gef finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

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Gef finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

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Page 1: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter
Page 2: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter
Page 3: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

CEO Endorsement Template-December-08.doc 05/29/2012 11:21:13 AM

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Submission Date: 05/22/2012 PART I: PROJECT INFORMATION GEFSEC PROJECT ID: 2119 GEF AGENCY PROJECT ID: 00233COUNTRY (IES): Eritrea, Ethiopia, Kenya, Rwanda, Tanzania and Uganda PROJECT TITLE: African Rift Geothermal Development Facility GEF AGENCY (IES):UNEP,(select), (select) OTHER EXECUTING PARTNER(S): UNEP/ROA, AUC-KfW, Eritrea Ministry of Mines and Energy, Ethiopia Ministry of Mines, Kenya Ministry of Energy, Rwanda Ministry of Infrastructure, Tanzania Ministry of Energy and Minerals; Uganda Ministry of Energy and Mineral Development GEF FOCAL AREA(s): Climate Change GEF-4 STRATEGIC PROGRAM(s): CC-SP3-RE (see preparation guidelines section on exactly what to write) NAME OF PARENT PROGRAM/UMBRELLA PROJECT:

A. PROJECT FRAMEWORK (Expand table as necessary)

Project Objective: The Project’s development objective is to accelerate the development and utilization of geothermal resources in the Rift Valley as a pathway to low carbon development in the region. The Project’s global objective is to facilitate reduction of the growth rate of GHG emissions in the region through geothermal energy development to produce electricity.

Project Components

Indicate whether Investment, TA, or STA2

Expected Outcomes

Expected Outputs

GEF Financing1 Co-Financing1 Total ($) c=a+ b ($) a % ($) b %

1. Regional Networking,information systems and capacity building

TA Strengthened technical and institutional capacity and information base through a regionalnetwork that willsupport and coordinate the implementation of the activities

Increase the information base and technical capacity in the region, raise awareness about appropriatepolicies and regulatory and legalframeworks for geothermaldevelopment

Establishment of the East AfricanGeothermal Association and nationalinformation network hubs

1,000,000 21 3,304,660 4 4,304,660

REQUEST FOR CEO ENDORSEMENT/APPROVAL PROJECT TYPE: Full-sized ProjectTHE GEF TRUST FUND

Expected Calendar (mm/dd/yy)Milestones Dates

Work Program (for FSPs only) 24/09/2009 Agency Approval date 10/30/2009Implementation Start 06/01/2010Mid-term Evaluation (if planned) 12/01/2014Project Closing Date 06/01/2016

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2. Technical Assistance

TA Support to surface exploration to priority geothermalprospects (at least four priority geothermalprospect areas)

Adjustment to afavorabledirection to geothermalenergydevelopment of the mininglegislationsof the different States

Economically viable and scientifically soundproposals for submission to GRMF with minimized drilling risks

Confirmationof priority prospects,prefeasibilitystudies and bankablefeasibilitystudies

3,372,334 71 5,726,992 8 9,099,326

3. AUC-KfWGeothermal RiskMitigationFacility

Grant Mitigate the geological risk element in explorationanddrillingactivitiesso that geothermalenergytechnologiesbecome financiallyattractive in the East African Rift System

At least Four geothermalfields with confirmedenergy resource proven

0 0 63,000,000 85 63,000,000

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4. TAF (Feasibility Study)

TA Mitigate the capacity of ARGeomember countries as well as project developers to proceed to Geothermal Powerdevelopment during post drilling stage

Facilitatefinancial close of exploration drillingoperations by providing postdrillingTA

On the job training program for regional GtE staff to use regionalexpertise in the execution of exploration and drillingprogrammes

0 0 2,000,000* 3 2,000,000

5. Project management 377,666 8 230,000 0,3 607,666Total Project Costs 4,750,000 100 74,261,652 100 79,011,6521 List the $ by project components. The percentage is the share of GEF and Co-financing respectively of the total amount for the component. 2 TA = Technical Assistance; STA = Scientific & Technical Analysis. *:This is an estimated amount for the AUC-KfW TAF (Feasibility study Component). The final financial distribution across the AUC/KfW components will be agreed in the 3rd quarter of 2012.

B. SOURCES OF CONFIRMED CO-FINANCING FOR THE PROJECT (expand the table line items as necessary) Name of Co-financier

(source) Classification Type Project %*

Participating countries Bilat. Agency In-kind 6,850,000* 9.2ICEIDA Bilat. Agency In Cash 249,052 0.3BGR Bilat. Agency In Kind 1,600,000 2.1AUC-KfW GRMF Multilat. Agency In Cash 65,000,000 87.5IAEA Multilat. Agency In Kind 312,600 0,4UNEP Impl. Agency In Kind 250,000 0,3 (select) (select) (select) (select) (select) (select) Total Co-financing 74,261,652 100%

* Percentage of each co-financier’s contribution at CEO endorsement to total co-financing.

C. FINANCING PLAN SUMMARY FOR THE PROJECT ($) Project

Preparation a

Project b

Total c = a + b

Agency Fee For comparison: GEF and Co-financing at PIF

GEF financing 880,000 4,750,000 5,630,000 506,700 Co-financing 399,052 74,261,652 74,660,704 Total 1,279,052 79,011,652 80,290,704 506,700

* THIS AMOUNT REFLECTS CO-FINANCING FROM ARGEO MEMBER COUNTRIES INCLUDING ERITREA-USD 250,000; ETHIOPIA-USD 1,650,000; KENYA-2,500,000; TANZANIA-USD 12,000; UGANDA-1,000,000 AND FOR RWANDA THE INITIAL ESTIMATE IS USD 1,440,000.

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D. GEF RESOURCES REQUESTED BY AGENCY(IES), FOCAL AREA(S) AND COUNTRY(IES)1

GEF Agency Focal Area Country Name/ Global

(in $) Project (a) Agency Fee (

b)2Total c=a+b

UNEP Climate Change Regional 4,750,000 506,700 5,256,700(select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) Total GEF Resources

1 No need to provide information for this table if it is a single focal area, single country and single GEF Agency project.

2 Relates to the project and any previous project preparation funding that have been provided and for which no Agency fee has been requested from Trustee.

E. CONSULTANTS WORKING FOR TECHNICAL ASSISTANCE COMPONENTS:

ComponentEstimated

personweeks

GEFamount($)

Co-financing

($)

Project total ($)

Local consultants* 258 322,500 237,500 560,000 International consultants* 347 1,038,920 237,500 1,276,420 Total 605 1,361,420 475,000 1,836,420

* Details to be provided in Annex C.

F. PROJECT MANAGEMENT BUDGET/COST

Cost Items

TotalEstimated

personweeks/months

GEFamount

($)Co-financing

($)Project total

($)

Local consultants* 103 77,500 200,000 398,480 International consultants* 66 198,480 - 77,500 Office facilities, equipment, vehicles and communications*

40,140 30,000 70,140

Travel* 61,546 - 61,546 Others** - - - Total 377,666 230,000 607,666

* Details to be provided in Annex C. ** For others, it has to clearly specify what type of expenses here in a footnote.

G. DOES THE PROJECT INCLUDE A “NON-GRANT” INSTRUMENT? yes no (If non-grant instruments are used, provide in Annex E an indicative calendar of expected reflows to your agency and to the GEF Trust Fund).

H. DESCRIBE THE BUDGETED M &E PLAN:

UNEP will follow the organization's standard monitoring, reporting and evaluation processes and procedures. Substantive and financial project reporting requirements are summarized in Appendix 8 of the project document. Reporting requirements and templates are an integral part of the UNEP legal instrument signed by the executing

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agency and UNEP. The project M&E plan is consistent with the GEF Monitoring and Evaluation policy. The Project Results Framework presented in Appendix 4 of the project document includes expected outcome as well as mid-term and end-of-project targets. These indicators along with the key deliverables and benchmarks included in Appendix 6 will be the main tools for assessing project implementation progress and whether project results are being achieved. The means of verification and the costs associated with obtaining the information to track the indicators are summarized in Appendix 7 of the project document. Other M&E related costs are also presented in the Costed M&E Plan and are fully integrated in the overall project budget.

The M&E plan will be reviewed and revised as necessary during ARGeo Steering Committee Meetings to ensure project stakeholders understand their roles and responsibilities vis-à-vis project monitoring and evaluation. Indicators and their means of verification may also be fine-tuned at steering committee meetings. Day-to-day project monitoring is the responsibility of the Project Manager inside the Project Management Unit but other project partners will have responsibilities to collect specific information to track the indicators. It is the responsibility of the Project Manager to inform UNEP of any delays or difficulties faced during implementation so that the appropriate support or corrective measures can be adopted in a timely fashion.

The Project Manager (PM) in the Project management Unit (PMU) is responsible for ensuring that the project meets UNEP and GEF policies and procedures. The ARGeo Project will also be monitored and evaluated by the ARGeo Steering Committee (ASC). This Committee is composed of representatives from participating ARGeo countries, implementing and executing agents, partners and cofinanciers. The ASC defines the purpose of the project, its strategic intent, objectives, and its values. ASC ensures that procedures and practices in place protect the Project’s assets and reputation. The role of the ASC is described in detail in section 4 of the project document.

The ASC will receive periodic reports from the PM on progress and will make recommendations to UNEP concerning the need to revise any aspects of the Results Framework or the M&E plan. The Task Manager of the implementing agent will also review the quality of draft project outputs, provide feedback to the project partners, and establish peer review procedures to ensure adequate quality of scientific and technical outputs and publications. Project supervision will take an adaptive management approach. The Task Manager will develop a project supervision plan at the inception of the project. The emphasis of the Task Manager supervision will be on outcome monitoring but without neglecting project financial management and implementation monitoring.

An ARGeo Technical Advisory Team (ATAT) will also be established to review and evaluate technical and scientific content of proposals and results of surface exploration studies. The terms of reference for the ATAT is enclosed in Appendix 9 of the project document.

Project risks and assumptions will be regularly monitored both by project partners and UNEP. Risk assessment and rating is an integral part of the Project Implementation Review (PIR). The quality of project monitoring and evaluation will also be reviewed and rated as part of the PIR. Key financial parameters will be monitored quarterly to ensure cost effective use of financial resources.

An annual management review or evaluation will take place before December 31 as indicated in the project milestones. The review will include all parameters recommended by the GEF Evaluation Office for terminal evaluations and will verify information gathered through the GEF tracking tools, as relevant. The review will be carried out using a participatory approach whereby parties that may benefit or be affected by the project will be consulted. Such parties were identified during the stakeholder analysis. It is the responsibility of the UNEP Task Manager to monitor whether the agreed recommendations are being implemented.

An independent terminal evaluation will take place at the end of project implementation. The Evaluation and Oversight Unit (EOU) of UNEP will manage the terminal evaluation process. A review of the quality of the evaluation report will be done by EOU and submitted along with the report to the GEF Evaluation Office not later than 6 months after the completion of the evaluation.

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The GEF tracking tools are attached in Appendix 14 of the project document. These will be updated at mid-term and at the end of the project and will be made available to the GEF Secretariat along with the project PIR report. As mentioned above the mid-term and terminal evaluation will verify the information of the tracking tool.

For the detailed monitoring and evaluation plan see Appendix 7 of the UNEP project document.

PART II: PROJECT JUSTIFICATION: In addition to the following questions, please ensure that the project design incorporates key GEF operational principles, including sustainability of global environmental benefits, institutional continuity and replicability, keeping in mind that these principles will be monitored rigorously in the annual Project Implementation Review and other Review stages.

A. STATE THE ISSUE, HOW THE PROJECT SEEKS TO ADDRESS IT, AND THE EXPECTED GLOBAL ENVIRONMENTAL BENEFITS TO BE DELIVERED:

The proposed ARGeo Program will assist the countries in accelerating the pace of geothermal resource development in the region. Geothermal energy is a key energy resource for East Africa. Scientific work conducted to date confirms that the East African Rift System (EARS) has abundant geothermal resources suited to electricity development, as well as to uses in the industry, agriculture, health, tourism and recreation sectors. The available information shows that the natural conditions of the few developed geothermal fields in Kenya and Ethiopia are representative of the variety of most of the resource prospect areas and the success achieved to date in geothermal exploration and development in these countries is widely replicable in the region. High physical and chemical qualities of geothermal resources are expected to prevail among the numerous known resource prospect areas, availing the opportunity for the utilization of proven technologies.

The estimated resource potential of 15,000 MW for electricity generation in EARS relates to the resources which are found in shallow subsurface areas (about 3 km depth). Despite these abundant geothermal resources in the region, the total installed capacity of geothermal energy in the East Africa Region to date is only about 220 MWe. Five geothermal power plants are operating in the region with an availability of more than 90%: four in Kenya (Olkaria I-IV) and a pilot plant in Ethiopia (Aluto- Langano). In addition, well head installation units in Kenya (Olkaria and Eburru) are generating about 8 MWe.

Geothermal energy (GtE) clearly stands out as one of the most promising and sustainable alternatives for low cost electricity production to complement hydropower and reduce growth of petroleum based thermal generation in the region. However, countries in the region still face a number of barriers to the development and utilization of geothermal resources. These barriers include:

(i) Incomplete and often inadequate geo-scientific information and analysis on most of the potential geothermal sites identified by the countries, (ii) Insufficient capabilities, in terms of human resources, institutional setups and technical infrastructure, to carry out surveys for discovering and characterizing geothermal resources, as well as for installing, operating and maintaining the geothermal resource development infrastructure and power plants. (iii) Insufficient investment in geothermal energy development.

In response to these barriers, ARGeo will:

(i) Provide technical and financial support to enable Governments to take the lead in generating the scientific, technical and economic information for selected priority geothermal energy prospect areas and develop scientifically sound geothermal development project proposals. (ii) Support regional networking and information sharing, and strengthen human, infrastructural and institutional capacities for geothermal energy development. (iii) Contribute to the development of the needed national policies and legislations as well as institutional and regulatory frameworks to attract private developers and investors. (iv) Promote financial instruments to reduce investment risks and facilitate public and private investments in geothermal energy development (i.e. Geothermal Risk Mitigation Funds).

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ARGeo covers Eritrea, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda. While there are many differences between these countries, all of them have considerable potential for Geothermal energy development and need significant additional power generation capacity in order to meet growing demand and expand access to electricity services.

In this project, UNEP will partner with the African Union Commission (AUC) - German Development Bank (KfW) Geothermal Risk Mitigation Facility (GRMF) which will mitigate the investment risks associated with geothermal exploration and drilling, paving the way for both private and public sector funded power plant developments.

Except for Kenya, targeted countries are at the very early stages of geothermal exploration. The technical support provided by UNEP under ARGeo will permit countries to generate high quality information on the potential geothermal reservoirs, which is critical for decision-making on whether exploration drilling would be warranted or not. UNEP’s support will enable ARGeo countries to develop a pipeline of projects for submission to the AUC-KfW Geothermal Risk Mitigation Facility (GRMF) with assurance that drilling risk is minimized.

The ARGeo project will accelerate the systematic development of geothermal energy in the region. ARGeo is designed to increase geothermal energy investments from both public and private sectors. This will displace diesel-based production, diversify energy resources and increase access to modern energy services. Its global objective is to facilitate reduction of the growth rate of GHG emissions in the region through geothermal energy development to produce electricity. Under the GEF alternative the project expects to realise 500MW of additional geoethermal energy resulting in 46.2 MTCO2 over 20 years, or 2.3 MTCO2 per year in post project direct impacts.

B. DESCRIBE THE CONSISTENCY OF THE PROJECT WITH NATIONAL AND/OR REGIONAL PRIORITIES/PLANS:

Many countries in the region are suffering from power shortage due to a combination of volatile oil prices, effects of periodic droughts linked to climate change on hydropower generation, and increasing energy demand linked to rapid population increase and healthy economic growth rates. In this context, the governments of the ARGeo countries are strongly committed to develop geothermal energy with a view to supplement and diversify their energy sources.

This geothermal energy based power generation is sought with the specific objectives of:

(i) Increasing the power generation mix, providing base load power to the national (and regional) power supply systems (currently based mainly on hydropower generation), and mitigate the instability of power supply due primarily to draughts or water use conflicts;

(ii) Contributing to low carbon development through greening the energy production and mitigating the excessive use of traditional biomass and imported petroleum products (this will indirectly support the preservation forests, agricultural land fertility, domestic health and generate foreign exchange savings); and

(iii) Increasing electricity generation from indigenous energy resources and therefore reduce dependence oil based power generation.

This opportunity has been recognized by the countries in their individual energy policies and poverty reduction strategies (for details refer to the project document). As a result, most of the ARGeo member countries are in the process of incorporating geothermal energy in their National Power Development Master Plan. This is also reflected in the Regional Power System Master Plan of the Eastern Africa Power Pool (EAPP) which envisages regional power interconnections using various renewable energy resources including geothermal energy.

Since 2011, AUC in partnerhip with other geothermal partners (including UNEP) is supporting regional policy development and harmonization with a view to establish harmonized national policies, legislations, regulations and institutional frameworks for geothermal energy development in the region. This work will lead to the development of regional geothermal energy policy guidelines. These guidelines will include guidance, lessons and best practices for the creation of appropriate institutions to lead exploration and development of geothermal energy; for developing concession agreements for geothermal exploration; and for establishing tax incentives, Feed in Tariffs, and Power purchase agreements. By adopting and implementing these guidelines, countries will allow more rapid geothermal resource development and utilization in the region and foster related public and private investments.

The situation in terms of geothermal development in the ARGeo member countries is as follows:

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(1) Kenya:

In 2011, Kenya has developed a draft for a new energy policy covering all forms of energy. This new policy aims to attract increased investments for renewable energy development. The policy focusses on one. This draft policy is currently under review by various stakeholders and partners.

Kenya’s Least Cost Power Development plan indicates a measurable shift from the reliance on hydropower resources to the development of geothermal sites. The regulatory framework in Kenya is well developed and supports geothermal development. A "Geothermal Act" was enacted in 1982 and concessions are available for exploration, drilling and operation. The Ministry of Energy gives authority to explore for geothermal resources in the country.

A "Feed in Tariff" (FiT) policy was enacted in 2008 that provides support for geothermal power and there are a number of Independent Power Producers (IPPs) in the Electricity market. This FiT policy is intended to apply for 20 years and for geothermal plants upto 70 MWe with a rate of 0.85$US/KWh. This is expected to apply to the first 500 MWe of geothermal power capacity developed in Kenya. In addition to the FiT, the Government of Kenya has established a Green Energy Fund to encourage investments in renewable energy and manufacture of energy efficient equipments and appliances. This Fund offers loans to projects at concessional rates which could finance a proportion of the risks associated with geothermal exploration.

A number of IPPs are currently active in Kenya. Power Purchase Agreements (PPAs) are negotiated with the Kenyan Power and Lighting Company (KPLC). To date, OrPower is the only IPP that supplies electricity to the grid from geothermal energy. The country has relevant experience with IPPs which form a key part of the Kenyan energy policy.

In addition to the Kenyan Power Generating Company (KENGEN), the government established a new state owned Geothermal Development Company (GDC) in 2008 to accelerate development of geothermal energy in the country. In order to meet the anticipated growth in demand, the Kenya Government through the newly formed GDC has embarked on an ambitious generation expansion plan aiming to install an additional 1000 MW electric power generation from geothermal sources by the year 2018 and 4000 MW by 2030. The country is also considering interconnection schemes with Ethiopia, Tanzania, Zambia and importing from Uganda.

In the framework of the Energy Sector Reform and Power Development Project, the World Bank (WB), the European Investment Bank (EIB) and the German Development bank (KfW) co-financed the Olkaria II geothermal power plant, which is operational since October 2003. A number of investment and development banks are actively engaged in supporting geothermal development in Kenya. KenGen, WB, Japanese International Cooperation Agency (JICA), KfW, EIB and French Development Agency (AfD) are funding the expansion of 280 MW of Olkaria I and Olkaria IV (Domes) power station planned for 2013-2014; and since 2007, the Government of Kenya, China Exim Bank and KfW are funding appraisal drillings. Exploratory drilling in Menengai is executed by GDC.

Kenya has submitted a request for support to UNEP for completing surface exploration studies on the Silai geothermal prospect area (for details see Appendix 15C of the project document).

(2) Eritrea:

Eritrea's energy policy aims at:

(i) Promoting economically and environmentally sound energy sector development through appropriate energy production technologies, energy conservation and usage optimisation, and introducing appropriate pricing structures that avoid the use of subsidies;

(ii) Diversifying energy resources to reduce dependence on biomass and imported oil;

(iii) Promoting private participation in hydrocarbon exploration and development of renewable energy;

(iv) Modernising of existing infrastructure; and

(vi) Building capacity through training and establishing appropriate legal and institutional frameworks for the energy sector.

The WB supported national power distribution and rural electrification programmes. Swedish bilateral aid from 1998-2002 analysed wind and solar resources with 25 measurement stations throughout the country and also provided technical training and assistance in the legal and regulatory framework for the energy sector. The Eritrean Renewable

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Energy Training Centre, part of the Department of Energy, has carried out several studies on renewable energy applications, including solar and wind assessments, and conducted pilot activities to promote improved cooking stoves and solar photovoltaic installations for water pumps and hospitals in decentralized villages.

The Department of Mines (DOM) of the Eritrean Ministry of Energy and Mines, submitted a request to UNEP for completeing surface exploration studies in the Alid geothermal prospect area with a view to locate 30 MW of electric power from the geothermal sites of Alid (for details see Appendix 15A of the project document).

(3) Ethiopia:

Institutionally, Ethiopia has moved from a vertically integrated electricity monopoly system towards an autonomous entity that manages electricity transport and distribution and allows for private generation. In its Energy development plan, the country seeks to diversify and increase production, and to promote the extension of the network and rural electrification. While interconnection schemes with Djibouti are currently in place; interconnection schemes with Kenya and Sudan are at the discussion stage.

The WB's Second Energy Project for Ethiopia supports institutional reforms for the national electricity utility EEPCo and a number of rural electrification initiatives. The Ethiopian Electric Power Corporation (EEPCo) is mandated to encourage private sector investments in the energy sector and related proclamations were enacted in 2005 and 2007. Private sector power purchase agreements (PPAs) are negotiated with EEPCo. Independent Power Producers (IPPs) are encouraged to enter the market through the Electricity Operations Regulations (49/1999), the letter of power sector policy (2003) and the Investment proclamation (280/2004). The regulatory framework in Ethiopia provides a reasonable level of support for geothermal power project developers who can buy geothermal exploration licenses and concessions from the government.

The Ethiopian Energy Agency (EEA) has drafted a feed-in Tariff (FiT) proclamation for a variety of renewable energy resources including geothermal. The FiT proclamation seeks to diversify the energy mix and encourage more medium scale generation. Geothermal tariffs for "FIRM" energy generation range from 0.08-0.10 $US/KWh, up to a maximum of 50 MWe capacity. Tariffs will be valid for up to 20 years.

Five geothermal exploration permits were recently sold to a Canadian Mining Company that continues to have interests in Potash exploration in Northern Afar. These concessions are located in the Main Ethiopian Rift Valley namely: Corbetti, Abaya and Tulu Moye - geothermal prospect areas which are considered to be easily utilizable geothermal systems. At present, a number of private sector actors (e.g. Reykjavik Geothermal) are involved in geothermal exploration and development in Ethiopia. WB and AfDB are currently supporting the expansion of the Aluto-Langano geothermal field, and AfD is supporting development of the Tendaho geothermal field in Afar.

The government of Ethiopia has submitted a request for support to UNEP for completing surface exploration studies of the Tendaho geothermal field (see Appendix 15B of the project document).

(4) Rwanda:

The regulatory framework in Rwanda is not well established for geothermal power production. Currently there is no geothermal law or FIT for geothermal energy. Private sector participation is encouraged in the electricity market although existing IPP’s are restricted to small emergency diesel generation. However the National Energy Policy recognizes a weakness in the governance framework and states that a regulatory framework for energy efficiency, renewable energy and an Electricity and Gas law will be established. GoR is developing a clear policy of giving out concessions and establishing modalities of joint ventures (JV), sustainable utilization of geothermal resources and where applicable the cost of steam supplied to an IPP by a public utility. The effort to develop geothermal resources is supported by the policy. It is believed that geothermal energy can support economic activity in remote areas while providing positive environmental and social impacts. The cost of the geothermal power in the Electricity Master Plan is estimated to be less than 50 RwF/kwh (US cents 5-6/kwh).

The existing installed (generating) capacity of Rwanda is 85 MWe, with approximately 60% being provided from hydro generation and about 40% from thermal. The rest is comprised of emergency diesel generation and micro schemes. Approximately 40% of Rwanda’s electricity demand cannot be served at present and severe load shedding has been required. Demand is anticipated to grow at around 10% per annum.

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National Energy Policy expects that in the future one of the largest inputs into the electricity grid will come from power generated from methane gas extracted from the bottom of Lake Kivu at Kibuye. Geothermal is also highlighted in the energy policy as one of the possible future sources of power. Private sector participation is welcomed at all levels of the electricity supply industry including geothermal exploration. Energy projects are to be prioritised for support by government and/or development partners according to current sector priorities. For electricity projects the priority list is to be determined by the cost effectiveness of competing projects in facilitating increased access to electricity, reducing the average cost of electricity supply and enhancing security of supply.

