Ethiopia and a US- Icelandic private developer Reykjavik Geothermal (RG) late last month signed a landmark agreement in Addis Ababa to construct Africa's largest geothermal plant in the Horn of Africa country.
Construction of the 1,000 MW Geothermal plant, expected to cost an estimated $4 billion, will be undertaken in two stages over an eight to 10 year period.
The agreement, which comes after US President Barack Obama announced the Power Africa Initiative in June, 2012, will see the construction of the geothermal plant in Corbetti Caldera.
Power Africa initiative seeks to add more than 10,000 MW of cleaner, more efficient electricity in six priority countries in Sub-Saharan Africa.
A recent exploration of Corbetti Caldera by team of Icelandic and Ethiopian geo-scientists identified the region as a rich geothermal resource site.
Corbetti was identified by USAID as a priority transaction that could showcase the Power Africa model, by combining private sector expertise and investments with US government tools to mitigate risk and build local government expertise.
A USAID-sponsored Geothermal Risk Mitigation Facility (GRMF), funded by German government-owned development bank, KfW, and managed by the African Union, will provide the Corbetti project with grant funding to defray the costs and risk of exploratory drilling.
The project marks Ethiopia's first independent power project and it is expected to be the largest geothermal facility in Africa.
The country has embarked on a multi-billion dollar energy sector development programme to become one of Africa's major exporters of electricity, and the geothermal power generation will complement a vast $9bn hydro-electric energy programme.
The government's Growth and Transformation Plan (2010-2015) emphasises accelerated industrialisation through the development of massive infrastructure projects, especially in energy and transport.
Under the transformation plan, Ethiopia is expected to generate 6,000MW through its Renaissance dam project, and by 2018 the country is expected to produce approximately 12,500MW by virtue of its hydro-electric dams alone.
Experts say the Corbetti agreement is a significant signal to the private sector and international investors that the Ethiopian energy sector is looking at new generation models beyond the dominant role the public sector has played in that country's energy sector until now.
Reykjavik expects the first 10 MW of power to be on-line in 2015, with an additional 100 MW in 2016, and the balance of the first phase 500 MW on-line in 2018.