Addis Ababa, Ethiopia's capital, on March 18, 2013 (Photo: Sean Gallup/Getty Images)
Ethiopia signed an energy deal worth $4 billion this week with Reykjavik Geothermal, an Icelandic-American company that builds geothermal energy plants. If you're not familiar with geothermal power, it's a method of generating electricity from heat stored in the Earth. Geothermal is considered sustainable because it only uses a small fraction of the planet's heat content to generate power.
Reykjavik Geothermal plans to build a 1000-megawatt geothermal farm 200 kilometres south of the Ethiopian capital, Addis Ababa. So far, $40 million of investment has been secured, with three quarters of the project expected to be funded by the company, backed by private investors. The rest of the money will be borrowed.
When it's done, the project will be the largest source of foreign direct investment in the country, AFP reports. The government has expressed hope that the investment will help turn Ethiopia into a a carbon-neutral, middle income country by 2025.
"This is an epic moment for all of us... bringing Ethiopia to the forefront of geothermal development," Reykjavik chief executive officer Gudmundur Thoroddsson said.
Thoroddsson also called geothermal an ideal source of energy for Ethiopia, where erratic weather and fluctuating oil prices can create challenges for other methods of generating power. The country currently faces frequent blackouts because of lack of power, Reuters reports.
Energy from the project will be used locally and also sold to neighbouring countries, Miret Debebe, head of the Ethiopian Electric Power Corporation, told reporters.
"Geothermal [is] one of the most attractive renewable energy resources," Miret said.
The geothermal farm will be built in two parts, with the first 500-megawatt phase expected to be completed in 2018, and phase two in 2021. Experts have put Ethiopia's geothermal power potential at 5,000 megawatts (that's roughly the same amount of geothermal potential in all of Canada, according to the Canadian Geothermal Energy Association), but Reykjavik says the real amount in Ethiopia could be more like 15,000 megawatts.