There is no legal and regulatory framework in place for geothermal energy production. National Energy Policy sets an outline strategy for geothermal development going forward including further resource assessment and exploration. Draft regulatory and legal documentation relating to the geothermal sector is anticipated to be developed shortly. A range of investment incentives exist in Rwanda including flexible work permits, exemption from withholding taxes and taxes on dividends, investment allowances, zero sales tax and zero import tax for plant and machinery. The Rwandan Development Board provides information and assistance for investors.

The Rwanda Utility Regulatory Agency (RURA) is responsible for regulation of the energy market. It does this through issuing of IPP and system operator licences along with setting energy tariffs to the end consumer. It is responsible for ensuring fair competition for the protection of both consumers and operators and thus facilitates private sector involvement in the Rwandan energy sector. There is no renewable energy tariff at present. However, the updated National Energy Policy 2008-12 sets out a number of key issues to address. This includes policy to provide economically justified FiTs (based on avoided costs of production to the utility) or other mechanisms to give incentives and reduce risks for electricity production from renewable sources.

(5) Tanzania:

Tanzania aims to triple its electricity production over the next 20 years and rural electrification is high on the country's development agenda for environmental and socio-economic reasons. The National Energy Policy of 2003 indicates that government of Tanzania is aware that renewable energy resources so far have remained under utilized while electricity needs to be made available for economic activities in rural areas, rural townships and commercial centres. Rural electrification is therefore a case of long-term national interest and a pre-requisite for a balanced socio-economic growth for all in Tanzania. Several parts of this policy refer to the development of renewable energy sources, including the introduction of norms, best practices, environmental considerations in energy planning, increasing research, the promotion of entrepreneurship, and increasing energy services in grid and non-grid areas. An important strategic objective in the national policy is to reduce fossil fuel dependency through increased use of renewables and improving energy efficiency.

Under the power sector-restructuring program, IPPs can generate power and sell to TANESCO. But to date, IPPs operate in the electricity market, solely providing thermal generation. Renewable energy tariffs exist for small power producers, but these are technology neutral. The regulatory framework in Tanzania is not focussed on supporting large geothermal development. No geothermal law has been developed, but concessions can be negotiated under the mining law.

The Swedish International Development Agency (SIDA) financed several geothermal reconnaissance and exploratory initiatives in Tanzania, yielding a draft geothermal plan. A subsequent UNDP mission and further geothermal studies by the Federal German Institute of Geosciences and Natural Resources (BGR) confirmed the potential for geothermal production and suggested further studies.

In 2012, the Ministry of Energy and Mineral Development (MEMD) established a National Task force on geothermal energy development. This Task force is expected to: (i) develop a clear and coherent regulatory and institutional framework for geothermal exploration and development, (ii) advise the government on the related capacity building needs, and (iii) develop a startegic geothermal development plan in line with National Power Development Master Plan.

The government of Tanzania is currently developing their request for completing surface exploration studies on the

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Mbeya geothermal prospect area under UNEP guidance. Once finalized, the proposal will be submitted to UNEP for technical and financial assistance.

(6) Uganda:

Uganda's Energy Policy (2002) indicates that despite the endowment of renewable energy sources, “only a meagre fraction of the country’s renewable energy potential being utilized, Uganda aims to develop the use of renewable energy resources for both single and large scale applications". This policy confirms the Government’s commitment to the development and utilisation of renewable energy resources and technologies. And therefore, the Government has spelled out a number of strategies ranging from dissemination of renewable energy technologies and introducing renewable energies in the school curricula to setting renewable energy standards and facilitating renewable energy financing schemes.

In 2007, Uganda developed a “Renewable Energy Policy”. This policy established standard PPAs and FiTs, and set a target of developing 25 MWe of geothermal by 2012. However FiTs are currently only available for hydro and biomass projects. No IPPs do currently operate on the market, but private sector participation is enclouraged. The implementation of the Renewable Energy Policy objectives will positively respond to the various policy instruments and programmes, which address poverty, catalyze industrialization and protect the environment. These include: the Uganda Constitution 1995, the Poverty Eradication and Action Plan (PEAP), the Millennium Development Goals (MDGs), the Electricity Act 1999, the National Environment Act 1995, the Programme for the Modernisation of Agriculture and the Kyoto Protocol. The overall objective of the Renewable Energy Policy is to diversify the energy supply sources and technologies in the country. In particular, the policy goal is to increase the use of modern renewable energy from the current 4% to 61% of the total energy consumption by the year 2017.

The country is in the process of establishing the available potential and demand of various energy resources with the view to allow increased access to affordable energy services for poverty eradication. An important focus is on improving energy governance and administration in order to stimulate economic growth. The Electricity Act 1999 has been passed for the sector to perform without subsidies, improve efficiency, satisfy electricity demand and increase coverage, improve reliability and quality, attract private capital, and take advantage of export opportunities.

The World Bank is financing a 10 year rural electrification programme in Uganda to increase access to clean and affordable energy through a mix of renewable and traditional fuels. The International Finance Corporation (IFC) is providing financing for mini-hydro schemes in Bushenyi and Mbarara. With regards to geothermal production, the Government with support from the UNDP, the OPEC fund, the government of Iceland, and BGR identified potential geothermal prospects in the country along the western branch of the Eastern Africa Rift. A number of local and international private developers are interested to invest in development of geothermal for power generation in the country. The country aims to develop geothermal energy to complement hydro and other sources of power to meet the rising energy demand.

The government of Uganda submitted a request for support to UNEP for completing surface exploration studies on the Kibiro Geothermal prospect area (for details see Appendix 15D of the project document).

C. DESCRIBE THE CONSISTENCY OF THE PROJECT WITH GEF STRATEGIES AND STRATEGIC PROGRAMS:ARGeo was developed under GEF-3 set of priorities and OPs 6. Although this was the starting point, the project is in line with the GEF-4 overarching goal to reduce GHG emissions through transforming markets. It is aligned with the GEF-4 Strategic Objectives in the Climate Change Focal Area. In particular, it addresses strategic objective 4 (To promote market approaches for renewable energy). Consistency with the strategic priorities is broadly categorized as follows: (a) promotion of renewable energy-based on on-grid electricity supplies (b) technical assistance and capacity building in the Governments, utilities, and private sector for promotion of renewable (geothermal) energy utilization with on-grid renewable policies. The ARGeo Program will promote market approaches for the supply of and demand for geothermal electricity. The expected outcome will be the growth in the investment and market for geothermal power in participating ARGeo countries. The results of surface exploration studies will be used by countries (with UNEP's support) to develop scientifically sound proposals for the AUC-KfW GRMF which will provide grants for exploration drilling and as a result facilitate geothermal power production and electricity generation. All ARGeo countries have a significant geothermal energy generation potential and made the development of a geothermal energy program a high priority. ARGeo will include a

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combination of (i) regional networking, capacity building and information systems; and (ii) technical assistance for surface exploration studies with a view to minimize drilling risks and develop project pipelines for the AUC-KfW GRMF. This would support the AUC-KfW GRMF to enhance the geothermal investment in the region with a view to generate electricity from geothermal energy therefore reducing the use of fossil fuels for power generation (for additional information see project document). D. JUSTIFY THE TYPE OF FINANCING SUPPORT PROVIDED WITH THE GEF RESOURCES.GEF funding will be used for providing technical and financial assistance to ARGeo member countries in order to remove the barriers to geothermal energy development. This technical and financial assistance will : (i) strengthen regional networking, infrastructural and institutional capacities and information base; and (ii) develop a pipeline of priority geothermal projects for the AUC-KfW GRMF and geothermal investors through completing surface exploration studies.The main challenges for geothermal energy development in the region are:

(i) Inadequate policy and regulatory frameworks to attract private developers;(ii) Important upfront costs of Geothermal Resource Exploration and Development; (iii) Lack of appropriate institutional frameworks to carry out a continous and integrated exploration and development of geothermal resources in the region; (iv) Lack regional coordination/collaboration/networking and uncoordinated technical assistance; (v) Risks associated with resource exploration and power development; and (vi) Lack of adequate investments in power development projects.

The GEF resources allocated to the ARGeo project will help to address these barriers and enhance investments through: (i) The establishment of a regional network to substantially improve coordination and collaboration; increase the information base; strengthen technical capacities in the region and maximize the use of regional expertise; and increase the awareness of policy makers and promote appropriate institutional, regulatory and legal frameworks for geothermal energy development in the participating countries. (ii) The provision of technical assistance activities with a view to confirm national priority prospects through surface exploration studies as well as the preparation of pre-feasibilty studies and bankable feasibility studies. Results of these studies will be used by member countries to develop (with UNEP's support) proposals responding to the requirements and criteria for accession to the AUC-KfW GRMF. This will enhance and thereby increase investment in geothermal energy development in the region.

E. OUTLINE THE COORDINATION WITH OTHER RELATED INITIATIVES:Since the idea of a regional geothermal facility was first discussed at the 2003 Nairobi conference, there has been renewed interest from the part of the countries and potential geothermal investors in East Africa. This interest is evidenced by a number of new initiatives such as AUC's Regional Geothermal Programme and the AUC-KfW GRMF with which UNEP established a direct partnership for the implementation of ARGeo; or the Scaling up Renewable Energy Programme (SREP). SREP seeks to scale up and diversify the renewable energy mix in beneficiary countries. Multi-lateral Agencies such as AfDB, WB and donors from various countries finance the programme managed by WB's Climate Investment Finance. SREP aims to promote both private and public interventions with high replication potential. In its pilot phase, SREP is supporting geothermal energy development in Kenya and Ethiopia: SREP allocated about 50 M $USD for Kenya for the Menengai Geothermal Exploration Drilling and prioritized and selected the following programmes for funding in Ethiopia: (i) Clean Energy Capacity Building and investment Facility (about 4M $USD); (ii) Aluto-Langano geothermal Field Development, and design of a long term Geothermal sector strategy that leverages private sector participation (about 26M$USD), and (iii) Assela Wind farm project (10M$USD). With the support from the ARGeo member countries, UNEP will synergize and collaborate with SREP's geothermal activities in the region to take the advantage of complementarities for supporting the development of geothermal energy and related investments. ARGeo will seek to support countries in the development of a pipeline of projects for SREP.

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Through ARGeo, UNEP has already established links and coordination with all main geothermal actors in the region, including a number of private developers that seek to invest in the development of geothermal energy in the East Africa Region. Finally it should be noted that ARGeo established tight cooperation with the UNEP implemented "Yemen Geothermal Development Project", financed by the GEF Trust Fund up to 47%, whose main objective is to accelerate the exploration and the development of geothermal power use in Yemen. The above coordination and partnership is implemented through the ARGeo PMU set up in Nairobi.

F. DISCUSS THE VALUE-ADDED OF GEF INVOLVEMENT IN THE PROJECT DEMONSTRATED THROUGH INCREMENTAL REASONING :

To date, energy production and consumption in the ARGeo member countries are low and structurally the least developed in respect of both the energy forms consumed, where traditional biomass use dominates, and the low share of energy use in economic production. More than 90% of electricity supply is based on fossil fuels in the East African Region. Imported petroleum use dominates for emergency electricty production management in many ARGeo member countries. Because national economies in the region are small, the required periodic additions to power generating capacity are also small and entail high unit capacity costs. Therefore, the price of electricity is generally too high to be affordable to most of the region’s population. Electricity supply is thus limited to the few large urban centers, which nevertheless experience frequent load shading entailing appreciable losses to the GDPs. Rural populations rely on traditional biomass fuel use with the attendant deterioration of the natural and social environment: deforestation, decline of agricultural soil fertility, prevalence of poor domestic health arising from particulate pollutants from biomass burning. This is leading to serious environmental degradation and deforestation.

The East African Power Pool (EAPP) seeks to interconnect the national electric power supply systems of the countries in Eastern and Northeastern Africa with a view to create a unified power supply system. This is intended to increase access to electricity by the population of the region and to promote its increased use in economic production. By the early 2020s, the EAPP plan envisages the powering of the regional interconnections by the use of renewable energy resources, incuding geothermal energy based generation (with a potential of >15 GW), in the process of displacing petroleum use in power generation.

This is the energy resource development and utilization context in which the ARGeo project intends to support the development of the large geothermal energy potential of the EARS region for improving the energy mix and for providing base load power. The ARGeo project in coordination with AUC-KfW GRMF and other regional geothermal initiatives will assist the region in overcoming the barriers and enhance development of the resource through active participation of private investors. GEF’s role is crucial in spear-heading the activities that will help facilitate and accelerate geothermal development in the ARGeo region. A detailed incremental analysis is provided in section 3.7. and Appendix 3 of the project document.

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15

H. EXPLAIN HOW COST-EFFECTIVENESS IS REFLECTED IN THE PROJECT DESIGN:The project is designed to encourage private and public investors to accelerate the geothermal resource development for power generation. This is mainly done by mitigating the risks associated with resource exploration activities. The ARGeo project implemented in partnership with the AUC-KfW GRMF benefits from better co-ordination and a range of shared resources for implementing project activities. UNEP and AUC will avoid the duplication of efforts, take advantage of complementarities and exploit synergies by optimizing skills, expertise and resources notably for capacity building, regional networking and geothermal surface exploration studies and subsequent preparatory work to ensure country readiness for submission of proposals for AUC-KfW GRMF. This will reduce the costs and improve efficiency and quality of the work that both organizations are doing to accelerate geothermal energy development in the region.

The ARGeo project will generate and facilitate access to critical information for private and public geothermal developers, strengthen national institutional capacities and minimize driling risks to support commercial development of geothermal resources on a regional scale. Given not only the potential snow-ball effect that will lead to other projects being developed in the region, the direct post-project benefits include the development of cost competitive and renewable energy resources, and the increased access to energy services in a underserved region.

PART III: INSTITUTIONAL COORDINATION AND SUPPORT

A. INSTITUTIONAL ARRANGEMENT:

UNEP will be the GEF Implementing Agency for this project. The Division of Technology Industry and Economics (DTIE) will act as the implementing agent. The UNEP Regional Office for Africa (ROA) based in Nairobi, Kenya, will host the PMU and execute the project. The AUC hosts and executes the AUC-KfW GRMF based in Addis Ababa, Ethiopia through their own sources of cofinancing. UNEP will create a regional network promoting geothermal energy development and develop a comprehensive technical assistance programme to help ARGeo member countries and other project stakeholders. These Regional Network and Technical Assistance activities aim at establishing a long-term and sustainable basis of expertise and local competencies in the region, including by making available the necessary technical means for all the ARGeo countries. This will ensure that geothermal investigations, surface explorations, exploratory drillings and related investments continue after completion of the project. The Regional Network is expected to continue activities beyond the project with the establishment of the East Africa Regional Geothermal Association.

B. PROJECT IMPLEMENTATION ARRANGEMENT:

UNEP will be the GEF Implementing Agency for the project and will have overall, but independent responsibility for the project implementation. The UNEP tasks consist of two, inter related components:

(i) A regional network to support the development of a regional geothermal energy information database and capacity building activities through training and exchanges of technical information and equipment pooling;

(ii) A comprehensive Technical Assistance programme focussing on the realisation scientific and technical investigations in the ARGeo countries to confirm the presence of utilizable geothermal resources with a view to minimize the drilling risk for potential investors and the Geothermal Risk Mitigation Facility.

The TA programme includes support for the feasibility studies needed to present bankable proposals and access local and international sources of financing; and for the establishment of the enabling conditions addressing the barriers to geothermal energy development in the ARGeo countries (through policy advice, promotion of dedicated institutional structures, development of adequate legal and regulatory frameworks and transaction advice). This will be coordinated with the AUC Regional Geothermal Programme which has a strong focus on encouraging the involvement of private sector developers and envisages hiring transaction advisors for the local governments, in order to help them during the negotiation processes of the establishments of PPPs and IPPs.

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An ARGeo Steering Committee (ASC) will be maintained at the international level as a forum for project direction, coordination and information exchange on project progress and performance. The ASC will meet once a year and will include nominated representatives of the six ARGeo countries, UNEP, AUC, KfW, and other ARGeo donors and partners. It will be chaired on a rotational basis by the designated representative of one of the member countries.

Following GEF endorsement of the project in 2009, the ARGeo Project management unit (PMU) was established in UNEP's Regional Office for Africa in Nairobi. The PMU is operational and is responsible for overall management and administration of ARGeo activities implemented by UNEP, and to coordinate with the different stakeholders (beneficiary countries, technical partners and donors).

An ARGeo Technical Advisory Team (ATAT) will be established to provide neutral expertise, guide and review surface assessments and pre-feasibility studies.

UNEP and AUC agreed to work in direct partnership linking ARGeo and AUC-KfW GRMF to accelerate the development of geothermal energy and related investments in the East African Rift System. In July 2011, UNEP and AUC-KfW identified the following areas of collaboration:

(1) Regional Networking, Information Systems and Awareness Creation through developing the Eastern Africa Geothermal Database; joint outreach and communication material and the organization of regional geothermal forums; (2) Policy Development and harmonization; and Capacity Building (institution and infrastructure); and (3) Technical Assistance: UNEP Technical Assistance component does the “up-stream” surface geo-scientific investigation work aiming to target the best sites for drilling and to minimize “drilling failure risk” and therefore support the development of a pipeline of projects for submission to AUC-KfW GRMF.

Furthermore, UNEP and GRMF will coordinate their surface exploration work, by sharing requests for surface exploration and make every effort to coordinate on this matter so as to optimize surface exploration to maximize the number of proposals promoted for investment. It was proposed that UNEP and AUC-KfW GRMF shall develop a joint Technical Advisory Team to review geothermal proposals and surface exploration studies for quality feasibility and selection. Both organizations agreed to share the costs of retaining the services of this high level group, and both parties will participate in the deliberations of this high level group. AUC-KfW in its GRMF programme incorporates a feasibility study (TAF) that combines exploration drilling results reservoir engineering together with market, regulatory and technical considerations with the aim of securing finance for the next stage of resource development.

UNEP will implement ARGeo in coordination and with the support of the Governments of Eritrea, Ethiopia, Kenya, Rwanda, Tanzania and Uganda by establishing National Project Management Unit in each ARGeo member country. This requires close coordination with the Department of Mines in the Ministry of Energy of Eritrea, the Geological Survey of Ethiopia, the Ministry of Mines and the Ministry of Energy and Water of Ethiopia, the Ministry of Energy and KenGen/GDC in Kenya, the Ministry of Infrastructure, Energy, Water and Sanitation Authority of Rwanda, the Ministry of Energy and Mineral Development of the Department of Geological Survey and Mines of Uganda, and the Ministry of Energy and Minerals in Tanzania. These agencies will participate in the ARGeo Project and coordinate with relevant national government agencies, institutes, universities, as well as national power utilities.

The ARGeo project also draws upon the geothermal experience and knowledge in Kenya (KENGEN/GDC) in terms of sharing their best practices, experience and knowledge with other ARGeo member countries. Close collaboration is also established with KENGEN/GDC/UNU-GTP for capacity building including for their short training course on geothermal surface exploration studies in Kenya. UNEP in partnership with Iceland/KenGen/GDC is also involved in the development of a regional geothermal training center in Kenya. UNEP also partners with BGR's and ICEIDA's geothermal technical assistance programmes in East Africa. The above coordination and partnerships are implemented through the ARGeo PMU based in Nairobi.

PART IV: EXPLAIN THE ALIGNMENT OF PROJECT DESIGN WITH THE ORIGINAL PIF:

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The project design has a different design from the project design approved at work program entry in 2003. Overall the project’s immediate objective “to facilitate investments in geothermal power production by addressing the existing barriers (knowledge and information, technical, institutional, financial) to the increased use of geothermal energy in the ARGeo countries and reduce implementation costs” has refined to : "accelerate the development and utilization of geothermal resources in the Rift Valley as a pathway to low carbon development in the region". In the short term, the project’s aim is to catalyze private sector and public investments in selected geothermal sites in the six ARGeo countries. In the long-term, the aim is to create an enabling environment for geothermal investments by establishing geothermal energy as a strategic option in the national power expansion plans of the region and thus facilitate the systematic utilization of geothermal energy throughout the East Africa Rift region for grid connection and rural electrification. This objective still remains the same with this project design.

Following the official GEF endorsement on September 24th 2009 and assuming the World Bank would submit the project to its Board for approval as was agreed, UNEP established the conditions for the execution of the project as described in the project document and officially started implementation in May 2010. However, two years after GEF endorsement of the project, the World Bank had still not been able to present and secure approval of the project from its Board. The World Bank officially notified GEF of the cancellation of the World Bank portion of the project early December 2011.

In response to the World Bank withdrawal, UNEP proposed to pursue the project in partnership with the AUC-KfW GRMF. In this amended ARGeo project the AUC-KfW GRMF takes over the mission initially fulfilled by the World Bank. The original member countries of ARGeo is also changed as Djibouti is replaced by Rwanda. The countries supported by UNEP will submit their georthermal project development proposals to the already approved and funded AUC-KfW Geothermal Risk Mitigation Facility (GRMF) which has established a Euro 50 Million grant Fund (or USD 65 million) that partially finances geothermal drilling and feasibility study (TAF) for ARGeo member countries and beyond.

UNEP's Technical Assistance activities focus on the “up-stream” geo-scientific surface investigation work aiming to target the best sites for drilling and therefore minimize “drilling failure risk”. Thus UNEP would fully support the development of a pipeline of projects for submission to AUC-KfW GRMF. In this case, the GEF Funding that was originally designed to support both the WB and UNEP components will be reduced by 13 million USD (11 million USD corresponding to the initial funding allocated to WB for the ARGeo RMF + 2 million USD corresponding to the WB TAF) and be limited to the originally approved 4.75 Million USD allocated to UNEP.

Due to withdrawal of the WB, the content of the project and its implementation arrangements have been revised. Originally, the ARGeo Project was started by UNEP, the German Development Bank (KfW) and the GEF. Support for the design of the regional geothermal program has been provided by the GEF through a PDF B activity, KfW and the Ministry of Environment of the Government of Italy. Due to Council decision the World Bank was brought on board to manage the RMF. Two years after GEF endorsement of the project, WB decisded to withdraw from the project.

Therefore, the current project design reflects a 'Stand Alone GEF Funded UNEP ARGeo Component'.

PART V: AGENCY (IES) CERTIFICATIONThis request has been prepared in accordance with GEF policies and procedures and meets the GEF criteria for CEO Endorsement.

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Agency Coordinator, Agency name

Signature Date

.(Month, day,

year)

ProjectContact Person

Telephone Email Address

Maryam Niamir-Fuller,Director, GEF CoordinationOffice, UNEP

05/24/2012 Geordie Colville,

TaskManager

254-762- 3257

[email protected]

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ANNEX A: PROJECT RESULTS FRAMEWORKPlease see Appendix 4 of the Project Document.

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ANNEX B: RESPONSES TO PROJECT REVIEWS (from GEF Secretariat and GEF Agencies, and Responses to Comments from Council at work program inclusion and the Convention Secretariat and STAP at PIF).

Most of the comments were directed at the WB portion of the project.

GEFSEC comments on the ARGeo Project (draft)

IA: WB/UNEP, PMIS: 2119 Region: African Rift Valley (Djibouti, Ethiopia, Eritrea, Tanzania, Kenya, Unganda)

Summary: � The project concept is very good, the design is sound and based on experience with similar GEF projects

(GeoFund). � The catalytic role of GEF is good. GEF Funding of $ 17 million leveraging $ 75.56 million (ratio of 1:4.26)

direct and potentially over $ 1 billion further investments through APLs for 180 MW renewable energy capacity. Regional geothermal potential is 6000+MW.

� GEF-Funding for TA components is considered high ($ 6.75 million) but strongly co-financed by beneficiary countries ($ ~12 million) and other donor countries ($ ~3 million).

� Project preparation is overdue and unsatisfactory. � The draft documentation provided is incomplete, inconsistent and lacking important parts (UNEP ProDoc,

confirmation of co-financing and other).

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ANNEX C: CONSULTANTS TO BE HIRED FOR THE PROJECT USING GEF RESOURCES

$/ Estimated person

weeks**Position Titles person week* Tasks to be performed

For project management �� �� ��Local �� �� ��Programme Assistant �$������������������750� 103� Support to the effective and

efficient management of the ARGeo project through a range of actions contributing to the design, planning, management and monitoring of project activities

International �� �� ��Project Manager �$���������������3�000� 66� Coordinate and manage

project activities with national project participants; Follow up on project expenses, in relation to project outputs and reporting; Identify additional potential partners and new financing sources; Alert on critical issues related to financial management and cost efficiency of the project

Justification for Travel, if any: the project manager will have to travel to the six ARGeo countries and strategic regional and international events

For technical assistance �� �� ��Local �� �� ��Junior expert �$���������������1�250� 62� Organize international and

regional meetings and conferences in collaboration with national executing agencies; Coordinate training programmes to trengthen capacities of the experts

Institutional Capacities Framework Expert �$���������������1�250� 20� Assess and strengthen national institutional capacities for geothermal assessments, explorations and geothermal energy development

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Geothermal project and PPP review Expert �$���������������1�250� 76� Support countries in developing geothermal exploration projects for submission to GRMF and related PPP arrangements

Webdesigner �$���������������1�250� 10� Design the ARGeo website and online platform

Geothermal exploration proposal development Expert �$���������������1�250� 16� Guide and support the development of high standard tenders for selected surface assessment/pre-feasibilityactivities in ARGeo countries

Geothermal Experts (Technical Advisory Body) �$���������������1�250� 32� Scientific review and validation of national surface exploration proposals and their results

Geothermal Experts (Implementation readiness building) �$���������������1�250� 42� Support national partners to ensure readiness for surface assessments

Total local �� 258� ��

International �� �� ��Senior Geothermal Expert �$���������������3�000� 265� Guide and support the

provision of technical and scientific studies for the planning and execution of nationally requested geothermal surface exploration activities in coordination with the respective partners; provide technical assistance to develop an appropriate institutional setup and technical capacity; Support the evaluation of institutional capacities for the regulation of geothermal resource mining and utilization; Review andcontribute to improvingexisting project conditions for private sector participation in geothermal development.

