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The Ethiopian Electric Power Corporation (EEPCo), the sole electric power utility in the country, and the Iceland geothermal firm, Reykjavík Geothermal (RG), are expected to sign a power purchase agreement (PPA) in the coming week.
Reykjavík Geothermal has been in negotiations to develop the Corbetti Geothermal Power Project in southern Ethiopia around Shashemene and sell the power to EEPCo.
According to sources, RG’s CEO and Mihiret Debebe, CEO of EEPCo, will sign the PPA.
Mihiret told Capital that no specific date has been set to sign the deal. “There are some small details concerning the documents that must be ironed out,” he said, to finalize the deal.
But he confirmed that the two sides would sign a preliminary deal regarding the PPA. According to Mihiret, the feed-in-tariff, the fee EEPCo pays to RG in return for electricity, will be set by the regulatory body – the Ethiopian Electric Agency, which is accountable to the Ministry of Water and Energy (MoWE).
RG’s project has gotten the government’s attention. In late September company officials, Prime Minister Hailemariam Desalegn and Deputy Prime Minister Debretsion Gebremichael (PhD) went to New York to announce the independent power project.
The CEO said that since the project has the commitment of the government, the tariff issue will be resolved in the near future.
Nejib Abba Biya, local partner of RG, who has several large joint venture businesses in Ethiopia including the Allana Potash project and gold mining, told Capital that the two parties have finalized the tariff issue and he confirmed that RG officials will visit Addis in the coming week. But he declined to provide details about the tariff.
Alemayehu Tegenu, Minister of MoME, told Capital that the tariff is negotiable and set by both sides, EEPCo and RG. He said that the final deal between the two sides will be the PPA.
EEPCo had been trying to negotiate a power purchasing agreement with several local and foreign companies but those companies’ were asking too high a price.
According to sources close to the issue, the electricity Feed-in-Tariff proclamation that was expected to pass into law during the past fiscal year is expected to be ratified by parliament at the beginning of this fiscal year after it is revised by the relevant body, the Ethiopian Electric Agency (EEA). The proclamation is the backbone for companies interested in investing in the country’s energy sector.
Meanwhile, the minister of MoME denied there is such a proclamation saying, “We do not have any Feed-in-Tariff proclamation that will be submitted to the parliament.”He said that the RG PPA deal is not related to any electricity feed-in-tariff.
The law, which encourages private investment in producing renewable energy, has gone through many changes over its life span.
Originally, the Feed-in-Tariff proclamation was expected to pass into law during 2012 facilitating the large-scale deployment of these technologies by providing investment security and market stability for companies investing in power generation.
The EEA, which is the regulatory body for power and power related issues, supervises and ensures that the generation, transmission, distribution and sale of electricity are carried out in accordance with the Electricity Proclamation. It is also the body responsible for revising the draft of the Feed-in-Tariff law.
The five year energy sector development plan indicated that implementation strategies are to promote a mix of energy sources by developing renewable wind and geothermal resources, preventing power loss and promoting the proper utilization of energy, reducing the unit cost of power generation investments and operations, and providing electricity at affordable prices.
“Implementation strategies will seek to meet increasing demand for energy by encouraging private investors to engage in the sector,” the government plan states. Actions taken to support this strategy include licensing applicants and granting certificates of competence to potential energy producers.
Founded in 2008, Reykjavík Geothermal acquired geothermal exploration licenses covering an area of more than 650sqm in Southern Ethiopia. Initially, the company planned to generate 300 MW at the site. However, now Reykjavik expects the first 10MW of power to be on-line in 2015, with an additional 100MW in 2016, with balance of the first 500MW phase, 390MW, coming on-line in 2018.
The 1000MW Corbetti geothermal plant will be built in two 500MW stages and is expected to be the largest geothermal facility in Africa, at a cost estimated at 4 billion dollars over an 8-10 year construction period. RG will build and operate the power plant, located at Corbetti Caldera, considered a top geothermal resource by the team of Icelandic and Ethiopian geoscientists that investigated the region.
RG say they have made significant progress in geothermal power development in Corbetti. USD 4.5 million has been put into geothermal exploration licenses, detailed geological, geochemical and geophysical feasibility surveys, an Environmental and Social Impact Assessment and an Environmental Management Plan, all of which have come up with positive results.
Aluto Langano, developed in the 1990’s, is the only geothermal site in the country. It put out around 7.3 MW when it was installed. Additional geothermal development is expected to commence in the coming months that will generate 35 to 75 MW of energy at a similar field in Langano.
In related news, the drilling of four geothermal wells at Aluto Langano, that was expected to begin in December 2012, will only start in the next few days, Capital has learnt.
The drilling project was delayed due to the crash of a truck that was transporting a cementing unit machine, which bonds the drilled well rocks with cement, from the Port of Djibouti at Adama as it transported the machine to the project area, which is between Zeway and Shashemane.
Since then the drilling has been delayed for several months because of the absence of the cementing unit, while the main drilling machine arrived at the project area on time.
Andarge Eshete, a representative of the generation operations head of EEPCo, told Capital that the drilling would commence shortly using a cementing unit that was rented from Kenya. He said that the machine arrived at the project site a few days ago.
The plan is to drill two wells within six months. “Previously the wells were drilled vertically, but now we will use the directional (diagonal) method, which will be able to collect more steam than the vertical wells,” Andarge explained.
Hopes are that this will develop up to 75 MW of energy from the Aluto Langano Geothermal field project. JEC, who is responsible for transporting the crashed cementing unit, is expected to transport another machine, according to Andarge.
Since 2010 the Japanese consultant firm WEST JEC, in collaboration with EEPCo and the Geological Survey of Ethiopia (GSE), has been conducting feasibility work for the drilling. The study was done to see if it was possible to expand the field to 75 MW by the drilling of appraisal and production wells. The study indicated that the expansion plan was feasible.
The World Bank, Japan and the Ethiopian government funded the endeavour. The World Bank and Japan have contributed over USD 20 million for the four wells, while the Ethiopian government covered the balance for other related costs, which including the cost of the various studies was around USD 32 million. The World Bank is expected to fund the Lion’s share. Japan is also transporting drilling machines and other equipment there.
The plan calls for five production wells to be drilled followed by three reinjection wells and the installation of a power plant.
The power production, power plant construction, and substation construction with other project expenses will come to around USD 350 million.
A venture known as the Scaling-up of Renewable Energy Program (SREP) will finance the production and reinjection wells to the tune of USD 23 million. That includes drilling, consultants and training.
These wells will produce steam that will put out 35-75 megawatts of electricity. Advanced technology allows them to drill to a depth of 2,500 meters. Each individual well will be able to produce 5-10 megawatts.
The Great Rift Valley is estimated to have a high potential for geothermal energy.
The government is planning to increase the country’s power generation capacity by identifying and developing geothermal resources in the prospect areas. The government plans to generate 450MW by 2019 and 10,00MW in 2030 from geothermal energy.
WEST JEC, a prominent company experienced in similar projects throughout the world, was selected through an international bid.
Geothermal energy has been sought after at Aluto Langano since the early 1980’s when exploration wells were first dug. Then in the 1990’s exploration wells were drilled and a pilot plant which put out around 7.3 MW was installed. Although the initial amount of power was small, EEPCo’s plans for geothermal energy are big. They see it as a critical stage in development that will serve as a catalyst for obtaining energy self sufficiency and future financing. By 2016 they plan for the Aluto Langano Geothermal Plant to produce a significant amount of energy. In addition, another site at Tendaho is expected to create five megawatts of additional power.