World Bank Supports Djibouti’s Exploration of Cheaper Renewable Energy

A project to tap into Djibouti’s volcanic riches as a source of geothermal power has the potential to reduce energy costs for the small African country and boost access to electricity for all citizens.

A US$6 million contribution to the Geothermal Power Generation Project was approved by the World Bank Board of Directors today. It will support Djibouti in assessing the commercial viability of the geothermal resource in the Fiale Caldera within the Lake Assal region.

Djibouti is located in the active East African Rift tectonic region which has a high potential for geothermal, an inexpensive, clean, reliable and renewable way of producing electricity,” said Ilhem Salamon, World Bank Project Team Leader. “Unlike wind or solar which are intermittent sources of energy, geothermal energy can be available at any moment. Developing this rich resource could allow Djibouti to function almost entirely on clean and affordable energy and foster private sector participation in the sector.”

Half of Djibouti’s population does not have access to electricity due to high tariffs, high connection costs and an electricity grid that covers only Djibouti City and its outskirts. The project is the first phase of a two-step process to develop local geothermal generation capacity and could help Djibouti fully meet its peak demand, alleviate energy dependency and reduce electricity production costs by 70 percent. The exploration phase, supported by donors, will assess whether large scale power generation is possible. This will be followed by the competitive tendering of the development of an estimated 56 MW geothermal power plant to private power producers.  This clean energy will also mean a reduction in carbon dioxide emissions and a healthier environment for the people.

 “The design of this project is built on international best practices as well as on lessons learned from previous attempts to develop the geothermal resource in Djibouti.  The project is supported by several of our partners and will bring the latest know-how in this field to Djibouti,” said World Bank Representative in Djibouti, Homa-Zahra Fotouhi. “We are very excited to bring this cutting-edge technology to a country where universal access to electricity seemed a remote hope. This could turn hope into reality.”

The World Bank has mobilized different donors to co-finance the total project costs of US$31 million including Global Environment Facility (GEF), OPEC Fund for International Development (OFID), African Development Bank (AfDB), Agence Française de Développement (AFD) and the Global Geothermal Development Plan (GGDP) through Energy Sector Management Assistance Program (ESMAP). The Government of Djibouti will also make a contribution.   

This project is financed by the World Bank’s International Development Association (IDA) which was established in 1960 to help the world’s poorest countries by providing interest-free loans (called ‘credits’) and grants that fund projects to boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 82 poorest countries. Resources from IDA bring positive change to 2.5 billion people living on less than $2 a day. Since 1960 IDA has supported development work in 108 countries. Annual commitments have increased steadily and averaged around $15 billion over the last 3 years.

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