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Institutional Capacities Framework Expert �$���������������3�000� 8� Assess and strengthen national institutional capacities for geothermal assessments, explorations and geothermal energy development

Geothermal project and PPP review Expert �$���������������3�000� 32� Support countries in developing geothermal exploration projects for submission to GRMF and related PPP arrangements

Geothermal exploration proposal development Expert �$���������������3�000� 7� Guide and support the development of high standard tenders for selected surface assessment/pre-feasibilityactivities in ARGeo countries

Geothermal Experts (Technical Advisory Body) �$���������������3�000� 13� Scientific review and validation of national surface exploration proposals and their results

Webdesigner �$���������������3�000� 4� Design the ARGeo website and online platform

Geothermal Experts (Implementation readiness building) �$���������������3�000� 18� Support national partners to ensure readiness for surface assessments

Total international �� 346� ��Justification for Travel, if any: International experts will in some cases be required to travle to the ARGeo member countries and ARGeo workshops/ trainings/events

* Provide dollar rate per person week. ** Total person weeks needed to carry out the tasks.

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ANNEX D: STATUS OF IMPLEMENTATION OF PROJECT PREPARATION ACTIVITIES AND THE USE OF FUNDS

A. EXPLAIN IF THE PPG OBJECTIVE HAS BEEN ACHIEVED THROUGH THE PPG ACTIVITIES UNDERTAKEN.Originally, the ARGeo project was started by UNEP, KfW, and the GEF. Support for the design of the regional geothermal programme has been provided by the GEF through a PDF B activity, KfW and the Ministry of Environment of the Government of Italy. The participating countries during project preparation are: Iceland for PDF C through Icelandic International Development Agency (ICEIDA) for $ 249,052 (Project preparatory activities, Resource exploration, Pre-feasibility studies etc.) Italy for PDF B for $120,388 (Project preparatory activities and for consideration with the Italian scientific council) and Germany for PDF C through BGR and KfW for 2,940,000 (participation to project preparation in the frame of Geotherm 1: Training, ARGeo Biennial Conferences, Meetings, Project appraisals, Exploration, Policy advice, Geoscientific assessments in Tanzania, Ethiopia, Uganda and Eritrea).

A systematic barrier removal approach was launched, the Joint Geophysical Imaging (JGI) medium sized project, in collaboration with KENGEN and Duke University. The objective of the JGI project was to transfer and adapt JGI methods for assessing geothermal reservoirs to Kenya with potential impacts for the East African Rift System. The over goal is to expand the opportunity for geothermal development in the region through the increased probability of finding large, productive steam reservoirs in highly permeable formations due to higher resolution and more accurate assessments. As part of project activities UNEP developed a plan for a replication through technical assistance, policy development and financial instruments in East African Rift Valley region, which resulted in a geothermal resolution supported by the participants of the Eastern Africa Market Acceleration conference held from 9 to 11 April 2003, in Nairobi, Kenya, and which provided substantial input to the ARGeo PDF-B.

ARGeo explicitly builds on the results and experience gained from the JGI project. During the PDF-B phase, a pipeline of 17 pilots geothermal of cost effective investments power plant has been identified in the ARGeo’s participating countries. During works of PDF B and PDF C, an important volume of co financing has been negotiated (years 2004 and 2005). That reflects the strong support to the project provided by various international donors as well as the commitment of the member countries themselves.

B. DESCRIBE FINDINGS THAT MIGHT AFFECT THE PROJECT DESIGN OR ANY CONCERNS ON PROJECT IMPLEMENTATION, IF ANY: NONE.

C. PROVIDE DETAILED FUNDING AMOUNT OF THE PPG ACTIVITIES AND THEIR IMPLEMENTATION STATUS IN THE TABLE BELOW:

Project Preparation Activities Approved

Implementation Status

GEF Amount ($) Co-

financing ($)

Amount Approved

Amount SpentTodate

Amount Committed

Uncommitted Amount*

UNEP PDF Activities (Select) PDF-B Completed 700,000 586,745 0 113,254 150,000PDF-C Completed 180,000 125,460 0 54,539 249,052

(Select) (Select) (Select) (Select) (Select) Total 880,000 712,205 0 167,793 399,052

* Any uncommitted amounts should be returned to the GEF Trust Fund. This is not a physical transfer of money, but achieved through reporting and netting out from disbursement request to Trustee. Please indicate expected date of refund transaction to Trustee.

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ARGeo�UNEP�expenditure��PDF��B�budget� 700,000.00

GFL�4740� 2328� 5070��������������������������Total�

2004� 135,138.00� 0� 135,138.002005� 116,711.00� 0� 116,711.002006� 53,233.18� 0� 53,233.18

Sub��total� 305,082.18� 0.00� 305,082.18

GFL/4721� 2328� 5070� �����������������Total�2004� 207,411.76� 207,411.762005� �3,812.75� �3,812.752006� 17,369.48� 0� 17,369.482007� 20,290.40� �1� 20,289.402008� �4,594.26� 45,000.00� 40,405.742009� 70,000.00� 70,000.002010� �7,500.00� �7,500.00

0.00Sub�Total� 306,664.63� 37,499.00� 344,163.63

PDF�B�total� 649,245.81�BDF�B�Balance� �� 50,754.19

PDF��C��Budget� 180,000.00GFL�4964� 2328� 5070� ���������������������Total�

2007� 17,398.83� 38,182.86� 55,581.692008� �1,831.33� 789.13� �1,042.202009� 0.002010� �25.24� �25.24

Total� 15,567.50� 38,946.75� 54,514.25

PDF�C�Balance� �� �� 125,485.75

QGL/4965�budget� 249,051.61QGL/4965� 2328� 5070� Total�

� �2007� 117,787.28� 117,787.282008� 33,670.02� 33,670.022009� 74,365.60� �188.81� 74,176.792010� 1,028.29� 1,028.29

Total� 75,393.89� 151,268.49� 226,662.38PDF�C�Co��Finance�balance� �� 22,389.23

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ANNEX E: CALENDAR OF EXPECTED REFLOWS

Provide a calendar of expected reflows to the GEF Trust Fund or to your Agency (and/or revolving fund that will be set up)

No reflows is expected to the project.

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PROJECT DOCUMENT

SECTION 1: PROJECT IDENTIFICATION

1.1 Project title: African Rift Geothermal Development Facility1.2 Project number: GFL/ PMS: 1.3 Project type: FSP

1.4 Sub-programme title: GEF strategic long-term objective: BD1

Strategic programme for GEF IV: N° 3: Promoting Market Approaches for Renewable Energies

1.5 UNEP priority: Climate Change

1.6 Geographical scope: Regional

1.7 Mode of execution: Internal

1.8 Project executing organization: UNEP/ROA

1.9 Duration of project: 72 months Commencing: June 2010 Completion: June 2016

UNEP GEF financing

Project preparation 880,000 Project 4,750,000

Sub-total 5,630,000

Co-financing UNEP

Project preparation 399,052 Participating countries 6,850,000 Bilateral and multilateral supports 67,411,652 Sub-total 74,660,704

Total without preparation 79,011,652

Total incl. preparation 80,290,704

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1.10 Project summary

In order to produce the systematic development of geothermal energy in the region, the African Rift Geothermal Development Facility (ARGeo) was initiated in 2003 under the direction of the United Nations Environment Programme (UNEP) with the participation of six east African countries: Eritrea, Ethiopia, Kenya, Rwanda, Tanzania and Uganda. ARGeo aims to accelerate geothermal energy investments by both public and private sectors. This will displace diesel-based production, diversify energy resources and lead to the reduction of greenhouse gas emissions. This initiative shall provide working examples for other private sector investments in the region. Furthermore, the implementation of the project will respect high level rules of social and environmental safeguard.

UNEP will be the GEF Implementing Agency for this project implementation. The overall GEF budget is $4.75 million and will be managed by UNEP/DTIE.

The ARGeo project consists of:

1. The creation of a regional network, information systems and capacity building for geothermal energy development. The project will support activities related to the development of a geothermal energy information database, capacity building activities through training and exchanges of ideas and experiences, and equipment pooling and awareness creation.

2. A comprehensive Technical Assistance Programme. This programme will focus on the implementation of technical surface exploration studies to confirm the presence of utilizable geothermal resources with the aim of minimizing the drilling failure risk for the Geothermal Risk Mitigation Facility.

3. A direct partnership with the AUC-KfW Geothermal Risk Mitigation Facility. Results of the studies conducted under the Technical Assistance programme will be used by member countries to develop (with UNEP support) and submit proposals responding to the requirements and criteria for accession to the AUC-KfW GRMF.

4. Technical Assistance support from AUC-KfW (included in the GRMF programme) to support feasibility studies that combines exploration drilling results and reservoir engineering together with market, regulatory and technical considerations with the aim of securing finance for the next stage of resource development

When implemented, the UNEP ARGeo project in partnership with the AUC-KfW GRMF will have developed pilot geothermal power production plants in the ARGeo member countries with a total power rating of about 500 MWe. In this context, initial estimates could lead to 2,393,656 tons of CO2 emission savings per year and up to 46.2 million tons of CO2 emission savings over 20 years1.

Given the demonstration and “snow-ball” effect of the ARGeo project, it is expected that these pilot projects will generate more interest in geothermal technologies and that further projects will be leveraged in the six targeted countries as well as in the future, in other countries of the Rift Valley (Djibouti, Sudan, , Burundi, the Democratic Republic of Congo, Malawi, Mozambique, and Madagascar as well as Yemen, on the Arabian side of the Rift). In some cases (Yemen), specific budgets for increasing exchange of know-how, are already established. The ARGeo project will also take advantage of an opportunity to benefit from results coming from the Joint Geophysical

1 This is a conservative estimate for the operational life of geothermal production facilities.

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Image (JGI) project financed by the GEF. The project will notably benefit from the use of integrated geophysical equipment bought and technicians trained as part of the JGI project.

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TABLE OF CONTENTS

SECTION 1: PROJECT IDENTIFICATION ...................................................................................... .ISECTION 2: BACKGROUND AND SITUATION ANALYSIS (BASELINE COURSE OF ACTION) ......... 1

2.1. Background and Context ............................................................................................................... 12.2. Global Significance ........................................................................................................................ 72.3. Threats, Root Causes and Barrier Analysis ................................................................................. 82.4. Institutional, sectoral and policy context ..................................................................................... 92.5. Stakeholder mapping and analysis ..............................................................................................192.6 . Baseline Analysis and Gaps ........................................................................................................232.7. Linkages with other GEF and non-GEF interventions ..............................................................28

SECTION 3: INTERVENTION STRATEGY (ALTERNATIVE) .......................................................... 293.1. Project rationale, policy conformity and expected global environmental benefits .................293.2. Project Goal and Objective ......................................................................................................33323.3. Project components and expected results ...................................................................................333.4. Intervention Logic and key assumptions ....................................................................................383.5. Risk analysis and risk management measures ...........................................................................383.6. Consistency with national priorities or plans .............................................................................413.7. Incremental cost reasoning...........................................................................................................463.8. Sustainability .................................................................................................................................473.9. Replication .....................................................................................................................................473.10. Public Awareness, Communications and Mainstreaming Strategy .........................................48

SECTION 4: INSTITUTIONAL FRAMEWORK AND IMPLEMENTATION ARRANGEMENTS ....... …484.1 Institutions and General Organization .......................................................................................484.2 Relationship with other Projects (GEF and others) ..........................................................................54

SECTION 5: STAKEHOLDER PARTICIPATION .............................................................................. 55SECTION 6: MONITORING AND EVALUATION PLAN ................................................................... 56SECTION 7: PROJECT FINANCING AND BUDGET ........................................................................ 58

7.1. Overall project budget ..................................................................................................................587.2. Project Co-financing .....................................................................................................................59Appendix 1: Budget by project components and UNEP budget lines ...............................................62Appendix 2: Co-financing table ............................................................................................................64Appendix 3: Incremental cost analysis .................................................................................................67Appendix 4: Results Framework ..........................................................................................................76Appendix 5: Work Plan and Timetable ...............................................................................................77Appendix 6: Key deliverables and benchmarks ..................................................................................79Appendix 7: M&E plan Work plan and corresponding budget ........................................................85Appendix 8: Reporting requirements ..............................................................................................8586Appendix 9: Decision-making and organizational flowchart .............................................................87Appendix 10: Standard TORs for Terminal Evaluation .................................................................92Appendix 11: Co-financing commitment letters from project partners .........................................93Appendix 12: Endorsement letters of GtEF National Focal Points ........................................ 112106Appendix 14: Tracking Tools ..................................................................................................... 122116Appendix 15: Project Proposals received from Four ARGeo member Countries ................. 124118Appendix 16: Geothermal Risk Mitigation Facility for Eastern Africa ........................................ 124118(Kindly refer to PDF attachment) ........................................................................................................ 124118Enclosed. ............................................................................................................................................. 124118

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ILLUSTRATIONS

FIGURE 1: THE EAST AFRICAN RIFT SYSTEM ………………………………………………………………………… 2FIGURE 2. ORGANOGRAM ................................................................................................................................................ 21 FIGURE 3: ARGEO PROJECT STRUCTURE .............................................................................................................................. 50 FIGURE 4: ARGEO GEF BUDGET FUND FLOW ...................................................................................................................... 59

TABLE 1: ARGEO COUNTRIES ECONOMIC AND ENERGY INDICATORS ................................................................................... 9TABLE 2: ARGEO COUNTRIES TOTAL PRIMARY ENERGY SUPPLY 2009 (KTOE) ................................................................. 12TABLE 3: ARGEO COUNTRIES TOTAL FINAL ENERGY CONSUMPTION 2009 (KTOE) ........................................................... 13TABLE 4: ARGEO COUNTRIES ELECTRICITY PROFILES (2009) ............................................................................................ 13TABLE 5: EFFECTIVE ELECTRICITY PRODUCTION (GWH) .................................................................................................... 14TABLE 6: STAKEHOLDERS IDENTIFIED .................................................................................................................................. 20TABLE 7: BASELINE ESTIMATE OF GHG EMISSIONS IN ARGEO COUNTRIES WITH CURRENT INSTALLED CAPACITY .......... 28TABLE 8: GHG BENEFITS OF ARGEO PROJECTS .................................................................................................................. 31TABLE 9: ESTIMATED ANNUAL GHG SAVINGS FROM PILOT GEOTHERMAL POWER PLANTS FOR 20 YEARS ....................... 31TABLE 10: EMISSIONS REDUCTION OF CO2 FOR 500 MW OF GEOTHERMAL POWER ........................................................... 32TABLE 11: IDENTIFIED GEOTHERMAL SITES AND STATUS ..................................................................................................... 37TABLE 12: NATIONAL EXECUTING AGENCIES ...................................................................................................................... 49TABLE 13: GEF BUDGET IN US$M ........................................................................................................................................ 58TABLE 14. OVERVIEW OF CO-FINANCING ............................................................................................................................. 60

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ACRONYMS AND ABBREVIATIONSAERDP Alternative Energy Resources Development Programme AFD French Agency for Development AfDB African Development BankARGeo African Rift Geothermal Development Facility ASC AFGeo Steering Committee ATAT ARGeo Technical Advisory Team AUC African Union Commission BGR German Federal Institute for Geosciences and Natural

Resources CAS Country Assistance Strategy EARS East African Rift System ECA Europe and Central Asia EEA Eritrea Electric Authority EEC Eritrea Electric Corporation EEPCO Ethiopian Electric Power Company EIB European Investment Bank EMPs Environmental Management Plans EOU Evaluation and Oversight Unit ERB Electricity Regulation Body ESMF Environmental and Social Management Framework FiT Feed in Tariff GDC Geothermal Development Company GDP Gross Domestic ProductGEF Global Environmental Facility GHG Green-House Gas GoR Government of Rwanda GRMF Geothermal Risk Mitigation Facility GtE Geothermal Energy GtPP Geothermal Power Plant HFO Heavy Fuel Oil IAEA International Atomic Energy Agency ICEIDA Icelandic International Development Agency ICS Interconnected System IFC International Finance Corporation IP-ERS Economic Recovery Strategy for Wealth and Employment

Creation IPP Independent Power ProducerIPPs Independent Power ProducersIPTL Independent Power Tanzania Ltd. ISOR Iceland GeoSurvey KENGEN Kenya Electricity Generating Company Ltd. KERB Kenya Electricity Regulatory Board KfW German Development Bank KPLC Kenya Power and Lighting Company LCPDP Least Cost Power Development Plan for Electricity

Production M&E Monitoring and Evaluation MoE Ministry of Energy NEAs National Executing Agencies

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ACRONYMS AND ABBREVIATIONSNPAG National Project Advisory Group NPC National Project Committee NPCU National Project Coordination Unit NPMG National Project Management Group OFE Owen Falls Extension OPEC Organization of Petroleum Exporting Countries PDF Project Development Fund PIR Project Implementation Review PMU Project Management Unit PPA Power Purchase Agreement PPAs Power Purchase Agreements PPP Public Private Partnership PRSP Poverty Reduction Strategy Paper PSC Project Steering Committee RCD Resource Confirmation Drilling

RECO Rwanda Electricity Corporation REG Reykjavik Geothermal RMF Risk Mitigation Facility

RURA Rwanda Utilities Regulatory Agency SCS Self-Contained System SEFI Sustainable Energy Finance Initiative SREP Scaling Up Renewable Energy Programme TA Technical Assistance TANESCO Tanzania Electric Supply Company TPES Total Primary Energy Supply UEB Uganda Electricity BoardUNDP United Nations Development Programme UNEP United Nations Environment Programme UNEP DTIE UNEP Division of Technology, Industry, and Economics UNOPS United Nations Office for Project Services USDOE US Department of Energy USTDA US Trade and Development Agency

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SECTION 2: BACKGROUND AND SITUATION ANALYSIS (BASELINE COURSE OF ACTION)

2.1 Background and Context The East African Rift System (EARS) is one of the major tectonic structures of the earth where the heat energy of the interior of the earth escapes to the surface. This energy flow takes place in the form of volcanic eruptions, earthquakes and the upward transport of heat by hot springs and natural vapor emissions. The EARS extends for about 6500 km from the Middle East (Dead Sea-Jordan Valley) in the North to Mozambique in the South. The EARS passes through Eritrea, Djibouti, Ethiopia, Kenya, Tanzania, Uganda, Rwanda, the Democratic Republic of Congo (DRC), Zambia, Malawi, Mozambique and Madagascar (Figure 1). Estimated Geothermal energy resource potential in the EARS is more than 15,000 MWe.

The proposed ARGeo program will assist the countries in the EARS to accelerate the pace of geothermal resource development in the region. ARGeo covers countries in the EARS namely: Eritrea, Ethiopia, Kenya, Rwanda, Tanzania and Uganda.

Geothermal energy is a key energy resource for East Africa. Scientific work conducted to date confirms that the EARS has abundant geothermal resources suited to electricity development, as well as to uses in industry, agriculture, health, tourism and recreation. The available information shows that the natural conditions of the few developed geothermal fields in Kenya and Ethiopia are representative of most of the resource prospect areas and the success achieved to date in geothermal exploration and development in these countries is widely replicable in the region. High physical and chemical qualities of geothermal resources are expected to prevail among the numerous known resource prospect areas, availing the opportunity for the utilization of proven technologies.

Despite the abundant geothermal resources in the EARS (>15 GW), the total installed capacity of geothermal energy in the East Africa region to date is only about 220MWe. Five geothermal power plants are operating in the region with more than 90% availability: four in Kenya (Olkaria I-IV) and a pilot power plant in Ethiopia (Aluto-Langano). In addition, a Well Head Installing Unit in Kenya (Olkaria and Eburru) are generating about 8 MWe.

Geothermal Energy clearly stands out as one of the most promising and sustainable alternatives for low cost electricity production to complement hydropower and reduce growth of petroleum based thermal generation in the region. However, countries in the region still face a number of barriers to the development and utilization of geothermal resources. These barriers include: (i) Incomplete and often inadequate geoscientific information and analysis in most of the potential geothermal sites identified by the countries, (ii) Insufficient capabilities, in terms of human resources, institutional setups and technical infrastructure, to carry out surveys for discovering and characterizing geothermal systems, as well as, for installing, operating and maintaining the geothermal resource development infrastructure and power plants; (iii) Insufficient investment for geothermal energy development.

In response to these barriers, the UNEP ARGeo project will: (i) provide technical and financial support to enable governments to take the lead in generating the scientific, technical, and economic information for selected priority geothermal energy prospect areas and develop scientifically sound geothermal development project proposals (ii) Support regional networking and information sharing, and strengthen human, infrastructural and institutional capacities for geothermal energy development (iii) Contribute to the development of the needed national policies and legislations as well as institutional and regulatory frameworks to attract private developers

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While there are many differences between the ARGeo member countries, all of them have considerable geothermal potential for geothermal energy development and need significant additional power generation capacity in order to meet growing demand and expand access to electricity services.

Figure 1. The East African Rift System

Except for Kenya, targeted countries are at very early stages of geothermal exploration. The technical support provided by UNEP ARGeo project will permit countries to generate high quality information on the geothermal reservoirs, which is critical for decision making on whether exploration drilling would be warranted or not. In this project, UNEP will partner with the African Union Commission (AUC)-German Development Bank (KfW) Geothermal Risk Mitigation Facility (GRMF) which will mitigate the investment risks associated with geothermal exploration and drilling, paving the way for both public and private sector funded power plant developments. UNEP’s support will enable ARGeo countries to develop a pipeline of projects for submission to the AUC-KfW GRMF with assurance that drilling risk is minimized. AUC-KfW in its GRMF programme incorporates a feasibility study that combines exploration drilling results, reservoir engineering together with market, regulatory and technical consideration with the aim of securing finance for the next stage of resource development.

The ARGeo project will accelerate the systematic development of geothermal energy in the region. ARGeo is designed to increase geothermal energy investments for both public and private sectors. This will displace diesel-based production, diversify energy resources and increase access to modern energy services. Its global objective is to facilitate reduction of the growth rate of GHG emissions in the region through geothermal energy development to produce electricity.

Given the above, the situation in terms of geothermal development in the ARGeo member countries is as follows:

Eritrea: In 1973, the United Nations Development Programme (UNDP) identified potentially significant exploitable geothermal resources in Eritrea. In 1995, with help of United States Geological Survey (USGS), Eritrea identified the Alid geothermal prospect area for follow up detailed investigations. This area is located about 120km south of Massawa.

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The eastern lowlands of the country are of potential geothermal interest. First priority was given to the Alid Volcanic center for exploration as it has numerous manifestations in the form of hot springs and fumaroles. Detailed geoscientific investigations revealed a reservoir temperature of about 250°C. There are also other sites (e.g. Nabbro Dubbi) suitable for discovery of a high temperature resource. A recent volcanic eruption (2011) took place in Nabbro Dubbi area.

Eritrea has embarked on an institutional power sector reform and a power distribution and rural electrification programme to increase access to electricity. Lacking significant hydro power potential, the country relies entirely on thermal generation for power production with elevated electricity costs. Utilization of fossil fuel for power generation leads to draining the country’s foreign exchange reserves, and affects the environment by GHG emissions. The country has thus to develop alternative energy sources such as geothermal, wind and solar that are indigenous and environmentally friendly energy resources. Unfortunately, its ability to diversify its sources of energy is hampered by the lack of knowledge of the potential of indigenous renewable energy resources like geothermal. The development of geothermal energy will enable Eritrea to provide an affordable and sustainable supply of electricity to the habitants who live in the adjacent coastal and island communities. Expert’s estimation indicates that the geothermal facility when developed may cost only $USD 0.06-0.07/kWh compared to the current average sales price of $USD 0.16/kWH for domestic consumption category. The recent price hikes in oil increased the cost by about $USD0.05/kWh.

At present, the Government of Eritrea submitted a request for surface exploration studies (project proposal) to the United Nations Environment Programme for acquiring technical and financial assistance to carry out surface investigations in Alid geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (See Appendix 15).

Ethiopia: Ethiopia started a long-term geothermal exploration undertaking in 1969. Over the years, a good inventory of the possible resource areas has been built up and a number of the more important sites have been explored in the Ethiopian Rift Valley. Of these areas, about sixteen are judged to have potential for high temperature steam suitable for electricity generation . A much larger number are capable of being developed for direct utilization of geothermal heat in agriculture, agro-industry etc.

In Ethiopia, estimated geothermal resource potential for power generation is about 5,000 MWe. So far, exploratory drilling has taken place in Aluto-Langano (1982 to 1985) and Tendaho-Dubti (1993 to 1998) geothermal fields. Detailed surface exploration has been completed in four other geothermal prospect areas (Corbetti, Abaya, Dofan Fantale and Tulu Moye).

