral sector, make East Africa an area where European companies can use their know-how for the green transformation of the continent (Gemeinsam mit Afrika Zukunft gestalten Die Afrika-Strategie des BMZ). Europe's historical relationship with Africa has been characterized by economic and human exploitation for centuries. The extraction of cheap raw materials was a key part of Europe's economic development. During this time, many trade networks were established which still create dependencies today. These dependencies have become increasingly dynamic in recent years, and Africa is seen less and less as a continent of the needy but rather as a continent of economic opportunity. EU initiatives such as the “Global Gateway Initiative” underline this trend (Global Gateway – Europäische Kommission).

Economic interests and the promise of geothermal energy

In East Africa, geological conditions for geothermal energy are ideal. Countries such as Kenya, Ethiopia and Tanzania have already taken the first steps towards industrial-scale production, while Uganda and Djibouti are currently examining the feasibility. For these countries, geothermal energy is far more than just a method of generating electricity: Geothermal energy can become the basis for long-term energy independence and economic growth, both locally and nationally. The idea of leap-frogging also applies to these countries: through innovation and its own commitment, Africa is creating a greater leap into the future. The power generation targets are very ambitious, but achievable. Kenya wants to obtain 100% of its electricity needs from renewable energies by 2030. Around 90% of its electricity already comes from renewable sources, which is partly due to the strategy of the national electricity supplier KenGen, which has driven forward the expansion of wind turbines, solar parks, hydropower plants and geothermal energy (Geothermal and hydropower revenues drive KenGen profit up by 35%).

As mentioned, East Africa is one of the most tectonically active regions on earth. In the so-called Rift Valley, drifting tectonic plates create temperatures below the earth's surface that can be used to generate not only heat (direct-use) but even electricity efficiently and cost-effectively. The Rift Valley can be divided into the eastern and western arms, with the former extending from Ethiopia via Kenya to northern Tanzania. The western arm, on the other hand, stretches from the Congo, through Uganda, Rwanda, Burundi, southern Tanzania and Zambia to Mozambique (Ring 2014).

The resilience that geothermal energy brings is particularly important for Africa, a continent that is particularly vulnerable to the consequences of climate change. In 2024, for example, power generation in Zambia was severely affected by drought; electricity generation from hydropower, which normally covers 83 % of local demand, was so severely reduced by the drought that power had to be switched off for 8 hours a day (Dürre verschärft Wirtschaftskrise in Sambia).

Thanks to decades of experience in the geothermal and alternative energy sector, European companies could hardly be in a better position to enter the African market. The German development bank (KFW) (Kenia setzt auf erneuerbare Energien – ein Interview mit dem KfW-Energieexperten Michael Andres | KfW Stories) is already playing a decisive role in the development of the energy infrastructure. It is flanked by engineering (GIZ) (Afrikanische Union – giz.de) or investments by EDF. With the Global Gateway Initiative, 150 billion in the form of public and private investments are to flow into climate and energy-related projects (Global Gateway – Europäische Kommission).

A geopolitical opportunity

In Africa, the EU wants to maintain its influence by offering infrastructure and investments based on transparency and sustainability (CHINA-AFRICA: Competition between systems – China's role in Africa and why Europe must react now). European companies participating in geothermal projects now will not only gain access to growing energy markets but will also help shape regulatory frameworks and project standards for decades to come.

At the same time, Africa's population growth and rapid urbanization are ensuring that the continent's energy demand is one of the fastest growing in the world. Geothermal energy – as a base-load capable and low-emission energy source – is particularly well suited to supplying future African cities and industries (Unsdg | Decoding Africa’s Energy Journey: Three Key Numbers).

Significance for European companies

East African countries and their private and public project developers are looking less for mere infrastructure and more for knowledge transfer and the involvement of local stakeholders. This shift plays to the strengths of European institutions, which can offer joint ventures, vocational training and knowledge exchange programs to strengthen local industries. By prioritizing sustainable investment and local workforce development – rather than importing labor – European companies can support Africa's long-term energy independence (How bridging the skills gap can boost Africa's green energy transition | Reuters).

The Geothermal Risk Mitigation Facility (GRMF) and the Rift Valley

The Geothermal Risk Mitigation Facility (Home – Geothermal Risk Mitigation Facility (GRMF)) was launched in 2012 by the African Union Commission (AUC) in cooperation with the German Federal Ministry for Economic Cooperation and Development (BMZ), the EU-Africa Infrastructure Fund (EUAITF), with KfW Development Bank as the interface. Its main objective is to promote the development of geothermal energy in Africa by mitigating the high financial risks associated with early-stage exploration. These risks have hindered investment in geothermal energy in the past – particularly in regions with limited data and infrastructure. GRMF aims to attract both public and private investors – including public-private partnerships – by providing co-financing and technical support in the crucial early stages of project development.

GRMF primarily provides financial support for two main types of geothermal development activities: surface studies and exploration drilling. Surface studies include geophysical, geochemical and geological surveys to assess geothermal potential. GRMF finances up to 80 percent of the costs incurred. Once promising areas have been identified, project developers can apply for support for drilling. GRMF covers up to 40 percent of the eligible costs for these. Infrastructure measures that are either necessary for carrying out surface studies or implementing the drilling – such as access roads or water supply systems – can also be co-financed with up to 20 percent. In addition, developers who continue project development within six months of submitting the final drilling report can receive a so-called “continuation premium”, which covers 30 percent of the drilling costs (a special double cap applies).

