Geothermal market booming in East Africa


published on 19th February 2021


​An attractive subsidy programme, stable conditions and government-backed PPAs: the East African market is showing a development that can make deep geothermal energy the backbone of power supply in the region.



Deep geothermal energy has so far played only a small role in the energy transition compared to other renewable energy sources. In 2019, it accounted for less than 1 percent of the world's installed capacity for electricity generation from RE1.  Yet it is considered a „hidden champion” by experts. It is inexhaustible from a human perspective, has a high energy output and thus a high CO2 reduction potential and low maintenance costs. It is becoming a key technology above all because it is the only combustion-free, base-load-capable renewable form of energy.


The expansion of this clearly advantageous technology is being held back by the high risk of discovery and the associated investment costs. Neither the exact temperature nor the amount of economically recoverable thermal water can be determined in advance through above-ground studies. Capital-intensive exploratory drilling must be carried out to determine the exact amount. Depending on the drilling depth, the costs can account for up to 60 percent of the total development costs.


In East Africa, the technical potential for geothermal energy is estimated at 15,000 MW2. In order to be able to develop local projects despite the exploration risk, the market incentive programme „Geothermal Risk Mitigation Facility” (GRMF) was launched in 2012 in cooperation between the African Union Commission (AUC) and KfW Entwicklungsbank (donors are the German Federal Ministry for Economic Cooperation and Development (BMZ), the EU Africa Trust Fund and the Foreign, Commonwealth & Development Office from England). GRMF is managed on behalf of the AUC by Rödl & Partner in cooperation with the Icelandic engineering firm Mannvit as fund manager. The declared aim of the programme was and is to create incentives for private and public investments in East African deep geothermal projects.


Funding opportunities include direct grants for surface study, exploration drilling and infrastructure costs incurred through exploration activities. In addition, projects can apply for a continuation premium for further project development activities. The aim of the programme is to trigger further investments in the region as a market incentive programme and thus to place geothermal energy as another option in the generation portfolio. This is dominated by hydropower, decentralised plants and also old heavy oil power plants. Wind and solar projects are added here and there, but the mostly state-owned, centrally controlled structures are responsible for holding on to large-scale projects (mostly hydropower, such as the Grand Ethiopian Renaissance Dam project). It is precisely here that geothermal energy plays to its strengths: If production in the hydropower plants is conditioned by sufficient rainfall, geothermal energy is completely independent of climatic influences.


The success of the programme is summarised in the following map, which shows all projects that have successfully completed the application process (competitive bidding & funding application). Some projects have secured funding (partly for surface studies and the drilling programme) from GRMF, but are still hampered in further development either by regulatory barriers or funding difficulties.




The 6th bidding round started in May 2020 for which GRMF received a total of 17 (!) expressions of interest from private and public project developers from Djibouti, Ethiopia, Kenya, Tanzania, Uganda and Zambia. Funding was requested for ten surface studies and seven drilling projects. The evaluation results of the 6th round are still pending, but it shows the continuing interest in the market to develop the potentials in the region. A 7th round is also currently under discussion in the short term.

The Tulu Moye project in Ethiopia is an example of the considerable opportunities. Ethiopia decided to enter into a PPA with the private operator, which made financing and project development possible. The infrastructure fund Meridiam has stepped in as the main financier and is driving the project forward, which can certainly be considered a milestone for Ethiopian energy supply. The resources for further projects are far from exhausted and new studies are already being carried out to implement further geothermal power generation projects in the country. The commitment to the Kenyan market is also outstanding, with the public developer GDC (Geothermal Development Company) and private developers pushing various projects. It should also be mentioned that the small country of Djibouti - until now still dependent on fossil energies - has decided to develop the existing geothermal potential. About 10 projects are currently being pursued in the country and the aim is to export the electricity to neighbouring countries, above all Ethiopia, and the entire East African region.

In summary: The East African market for geothermal projects has developed considerably in the last 6 years. There are currently good opportunities for market entry due to the large number of possibilities for suppliers or service providers in the special sector, but also for investors, as the necessary equity capital for the first phases of the projects in particular represents a considerable hurdle for private developers. With project sizes ranging from 50 MW to conceivably well over 500 MWe, substantial investments are also needed to develop the market.

1 REN21 Global Status Report 2020
2 Overview of Geothermal Resource Utilization in the East African Rift System Peter Omenda1 and Meseret Teklemariam, Geothermal Development Company Ltd.; Short Course V on Exploration for Geothermal Resources, organized by UNU-GTP, GDC and KenGen, at Lake Bogoria and Lake Naivasha, Kenya, Oct. 29 – Nov. 19, 2010 2010





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