A 7.3 MWe geothermal pilot power plant has been installed at Aluto. This pilot plant is currently generating about 4 MWe. Feasibility study for the expansion of the Aluto Langano Geothermal power has been recently completed with the Japanese Overseas Development Assistance. On the basis of this study, drilling of four deep appraisal wells is planned for 2012 with the technical assistance of government of Japan and loan from the World Bank. The government is now working on expansion of the Aluto-Langano geothermal field to 70 MWe. The WB, AfDB and JICA are involved in financing expansion of this geothermal field. Other geothermal prospect areas in the Ethiopian Rift Valley that are at reconnaissance stage of exploration are: Teo, Danab, Kone and others.

Five geothermal exploration permits were recently sold to a Canadian Mining Company that continues to have interests in potash exploration in northern afar. These concessions are located in the main Ethiopian Rift Valley namely: Corbetti, Abaya and Tulu Moye geothermal prospect areas

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which are considered to be with high potential for electricity generation. At present, a number of private developers (e.g. Reykjavik Geothermal) are involved in geothermal exploration and development activity in Ethiopia. During the four decades that the geothermal resources exploration work was carried out in Ethiopia, reasonable information base and degree of exploration capacity has been developed. This is especially true in the human capacity and basic infrastructure development that will be critical in ensuring that future selected resources sites are advanced to the development phase much more rapidly than before.

At present, the Government of Ethiopia submitted a request for surface survey to the United Nations Environment Programme for acquiring technical and financial assistance to carry out further surface investigations in Tendaho geothermal prospect (new target area) with a view to confirm the resource potential and minimize the drilling failure risk (For details see Appendix 15 B).

Kenya: In the East African Rift region, Kenya is the leader in advancing geothermal resource exploration and development. This has partly been due to the problems that it has in developing its limited hydro resources and the successes that it had in small scale development since 1981. Kenya's first electricity generating plant has been operating now for more than 30 years and has proven reliable and economic, running at 98% availability. This compares very favorably with the 50-60% that is typical for hydro-power plants, effectively reducing the investment cost per unit of energy produced. This has confirmed experience elsewhere that geothermal power plants operate at much higher load factors compared to hydro and are particularly suited for base-load power supply. This has also encouraged Kenya to speed up its geothermal power development program and is now generating about 212 MWe representing 14 % of the country’s electricity production. Project development of GtE has been done primarily by the state utility KENGEN but also by Independent Power Producers (IPPs) such as ORMAT. A recent 20-year geothermal development programme prepared by KENGEN is targeting to develop over 600 MW of power production by 2020.

Kenya has fast tracked the development of geothermal resources in the country as a source of affordable and clean power. The Government established the Geothermal Development Company (GDC) with the sole purpose of making available enough steam for electricity generation by Independent Power producers (IPPs) and KENGEN. At present, GDC is carrying out deep exploratory drilling in Menengai. Menengai is the second geothermal field outside of the Olkaria geothermal field. Other geothermal areas such as, Eburu, Silali, Longonot, Suswa, etc., are at various stages of exploration.

In the process of these activities, Kenya has acquired considerable expertise in geothermal related earth sciences and engineering. It has also led to a development of the institutional infrastructure that is necessary for geothermal resource exploration, development and utilization.

At present, the Government of Kenya (GDC) submitted a surface survey request project proposal to UNEP for acquiring technical and financial assistance to carry out surface investigations in Silali geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (For details see Appendix 15 C).

Rwanda: Geothermal exploration & development in Rwanda is still at an early stage and substantial investments are required to accelerate geothermal development. Some surface reconnaissance studies have only been carried out in western region of Rwanda within the Virunga Volcanic Chain along the border with the Democratic Republic of Rwanda (DRC) and Uganda .

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Geothermal exploration in Rwanda started in 1982 with the French Bureau of geology and mining research (BRGM). This exploration study started with a view to diversify energy sources in the generation of electricity and meet the electricity demand in the country.

Systematic exploration of geothermal energy resources in Rwanda started earnestly in 2006. All the studies have shown that Rwanda has a potential of 300-800 MWe from a geothermal reservoir with temperatures over 150°C. Occurrence of active volcanic activity (heat source), and existence of surface manifestations (Machyuza) which are more than 100°C at a depth of 0.5m are positive indicators geothermal resources. It is therefore important to carry out surface exploration studies and exploration drilling to confirm the geothermal resource potential.

Surface exploration studies have been carried out in several phases as shown below:

• In 1983, the French Bureau of Geology and Mines (BRGM) identified Gisenyi and Bugarama as potential sites for geothermal with estimated reservoir temperatures of over 100°C.

• In 2006, Chevron carried out geochemistry studies in the Bugarama and Gisenyi geothermal prospects and estimated the geothermal reservoir temperatures to be more than 150°C.

• In 2008, the Germany Institute for Geosciences and Natural Resources (BGR), in collaboration with the Kenya Electricity Generating Company (KenGen), the Icelandic Geo Survey (ISOR) and the Spanish Institute for Technology and Renewable Energies (ITER) carried out surface studies in the Gisenyi, Karisimbi and Kinigi areas. The results from this study are:

• A high temperature geothermal system (>200°C) on the southern slopes of Karisimbi volcano,

• A medium temperature geothermal system around Lake Karago (150-200°C). • A heat source for the geothermal system at a depth of about 5 km

• In 2009, KenGen acquired additional surface studies (geochemistry and geophysics) and base line EIA on the southern slopes of the Karisimbi Volcano. The results from this study are; (i) A higher resolution conceptual model used to identify targets for drilling 3 exploration wells.; (ii) identified three sites for exploration drilling and estimated geothermal resource area of more than 20 km2 ; (iii) estimated geothermal potential of over 300 MWe; (iv) a preliminary EIA.

According to previous studies, most favorable conditions appear to exist in N-W of the country, in the vicinity of the National volcanoes Park. Additionally to the W-E ranging volcanic system between Rwanda, DRC and Uganda, the Cyangugu area also hosts a geothermal system with surface manifestations.

To the north of Lake Kivu, the Karisimbi prospect has received significant surface exploration attention over the past four years and preliminary results indicate the potential for a large system with temperatures over 210°C. At a workshop of regional and national experts held in Rwanda in 2010 it was recommended to site exploratory drilling wells (2-3 km deep) in the southern slopes of Karisimbi volcano.

Preliminary assessment of the Bugarama prospect in the south of the country indicateed low to moderate temperature resources. Geochemistry from fumaroles at two further sites, Mashyuza and Gisenyi also indicate the potential for low to medium temperature resources. .

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Detailed geoscientific studies including geological mapping (remote sensing), geochemical sampling (water and soil gas analysis), temperature and gas (CO2 flux, Radon, etc.) as well as geophysical measurements (magneto telluric MT and Transientelectromagnetic TEM) were carried ou in the Karisimbi geothermal Prospect Area with the assistance of the Germany Federal Institute of Geosciences and Natural Resources (BGR), in collaboration with the Ministry of Infrastructure and the Ministry of Natural Resources both Rwandan ministries.

Preliminary results indicated a low resistivity anomaly and there is a possibility of the existence of medium to high temperature geothermal system(s) of more than 210°C on the southern slopes of Karisimbi volcano in Rwanda and of a medium temperature geothermal system(s) probably exist along the NE trending accommodation zone west of Mukamira. (MT survey of Virunga Geothermal Prospect,Rwanda; Kenya electricity Generating Company).Detailed surveys are recommended in the area where anomalies were detected and exploratory drilling is planned to start recently.

In 2006, the Ministry of Infrastructure (MININFRA) was given the responsibility of developing Rwanda’s geothermal resources for electricity generation. MININFRA is currently developing local geothermal expertise through capacity building programmes. Short term training is being undertaken in Kenya and Iceland.

Tanzania: Geothermal exploration in Tanzania was carried out between 1976-1979. Reconnaissance studies for surface exploration were carried out in the north (near Arusha, Lake Natron, Lake Manyara and Maji Moto) and in the south (Mbeya region). Geothermal work in all locations in Tanzania is at the surface exploration stage. .Two potential target areas for geothermal exploration singled out so far are: (a) Arusha region near the Kenyan border in the North; and (b) Mbeya region between Lake Rukwa and Lake Nyasa in the southwest. Another potential area (Luhoi) was prospected during 1998-2002 by First Energy Company (a local firm). It conducted important project definition and reconnaissance evaluation work. This area is located 160 km south of Dar es Salaam. The work conducted so far indicates the existence of a geothermal reservoir with a temperature greater than 200 °C.

Tanzania has suffered from drought related hydropower shortages during the last years and is looking to diversify supply to renewable and domestic gas-generated power supply from recently confirmed natural gas fields. Ambitious rural electrification targets will further increase the demand. Tanzania is at the identification stage of potential geothermal resources. Promising sites include Mbeya where a 20 MW geothermal plant has been proposed by developers. The Ministry of Energy and Mineral development set up a National Task Force with a view to facilitate development of geothermal resource. This Task Force is expected to perform the following: (i) To develop a clear and coherent regulatory and institutional framework, (ii) advise government how to build capacity, and (iii) develop a strategic geothermal development plan in line with “National Power Development Master Plan”. At present, the government of Tanzania is working on the revision of the request for proposal for surface exploration studies (project proposal) on surace exploration studies of the mbeya geothermal prospect area to submit to UNEP for technical and finacial assistance to implement the project.

Uganda

Exploration for geothermal energy in Uganda has been in progress since 1993. The studies have focused on three major geothermal areas namely Katwe, Buranga and Kibiro. The three areas are at various stages of exploration and will soon be subjected to detail exploration studies that will pave the way for exploratory drilling. The overall objective of the study is to develop geothermal energy to complement hydro and other sources of power to meet the energy demand of rural areas in sound environment.

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The current study has focused on geology, geochemistry, hydrology and geophysics with the aim of elucidating subsurface temperatures and the spatial extent of the geothermal systems. The results indicate that the geothermal activity in the three areas is related to the volcanic and tectonic activities of the Rift Valley, which has a higher heat flow than the surrounding Precambrian crust. Subsurface temperatures of approximately 140-200°C for Katwe, 120- 150°C for Buranga, and 200-220°C for Kibiro have been predicted by geothermometry and mixing models.

Anomalous areas have been delineated in Katwe and Kibiro prospects using geophysical methods. Drilling of shallow boreholes to a depth of 200-300m for temperature gradient measurement has been completed and the temperatures measured (30-36°C/km) are slightly above the global average of 30°C/km, which suggests deep reservoirs in Katwe and Kibiro or geothermal reservoirs offset from the drilled areas. Additional geophysical measurements to locate the deep reservoirs and drill sites in the two areas are recommended. The results will then be used to update the geothermal models that will be a basis for drilling of deep geothermal wells in the two areas. The Buranga area still needs detailed geophysical surveys to delineate anomalous areas that could be targets for drilling.

The fourth area, Panyimur in Nebbi district, West Nile region, has indications of a geothermal prospect following the results of the petroleum drilling programme that has encountered high temperature gradients (maximum 80°C/km) in the vicinity of the thermal area. The results of the preliminary geothermal investigations on other areas predict subsurface temperatures of 100 -160°C suitable for small scale electricity production and direct uses. These areas have been ranked based on predicted subsurface temperatures and other geothermal features for further exploration and development.

Uganda is facing unprecedented power shortages due to reduced hydropower generation, and has commissioned expensive diesel generators to partially reduce the shortages. The Bujagali Hydro Power Dam (250 MW) is due to be commissioned by 2012 but is not likely to cover the expected demand growth past 2012. Uganda is in the early stages of confirming its geothermal resources and is undertaking a resource assessment with World Bank and bilateral donor support. In addition to relatively large facilities, the Government sees geothermal resources being applied towards production for mini-grids and in rural areas (5-10 MW) which fits in the government’s overall policy for increasing rural electrification.

At present, the Government of Uganda submitted a request for surface survey to the United Nations Environment Programme for acquiring technical and financial assistance to carry out surface investigations in the kibiro geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (for details see Appendix 15 D of the project document).

2.2 Global Significance Presently, more than 10 GW of geothermal electrical power generation stations are on line in some 24 countries, including China, Costa Rica, El Salvador, Iceland, Indonesia, Italy, Japan, Kenya, Mexico, New Zealand, Nicaragua, Philippines, Romania, Russia, Papua New Guinea, Turkey, and the United States. There is an increase of about 20% from 2005 when global installed capacity was 8,933 MWe. By some estimates, as much as 80,000 megawatts of geothermal power are available from volcanic systems in developing countries throughout the world. Indonesia alone estimates its potential at 19,000 megawatts.

At present, the USA is the leading producer with an installed capacity of more than 3000 MWe, followed by the Philippines with about 1,970 MW, and Indonesia with about 1187MW. Iceland, which produces 99.9% of its electricity from renewable energies, is developing new electricity

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production capacities in order to develop its aluminium production activity. Over the last few years, Iceland has more than doubled its installed capacity to reach more than 450 MW, with new power stations located in Nesjavellir, Hellisheidi and Reykjanes.

The two major competing energy sources in southern and eastern Africa are imported petroleum-fuelled plant and hydropower. Diesel medium speed power plants can be added without much planning and at a low cost for capacity but at a highly fluctuating cost to operate, being subject to world petroleum price variations. Hydropower from most dams, while the lowest cost power source, has also proven unreliable due to drought and silting of reservoirs indicating that a stranded investment penalty should apply2. Severe droughts from the early years 2000 had considerably contributed to a down turn of the economy due substantially, among other factors, to power outages.

Geothermal power denotes clear benefits. Firstly, it is insensitive to drought effects and petroleum-price fluctuations. Secondly, it is a clean energy and thus induces major improvements in environmental conditions and public health and associated savings. The ARGeo project will contribute to the reduction of green-house gas (GHG) emissions and help countries adapt to changing climate patterns by diversifying the regional energy supply.

However, whereas geothermal power has reached overall competitive prices, up-front detailed geological investigations and expensive drilling of geothermal wells require a major financial commitment while geological risks still exist, in spite of the progress made at the level of surface investigations. One geothermal well can cost up to US$ 4-5 million and carry a significant risk that the drilled well may turn out to be unproductive. With a minimum of three wells necessary to prove the resource for further development, the upfront financial risk under the exploration phase constitute a formidable barrier for any developer, even when extensive pre-drilling geological surveys indicate good prospects.

This proposed ARGeo project will assist the member countries in accelerating the pace of geothermal resource development in the region by mitigating the above risks associated with resource exploration.

UNEP will implement this project, and be responsible for regional knowledge sharing, capacity building and up-stream technical assistance (surface exploration studies). Results of these studies will be used by member countries to develop (with UNEP's support) and submit proposals responding to the requirements and criteria for accession to the AUC-KfW GRMF.

2.3 Threats, Root Causes and Barrier Analysis There are different barriers to GtE development; some are generic and some specific to individual countries. The following list addresses barriers relevant to the East African Rift Region.

(A) Legal, Regulatory, Institutional Barriers:• Insufficient legal, regulatory, and institutional framework to support GtE development

(Geothermal Policy, Legislation, regulation and institutional and infrastructural capacities) • Lack of standards for assessing the economics of geothermal resources. • Lack of Coordination between different government bodies (e.g., those in charge of

Energy, Water, Environment, Natural Resources, Agriculture, Forestry, R&D, etc.)• Inability to price GtE, lack of incentives.• Institutional weaknesses of utilities to pursue GtE development.

2 With the exception of the Lake Victoria fed Nile River. Some Kenya dams are said to be approximately 70% silted, Malawi dams are approximately 80% silted.

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(B) Technical Barriers: • Lack of adequate information on Geothermal Energy (GtE) resources and facilities. • Lack of adequate management and planning capabilities to identify, prepare, and

implement feasible GtE projects. • Lack of technical and techno-economic knowledge and know-how of geothermal

energy technologies • Lack of adequate geothermal equipment (for geoscientific studies, drilling, rig etc.) • Lack of tools to help decision makers in prioritizing and selecting suitable geothermal

energy projects. (c) Market Barriers

• Insufficient information on competitiveness of GtE projects.• Lack of national or regional energy planning, setting targets for GtE development into

energy sector projections.

(D) Investment Risk and Financial Barriers • High up-front investment costs associated with high resource risk at early stage of

geothermal field development.• High transaction costs for GtE investments developed by the private sector.• Difficult access to eligibility for guarantees from government or other institutions.• Difficult access to foreign long-term financial sources (donors, banks, investors)

needed for GtE technologies.• Lack of creditworthiness, equity or facilities useable as equity among interested

project promoters.• The targeted countries, among the poorest in the world and some of them subject to

political instability, are classified as high credit risk.

2.4 Institutional, Sectoral and Policy context

Economic Overview

The six countries of the African Rift Valley region involved in the ARGeo PDF activities are among the least developed countries in the world3. Between them, they are at relatively different stages of economic, social and institutional development (Table 1).

Table 1: ARGeo Countries Economic and Energy indicators

Country Population (million)

GDP(billion US$)

TPES(Mtoe)

Electricity Generation

(TWh)

Electricity Consumption

(TWh)

CO2Emissions

(Mt of CO2)

Eritrea* 5.07 0.83 0.73 0.277 0.242 0.47 Ethiopia* 82.83 16.62 32.68 4.0393 3.6483 7.42 Kenya* 39.80 17.99 18.72 6.573 5.516 10.02 Rwanda* 11 13.1 9.72 0.24 0.301 0.72 Tanzania* 43.74 16.24 19.62 4.489 3.589 6.26 Uganda* 29.9 9.419 n a 2.445 2.21681 1.62 Sources: *:IEA-International Energy Statistics 2009/ and Energy Information Administration (eia) 2009

3 For example, all six countries are eligible for International Development Association concessional financing (<$1,465 GNI per capita in 2003)

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Kenya: is generally the most advanced of the six countries in terms of economic and institutional development (Table 1). Its GDP per capita is the second highest of the list4. Kenya is the trade and finance centre for East Africa and has pursued different economic reform programs, including the restructuring of the power sector in 1996. Currently, for example, IPPs provide 16 percent of the country’s electricity production. Nevertheless, recent droughts have caused water and electricity rationing and a drop in agricultural output (which represents 1/3 of GDP). The current government (since 2002) has embarked on a wide poverty-reduction strategy and pledged to promote economic growth. Post-election violence in early 2008, coupled with the effects of the global financial crisis on remittance and exports, reduced GDP growth to 1.7 in 2008, but the economy rebounded in 2009-10. GDP growth in 2011 was only 4.3% due to inflationary pressures and sharp currency depreciation - as a result of high food and fuel import prices, a severe drought, and reduced tourism. In accordance with IMF prescriptions, Kenya raised interest rates and increased the cash reserve in November 2011.

The remaining Horn of Africa states include Eritrea and Ethiopia.

Eritrea: is one of the least developed countries in the world. Like the Economies of many African nations, a large share of the population, nearly 80%, is engaged in subsistence agriculture. Erratic rainfall and demobilization of agriculturalists from the military continue to interfere with agricultural production, and Eritrea’s recent harvests have been unable to meet the food needs of the country. The government continues its effort for additional revenue on the development of several international mining projects. A Canadian mining company signed a contract with the government in 2007 and began mineral extraction in 2010. Eritrea’s economic future depends on its ability to master social problems such as illiteracy, unemployment, low skills and more importantly the government’s commitment to support a true market economy. The government maintains control over the economy and has concentrated on infrastructure improvements (transport, ports, etc.) The country has embarked on a power distribution and rural electrification programme to increase access to electricity and an institutional power sector reform.

Ethiopia: is the most populous of the ARGeo countries. It is also one of the poorest countries in the world. Ethiopia’s economy is based on agriculture, which accounts for 41% of GDP and 85% of total employment. Coffee has been a major export group. The agricultural sector suffers from poor cultivation practices and frequent drought, but recent joint efforts by the Government of Ethiopia and donors have strengthened Ethiopia’s agricultural resilience, contributing to a reduction in the number of Ethiopians threatened with starvation. The five-year Growth and Transformation Plan that Ethiopia revealed in October 2010 presents a government-led effort to achieve the country’s ambitious development goals. The banking, insurance, and micro-credit industries are restricted to domestic investors, but Ethiopia has attracted significant foreign investment in textiles, leather, commercial agriculture and manufacturing and the most poverty stricken. Over 50% of its economy is based on agriculture, which suffers from drought, poor cultivation practices. In cooperation with international donors, Ethiopia has begun multi pronged poverty reduction programmes, including agricultural sector development lead industrialization.

Finally, the Great Lakes countries of Rwanda, Tanzania and Uganda are both among the poorest countries in the world.

Rwanda: Rwanda is a poor rural country with about 90% of the population engaged in (mainly subsistence) agriculture and some mineral and agro-processing. Tourism, minerals, coffee and tea are Rwanda's main sources of foreign exchange. Minerals exports declined 40% in 2009-10 due to

9 Djibouti’s GDP per capita is high due to the value of services and the relatively small population

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the global economic downturn. Rwanda has made substantial progress in stabilizing and rehabilitating its economy to pre-1994 levels. GDP has rebounded with an average annual growth of 7%-8% since 2003 and inflation has been reduced to single digits. Nonetheless, a significant percent of the population still live below the official poverty line. Despite Rwanda's fertile ecosystem, food production often does not keep pace with demand, requiring food imports. In recognition of Rwanda's successful management of its macro economy, in 2010, the IMF graduated Rwanda to a Policy Support Instrument (PSI). Rwanda also received a Millennium Challenge Threshold Program in 2008. Africa's most densely populated country is trying to overcome the limitations of its small, landlocked economy by leveraging regional trade. Rwanda joined the East African Community and is aligning its budget, trade, and immigration policies with its regional partners. The government has embraced an expansionary fiscal policy to reduce poverty by improving education, infrastructure, and foreign and domestic investment and pursuing market-oriented reforms. Energy shortages, instability in neighboring states, and lack of adequate transportation linkages to other countries continue to handicap private sector growth. The Rwandan government is seeking to become regional leader in information and communication technologies. In 2010, Rwanda neared completion of the first modern Special Economic Zone (SEZ) in Kigali. The SEZ seeks to attract investment in all sectors, but specifically in agribusiness, information and communications technologies, trade and logistics, mining, and construction. The global downturn hurt export demand and tourism, but economic growth is recovering, driven in large part by the services sector, and inflation has been contained. On the back of this growth, government is gradually ending its fiscal stimulus policy while protecting aid to the poor. In 2011 rises in global food and fuel prices increased inflation in Rwanda from 1% in January to more than 7% in October.

Tanzania: Tanzania is one of the world’s poorest economies in terms of per capita income. However, Tanzania’s average GDP growth is 7% per year between 2000 and 2008 on strong gold production and tourism. The economy depends on heavily on agriculture, which accounts for more than one-quarter of GDP, produces 85% of exports, and employs about 80% of the work force. International donors (e.g. WB, IMF) have recently focused on the rehabilitation of the economic infrastructure and utilities. Recent banking reforms have helped increase private-sector growth and investment, and the government has increased spending on agriculture to 7 % of its budget. Continued donor assistance and solid macro-economic policies supported a positive growth rate. In 2008, Tanzania received the World’s largest Tanzania Millennium Challenge Compact grant of about $698 Million. Tanzania used fiscal stimulus and loosened monetary policy to ease the impact of global recession. GDP growth in 2009-11 was a respectable 6% per year due to high gold prices and increased production. Oil and gas exploration and development have contributed to this growth.

Uganda: has substantial natural resources including fertile soils, regular rainfall, small deposits of copper, gold and other minerals, and recently discovered oil. Uganda, like Tanzania, boasts a large population of which over 80% are employed by the agricultural sector. Coffee is the major export earner. Significant economic reforms have been introduced since the 1990’s including the rehabilitation of the infrastructure sectors. The policy changes are especially aimed at dampening inflation and boosting production and export earnings. The government funding as oil comes online in the next few years. The global economic downturn has hurt Uganda’s exports; however, Uganda’s GDP growth is still relatively strong due to past reforms and sound management of the downturn. Macroeconomic growth since 1995 averaged 6.7% per year. Oil revenues and taxes will become a large source of government funding as oil comes online in the next few years. Rising food and fuel prices in 2011 led to protests.

2.4.1 Energy Structure in ARGeo Countries

Energy production and consumption in ARGeo countries are low and structurally the least developed in respect of both the energy forms consumed, where traditional biomass use dominates,

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and the low share of energy use in economic production (Table 2). More than 90% of electricity supply is based on fossil fuels in the East Africa Region. Imported petroleum use dominates, for emergency management in much of the ARGeo member countries. Because the initial economies in the region are small, the required periodic additions to generating capacity are also small and entail high unit capacity cost. This causes the price of electricity to be high to be affordable to most of the region’s population. Electricity supply is thus limited to the few large urban centres, which nevertheless experience frequent load shading entailing appreciable losses to the GDPs. Rural populations rely on traditional biomass fuel use with the attendant deterioration of the natural and social environment: deforestation, decline of agricultural soil fertility, prevalence of poor domestic health arising from particulate pollutants from biomass burning. Renewable energy sources (hydro, geothermal, solar, etc) represent a small portion of total energy production, averaging 2% for hydropower and solar and geothermal production combined.