Geographically, GRMF focuses – although not exclusively – on countries along the East African Rift Valley (East African Rift System, EARS), one of the world's most active tectonic regions. Participating countries include Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Eswatini, Ethiopia, Kenya, Malawi, Nigeria, Rwanda, Somalia, Tanzania, Uganda and Zambia. At the beginning of the year, however, a mechanism was created to allow countries to apply for admission to GRMF, making the program a pan-African program.

By reducing the risks in the most capital-intensive and uncertain project phases, GRMF promotes investment in the development of the area, the construction of power plants and grid connection.

Power generation with geothermal energy

Geothermal energy in East Africa is mainly used to generate electricity. The temperatures below the surface typically exceed 200 °C, which makes them particularly suitable for power generation (Thermal structure of the African continent based on magnetic data: Future geothermal renewable energy explorations in Africa – ScienceDirect). The most developed geothermal power program in Africa is in Kenya. There, decades of exploration and infrastructure development have enabled the deployment of large-scale geothermal power plants. The country is therefore a leader in geothermal power generation and ranks sixth in the world with an installed capacity of over 950 MW (as of 2023), most of which is concentrated in the Olkaria geothermal complex (How Kenya’s energy policy is driving geothermal development). The country obtains over 40% of its electricity from geothermal energy – a remarkable achievement that has helped to reduce dependence on hydropower and fossil fuels while stabilizing electricity prices (Kenya is hot for geothermal energy | KfW Development Bank). Ethiopia is still at an earlier stage of development but is rapidly expanding its geothermal sector with projects such as Tulu Moye. This project was the first to be financially supported by a European infrastructure fund (Tulu Moye Geothermal wins m co-financing GRMF grant from African Union | ThinkGeoEnergy – Geothermal News & Insights) and was also co-financed by GRMF.

The following map shows all projects supported by GRMF: Drilling programs and surface studies. Some projects have already been completed, others are still struggling with financing problems, regulatory challenges or environmental and social requirements.

Direct use of geothermal heat

While electricity generation is the focus of geothermal development in East Africa, the direct use of geothermal heat offers an important and often underestimated opportunity. Geothermal heat can already be used at lower temperatures – for example for greenhouse heating, aquaculture, industrial drying processes, district heating or even therapeutic spa applications. These applications do not require complex turbine systems and can be used in areas with moderate geothermal temperatures – as are widespread in both arms of the Rift Valley (Geothermal Development in Eastern Africa).

Expanding the direct use of geothermal energy could bring significant economic and environmental benefits – especially for rural communities and regions without access to electricity. GRMF can help raise awareness of such projects and promote feasibility studies. The integration of geothermal heat into national energy strategies would enable countries to make full use of their geothermal potential – especially where electricity generation is not technically or economically feasible.

The following map shows the first projects supported by GRMF under "GRMF – Heat", a program that was only launched in 2024. Interest has been very high and the second round of applications almost completed. The submitted projects cover various uses of geothermal heat: from drying agricultural products to industrial applications such as beer brewing and milk pasteurization to silkworm breeding and spa operations (Direct Use – Geothermal Development Company).

Conclusion

We at Rödl & Partner are convinced that the development of the geothermal market in Africa is currently at its peak. Public and private companies are tendering for specific services, but still have difficulties in finding professional companies for the following services (not a complete list) (Risky business: developing geothermal power in Kenya):

Geological surveys and planning (work plans for surface studies and drilling)
Drilling engineering
Quality assurance
Environmental and social consulting
Drilling supervision (company engineers)
Drilling and related services

In addition, many projects continue to struggle with financing the next phases of development – in some cases even with the 20% equity share not covered by GRMF for surface studies. Financing drilling remains a major challenge for the private sector. Nevertheless, many are open to cooperation, especially with professional investors from abroad. While political decisions or conflicts could influence development, the potential is huge, and the continent is ready to be perceived as a promising market. Of course, doing business in Africa brings with it particular challenges – but with local consultants, many risks can be avoided. A European African partnership could accelerate market development, strengthen Africa's energy supply and make a significant contribution to overcoming the global climate crisis.

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Sources:

Elbarbary et al.: Thermal structure of the African continent based on magnetic data: Future geothermal renewable energy explorations in Africa - ScienceDirect (2022)

Szymaczak: Africa To Overtake Europe in Geothermal Capacity by 2030 (2023)

Payton: How bridging the skills gap can boost Africa's green energy transition | Reuters

EU: Global Gateway - Europäische Kommission

Schott: CHINA-AFRICA: Competition between systems - China's role in Africa and why Europe must react now (2024)

El Hillo: Unsdg | Decoding Africa's Energy Journey: Three Key Numbers, UN (2025)

Richter: How Kenya's energy policy is driving geothermal development (2025)

Tulu Moye Geothermal: Tulu Moye Geothermal wins m co-financing GRMF grant from African Union | ThinkGeoEnergy - Geothermal News & Insights

Johnson and Ogeya: Risky business: developing geothermal power in Kenya (2020)

IRENA: Geothermal Development in Eastern Africa