The Climate Investment Funds (CIF) has approved US $21.7 million for the United Republic of Tanzania to finance its Geothermal Energy Development Project.
The project serves as a significant step in advancing the country’s plans to transform its national economy bolstered by an affordable and baseload sustainable energy technology. It will develop the Ngozi geothermal steam field in southwestern Tanzania and ultimately showcase the technology’s broader potential in the country’s energy transformation.
The project is funded under the CIF’s Scaling-up Renewable Energy Program (SREP) and will receive US $ 5 million as loan and US$16.73 million in grant resources to be implemented by AfDB.
Tanzania has made significant economic and social progress over the past 20 years and is today one of Sub-Saharan Africa’s best economic performers. However, the country still wrestles with poverty and an under-developed energy sector, with half of its electricity being generated by fossil-based technologies and half from hydro.
The country has committed to transforming its energy sector through a more diversified mix of technologies tapping into its renewable resources. Geothermal energy is particularly a promising technology for the country, which has around 15 geothermal sites with an untapped estimated potential of 650 megawatts (MW). A sixth of this potential can be developed in the Ngozi site.
“Today, we are assisting in the first step in the transformation of Tanzania’s energy sector, a transformation that is being built on a sustainable energy source,” said Leandro Azevedo, AfDB’s Senior Climate Finance Officer and CIF Coordinator.
“Developing geothermal capacity in Tanzania is an essential part of that transformation and we hope that this project’s success will lead downstream to the installation of a 100 MW power plant and help create the conditions for the development of other geothermal sites in the country,” he added.
The project involves conducting exploratory test drilling and installing the required steam gathering infrastructure in the Ngozi geothermal site. This SREP highly concessional finance will be instrumental in mitigating the high-risk nature of geothermal prospection and field development. Ultimately, the project is also expected to have transformational effects not only on Tanzania and its energy sector but also more broadly in the African Rift Valley Region.
Once fully operational, the project is expected to come with the following benefits to the country: improved power supply, increased energy security, increased public and private investment, and benefits to local households and businesses
The project’s 100 MW generation will be added to the country’s energy mix adding up to 823 GWh per year to the grid. Electricity from these fields will increase the country’s energy security and reduce its dependence on electricity imported from Uganda, Zambia and Kenya. In addition, a more diversified energy mix will strengthen the power sector’s resilience to future shocks. The project will also contribute downstream to capital mobilization from both public and private investors by creating an enabling environment for unlocking both public and private funds. The total contribution expected from private sector is estimated at US $300 million. Households and businesses will benefit from the supply of clean and reliable green energy, thereby creating urgently needed jobs.