This is a baseline scenario in the ARGeo member countries that leads to environmental degradation and deforestation. The East African Power Pool (EAPP) seeks to interconnect the national electric power supply systems of the countries in the Eastern and North eastern Africa with a view to creating a unified power supply system. This is intended to increase access to electricity by the population of the region and to promote its increased use in economic production. By the early 2020’s the EAPP plan envisages the powering of the regional interconnections by the use of renewable energy resources, including geothermal energy based generation (with a potential of >15 GW), in the process of displacing petroleum use in power generation. This is the energy resource development and utilization context in which the ARGeo project intends to support the development of the large geothermal energy potential of the EARS region for improving the energy mix and for providing base load power. The ARGeo project, in coordination with other geothermal initiatives such as AUC-KfW GRMF, will assist the region in overcoming barriers and enhance the development of the resource through active participation of the private sector.

Table 2: ARGeo Countries Total Primary Energy Supply 2009 (ktoe) Country Coal Crude

oil Petro leum pro ducts

Gas Hydro Geothermal Solar, etc.

Combustible Renewable Waste

Electri- city

Total

Eritrea* 164 561 726 Ethiopia* 2305 308 13 30052 32678 Kenya* 59 1614 1477 187 1152 14234 1 18723 Rwanda 1069 8360 292 9721 Tanzania* 59 1570 543 239 17205 0 19616 Uganda** Sources: *:IEA-International Energy Statistics 2009, , ** Pending

In OECD countries, by comparison, combustible waste and biomass only represent 3% of total energy produced. The main differences between energy production in ARGeo countries and the OECD lies in the increased use of coal and crude oil in the production mix, as well as natural gas and nuclear production (33%).

In terms of final energy consumption, combustible waste and biomass is the dominant category in ARGeo countries. This is explained mainly by cooking and heating uses. Petroleum products, which represent the second category, are primarily used in the transportation sector. Electricity represents, on average, 2% of the energy consumed in the ARGeo countries and is supplied mainly in urban or semi-urban areas. Rural areas remain largely off-grid or un-electrified in the ARGeo countries.

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Table 3: ARGeo Countries Total Final Energy Consumption 2009 (ktoe) Country Coal Petroleum

products Gas Combustible

Renewable Waste

Electricity Total

Eritrea* 91 387 21 498 Ethiopia* 2284 28370 292 30947 Kenya* 59 2283 9182 496 12019 Rwanda* 16 1389 248 1653 Tanzania* 23 1558 63 15,084 299 17026 Uganda** Sources: *:IEA-International Energy Statistics 2009, ** Pending

Final energy consumption in OECD countries relies little on combustibles, waste or biomass as in the ARGeo countries. Consumption of petroleum products by the transport and industrial sectors is the dominant category. Natural gas and electricity consumption both represent 20% of total final consumption in OECD countries, compared to 3% (electricity) in ARGeo countries. Statistically, OECD countries consume, on average, 8,056 kWh per capita compared to less than 121 kWh per capita in ARGeo countries. Regionally, South Africa consumes 4,452 kWh per capita while the average for all of Africa is 512 kWh.

2.4.2 Electricity Production and Distribution Structure in ARGeo Countries

With regards to developed electricity production resources, Kenya is the most advanced country in the group, with over 1,500 MW followed by Tanzania and Ethiopia that develop > 900 MWe of total installed capacity (Table 4). This represents approximately 10 times the installed capacity in neighbouring Djibouti or Eritrea and at least 40% more than the rest of the other ARGeo countries. Table 4: ARGeo Countries Electricity profiles (2009)

Country Total Installed capacity(MWe)

Total Production (GWh)

Total Final Consumption

(GWh) Eritrea* 124 295 242 Ethiopia* 950 4106 3398 Kenya* 1650 6875 5767 Rwanda** 85 744 301 Tanzania* 960 4628 3476 Uganda** 530 1,980 1,670 Total 4,274 18,124 14,854 Sources: *:IEA-International Energy Statistics 2009/ **:EIA-US Doe international energy data 2008/ Energy Information Administration (eia) 2009

Hydropower is currently the predominant source of electricity production in the region (70%), yet recent droughts and the silting of reservoirs pose questions concerning the reliability of these resources (Table 5). Thermal production (mainly diesel generation) is present in most countries and is the only source of production in Eritrea and Djibouti. Volatile prices and high import costs make diesel production a costly production source.

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Table 5: Effective Electricity production (GWh)

Country Coal Oil Biomass Hydro Geothermal Solar PV

Total

Eritrea* 293 2 295 Ethiopia* 508 3583 15 4106 Kenya* 3029 321 2170 1339 6859 Rwanda 133 107 240 Tanzania* 125 42 2784 2951 Uganda** 1,980 1,980 Sources: *:IEA-International Energy Statistics 2009/ **:EIA-US Doe international energy data 2008/ Energy Information Administration (eia) 2009

The current extent of electrification is low in most of the ARGeo countries, due to the relatively limited development of the infrastructure (scope and depth) and the large populations. While urban centres have access to electricity grids (4 –20%), the rate of electrification in rural areas is 1 – 2% for Ethiopia, Eritrea, Tanzania and Uganda. National development policies in most countries emphasize the promotion of local, independent or mini-grid electrification, yet the most likely source for this type of production (diesel generators) is expensive in terms of fuel transport and spare part to remote areas. Renewable options other than geothermal are also being explored in some countries, such as solar and wind power.

Electricity demand growth is high in all ARGeo countries, averaging at least 3 to 5% per year. In relatively mature markets, such as Kenya, the reference baseline forecast for increases in consumption is 5.4% per year to 2020. In the more southern countries of the ARGeo region, electricity demand is reportedly growing at 7 to 11% per year in Tanzania and at 2% per month in Uganda. High electricity demand growth in the ARGeo countries translates into the need for adequate and diverse electricity production supply sources, including geothermal production.

Electricity prices in the ARGeo countries reflect the different production, transmission and distribution structures, production costs varying between US$0.035 and US$0.3. Electricity is provided by the national utilities in the urban, capital centres via the national grids. High technical and commercial losses as well as poor maintenance can significantly affect the selling price (as in Eritrea). Outside of urban areas, there is little rural network coverage and electricity (if it is supplied at all) is usually provided via small 5 – 10 MW diesel generation units run by cooperatives or other entities.

2.4.3 Electricity Sector Descriptions of the ARGeo countries

Eritrea Electricity Sector

The total installed capacity of electricity generation in Eritrea is about 124 MWe (IEA 2009). This electricity is generated mainly from imported fossil fuel. Lacking significant hydro power potential, the country relies entirely on thermal generation for power production with elevated electricity costs. The Eritrea Electric Corporation (EEC) is a public electric utility linked with the Ministry of Energy and Mines and is responsible for generation, transmission and distribution of electricity.

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The electrification of the densely populated Zobas of highland Eritrea is being done through grid extension. With capital assistance from donor partners, the Ministry of Energy and Mines and EEC have embarked on extending the grid to many of the villages around large cities, major roads, and transmission and distribution lines.

Approximately 32% of Eritreans have access to electricity, but only 3% of the rural population. Averaged over the whole population, per capita electricity consumption has improved from as low as 16 kWh in 1991 to 59 kWh in 2001. Present electricity rates are US$ 0.10 per kWh for industrial customers and US$ 0.16 per kWh for residential and commercial customers. The recent price hikes in oil increased the cost by about 5 US cents/kWh. No subsidies are provided and prices are determined by actual costs with a reasonable profit. The cost of small-scale diesel generation in the rural areas is in the US$ 0.20-0.30 per kWh range. There are a number of mini-grids in the rural areas which use diesel power and provide electricity for a few hours each day.

Ethiopia Electricity Sector

Ethiopia has about 950 MW of installed generating capacity (IEA 2009). The vast majority of Ethiopia's existing capacity (94%) is hydroelectric and accounts for 97.5% of electrical energy produced. Diesel generators contribute most of the remainder (5%) of capacity and geothermal 1%. Currently, less than half of Ethiopia's towns and about 35% of the population have access to electricity. In Ethiopia, Per Capita Energy consumption is about 100KWh/ year. Projected energy requirements from the year 1990 through 2040 indicate that power generation capacity needs will increase more than 20 times by 2020 and about 25 times by 2040. Most of the larger urban centres are served by the grid (known as the Interconnected System or ICS) while smaller centres receive only part-time electric service from diesel generators operated as part of the Self-Contained System (SCS). Small towns and villages lack access to electricity.

The agency responsible for managing and operating including construction, generation and distribution of electric power in Ethiopia is the Ethiopian Electric Power Corporation (EEPCO). A World Bank Power Sector reform project underwent which includes consideration of renewable energy especially for rural electrification. The Ethiopian Energy Agency (EEA) has been established with regulatory powers and while EEPCO is expected to maintain the existing hydro generation facilities. New generation capacity including geothermal would be developed by both public (EEPCo) and the private sector. EEPCo is mandated to encourage private sector investment in the energy sector and relevant proclamations were enacted in 2005 and 2007.The generated development plan consists mainly of hydro projects. Generation from wind and geothermal power plants are expected to compliment the hydro power. Ethiopia has devised a strategy for accelerating countries and further to other nearby countries (Djibouti, Sudan, Kenya etc...) to spur regional economic growth through developments of the untapped hydro-resources for electricity.

The EEA has drafted a feed in Tariff (FiT) proclamation for a variety of renewable and non-renewable technologies. This seeks to diversify the energy mix and encourage more medium scale generation. Geothermal tariffs for “Firm” energy generation range from 0.08- 0.10 US$/KWh up to a maximum of 50 MWe capacity. The tariff provided shall apply to electricity generated from geothermal source and supplied in bulk to the grid system operator at the interconnection point. It shall apply for a maximum of 20 years from the date of commissioning of geothermal power plant. However, as most of the poorer members of society do not have the least access to electricity, the pricing policy is regressive.

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Production costs are reported to be US$ 0.023 per kWh for hydro and US$ 0.24 per kWh for diesel. The selling price of electricity is suppressed to 0.6 birr/kWh (equivalent to US $0.06) with subsidies. Subsidizing electricity is a government policy to ensure access to energy of the poor.

Kenya Electricity Sector

Kenya’s Least Cost Power Development Plan indicates a measurable shift from the reliance on hydropower resources to the development of geothermal sites. At present only 10% of Kenya’s total energy comes from electricity. This figure is expected to increase in Kenya’s 2030 Vision of Development and Least Cost Power Development Plan 2009-2029 (LCPDP).

The current electricity supply / demand balance in Kenya is tight, with an installed electricity generation capacity of around 1,650 MW under average hydrological conditions. Almost three quarters of KENGEN’s electricity output is currently hydropower, with 14% of electricity generated by geothermal plants.

More than 80 percent of Kenyans live without electricity and Kenya Power and Lighting Company is implementing an ambitious plan of increasing the customer base by 1,000,000 through a scale up policy in five years from 2009/10.

The institutional arrangement in the electricity sub sector in Kenya currently comprises the Ministry of Energy (MOE), Energy Regulatory Commission (ERC), Kenya Generating Company (KENGEN), Kenyan Power and Lighting Company (KPLC), the Rural Electrification Authority (REA), Kenya Transmission Company (KETRACO), Geothermal Development Company (GDC) and Independent Power Producer (IPPs).

MOE is mandated by both the Policy and the Law for the stewardship of the sector through energy policy development. The Ministry is in charge of creating energy policies to enable the efficient operation and growth of the sector, and facilitating the mobilization of resources for the sector investment.

In Kenya, Kenya Power and Lighting Company (KPLC) is responsible for distribution, KETRACO, for transmission and the Kenya Electricity Generating Company (KENGEN) is responsible for the public generating assets.

The Geothermal Development Company (GDC), a 100% state-owned company established in 2008 under the Companies Act as a special vehicle to accelerate the development of geothermal energy in Kenya. GDC falls under the MOE and is tasked with exploration, drilling, assessing and development of geothermal resources and selling geothermal energy for electricity generation. Kenya’s Least Cost Power Development Plan (LCPDP) aims to identify a least cost development direction for the Kenyan electricity sector over a 20 year period. The LCPDP 2009-2029 developed a least cost generation mix based on an assessment of a number of technological and economic indicators.

Electrification is part of the sector plan expanding from the current 15% of the population covered. Expansion of capacity has been hampered by socioeconomic and environmental impact objections. Hydro and geothermal are included however, as noted elsewhere; diesel has become the default replacement when other capacity does not come on line as planned. The average industrial electricity tariff in Kenya amounts to around US$0.12/kWh, assuming a fuel cost adjustment of 0.50 $US/kwh that is subjected to change on monthly basis.

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The Energy Regulatory Commission (ERC) oversees pricing and plays a role in negotiation of Power Purchase Agreements (PPAs) between KPLC and the power producers as private entities. While the national energy plan projects significant geothermal developments, 1000MW by 2015, recent experience demonstrates the danger of using medium speed diesel as backup measure, although presenting less investment costs as well as shorter deployment time.

A number of Independent Power Producers (IPPs) are currently active in Kenya. Power Purchase Agreements are negotiated with KPLC on a project by project basis. Active IPPs contribute approximately 30% of the effective generating capacity.

Rwanda Electricity Sector

At present, installed capacity in Rwanda is small, totaling around 85 MW, comprising mainly hydro and thermal capability. Four small hydropower plants of around 27 MW are currently installed, with 15 MW of imported hydro and the remaining is Diesel generated. A further 39 MW of hydro is planned by 2012, plus some 14 MW of micro hydro sites. 1 MW of solar plant is also under development.250 KW is already installed. A 4.5 MW of methane gas is completed. This compares with average per capita annual consumption of electricity in sub-Saharan Africa of 478 kWh, and for developing countries as a whole of 1,200 kWh per capita per annum.

Rwanda currently suffers a severe electricity deficit. The lack of generation capacity has exacerbated by falling hydro production due to low lake levels and rapidly growing electricity demand, with demand growth in 2007 of 25%. Despite severe load shedding, given that lake levels have fallen to a minimum since January 2004, 40% of Rwanda‘s electricity demand cannot be served. Geothermal and methane has been highlighted as potential capacity contributors in the future. One of the biggest inputs into the electricity grid in the near future will be power generated from methane gas extracted from the bottom of lake Kivu. The GoR is funding a 4.5 MW methane gas pilot project and the Rwandan Investment Group (RIG) is developing a pilot project with an expected output of 3.6 MW. Electricity tariffs in Rwanda currently adopt a ‘postage stamp’ pricing policy – with all consumers paying a single flat rate. Recently tariffs increased from 80 RwF per kWh to 112 RwF. It has been estimated that a cost reflective tariff of 67 RwF (2007) for medium voltage and 134 RwF for low voltage customers is appropriate.5 Recently, increases in electricity tariffs have occurred due to the use of rented emergency diesel generation and currency fluctuations

A key element of the strategy for the electricity sub-sector is to reduce electricity tariffs from the present level of 112 FRW/kWh for domestic customers and 105 FRW/kWh for large commercial and industrial customers6 to a level of approximately 80 FRW/kWh which was the tariff ruling prior to the present energy crisis.

The national transmission grid, consists of some 285 km of 110 kV lines and 64 km of 70 kV lines. The distribution system consists of both medium voltage (30 kV, 15 kV and 6.6 kV) and low-voltage (380 volt threephase and 220 volt single-phase) networks, with a significant proportion being located in Kigali and much of that is undergrounded.

Rwanda Electricity Corporation, RECO Electrogaz, is Rwanda’s largest company and the only operator in the sector. It is a 100% publicly owned utility for grid electricity and urban water supplies. A five-year management contract was awarded to Lahmeyer International in November

5 Rwanda, Electricity and water tariff analysis, US Agency for International Development, 20056 These are the kWh tariff rates and do not include the standing (meter) charge which is 500 FRW /month for prepayment customers and FRW 200 /month for credit meter customers.

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2003 to improve its operations. IPP activity in Rwanda is presently limited to back-up thermal generation, however it is anticipated that RECO will purchase electricity from new IPPs as they enter the market.

The Rwanda Utilities Regulatory Agency (RURA) is responsible for regulation of the energy market. It does this through issuing of IPP and system operator licences along with setting energy tariffs to the end consumer. It is responsible for ensuring fair competition for the protection of both consumers and operators and thus facilitates private sector involvement in the Rwandan energy sector. There is no renewable energy tariff at present. However, the updated National Energy Policy 2008-12 sets out a number of key issues to address. This includes policy to provide economically justified FiTs (based on avoided costs of production to the utility) or other mechanisms to give incentives and reduce risks for electricity production from renewable sources.

Tanzania Electricity Sector

The installed electrical generating capacity in Tanzania is 960 MW. About 65% is from large hydro, 35% from thermal and 10% from aging small diesels around the country. Tanzania has substantial proven energy resources including hydropower, natural gas, coal, biomass, solar, and wind. There are indications of potential geothermal and oil resources in the country. A long range Power Sector Development Master Plan for Tanzania covering the period up to 2026 was recently completed. The energy and peak demand projections are expected to increase from 2,118 GWh in 1998 to 13,360 GWh by 2025. Peak demand will grow from 367 MW in 1998 to 2,312 MW by 2025. In order to satisfy this increase, a total of 1,440 MW of new generating capacity will be required between 2002 and 2021. Government policy aims to reduce dependence on hydro sources and increase utilization of indigenous thermal resources such as natural gas, coal and other renewable energy resources in the medium to long term.

Electricity generation, transmission and distribution in Tanzania are carried out by the Tanzania Electric Supply Company (TANESCO). The company is responsible for 98% of the country's electricity supply. The present TANESCO system consists of a main grid serving the major towns and a number of isolated grids serving smaller towns. Recently, the market has been opened to the private sector and incentives provided. TANESCO identified some of its non-core activities and has started divesting them. The power distribution activities of TANESCO have been earmarked for privatization. Although the national grid extends to 14 of the 20 regions of mainland Tanzania and to Zanzibar, less than 15% of Tanzania’s population lives in areas served by the grid.

A private power agreement was signed by TANESCO with a Malaysian firm, Independent Power Tanzania Ltd. (IPTL), for 10 x 10 MW diesel/gas turbines. Other IPPs include TANWAT in Njombe (approx. 2.5 MW generated from wood), Kiwira Coal Mine (approx. 6 MW capacities) and Songo-Songo Gas Project (gas to electricity) which is in the planning phase. Small isolated diesel minigrids and gold mines in the west present opportunities for generation capacity from geothermal energy that would be close to the load compared to natural gas at the coast.

Uganda Electricity Sector

The electricity sub-sector contributes 1 per cent of the total energy (including biomass) consumed in Uganda, which is generated primarily from Nalubaale and Kiira dams (formally Owen Falls Dam) at Jinja. In the smaller, remote urban centres, electricity is produced using diesel-oil generators. Electrification access in Uganda is still very low, standing approximately 9% nationally and 3% in rural areas. The 91% of the population, which is not yet reached, represents a potential market for increased electric power generation, transmission and distribution.

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In Uganda there is currently a power supply deficit. The current total installed electricity generation capacity is 497 MW, out of which 380 MW is large hydropower, 17 MW is mini-hydropower and 100 MW diesel-based capacities is on emergency contract for a temporary period up to 2011-2012. However, due to reduced level of rainfall in the region over the past few years, the large hydropower plants are only capable of generating about 140 MW. With the peak power demand of about 380 MW and total generation of just about 240 MW, the country has continued to suffer from power supply rationing. In addition, the introduction of fossil fuel for power generation has led to increase in electricity tariff and higher production costs.

Investment in energy infrastructure was considered the first priority in National Budget for the 2007/8 Financial Year. Energy will remain a key priority for the realization of the national development goals. The government has therefore put in place strategies to increase the power supply in the country.

The short term measures include the promotion of energy efficiency at the demand side, reduce power system losses and contracting of independent power producers to supply 100 MW of electricity from fossil fuel under a short-term emergency programme. Additional 200 MW of thermal generation capacity based on heavy fuel oil is also under construction.

The construction of 250 MW Bujagali hydropower plant along the Nile River, 8 km downstream of the Nalubaale and Kiira dams at Jinja is already completed recently.

The long-term strategies include developing other large hydropower sites along the Nile River as well as several renewable energy resources like geothermal, biomass, and wind. Concrete planning and implementation of these strategies are critical for ensuring sustainable electricity supply.

2.5 Stakeholder Mapping and Analysis

The primary beneficiary of ARGeo project will be the GEF itself; the project objective is "to accelerate geothermal energy investments by both public and private sectors. This will displace diesel-based production, diversify energy resources and lead to the reduction of greenhouse gases' emissions." The set of obtained results as well as the comprehensive recommendations that will come out of this project will help the GEF to shape its operational programs in the East Africa Rift region.

The ARGeo project involves a wide range of stakeholders. The mapping of these stakeholders includes:

• Multilateral/ Bilateral Donors: UNEP-DTIE, UNEP-ROA, GEF, Federal German Institute of Geoscience and Natural Resources (BGR); Icelandic International Development Agency (ICEDA), African Union Commission (AUC), German Development Bank (KfW), Scaling Up Renewable Energy Programme (SREP), French Agency for Environmental Protection and Energy Conservation. UNEP will have a $4.75 million GEF grant allocated to its project components on technical assistance with emphasis on regional knowledge sharing and technical assistance for the upstream pre-drilling stage. UNEP will present the ARGeo Programme package as a stand alone GEF funded project when presented to GEF CEO for approval of major amendments. Other governments and bilateral agencies are expected to participate in the ARGeo initiative during the implementation period and coordinate their activities as members of the ARGeo Steering Committee Members (ASC) and various working groups.

• National and International Scientific Agencies: Iceland Geosurvey (ISOR), International Atomic Energy Agency (IAEA), United Nations University-Geothermal Training Programme (UNU GTP)National Geological Surveys, Department of Mines, Universities and Research Institutions

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• National Executing Agencies: , Department of Mines, Ministry of Energy (Eritrea), Ministry of Mines and Ministry of Energy and Water (Ethiopia), Ministry of Energy and KENGEN/GDC (Kenya), Ministry of Infrastructure (Rwanda), Ministry of Energy and Minerals (Tanzania), Ministry of Energy and Minerals Development (Uganda).

• Private Developers: Reykjavik Geothermal, Ormat Tech., Blake, Cassels & Graydon LLP,Geothermal Development Associates, Pertamina, other private developers have expressed interest in the ARGeo project and intend to finance exploration and appraisal drilling with support from the GRMF.

• National, Regional International Geothermal Associations: Ethiopian Geothermal Association (EGA), Geothermal Association of Kenya (GAK), East Africa Geothermal Association (EAGA) and International Geothermal Association (IGA).

• End-Users: Urban and rural inhabitants and businesses in ARGeo countries.

The ARGeo project involves these different types of stakeholders through a series of regional meetings, work-shops and conferences designed to facilitate technology transfer, capacity building and development activities with respect to identified geothermal resources. This tight public-private cooperation will ensure a comprehensive approach to geothermal development in the region that otherwise would not have been possible. Given successful exploratory studies, the result of this stakeholder participation will result in the introduction of a reliable, renewable energy source that produces electricity that is price competitive (with alternatives, particularly diesel generator sets) which will lead to multiple benefits for the end-users. The outcomes of this project will also enable governments of the involved countries to establish or further define clear, achievable targets and more accurate GtE planning measures.

The information and technical results generated by this project will be available to the public and private sectors through the East African Geothermal Database. The ARGeo member countries will use the results of studies to make it available and attract private developers.

Table 6: Stakeholders identified

Role - Name Main Interest Specific Interest in the project

Beneficiary - GEF Financial interventions dealing with the reduction or avoidance of greenhouse gas emissions in the areas of renewable energy, energy efficiency, and sustainable transport

Beneficiaries - Developing Countries policy makers

Integrated planning for sustainable GtE development, climate change

Tailored support for GtE policy and planning in the form of increased knowledge, recommendations for improving current exploration and production practices, possible involvement in R&D, acquire quality resource information

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Role - Name Main Interest Specific Interest in the project

Scientific and Technical guidance - STAP

To provide objective, strategic scientific and technical advice on GEF policies, operational strategies, programs and on projects and programmatic approaches

To clearly identify and analyze those segments of the liquid bio fuels for transport and stationary applications where GEF intervention would be appropriate and would lead to significant global benefits, using settings which would reflect practical combinations of feedstocks, conversion routes, fuels and applications

Implementing Agency - UNEP DTIE and Lead Executing Agency - UNEP ROA

Playing a central role in major environmental assessments and in the provision to developing countries of policy advice and tools

The Targeted Research project constitutes one important activity of UNEP renewable energy program whose objective is to contribute to the development of an economically, environmentally and socially sustainable renewable energy sector worldwide. Specifically the project will provide useful guidance to investors (primarily the GEF) for investing with confidence in sustainable GtE projects and to governments for better GtE planning

Geothermal companies in each country and electrical utilities

To have at one's disposal a local, clean source of energy, the production cost of which is independent of fluctuations international

To be supported in the elaboration of national geothermal energy plan of development, to gain advantage from a partial coverage of geological risk and be helped to find private technical and financial partners

National, Regional and International Geothermal Associations

Promotion, deployment of geothermal energy technology, information dissemination, Regional Networking and Capacity building

To support in producing high quality resource information, research and development, update geothermal database, capacity building etc...

Private Developers Investment in geothermal development in the EA region

Good quality Resource information, provision of clear and coherent geothermal policy, legislation, regulation and institutional framework, experts in the field, Geothermal Database

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Figure 2: ORGANOGRAM

UNEP/DTIE

(Implementing Agent)

ARGeo Technical Advisory Team (ATAT)

Independent and neutral geothermal experts

UNEP/ROA Project Management Unit (PMU)

Executing agent for Regional Networking &TA

ARGeo Steering Committee Members (SC)

ARGeo Countries (NPD), UNEP, AUC-KfW, SREP, USAID, Donors and Supporters

� Overall guidance to partner institutions and monitoring of progress and performance

� Consider applications for new member countries of ARGeo

� Administrative work � Regional knowledge sharing � Screens country specific and

regional TA proposals � Management of ATAT

Advice

Advice

NPMU-Rwanda

NPMU-Eritrea

NPMUEthiopia

NPMU Kenya

NPMU Tanzania

NPMU Uganda

GEF Reporting

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2.6 Baseline Analysis and Gaps Baseline Forecast without GEF Intervention

Energy production and consumption in ARGeo countries are low and structurally the least developed in respect of both the energy forms consumed, where traditional biomass use dominates, and the low share of energy use in economic production. More than 90% of electricity supply is based on fossil fuels in the East Africa Region. Imported petroleum use dominates, for emergency management in much of the ARGeo member countries. Because the initial economies in the region are small, the required periodic additions to generating capacity are also small and entail high unit capacity cost. This causes the price of electricity to be high to be affordable to most of the region’s population. Electricity supply is thus limited to the few large urban centers, which nevertheless experience frequent load shading entailing appreciable losses to the GDP. Rural populations rely on traditional biomass fuel use with the attendant deterioration of the natural and social environment: deforestation, decline of agricultural soil fertility, prevalence of poor domestic health arising from particulate pollutants from biomass burning. Renewable energy sources (hydro, geothermal, solar, etc) represent a small portion of total energy production, averaging 2% for hydropower and solar and geothermal production combined.

This is a baseline scenario in the ARGeo member countries that leads to environmental degradation and deforestation. The East African Power Pool (EAPP) seeks to interconnect the national electric power supply systems of the countries in the Eastern and North eastern Africa with a view to creating a unified power supply system. This is intended to increase access to electricity by the population of the region and to promote its increased use in economic production. By the early 2020’s the EAPP plan envisages the powering of the regional interconnections by the use of renewable energy resources, including geothermal energy based generation (with a potential of >15 GW), in the process of displacing petroleum use in power generation.

As a result, many of the ARGeo countries are keen and committed to develop geothermal in order to supplement and diversify their energy resources. Geothermal energy clearly stands out as one of the most promising and sustainable alternatives for low cost electricity production to complement hydropower and reduce growth of petroleum based thermal generation in the region. However countries in the region still face a number of barriers to the development and utilization of resources. These barriers include: (i) Incomplete and often inadequate geoscientific information and analysis on most of the potential geothermal sites identified by the countries; (ii) Insufficient capabilities in terms of human resource institutional set ups and technical infrastructure to carry out surveys for discovering and characterizing geothermal resources as well as for installing, operating and maintaining the geothermal resource development infrastructure and power plants; (iii) Insufficient investment for geothermal energy development; and (iv) Inadequate policy, legislation, regulatory and institutional frameworks to attract private developers.

In response to these barriers, ARGeo will: (i) provide technical and financial support to enable governments to take the lead in generating the scientific, technical and economic information for selected priority geothermal energy prospect areas and develop scientifically sound geothermal development project proposals; (ii) Support regional networking and information sharing, and strengthen human, infrastructural and institutional capacities for geothermal energy development; and (iii) contribute to the development of the needed national policies and legislations as well as institutional and regulatory frameworks to attract private developers.

In the absence of GEF financing for the ARGeo facility, geothermal production will probably not develop in most of the ARGeo countries, except in Kenya and to a lesser extent in Ethiopia where geothermal investments and adequate resource information have been already realized. It is likely that this policy will not reach

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fully operational status. The ARGeo programme is based on a long-term approach during which project experience and technical know-how are transferred from existing sites in more advanced countries to stakeholders in other countries during a 10 year period in order to stimulate development of this technology.

It can then be confirmed that lack of GEF support will certainly lead to:

• continued reliance on large scale, installed hydropower and increasingly on diesel generation for the national network in particular as a consequence of a lack of a specific legal and regulatory framework for the production and use of renewable energy,

• continued reliance on small, diesel power production sets in off-grid areas which despite relatively low capital investment costs, demonstrate high operating costs, especially with imported fuel prices hovering > $90-100 per barrel of oil;

• continued “electricity gap” between urban electrified zones and off-grid, rural areas that exacerbates poverty differences and stifles the development of small scale industries;

• continued emission of greenhouse gases; • the slower adoption and development of these clean and renewable energy technologies in

the region.

Specifically, the likely baseline forecast for geothermal development in the six countries without GEF funding is as follows:

Kenya Kenya is accelerating the development of geothermal resources to meet the increasing power demand. Power demands now stands at 8% with only about 1 % of the rural population having access to electricity. For a very long time, growth of geothermal was slow as the country relied more on the hydro power production because there was adequate precipitation. With the current changes in climate and the dwindling rainfall, overreliance on hydro power production has proved to be expensive. Geothermal energy capacity ratio does not depend on the weather conditions and therefore it is more reliable. The Government has fast tracked the development of geothermal resources in the country as a source of affordable and clean power. The Government established the Geothermal Development Company with the sole purpose of making available enough steam for electricity generation by Independent Power producers (IPPs) and KENGEN.

Kenya has a great potential in geothermal resources when utilized would generate over 7000MWe. In Olkaria it has been a success story and KENGEN is optimizing this field with incorporation of new technologies to ensure maximum output from the steam. Of all the fields in the Kenyan Rift Olkaria is the most developed and utilized and that is why the government has given priority to the geothermal by incorporating the Geothermal Development Company (GDC) to ensure that the utilization is achieved. At present, the Geothermal Development Company is carrying out exploration drilling in Menengai geothermal field. It has a plan to further explore and drill in other geothermal prospect areas such as Silali, Suswa etc...GDC facilitates the realization of at least 1,500MW of geothermal in ten years and at least 5,000 MW by 2030 through an accelerated development program.

KENGEN has a fine track record ensuring that project are completed ahead of schedule and hence has enabled to ensure addition of Megawatts to the national grid. There is need to do more geoscientific work on the other fields outside of Olkaria to ensure the realization of vision 2030 of achieving 4000MW of electricity from geothermal.

At present, the Government of Kenya submitted a request for surface survey to the United Nations Environment Programme for acquiring technical and financial assistance to carry out surface

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investigations in Silali geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (For details see Appendix 15).

Eritrea

The country has only recently begun serious investigations into the use of geothermal resources. Currently, the country has approximately 124 MW of installed capacity, all thermal power stations (diesel). The geothermal resource at Alid is promising, though it has not been confirmed. Without external financing, the necessary further exploration and analysis in Alid as well as in other sites will probably not be performed because the country cannot afford the necessary exploratory costs estimated in total at around $6,5 million. In lieu of geothermal power production, the country will then tend towards the further development of fossil-fuel based power production.

At present, the Government of Eritrea submitted a request for surface survey to the United Nations Environment Programme for acquiring technical and financial assistance to carry out surface investigations in Alid geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (For details see Appendix 15 A).

Ethiopia The significance of Geothermal Power within Ethiopia has long been recognized. Under a programme that began in 1969, geo-scientific studies have been conducted in a number of Ethiopian fields and over sixteen areas have been identified in the Ethiopian Rift Valley to have Geothermal Resources suitable for electricity generation. From these areas it is recognized that a total of about 5000 MWe geothermal energy could be developed. So far deep drilling has been undertaken in Aluto Langano (1982 to 1985) and Tendaho-Dubti (1993 to 1998) and detailed surface exploration has been nearly completed in four other areas. A 7 .3 MWe net capacity pilot plant has been installed at Aluto, currently generating about 4MWe. Feasibility study for the expansion of the Aluto Langano Geothermal power has been recently completed with the Japanese Overseas Development Assistance. The study indicated expansion of the Aluto Geothermal power to additional 70 MWe is feasible.

Accordingly, as an initial step to develop the 35MWe, it is planned to drill four deep appraisal wells in 2012 with the Japanese technical assistance and the World Bank. The government encourages private sector investment in Geothermal exploration and development. Attractive feed in tariffs and incentive packages are in the process of being implemented. Within the Ethiopia’s long range power plan, geothermal is now recognized as offering an important (potential) input to the Ethiopian grid as it is base-load and climate independent. Irrespective of future hydro developments, geothermal’s contribution to energy security at times of drought is considered critical. The generation development plan consists mainly of hydro projects. However generation from Wind and Geothermal power plants is foreseen to compliment the hydro. By 2015 it is planned to generate 75 MWe geothermal powers from Aluto Langano and by 2020 it is anticipated to generate a total of 450 MWe from five other geothermal areas in the Rift. The order of priority for geothermal development in these areas is: Aluto Langano, Tendaho, Corbetti, Abaya, Dofan-Fantale and Tulu Moye.

At present, the Government of Ethiopia submitted a request for survey to the United Nations Environment Programme for acquiring technical and financial assistance to carry out surface investigations in Tendaho geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (For details see Appendix 15B).

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Rwanda

The electrical energy in Rwanda is currently predominantly on diesel generation (40%) followed by hydropower (60%) as consequence of low rainfall and an increasing demand for electricity. The high prices of oil are putting a strain on the national budget and constitute presently a serious hurdle to the economic growth for a landlocked developing country such as Rwanda. Consequently, to minimize the dependency on energy imports, save foreign currency and create conditions for the provision of safe, reliable, efficient, cost-effective and environmentally appropriate source of energy, geothermal development is found to be e the long term solution to this problem. Rwanda is believed to have a geothermal potential which is estimated to be in excess of 300 MW and it presents a huge number of high, medium and low enthalpy geothermal zones of interest. The exploration of geothermal energy in Rwanda is still at an early stage. Major challenges impacting on geothermal development are: (i) inadequate and unpredictable funding for geothermal exploration and development.; (ii) confirmation of whether the existence of geothermal resources, how deep and what is the temperature and fluid chemistry. This can only be confirmed by integrated geoscientific studies and deep drilling of at least 3 exploration wells in each of the 4 geothermal areas; (iii) inadequate data to conclusively determine the geothermal potential for Rwanda; (iv) determining drilling targets and developing the infrastructure to support drilling. (v) inadequate human resources capacity; and (vi) inadequate equipment to carry out geothermal exploration. Currently, the country is evaluating its high and medium enthalpy geothermal resources and the preliminary results from geology, geochemical data analyses and geophysical measurements indicate that medium to high temperature geothermal systems exist in the North-Western part of the country and possibility of drilling into a high temperature geothermal reservoir is high.

Given the frequent drought that affect the national hydropower, fluctuations in fossil fuel prices in the world and the rapid demand for more power, geothermal energy offers an indigenous environmental friendly alternative source of energy for Rwanda. The deficiency in Rwanda geothermal resource development in Rwanda has been due to the availability of cheap hydropower however due to the existing energy context, the development of this resource is now fundamental. The volcanoes area, the geological context and the hydrothermal manifestations of Rwanda indicate the existence of potential geothermal system. The Government of Rwanda in collaboration with its partners has started to carry out investigations of its geothermal resources and build its human capacity within the sector. However, private sector involvement for the development of the Rwanda Geothermal Resources is highly needed.

Detailed assessment of Rwanda geothermal resources is urgently needed in order to properly evaluate the country geothermal prospects. It is in that view that the Government of Rwanda is currently working with various partners for the geothermal resource assessment and capacity building in the Northern part of the country. The Government of Rwanda (GoR) is securing USD 25 million to undertake detailed surface studies, develop infrastructure for drilling, water resources and drilling 3 exploration wells. GoR is also in the process of discussing and securing a further USD 50,000 from donors and soft loans to drill wells and construct a 10 MWe power plant as a proof of concept and lower the risks for interested private developers.

Tanzania Tanzania is at the identification stage of potential geothermal resources. The country’s power sector development master plan depends mainly on natural gas, including the Songo Songo gas to electricity plant, and on coal and hydropower resources. Total exploration costs including exploration drilling for the geothermal resources at Mbeya are estimated at $13 million, and therefore, it is unlikely that this resource would be developed without GEF funding, although the

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potential there is seen as promising concerning the possible implementation of a 20MW geothermal plant.

In 2012, the Tanzanian Ministry of Energy and Mineral Development set up a National Task Force with a view to facilitate development of geothermal energy resource in the country. This Task force is expected to perform the following: (i) To develop a clear and coherent geothermal policy, legislation, regulatory and institutional framework; (ii) Advice government how to build capacity; (iii) develop a strategic geothermal development plan in line with national and regional energy power development Master plan.

At present, the Ministry of Energy and Minerals development is revising a request for surface exploration studies (project proposal) of the Mbeya Geothermal prospect Area to submit to UNEP for technical and financial assistance.

Uganda Exploration for geothermal energy in Uganda has been in progress since 1993. The studies have focused on three major geothermal areas namely Katwe, Buranga and Kibiro. The three areas are in various stages of exploration and will soon be subjected to detailed exploration studies that will pave the way for exploratory drilling. The overall objective of the study is to develop geothermal energy to complement hydro and other sources of power to meet the energy demand of rural areas in sound environment. The current study has focused on geology, geochemistry, hydrology and geophysics with the aim of elucidating subsurface temperatures and the spatial extent of the geothermal systems. The results indicate that the geothermal activity in the three areas is related to the volcanic and tectonic activities of the Rift Valley, which has a higher heat flow than the surrounding Precambrian crust. Subsurface temperatures of approximately 140-200°C for Katwe, 120- 150°C for Buranga, and 200-220°C for Kibiro have been predicted by geothermometry and mixing models.

Anomalous areas have been delineated in Katwe and Kibiro prospects using geophysical methods. Drilling of shallow boreholes to a depth of 200-300m for temperature gradient measurement has been completed and the temperatures measured (30-36°C/km) are slightly above the global average of 30°C/km, which suggests deep reservoirs in Katwe and Kibiro or geothermal reservoirs offset from the drilled areas. Additional geological, geochemical and geophysical measurements to locate the deep reservoirs and drill sites in the two areas are recommended. The results will then be used to update the geothermal models that will be a basis for the drilling of deep geothermal wells. The Buranga area still needs detailed geophysical surveys to delineate anomalous areas that could be targets for drilling. The results of the preliminary geothermal investigations on other areas predict subsurface temperatures of 100 - 160°C, and there is an obvious need of external support to help financing further exploratory costs.

At present, the Government of Uganda submitted a request for survey to the United Nations Environment Programme for acquiring technical and financial assistance to carry out surface investigations in Kibiro geothermal prospect area with a view to confirm the resource potential and minimize the drilling failure risk (For details see Appendix 15D).

Environmental Baseline The operational environmental impact of hydropower, the most important energy source for electricity production in the region, is negligible in terms of GHG. Its impact on wildlife, human settlement, etc, however, is more serious. Recent droughts and silting of hydropower resources have reduced the utility of hydropower generating plants. Thermal electricity production is the second most common and represents approximately 25% of the electricity generation in the ARGeo

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countries. The fuel mixes and utility factors used for the thermal generators vary from country to country and from site to site:

Table 7: Baseline Estimate of GHG Emissions in ARGeo countries with current installed capacity Country TPES

(Mtoe)TFEC (Mtoe)

Electricity Generation

(TWh)

Electricity Consumption

(TWh)

CO2 Emissions (Mt of CO2) from Fuel combustion

only Eritrea* 0.73 498 0.289 0.26 0.47 Ethiopia* 32.68 32.678 2.872 3.72 7.42 Kenya* 17.25 18.723 6 4.93 9.86 Rwanda 9.72 1.653 0.24 0.301 0.72 Tanzania* 20.40 19.616 3.03 2.36 4.10 Uganda** n a n a 1.98 1.67 1.62 Sources: *:IEA-International Energy Statistics 2009/ **:EIA-US DOE international energy data 2008

2.7 Linkages with other GEF and non-GEF interventions

Geothermal energy for electricity generation or direct uses is considered in the GEF Operational Strategy approved by the GEF Council in 1995, as one of the RETs of possible GEF interest for the reduction of GHG emissions. Geothermal based energy schemes are in fact virtually free of GHG emissions, and in general environmentally benign. While the transformation technology is mature, the uncertainties and risks, linked with the exploration of this natural resource have for a long time limited the development of this otherwise very attractive and cost effective energy source to the developed countries (Italy, USA, New Zealand, Iceland, Japan). Only recently, large geothermal developments have occurred in developing countries. During the GEF Pilot Phase, the World Bank funded a large geothermal programme in the Philippines, the Leyte-Luzon Geothermal Project, including a $US 30 m GEF grant. The success of the operation led to investments in the order of billions of US dollars, and to the installation of many hundred megawatts of geothermal generated electricity.

Following this initial intervention, GEF sponsored geothermal activities have been limited and no other GEF geothermal project (electricity generation) has been implemented and completed since then. A number of attempts have been however made, that did not result in actual projects:

a) Djibouti Assal Project (UNDP, 1998). The project idea was to support a private sector development in the Assal geothermal field. The initiative did not however materialize due to lack of follow up action from the Government and the Implementing Agency. The project idea was later incorporated into the previous ARGeo concept.

b) IFC promoted initiatives. In several instances, the IFC initiated the preparation of GEF geothermal projects involving private developers in Vanuatu, Fiji and Kenya. Notwithstanding full GEF support, the IFC did not eventually follow up on these projects for internal reasons. In one of these cases (Olkaria, Kenya) an approved GEF grant was even cancelled, but the project was eventually developed on its own with success by the private company ORMAT.

However, a new generation of GEF geothermal initiatives have been developed during the last years, all based on a systematic barrier removal approach, with emphasis on the mining risk, such as the approaches developed in Iceland or France, as well as by the GEF/World Bank Geofund, through the setting up of guarantee funds. The basic principle is that instead of infrastructure grants, guarantee instruments to catalyse private sector involvement have to be considered, as well as policy environment, institutional capacity and technical assistance and research. An example of this more recent approach is the Joint Geophysical Imaging (JGI) Medium-Sized Project with

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KENGEN and Duke University. The immediate objective of the JGI project is to transfer and adapt Joint Geophysical Imaging (JGI) methods for assessing geothermal reservoirs to Kenya with potential impacts for the African Rift Valley. The overall goal is to expand the opportunity for geothermal development in the region through the increased probability of finding large, productive steam reservoirs in highly permeable formations due to higher resolution and more accurate assessments. It should also be noted that tight cooperation is established with the UNEP implemented “Yemen Geothermal Development Project”, financed by GEF Trust Fund up to 47 %.

As part of the project activities, UNEP developed a plan for replication through technical assistance, policy development and financial instruments in the Africa Rift Valley region, which resulted in a geothermal resolution supported by the participants of the Eastern Africa Market Acceleration Conference held from 9 to 11 April 2003, in Nairobi, Kenya, and which provided substantial input to the ARGeo PDF B phase.

Since the idea of a regional geothermal facility was first discussed at the 2003 Nairobi conference, there has been renewed interest from the part of the countries and of potential investors in geothermal development in East Africa. This interest has generated new initiatives in the East Africa Region such as the Scaling up Renewable Energy Programme (SREP). Its criteria are to scale up and diversify the renewable energy mix to replace hydro dependency and displace use of fossil fuel. As a pilot phase, this programme is focussed on Kenya and Ethiopia out of the ARGeo member countries. The program will help these countries in proving the technical possibility and viability of developing the country's considerable geothermal potential further, thereby increasing future investment confidence. It will promote both private and public interventions with high replication effect. This programme allocated about USD 50 M for Kenya for the Menengai Geothermal Exploration drilling. Similarly, SREP prioritized and selected the following programmes for funding in Ethiopia: (i) Clean Energy Capacity Building and investment Facility (about USD 4M); (ii) Aluto-Langano geothermal Field Development, and design of a long term Geothermal sector strategy that leverages private sector participation (about USD 26M), and (iii) Assela Wind farm project (about USD 10M). This programme is complementary with the UNEP ARGeo project in terms of its two components: (i) Regional Networking, information systems, capacity building and awareness creation; use of East African geothermal Database and geothermal expertise in various geoscientific disciplines; Geothermal policy guideline and participation in ARGeo national and regional geothermal workshops and conferences; and (ii) Technical Assistance: where the program will be able to use project pipelines produced by the UNEP ARGeo project. The WB and AfDB support the expansion of the Aluto-Langano geothermal field, the acceleration of negotiations between the Government of Djibouti and a private sector partner, and the promotion of a number of private developers to invest in the development of geothermal energy in the East Africa Region.

SECTION 3: INTERVENTION STRATEGY (ALTERNATIVE)

3.1. Project rationale, policy conformity and expected global environmental benefits

3.1.1. Project rationale and policy conformity

The Project is consistent with the GEF Operational Strategy for its Climate Change Focal Area, and supports the objectives set out in Operational Program #6: Promoting the Adoption of Renewable Energy by Removing Barriers and Reducing Implementation Costs. ARGeo was developed under GEF 3 set of priorities and Ops 6. Although this was the starting point, the project is in line with the GEF-4 overarching goal to reduce GHG emissions through transformation markets. It is aligned with the GEF 4 strategic objectives in the Climate Change Focal Area. In particular, it addresses strategic objective 4 (To promote market approaches for renewable energy). Consistency with the

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strategic priorities is broadly categorized as follows: (a) promotion of renewable energy-based on-grid electricity supplies, (ii) technical assistance and capacity building in the governments, utilities, and private sector for promotion of renewable energy (geothermal energy) utilization with on grid renewable policies. The ARGeo program will promote market approaches for the supply of and demand for geothermal electricity.

The expected outcome will be the growth in the investment and market for geothermal power in participating ARGeo countries. The results of surface exploration studies will be used by countries (with UNEP’s support) to develop scientifically sound proposals for the AUC-KfW GRMF which will provide grants for exploration drilling and, as a result, facilitate geothermal power production development and generation of electricity. All ARGeo countries have significant geothermal energy generation potential and made the development of a geothermal energy program a high priority. ARGeo will include a combination of: (i) regional networking, capacity building, information systems; and (ii) technical assistance for surface exploration studies with a view to minimize risks of drilling and develop project pipelines for the AUC-KfW GRMF. This would support the AUC-KfW GRMF to enhance the geothermal investment in the region with a view to generate electricity from a clean, renewable and environmentally clean energy resource: geothermal energy by replacing the use of fossil fuel for power generation.

3.1.2 Expected Global Environmental Benefits

When implemented, the ARGeo Facility in collaboration with the AUC-KfW GRMF will have developed pilot geothermal power production plants in the initial ARGeo participating countries of the East African Rift Valley region. Initial estimates indicate that these investments could lead to 2,393,656 tons of CO2 emission savings per year and up to 46.2 million tons of CO2 emission savings over 20 years7. Given the demonstration and “snow-ball” effect of the ARGeo project, it is expected that these pilot projects will generate more interest in geothermal technologies and that further projects will be leveraged in the six targeted countries as well as in the future, in other countries of the Rift Valley (Sudan, Rwanda, Burundi, the Democratic Republic of Congo, Malawi, Mozambique, and Madagascar as well as Yemen, on the Arabian side of the Rift).

3.1.3 Estimated Avoided GHG Emissions

In terms of the potential for avoided annual GHG emissions, the following table (Table 8) outlines the annual GHG savings associated with geothermal electricity production in the ARGeo countries according to the GEF manual8. The table is particularly relevant for those countries in which the main alternative to geothermal power is fossil fuel production (e.g Eritrea). Moreover, the alternative of adding hydropower capacity in other ARGeo countries would entail significant lead time, which effectively makes diesel alternatives the more likely alternative in the short to medium term.

There are three types of environmental benefits:

• Direct GHG impact (stemming from investment) • Direct Post-Project GHG impact (resulting from financial mechanism after end of project) • Indirect GHG Emission Savings (capacity building, enabling environment, etc…) bottom up

or top down methods

7 This is a conservative estimate for the operational life of geothermal production facilities. 8 Manual for Calculating GHG Benefits of GEF Projects: Energy Efficiency and Renewable Energy Projects, GEF Council, Washington D.C. Feb. 2008.

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Table 8: GHG Benefits of ARGeo Projects

African Rift Geothermal Development Program (ARGeo) tCO2e

Results Directions emissions reductions 46,252,800Direct post project emissions reductions 0Indirect bottom-up emissions reductions 138, 758,400Indirect top-down emissions reductions 138,758,400

Key data Annual electricity saved /generated (MWh) 3,504,000Emissions factor (T CO2/MWh) 0.66Useful Investment Life time (years) 20Revolving Fund Size ($) 0Revolving Factor 0Replication factor 3P10 (TCO2) 231,264,000GEF Causality Factor (%) 60

Direct Emission Reductions:

The direct project emission reductions from the project are estimated at 46.2 million tons of CO2equivalent, assuming diesel comparison as the most likely alternative.

Table 9: Estimated annual GHG savings from Pilot Geothermal Power Plants for 20 years

Country Pilot Site MtCO2

Pilot

Eritrea Alid 2.77

Ethiopia Tendaho 13.86

Kenya Silali 18.48

Rwanda Bugarama 4.62

Uganda Kibiro 1.85

Tanzania Mbeya 4.62

Total 46.2

Assuming that that total of 500 MW of pilot projects are fully developed and operational (8760 hours per year x 0.8 capacity factor over 20 years) based on positive exploratory drilling using the

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AUC-KfW GRMF and development activities, the comparison in terms of emissions is presented in the following table. In terms of the potential for avoided annual GHG emissions, the CO2 emission factor, utilised come from: "Geothermal Research Council Bulletin, April 2003, Bloomfield, Moore and Nielson".

Table 10: Emissions reduction of CO2 for 500 MW of geothermal power

Power Source Emission factor CO2 emissions tons Direct-project benefits Geothermal 0.0867t/MWh 6,026,880 Natural Gas 0.572 t/MWh 40,085,760 34,058,880 Petroleum 0.853 t/MWh 59,778,240 53,751,360

Coal 0.907 t/MWh 63,562,560 57,535,680

The table is particularly relevant for those countries in which the main alternative to geothermal power is fossil fuel production e.g Eritrea, and, to a lesser extent, Kenya. Moreover, the alternative of adding hydropower capacity in other ARGeo countries would entail significant lead time, which effectively makes diesel alternatives the more likely alternative in the short to medium term.

Direct post-project Emissions Reductions:

There are no post-project emissions because the project contains no fund that will operate after the project close.

Indirect Emissions Reductions:

The indirect emission reductions from the project using the GEF bottom-up methodology are estimated at approximately 138,758,400 tons of CO2 equivalent. This figure assumes three times of replication after completion of the project i.e. 1500 MWe. After completion of the project, for the next 5 years there will be 5000 MW of geothermal plants in the region. For Kenya, the government plans to implement 4500 MW in the next Fifteen years and for Ethiopia and the rest of the countries about 1000 MWe in the next 15 years. The calculation is based on the comparison to the most likely alternative fuel source.

The difference with the indirect top-down emissions reductions, only 138,758,400 tons of CO2equivalent, could be explained, first by the very low development of the geothermal energy compared to its very huge potential, and second by the constant growth of the demand in an area under electrify.

In addition, the project is fundamentally designed to spur the development of local expertise and interchanges within the region concerning geothermal power production (via the regional workshops, database, etc). This will increase the likelihood that future geothermal projects will be implemented more quickly and become integral elements of the national energy strategies and development plans of the individual ARGeo countries. Finally, the successful development of geo-thermal based energy production will increase access to energy services in a largely under-served region, thereby improving living standards and opportunities for the end-users and contributing towards the objectives of “Millennium Development Goals” and the UN initiative “Year of Sustainable Energy”.

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3.2. Project Goal and Objective

The project’s development objective is to accelerate the development and utilization of geothermal resources in the Rift Valley as a path way to low carbon development in the region. The program’s global objective is to facilitate reduction of the growth rate of GHG emissions in the region through geothermal energy development to produce electricity.

3.3 Project components and expected results 3.3.1 Project Components Project components (Summary)

The ARGeo project consists of two inter-related components:

• The creation of a Regional Network managing a geothermal information system and capacity building and awareness raising program. The project will support activities related to the development of a geothermal energy information database, capacity building activities through training, exchanges of ideas and experiences and equipment pooling.

• A comprehensive Technical Assistance Program focusing on the implememntation of technical surface investigation susceptible to confirm the presence of utilizable geothermal resources with the aim of minimizing the drilling risk failure for the AUC-KfW GRMF; and (b) Sector policy advice and the promotion of institutional structures and an adequate legal and regulatory framework for concerned governments through collaboration with AUC-KfW geothermal programme.

• A direct partnership with the AUC-KfW Geothermal Risk Mitigation Facility. Results of the studies conducted under the Technical Assistance programme will be used by member countries to develop (with UNEP support) and submit proposals responding to the requirements and criteria for accession to the AUC-KfW GRMF.

• Technical Assistance support from AUC-KfW (included in the GRMF programme) to support feasibility studies that combines exploration drilling results and reservoir engineering together with market, regulatory and technical considerations with the aim of securing finance for the next stage of resource development

Project components (Detail)

Regional Information System, Capacity Building and Awareness Raising Programme

1. The detailed activities and outputs of the regional information system, capacity building and awareness raising program component are presented at length in the following sections. However, all of these activities lead to the overall principal objective of formulating fully documented geothermal project proposals to the AUC-KfW GRMF, including the technical surface investigation reports.

Regional information system, capacity building and awareness raising programme

Subcomponent 1: Creation of a Regional Network of Geothermal Agencies

Activities

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• Establish working groups in each country (NPMU) for each of the four project activity clusters with a regional dimension (cluster 1: regional information system; cluster 2: regional forums and outreach, and regional training and capacity building; cluster 3: resource confirmation and equipment pool; cluster 4: regional program for the promotion of policies and regulatory frameworks conducive for geothermal development )

• Develop, implement, monitor and review the working groups work plans • National and regional meetings of the working groups according to the work plan and as

needed to implement specific activities.

Outputs

1. A regional network that will support and coordinate the implementation of the activities under component 1 and 2 of the project.

Subcomponent 2: Creation of the Regional Information System

Activities

1. Establish network hubs in the designated national executing agencies in each country 2. Support the development of a data collection and management plan for the region and for

each country 3. Support data collection and establish an easily accessible metadata base and inventories 4. Training in geothermal database management 5. Technical support to network hubs 6. Prepare a synthesis of all geothermal research undertaken in the Rift Valley. 7. Preparation of a bi-annual regional geothermal newsletter and other outreach products. 8. Create a web site that will contain project information, the meta-database, post a news letter,

announcements, queries, contact information, links, etc. 9. Production and publication of geothermal compendia on the African Rift resource (atlas),

uses and technologies at the national level and as a joint project at the regional level.

Outputs 1. Fully operational information network hubs in each country 2. National and regional data collection and management plans and system 3. A metadata base on available technical reports, and papers on geothermal prospects; and a

database of publicly available reports and data, accessible on the web; inventories of experts and equipment in the region

4. Geothermal agency staff trained in data management 5. A synthesis of all geothermal research undertaken in the Rift Valley 6. A biannual regional geothermal newsletter and other outreach products 7. A web site for ARGeo containing project information, the meta-database, news letters,

announcements, queries, contact information, links, etc 8. Published geothermal compendia on the African Rift resource (atlas), uses and technologies

at the national level and as a joint project at the regional level.

Subcomponent 3: Regional Forum for the Exchange of Information

Activities

1. Biennial Eastern-African conferences organized by national executing agencies with the support of the UNEP PMU, on a rotating basis

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2. Regional participation in international and regional conferences, which may include ARGeo side events

Outputs

1. A regional forum for the exchange of geothermal experience, research and technical advances in the region and world-wide

2. Enhanced capacity in the region for the organization of conferences 3. Increased international exposure of regional geothermal experts, and increased awareness

among bilateral and multilateral agencies and the private sector about the geothermal potential in the African Rift Valley.

Subcomponent 4: Regional Training and Capacity Building

Activities

1. Formal training at the United Nations University (UNU) geothermal training program in Iceland. Designed for professionals in geo-scientific and engineering fields as applied to geothermal resources exploration, development and utilization. Priority will be given to countries with limited trained manpower resources but having good possibilities for economically benefiting from the development of their geothermal resources.

2. Short courses on surface exploration studies organized by KENGEN/GDC/UNU-GTP in the region (with the long-term view of establishing a regional training centre in Naivasha, Kenya). From the Short Courses and the Training by Participation as well as geothermal workshops, the centre will grow to meet the geothermal training needs of the region with an input as necessary from the UNU-Geothermal Training Programme (GTP) and other universities, research institutions and geothermal centres worldwide.

3. Specialized training. In addition to the fairly standardized technical training, tailor-made (Customized) training will be provided based on needs (for example on optimization of plants, project financing, project management, and other topics to be determined).

4. Training by Participation: participation in field surveys, drilling programs, resource development activities and specialized laboratory analytical works etc in the region. The project will make it possible for young scientists and engineers from the participating countries to take part in ongoing geothermal projects in the region and will fund the travel costs and subsistence expenses of such trainees.

5. Technical Workshops : will be organized (back to back with Eastern African geothermal or other regional/ international geothermal conferences or the regional training courses as appropriate and where possible). These will address specialized issues relating to specific geothermal exploration and development problems, methods, techniques, instrumentation, technologies etc. The workshops will also be used, whenever the opportunity arises, as forage for case studies and also for evaluating project outputs at specific landmarks: e.g. end of surface investigations, end of exploration drilling, feasibility study, power development, and installation of other resource use facilities.

Outputs

1. Experts trained at UN Centre in Iceland and in Kenya 2. A regional training programme 3. Specialized courses developed based on needs assessment and presented. 4. Direct, on the job training experience in geothermal exploration and operations. 5. Technical workshops on issues relating to specific geothermal exploration and development

problems, methods, techniques, instrumentation, technologies etc.

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Subcomponent 5: Regional Program for Promotion of Policies and Regulatory Frameworks

This subcomponent is being implemented in collaboration with AUC with a view to prepare a Geothermal Policy Guideline for the East Africa Region. This guideline will comprise: Geothermal Policy, Legislation, Regulation and Institutional Framework.

1. Review of policies affecting and governing energy development, and advice on any conflicts or hindrances and ways of rectifying them.

2. Review of the mandates of institutions responsible for various aspects of energy development in general and geothermal resources in particular to discern whether there are conflicts, incoherence or whether they re-enforce each other, whether there are necessary tasks that are not mandated to any one institution and advice on weighs of rectifying any short-comings.

3. Preparation of policy guidance documents, analyses and briefs. 4. Organization of a regional meeting held for policy-makers, regulatory agencies, utilities and

other relevant institutions focusing on public-private partnerships, financibility, risk-sharing, and policies and regulatory frameworks.

Outputs 1. Reviews of policies and mandates of institutions affecting geothermal, with

recommendations on improving the institutional, legal framework. 2. Advice on including geothermal energy development in national energy master plans. 3. Policy guidance documents and briefs.

4. Regional meeting for policy-makers, regulatory agencies, utilities and other relevant institutions focusing on public-private partnerships, financing issues, risk-sharing and policies and regulatory frameworks.

Technical Assistance Activities

Institutional and technical capacity building

• Provide technical assistance to develop an appropriate institutional setup and technical capacity, including evaluating the adequacy of environmental protection legislation and regulations as well as social impact issues for successful geothermal resource mining and utilization for power generation.

• Provide support in the execution of surface exploration activities, including geophysics, for the definition of drilling sites and reservoir models.

• Facilitate access by national projects to support services available in the region, and when necessary to facilities and services available internationally.

• Support the evaluation of institutional capacities for the regulation of geothermal resource mining and utilization.

• Review existing project conditions for private sector participation in geothermal development and in particular support private partners through public private partnership.

Regional Technical Assistance Program, to be implemented by UNEP, will have as its centrepiece a Regional knowledge sharing network which will manage geoloscientific information in a joint database accessible for all the ARGeo countries. In addition this component will support activities upstream surface exploration, capacity building and awareness-raising through training, exchanges of technical information and equipment pooling.

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3.3.2 Expected Results

(Forecast with GEF Intervention)

Development of functioning network, upgrade of local skills, and investments. A pipeline of cost-effective investments has been identified during the PDF B phase and is presently being further developed by the concerned countries. All six countries have already identified at least one project that can be targeted for immediate support by the project, while another 10 projects are in the pipeline at various stages of advancement representing a total potential of 1500MW of capacity, as shown in the table below (Table 11). This initial list only includes projects for which serious scientific and economic indications regarding the geothermal potential have been provided. Many other opportunities do exist, however, such as the 14 and 16 possible geothermal prospect sites identified in Kenya and Ethiopia, respectively. The projects indicated in Table 9 are relatively smaller in size (< 250 MW). Nevertheless, these projects allow for a ‘modular approach’ in which developers and promoters can invest in pilot projects (Well Head Installing Unit), acquire relevant knowledge about the site, technology and the operating processes, and then later expand the plant size to a more significant size or bundle several small projects into a larger framework. This modular approach is state of the art in the industry. As a pre-requisite for financially and economically sound geothermal development, countries without any experience in geothermal development rather start by small power plants. They then move to larger plant sizes as they proceed on the learning curve at industry level. This pattern was successfully applied in Kenya as well as in other countries worldwide.

GEF co-financing support during the critical exploration and confirmation phase of these projects could leverage up to $USD 1.5 billion for the initial prospects in the six ARGeo countries and additional co-financing for the other projects could lead to up to $USD4.5 billion of total investment. GEF support would then be instrumental in fostering the realisation of at least six projects (one per country) for which calculations have shown that their impact in terms of CO2reduction should be in the range of 2.3 million tons per year. In addition, important benefits pertaining to sustainable development, including electricity generation independent from climatic fluctuations (climate change adaptation) will be also brought about.

Table 11: Identified geothermal sites and status

Country Pilot Site MWe Pilot Others Total

Eritrea Alid 30 50 80 Ethiopia Tendaho 150 200 350 Kenya Silali 200 550 750 Rwanda Bugarama 50 60 110 Tanzania Mbeya 20 60 80 Uganda Kibiro 50 80 130 Total 500 1000 1500

At pre-feasibility stage, the above projects show an estimated investment cost of less than US$3,000 per kW comprised of between US$ 200-500 for exploration, US$500-1000 for steam field and US$1000-1500 for power plant. As a first step they will constitute the long pipeline of projects for

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the AUC-KfW GRMF. Total envisaged investment for the selected portfolio is estimated at US$ 1.5 Billion.

Note: Among a number of other prospects identified in Ethiopia, five more locations, namely Corbetti, Abaya, Tulu, Moye, Dofan and Fantale, could be considered in addition to those in the table, due to their strategic location in close proximity to the existing grid and to regions of high population density.

The GEF intervention will directly allow for the realization of the Technical Assistance and capacity building exercises. UNEP will fully support the development of a pipeline of projects for submission to AUC-KfW GRMF for implementation of Risk Mitigation Facility in the ARGeo member countries. The overall post-project objective, however, is to stimulate the commercial development of geothermal resources in the region.

3.4 Intervention Logic and Key Assumptions

The Project Results Framework identifies as the overall goal the assurance that the most environmentally sustainable, lowest cost GHG emitting, socially benign and cost-effective pathways are identified and adopted around the developing world. This is to be achieved by the development of a methodology and standards to analyze prevailing and most promising pathways for geothermal development worldwide. Ultimately this should lead to an understanding in developing countries to apply the most cost-effective and sustainable geothermal pathways with increased levels of investment for development and electricity production while lowering GHG emissions. Another key assumption is that GEF remains interested in the guidelines and recommendations that will emerge from this project in GEF-eligible countries.

3.5 Risk Analysis and Risk Management Measures

A preliminary assessment identified the following risks and mitigation strategies and actions for the ARGeo facility:

Risk Level of Risk Commentary and Mitigating Strategies and Actions Slower than expected project portfolio build-up

Moderate Country studies on potential geothermal supply, potential geothermal projects, and on identification and eventual removal of barriers.

Insufficient local equity financing of subprojects

Moderate Mobilization of international finance institutions that can provide equity finance (e.g., bilateral donors, IFC)

Governments do not implement required conducive policies.

Moderate A Regional Policy guideline is being produced by AUC in collaboration with UNEP and other partners to provide guidance and support to countries to develop a clear and coherent geothermal policy, legislation, regulatory and institutional framework.

Lack of private sector interest Substantial This risk is mitigated through the combined interventions in the project components, the continuous monitoring and through the feedback from the independent evaluations.

Market/economic risk Low The chance of a slow down in the rapid increase in electricity demand and a significant fall in the price of oil during the project’s life time is unlikely.

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Peace and order risk Moderate Some territorial strife exists between some of the participating countries. Planning of events and activities should be executed with proper cares. All precautions will be taken so that no one, implicated in the Project, could intervene in zones potentially risky.

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Risk Management Process

UNEP/DTIE is using the standard risk management definitions as presented below to implement its Risk Management Process (RMP). Based on the GEF Council’s request to explore RMP, UNEP is using a risk management approach at the project level that covers the need of the project team to proactively handle the risks on their project, allowing for corrective planning and execution to take place if necessary.

Risk Management Definition: Risk management is the systematic process of identifying, analysing and responding to project risk and constitutes the initial management process of the project M&E (Monitoring and Evaluation) plan.

Risk Management Objective: To locate risks before they become problems and to incorporate this information into the project management process.

Identification of project risks ARGeo will evaluate prospective projects and their potential risks, in order to be able to build a project plan that maximizes the probability of project success. Initial risk identification has been done, and will be further strengthened at the beginning of the active project work, and following the planned evaluations. The process of identification is assisted by the use of a risk factor table that captures commonly encountered risks as well as specific risks to the focal area and project. The TA component of the project is designed to reduce the technical as well as financial risk to a minimum. However, projects at risk might occur independently from TA activities and in particular be related to changing conditions in project proponents, force majeure in one of the countries concerned, etc.

Analysis of Project Risks ARGeo will analyze the identified risks to establish the project exposure to each risk and to determine which risk items are the most important ones to address. This analysis will be supported by a top risk chart. While the initial risk analysis deals with the risks identified early in the project, sustained analysis is needed as the project proceeds. In some cases new risks can be identified. The top risk chart will be attached to the Progress Report. The risks may or may not be addressed with a mitigation action, depending on the cost of that action and the ranking of the risk.

Handling Project Risks ARGeo may handle project risks in different ways:

• Accept the risk, with no investment of effort or cost, when the cost of mitigation exceeds the exposure, and the exposure is acceptable.

• Fund and staff the efforts to reduce the probability that the risk will become a problem. • Fund and staff the effort to reduce the loss associated with the risk should it become a

problem.

Appropriate handling actions will be determined at the ARGeo Steering Committee level.

Tracking and Controlling Project Risks

Throughout the project, the ARGeo management will track progress handling the risks to ensure that:

• Actions which should reduce the probability of occurrence are effective • Actions which should reduce the loss associated with the risk are effective • A contingency plan is implemented for risks where there is no possible mitigation

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In addition, the project team will assess additional risks that need to be addressed, as well as changes in impact or probabilities to previously identified risks.

The ARGeo risk management process is intended as an early warning project management tool to allow for corrective actions to take place (which responds to both GEF Council requests of identification and response to risk) and therefore the process must happen at the project level, and before the project at the design level. It comprises project management related risk assessment, political risks, technical risks and financial risks.

3.6 Consistency with National Priorities or Plans

Many of the countries in the region are suffering from power shortage due to a combination of: (i) Volatile oil prices, (ii) effects of periodic drought linked to climate change, and (iii) strong increase energy demand due to rapid population increase and healthy economic growth rates. Due to these facts, the governments of the ARGeo countries are committed to develop geothermal energy in order to supplement and diversify their energy resources.

This geothermal energy based power generation is sought with the specific objectives of: (i) Increasing the power generation mix, providing base load power to the national (and regional) power supply systems which are based mainly on hydropower generation, and mitigate the instability power supply due primarily to draught or to conflicting water use; (ii) Contributing to low carbon development through greening the energy production and mitigating the excessive use of traditional biomass and imported petroleum products, ensuring the preservation forests, agricultural land fertility, domestic health and generate foreign exchange savings; and (iii) Creating domestic sources of electricity in countries with no other indigenous resources and the displacement of oil based power generation. This opportunity has been recognized by the countries in their individual energy policies and poverty reduction strategies. As a result most of the ARGeo member countries incorporated geothermal energy in their National Power Development Master Plan. This is also reflected in the Regional Power System Master Plan of the East Africa Power Pool (EAPP) which envisages regional power interconnections using various renewable energy resources including geothermal energy.

Since 2011, AUC in partnership with other geothermal partners (including UNEP) is working on regional policy development and harmonization with a view to produce a regionally harmonized national policies, legislations, regulations and institutional set ups, This can allow the rapid geothermal resource development and utilization in the region in an optimal manner with the participation of public and private investment. This work will lead to the development of a regional policy guideline focusing on geothermal energy policy, legislation, regulation and institutional framework. It will include guidance and best practice for creation of appropriate institutions for exploration and development of geothermal energy; for developing concession agreements for geothermal exploration; for establishing Tax incentives, Feed in Tariffs, and Power Purchase agreements. Given the above, the situation in terms of geothermal development in the ARGeo member countries is as follows:

Kenya: is well developed and supports geothermal development. A " Kenya’s Least Cost Power Development Plan indicates a measurable shift from the reliance on hydropower resources to the development of geothermal sites. The regulatory framework Geothermal Act" was enacted in 1982 and concessions are available for exploration, drilling and operation. The Ministry of Energy gives authority to explore for geothermal resources in the country.

A "Geothermal Act" was enacted in 1982 and concessions are available for exploration, drilling and operation. The Ministry of Energy gives authority to explore for geothermal resources in the

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country. A "Feed in Tariff" policy was enacted in 2008 that provides support for geothermal power. There are also a number of IPP's in the Electricity market. This FiT policy is intended to apply for 20 years and for geothermal plants upto 70 MWe with a rate of 0.85$US/KWh. This is expected to apply to the first 500 MWe of geothermal power capacity developed in Kenya.

In addition to the FiT, the Government of Kenya has established a Green Energy Fund to encourage investment in renewable energy and manufacture of energy efficiency goods. The Fund will offer loans to prjects at concessional rates and could finance a proportion of the risks associated with geothermal exploration. A number of IPPs are currently active in Kenya. Power Purchase agreements are negotiated with the Kenyan Power and Lighting Company (KPLC). OrPower is the only IPP that supplies electricity to the grid from geothermal energy. In addition to the Kenyan Power Generating Company (KENGEN), the government established a new state owned Geothermal Development Company (GDC) in 2008 to accelerate development of geothermal energy in the country. In order to meet the anticipated growth in demand, the Kenya Government through the newly formed utility (GDC) has embarked on an ambitious generation expansion plan to install additional 1500 MW and 4000 MW of electric power by the year 2018 and 2030 from geothermal sources respectively.

Regionally, the country is also considering interconnection schemes with Ethiopia, Tanzania, Zambia and importing from Uganda. Domestically, the country has relevant experience with independent power producers (IPPs) that also form a key part of the Kenyan energy policy. In the framework of the Energy Sector Reform and Power Development Project, the World Bank, the EIB and KfW have co-financed the Olkaria II geothermal power plant, which is operational since October 2003. The current target expansion for 280 MW of Olkaria I and Olkaria IV (Domes) power station in 2012/13 is funded by KENGEN, World Bank, JICA, KfW, EIB, AfD etc. Appraisal drilling has been funded since 2007 by Government of Kenya, China Exim Bank, KfW. Exploratory drilling in Menengai is executed by GDC. At present, a number of investment and development banks are actively engaged in supporting geothermal development in Kenya. These include: WB, KfW, AfD, EIB, China Exim Bank, AfDB etc. In 2011, Kenya has developed a "new energy policy" with a view to attract investment particularly in renewable energy development. The policy focusses on one energy policy and legislation that comprises all forms of energy. At present, this policy is under review by various stakeholders and partners. Kenya submitted to UNEP a Request for surface exploration (project proposal) of Silai Prospect area (For details see Appendix 15C of the project document).

Eritrea: Eritrea's energy policy aims at: (i) promoting economically and environmentally sound energy sector development through appropriate energy production technologies, energy conservative and usage optimisation. Introduce appropraite pricing structures that avoid subsidies; (ii) Diversifying energy resources to reduce dependence on biomass and imported oil; (iii) Promoting private participation in hydrocarbon exploration and development renewable energis ; (iv) Modernising of existing infrastructure; (vi) Building capacity through training and establishing appropriate legal and institutional frameworks for the energy sector.

The WB supported the power distribution and rural electrification project . Swedish bilateral aid from 1998-2002 analysed wind and solar resources with 25 measurement stations throughout the country and also provided technical training and assistance in the legal and regulatory framework for the energy sector. The Eritrean Renewable Energy Training Centre, part of the Department of Energy, has carried several studies on renewable energy applications, including measuring wind speeds and solar radiation, cooking stoves and solar photovoltaic installations for village water pumps and hospitals. The Department of Mines (DOM) of the Eritrean Ministry of Energy and

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Mines, submitted a request for surface exploration studies (project proposal) to UNEP , to acquire technical and financ ial support to implement the project (For details see Appendix 15 of the project document).

Ethiopia: Institutionally, Ethiopia has moved from a vertically integrated monopoly towards an autonomous entity that ensures transport and distribution and allows for private generation. The country has developed a Growth and transformatonal plan to be implemented for the coming five years. In its Energy development plan the country seeks to diversify and increase production from resources of all kinds, including geothermal. In addition, extension of the network and rural electrification are priorities, while interconnection schemes with Djibouti is currently in place. With Kenya and Sudan, they are at the discussion stage.The World Bank Second Energy Project involves institutional reforms for the national electricity utility EEPCO and other rural energy initiatives. The Ethiopian Electric Power Corporation (EEPCo) is mandated to encourage private sector investment in the energy sector and relevant proclamation were enacted in 2005 and 2007. Private sector power purchase agreements are negotiated with EEPCo. Independent Power Producers (IPP) are promoted to supply power through the Electricity Operations Regulations (49/1999), the letter of power sector policy (2003) and the Investment proclamation (280/2004). The regulatory framework in Ethiopia provides a reasonable level of support for the developer with geothermal exploration licenses and concessions being available. Independent Power Producers are able to operate in the market and a feed in tariff proclamation has been drafted which includes geothermal power. The Ethiopian Energy Agency (EEA) has drafted a feed-in Tariff (FiT) proclamation for a variety of renewable energy resources. This seeks to diversify the energy mix and encourage more medium scale generation. Geothermal tariffs for "FIRM" energy generation range from 0.08-0.10 $US/KWh, up to a maximum of 50 MWe capacity. Tariffs will be valid for up to 20 years. Five geothermal exploartion permits were recently sold to a Canadian Mining Company that continues to have interests in Potash exploration in Northern Afar. These concessions are located in the Main Ethiopian Rift Valley namely: Corbetti, Abaya and Tulu Moye geothermal prospect areas which are considered to be easily utilizable geothermal systems. At present, a number of private sectors (eg. Reykjavik Geothermal) is involved in geothermal exploration and development activity in Ethiopia. WB and AfDB, are also involved in financing expansion of the Aluto-Langano geothermal field to 70 MWe where as AfD is involved in supporting development of the Tenadaho geothermal field in Afar. The government of Ethiopia has submitted a request for surface exploration studies (project proposal) on surface exploration studies of the Tendaho geothermal field to UNEP for acquiring a technical and financial assistance to implement the project (see Appendix 15 of the project document). Ethiopia has signed the Kyoto Protocol and the Environmet Protection Authority under the Prime Minister's office was designated as the Designated National Authority for all Green Economy and CDM projects in Ethiopia.

Rwanda: The regulatory framework in Rwanda is not well established for geothermal power production. Currently there is no geothermal law or FIT for geothermal energy. Private sector participation is encouraged in the electricity market although existing IPP’s are restricted to small emergency diesel generation. However the National Energy Policy recognizes a weakness in the governance framework and states that a regulatory framework for energy efficiency, renewable energy and an Electricity and Gas law will be established. GoR is developing a clear policy of giving out concessions and establishing modalities of joint ventures (JV), sustainable utilization of geothermal resources and where applicable the cost of steam supplied to an IPP by a public utility. The effort to develop geothermal resources is supported by the policy. It is believed that geothermal energy can support economic activity in remote areas while providing positive environmental and social impacts. The cost of the geothermal power in the Electricity Master Plan is estimated to be less than 50 RwF/kwh (US cents 5-6/kwh).

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The existing installed (generating) capacity of Rwanda is 85 MWe, with approximately 40% being provided from hydro generation and about 60% from thermal. Approximately 40% of Rwanda’s electricity demand cannot be served at present and severe load shedding has been required. Demand is anticipated to grow at around 10% per annum.

National Energy Policy expects that in the future one of the largest inputs into the electricity grid will come from power generated from methane gas extracted from the bottom of Lake Kivu at Kibuye. Geothermal is also highlighted in the energy policy as one of the possible future sources of power. Private sector participation is welcomed at all levels of the electricity supply industry including geothermal exploration. Energy projects are to be prioritised for support by government and/or development partners according to current sector priorities. For electricity projects the priority list is to be determined by the cost effectiveness of competing projects in facilitating increased access to electricity, reducing the average cost of electricity supply and enhancing security of supply.

There is no legal and regulatory framework in place for geothermal energy production. National Energy Policy sets an outline strategy for geothermal development going forward including further resource assessment and exploration. Draft regulatory and legal documentation relating to the geothermal sector is anticipated to be developed shortly. A range of investment incentives exist in Rwanda including flexible work permits, exemption from withholding taxes and taxes on dividends, investment allowances, zero sales tax and zero import tax for plant and machinery. The Rwandan Development Board provides information and assistance for investors.

The Rwanda Energy Sector Strategic Plan (2008-12) indicated that , the main issues in the energy sector revolve around poor access to energy, high costs of supply, lack of energy security and institutional weakness in the management of energy. The specific issues that have been highlighted in the energy component of the strategic plan are: (i) Increase access to electricity for enterprises and households in 2012, including giving access to 100% of health and administrative centres and at least 50% of schools; (ii) Reduce the costs of supply of electricity and the use of imported petroleum products; (iii) Diversify sources of energy supply and enhance energy security by developing hydropower potential, geothermal and methane gas; (iv) Strengthen the governance framework and institutional capacity of the energy sector. Rwanda is signatory to the Kyoto Protocol and the Designated National Authority is the Rwanda Environment Management Authority.

Tanzania: Tanzania has the objective of making the electricity production triple over the next 20 years. This needs an energy efficient production, transportation, distribution and end-use system is established and works in an environmentally sound and sustainable manner. Energy efficiency at both the supply and demand side must be developed.

Rural electrification for socio-economic reasons (reduction on reliance on biomass and kerosene) and for promoting commerce in rural areas is also an important objective of the national policy. SIDA has previously financed several geothermal reconnaissance and exploratory initiatives in Tanzania, yielding a draft geothermal plan. A subsequent UNDP mission and further geothermal studies by the Federal German Institute of Geosciences and Natural Resources (BGR) confirmed the potential for geothermal production and suggested further studies.

The regulatory framework in Tanzania is not focussed on supporting large geothermal development. No geothermal law is in existence, but concessions may be negotiated under mining law. Renewable energy tariffs exist for small power producers, but these are technology neutral. IPPs operate in the electricity market, solely providing thermal generation. Specific needs of the sector include financing, geologic studies, infrastructure money and private development. In terms of

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policy, Tanzania recently revised the national energy policy to accommodate power sector reforms, promote renewables and advance rural electrification. Under the power sector-restructuring program, independent power producers can generate power and sell to TANESCO.

An important strategic objective in the national policy is to reduce fossil fuel dependency through increased use of renewables and improving energy efficiency. Some renewable energy and rural electrification projects have been implemented with assistance from various agencies. However most of the past efforts have been targeted at households and not at the rural industrial sector. The National Energy Policy for 2003 indicates that government of Tanzania is aware that renewable energy resources so far have remained under utilized while “electricity needs to be made available for economic activities in rural areas, rural townships and commercial centres. Rural electrification is therefore a case of long-term national interest and a pre-requisite for a balanced social economic growth for all in Tanzania”. Several passages of this policy refer to the development of renewable energy sources, including the introduction of norms, best practices, environmental considerations in energy planning, increasing research, the promotion of entrepreneurship, and increasing energy services in grid and non-grid areas. In 2012, the Ministry of Energy and Mineral development set up a National Task force with a view to facilitate development of geothermal resource. This Task force is expected to perform the following: (i) To develop a clear and coherent regulatory and institutional framework, (ii) advice government how to build capacity, and (iii) develop a startegic geothermal development plan in line with National Power development Master Plan. Government of Tanzania is working on the revision of the project proposal on Surace exploration studies of the Mbeya geothermal prospect area to submit to UNEP for technical and finacial assistance to implement the project.

Uganda: The Energy Policy for Uganda (2002) indicates that despite the endowment of renewable energy sources, “only a meagre fraction of the country’s renewable energy potential being utilized, Uganda aims to develop the use of renewable energy resources for both single and large scale applications.” The policy laid down the Government’s commitment to the development and utilisation of renewable energy resources and technologies. As a result, the Government has spelled out a number of strategies ranging from dissemination of technologies, including renewable energies in school curricula, setting of standards, facilitating financing schemes, etc.

In 2007, the Government put in place the “Renewable Energy Policy”. This Energy Policy established standard PPA's and Feed in Tariffs (FiTs), and set a target of developing 25 MWe of geothermal by 2012. However FiTs are currently only available for hydro and biomass projects. No IPP's currently operate in the system, but private sector participation is enclouraged. The implementation of the Renewable Energy Policy objectives will positively respond to the various policy instruments and programmes, which address poverty, catalyze industrialization and protect the environment. These include; the Uganda Constitution 1995, the Poverty Eradication and Action Plan, the Millennium Development Goals, the Electricity Act 1999, the National Environment Act 1995, the Programme for the Modernisation of Agriculture and the Kyoto Protocol.

The overall objective of the Renewable Energy Policy is to diversify the energy supply sources and technologies in the country. In particular, the policy goal is to increase the use of modern renewable energy from the current 4% to 61% of the total energy consumption by the year 2017. The country is in the process of establishing the available potential and demand of various energy resources with the view to allow increased access to affordable energy services for poverty eradication. An important focus is on improving energy governance and administration in order to stimulate economic growth.

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The Electricity Act 1999 has been passed for the sector to perform without subsidies, improve efficiency, satisfy electricity demand and increase coverage, improve reliability and quality, attract private capital, and take advantage of export opportunities. The World Bank is financing a 10 year rural electrification project in Uganda to increase access to clean and affordable energy through a mix of renewable and traditional fuels. The International Finance Corporation is providing financing for mini-hydro schemes in Bushenyi and Mbarara. With regards to geothermal production, the Government with support from the UNDP, the OPEC fund, the government of Iceland, and BGR have previously identified prospects in the country along the western branch of the Eastern Africa Rift. A number of local and international private developers (e.g. Pertamina in collaboration with local private developers ) are interested to invest in development of geothermal for power generation. The overall objective of the study is to develop geothermal energy to complement hydro and other sources of power to meet the energy demand of rural areas in a sound environment. The government of Uganda submitted a request for surface exploration studies (project proposal) of the Kibiro Geothermal prospect area to UNEP for acquiring technical and financial assistance to implement the project (See Appendix 15D for details).

3.7 Incremental Cost Reasoning

Energy production and consumption in ARGeo countries are low and structurally the least developed in respect of both the energy forms consumed, where traditional biomass use dominates, and the low share of energy use in economic production. More than 90% of electricity supply is based on fossil fuels in the East Africa Region. Imported petroleum use dominates, for emergency management in much of the ARGeo member countries. Because the initial economies in the region are small, the required periodic additions to generating capacity are also small and entail high unit capacity cost. This causes the price of electricity to be high to be affordable to most of the region’s population. Electricity supply is thus limited to the few large urban centers, which nevertheless experience frequent load shading entailing appreciable losses to the GDPs. Rural populations rely on traditional biomass fuel use with the attendant deterioration of the natural and social environment: deforestation, decline of agricultural soil fertility, prevalence of poor domestic health arising from particulate pollutants from biomass burning. Renewable energy sources (hydro, geothermal, solar, etc) represent a small portion of total energy production, averaging 2% for hydropower and solar and geothermal production combined.

This is a baseline scenario in the ARGeo member countries that leads to environmental degradation and deforestation. The East African Power Pool (EAPP) seeks to interconnect the national electric power supply systems of the countries in the Eastern and North eastern Africa with a view to creating a unified power supply system. This is intended to increase access to electricity by the population of the region and to promote its increased use in economic production. By the early 2020’s the EAPP plan envisages the powering of the regional interconnections by the use of renewable energy resources, including geothermal energy based generation (with a potential of >15 GW), in the process of displacing petroleum use in power generation. This is the energy resource development and utilization context in which ARGeo project intends to support the development of the large geothermal energy potential of the EARS for improving the energy mix and for providing base load power. The ARGeo project in coordination with other geothermal initiatives such as AUC-KfW GRMF will assist the region in overcoming the barriers and enhance development of the resource through active participation of private investors. The GEF’s role is crucial in spear heading the activities that will help facilitate and accelerate geothermal development in the ARGeo Region.

Two scenarios are identified:

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(i) Baseline scenario: Geothermal exploration and utilization is continued (or not) in the different ARGeo countries depending upon national priorities and policies. The most likely general energy production development in the ARGeo countries would include:

• continued reliance on large scale, installed hydropower and diesel generation for the national network,

• continued reliance on small, diesel power production sets in off-grid areas which despite relatively low capital investment costs, demonstrate high operating costs, especially with imported fuel prices currently hovering over $90-100 per barrel of oil;

• continued “electricity gap” between urban electrified zones and off-grid, rural areas that exacerbates poverty differences and stifles the development of small scale industries;

• continued emission of greenhouse gases; • the slower adoption and development of these clean and renewable energy

technologies in the region including geothermal.

(ii) Alternative (GEF – scenario): GEF financing for specific activities of the UNEP component allows for the development of the ARGeo facility, the regional development and utilization of geothermal resources, and the reduction of GHG via the substitution over petroleum-based alternatives. At a minimum, one pilot project (already identified) is developed in each of the 6 participating countries. An overall potential of 1500 MW exists in the total project pipeline, which could leverage up to $4.5 billion of total investment and lead to the reduction of over 5 million tonnes of CO2 per annum.

The incremental cost of the ARGeo project is the cost of the Alternative (GEF – scenario) minus the costs of already existing programmes and activities supported by regional governments, etc in the Baseline scenario. The proposed GEF financing would serve to cover these incremental costs.

Baseline activities include all planned geothermal investments in Kenya (late) as well as in Aluto Langano (Ethiopia). At present, geothermal development in the other countries are practically non-existent, so baseline will be considered as zero. At the outset, all of the ARGeo geothermal investments are considered to essentially replace any future planned fossil fuel based production and therefore would be incremental to the existing baseline in the ARGeo countries.

3.8 Sustainability The goal of the ARGeo program is to develop a sustainable approach and its project components are developed in that perspective:

The Regional Network and Technical Assistance components aim at establishing a long-term and sustainable basis of expertise and local competencies in the region, associated to making available for all the ARGeo countries the necessary technical means. This will allow investigations, surface explorations, exploratory drillings, etc. to continue even after the present ARGeo program ends up. It is therefore expected that the Regional Network will continue activities beyond the project through the East Africa Geothermal Association. This will be achieved through a phased approach in which after 5 years, the network will be gradually handed over to the beneficiary countries.

3.9 Replication The UNEP-Technical Assistance will help produce project pipelines with detailed resource information to be handed over to the AUC-RMF GRMF. Once the first few projects have been

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implemented with the participation of both public and private sector, it is likely that further similar developments will take place with no need of further support.

This technical assistance could be replicated in other regions/countries where geothermal energy is a significant, untapped potential resource, such as East Asia.

3.10 Public Awareness, Communications and Mainstreaming Strategy The ARGeo project, since its inception, has included a strong communications strategy. The establishment and functioning of the regional network directly involves relevant stakeholders from the national, regional, and international government, scientific and donor agencies. The ARGeo web page and blog has been developed to facilitate interchanges between stakeholders and periodic (Biennial) international conferences have been held to coordinate, exchange information, and chart the future course of action.

In terms of external communication, the preparation of investments under the ARGeo project are designed to correspond with national energy strategies that increase access to energy services and electrification as well as efforts to develop renewable energy, energy independence and diversification. The project includes a communication component and different media activities will be planned in line with national priorities and media preferences (brochures, newspapers, radio campaigns/talk shows, television, internet, etc...).

SECTION 4: INSTITUTIONAL FRAMEWORK AND IMPLEMENTATION ARRANGEMENTS

4.1 Institutions and General Organization

UNEP will be the GEF Implementing Agency for the project and will have overall, but independent responsibility for the project implementation. UNEP/DTIE will be the implementing agent of the project whereas UNEP/ROA will host the PMU in Nairobi and will execute the project. AUC hosts and executes the AUC-KfW GRMF based in Addis Ababa, Ethiopia through their own sources of cofinancing. The AUC-KfW GRMF will be executed by the AUC based in Addis Ababa, Ethiopia. The UNEP tasks consist of two, inter related components: (i) the creation of a regional promoting network for geothermal energy development. The project will support activities related to the development of a geothermal energy information database, capacity building activities through training and exchanges of technical information and equipment pooling; (ii) A comprehensive Technical Assistance programme. This Technical Assistance programme is focussing on: (i) the realisation technical investigation to confirm the presence of utilizable geothermal resources, with the aim of minimizing the drilling risk for the Risk Mitigation Facility; (b) on support to feasibility studies to present bankable proposals to local or international source of financing; and (c) to assure the conditions of development of geothermal energy in concerned countries by following actions: policy advice, promotion of dedicated institutional structures, development of adequate legal and regulatory framework and transaction advice. The latter will be coordinated with the AUC Regional Geothermal Programme that reflects particular attention which will be paid to supporting the involvement of private sector developers through the hiring of transaction advisors to the local governments, in order to help them during the negotiation process of the establishments of PPP and IPP’s.

A Project Steering Committee (PSC) will be maintained at the international level as a forum for project direction, coordination and information exchange on project progress and performance. The PSC will meet once a year and will include nominated representatives of the six ARGeo countries, UNEP, AUC, KfW, and other donors and partners. It will be chaired on a rotation basis by one of the countries representatives.

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The PMU is established and steered by UNEP. The PMU was set up at UNEP Regional Office for Africa in Nairobi with the purpose of overall management and administration of ARGeo components implemented by UNEP. ARGeo Technical Advisory Team will provide neutral expertise to guide and review surface assessments and pre-feasibility studies.

The UNEP ARGeo component and AUC-KfW GRMF agreed to work in direct partnership for supporting the development of geothermal energy and related investments in the East African Rift System. In July 2011, UNEP and AUC-KfW identified the following as areas of collaboration: (1) Regional Networking, Information Systems and Awareness Creation: (i) Eastern Africa Geothermal Database; (ii) Website, Outreach and communication material; (iii) Organization of regional geothermal forums; (iv) Policy Development and harmonization; and Capacity Building (institution and infrastructure); and (2) Technical Assistance: UNEP Technical Assistance component does the “up-stream” surface geo-scientific investigation work aiming to target the best sites for drilling and to minimize “drilling failure risk” and therefore support the development of a pipeline of projects for submission to AUC-KfW GRMF.

Furthermore, UNEP and GRMF will coordinate their surface exploration work, by sharing requests for surface exploration and make every effort to coordinate on this matter so as to optimize surface exploration to maximize the number of proposals promoted for investment. It was proposed that UNEP and AUC-KfW GRMF develop a joint Technical Advisory Team to review geothermal proposals and surface exploration studies for quality feasibility and selection. Both organizations agreed to share the costs of retaining the services of this high level group, and both parties will participate in the deliberations of this high level group. UNEP will jointly implement the ARGeo program in coordination and with the support of the Governments of Djibouti, Eritrea, Ethiopia, Kenya, Tanzania and Uganda by establishing National Project Management Unit in each ARGeo member country.

This requires close coordination with the , Department of Mines, Ministry of Energy (Eritrea), Geological Survey of Ethiopia, the Ministry of Mines, and Ministry of Energy and Water (Ethiopia), the Ministry of Energy and KENGEN/GDC (Kenya), Ministry of Infrastructure (Rwanda), the Ministry of Energy and Minerals Development, the Department of Geological Survey and Mines (Uganda), Ministry of Energy and Minerals (Tanzania). These agencies will participate in the ARGeo Program in collaboration with other national government agencies, institutes, universities, and national power utilities.

The ARGeo Program also draws upon the geothermal experience and knowledge in Kenya (KENGEN/GDC) in terms of sharing their best practices, experience and knowledge with other ARGeo member countries. Close collaboration is also established with KENGEN/GDC/UNU-GTP for capacity building including for their short training course on geothermal surface exploration studies in Kenya. In partnership with Iceland/KENGEN/GDC, UNEP is also involved in the development of a regional geothermal training center in Kenya. In the framework of ARGeo, UNEP also partners with BGR's and ICEIDA's geothermal technical assistance program Table 12: National Executing Agencies

Country National Executing Agencies (NEAs)

Eritrea Department of Mines Ministry of Energy Ethiopia Geological Survey of Ethiopia, Ministry of Mines, and the Ministry of

Energy and Water Kenya Ministry of Energy and KENGEN/GDC Rwanda Ministry of Infrastructure, Energy, Water and Sanitation Authority Tanzania Ministry of Energy and Minerals Uganda Ministry of Energy and the Department of Geological Survey and Mines

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The organisational chart of ARGeo is described in figure below. Figure 3: ARGeo project structure

Project Steering Committee A Project Steering Committee (PSC) will be maintained at the international level as a forum for project direction, coordination and information exchange on project progress and performance. The PSC will meet once a year and will include nominated representatives of the six ARGeo countries. UNEP, the co-financing countries namely the Iceland, USA, Germany, Italy and France. It will be chaired on a rotation basis by one of the countries representatives.

Project Management Unit (PMU)

The PMU is established and steered by UNEP. The PMU was set up at UNEP Regional Office for Africa in Nairobi with the purpose of overall management and administration of ARGeo components implemented by UNEP. It may provide technical support to public applicants during project preparation to assist them in meeting ARGeo’s eligibility criteria and will provide an evaluation report on any project application.

UNEP/DTIE

(Coordination team &Implementing Agent)

ARGeo Technical Advisory Team (ATAT)

Independent and neutral geothermal experts

UNEP/ROA Project Management Unit (PMU)

Executing agent for Regional Networking &TA

ARGeo Steering Committee Members (SC)

ARGeo Countries, UNEP, AUC-KfW, Donors and Supporters

Advice

Advice

NPMU-Rwanda

NPMU-Eritrea

NPMUEthiopia

NPMU Kenya

NPMU Tanzania

NPMU Uganda

GEF

Report

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Terms of Reference and working procedure of ATAT and ASC

ARGeo Advisory Technical Team (ATAT)

ATAT experts will provide neutral expertise to guide and review surface assessments and pre-feasibility studies.

The overall objective of ATAT is: (i) to enhance the quality of “proposal” (or TOR) for the surface exploration studies received from ARGeo Countries for financial assistance, and (ii) to evaluate results of surface exploration studies. The required enhancement would help to focus the “proposal” to lead to identification of the best sites for exploration wells for ultimate development. In turn, the output of such studies will facilitate ARGeo member countries to prepare and propose economically viable and scientifically sound (with minimized drilling failure risks) projects for exploration drilling to the RMF.

Specifically, ATAT experts would: (i) conduct a scientific and technical evaluation of project proposals submitted to UNEP for technical and financial assistance; (ii) provide guidance and advice in selecting the most appropriate exploration methods to solve the problems/issues identified by the country in its “proposal”, and (iii) evaluate individual studies, and provide guidance, on the “conceptual models” of the concerned geothermal system that should be targeted to select the best sites for deep exploratory wells.

(A)Work Methodology for ATAT

The UNEP ARGeo Component would be the implementing Agency with supervision responsibility for the ATAT’s activities related to the surface exploration studies through integrated geoscientific investigations. The experts (individually or in combination, as appropriate in each case) would:

• Assess the geological, geochemical, geophysical and other relevant aspects for scientific and technical content

• Confirm whether the data and information provided is sufficient to form an opinion.

• Alternatively, suggest complementary surface investigations that should be undertaken; • Address the unresolved issues/gaps; and provide guidance in defining and applying various

exploration methodologies for assessing and analyzing the unresolved issues projects from a scientific and technical point of view.

• Provide interpretative comments on how each result improves and expands the knowledge of the resource and implications of this with respect to the design and location of wells;

• Critique the siting of wells; provide second opinion on siting of wells. • Comment and advise on proper environmental management during, and after, surface

exploration studies • All data related to surface exploration studies made available to the members of ATAT are

confidential and shall not be published before receiving a written authorization from the ARGeo member countries and UNEP PMU.

(B)Meetings of ATAT

• UNEP Project Manager will call meetings of one or more ATAT experts, as and when required.

• The meetings may also be held for “technical reviews” or for detailed discussion or a forum to assist UNEP’s decision-making.

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• Meetings may take place by teleconference or in person. • The schedules of these meetings will be agreed adequately in advance. • ATAT experts will be provided the Agenda for the meetings in addition to pertinent

documents relating to that person's area of expertise. This will be done adequately in advance of the meeting so that the experts become adequately familiar with these materials before the meeting.

(c) Reporting requirements

• ATAT experts may be required (when requested) to prepare and submit the following reports to UNEP PMU who shall circulate them:

o Draft Report (ATAT experts will establish the format (structure and contents) of the Draft report for approval by UNEP Project Manager.

o Final Report (The report shall summarize all the activities of the concerned experts of ATAT and list the main findings and recommendations).

(d) Appointment

ATAT experts will be reputable international and regional experts, selected on the basis of their

experience and knowledge of geothermal activities in East Africa or areas of similar geological

environment. The ATAT experts will represent the various geothermal science disciplines involved

in geothermal exploration including geology, hydrogeology, geochemistry, and geophysics,

• The work of these experts will be coordinated by the UNEP Project Manager. • The ATAT experts will be appointed for two years with a possibility for renewal.

(e) Qualification Requirements:

Education: A professional degree in earth or physical sciences from a recognized University

Experience:

o A minimum of 20 years’ experience in geothermal technology (exploration) with specialization in geology, geochemistry, geophysics or any other relevant geothermal fields.

o Fluent in both written and spoken English

o Has professional Experience in a geological setting similar to that of the East Africa Rift System

o Be recognized as an expert in his/her field through publications, memberships in

appropriate professional societies, or honors and awards received for works.

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National Project Management Unit (NPMU)

National Project Management Unit will be established in each country comprising representatives from the National Executing Agencies, and relevant Ministries to ensure coordination at the national level.

Role of the Steering Committee

The main role of any Steering Committee for a project is to play a supervisory role to guide implementation of a project. This is an adequately senior level role focusing on broad issues of implementation and monitoring. It is not a “technical” role.

The SC defines the purpose of the project, its strategic intent, objectives, and its values. Both the purpose and values should be clear, concise and achievable. SC ensures that procedures and practices in place protect the Project’s assets and reputation.

Members of the ARGeo SC are senior representatives of: UNEP, AUC, KfW, ARGeo member countries, Donors and Co-financiers. The actual members nominated to the Steering Committee are expected to play this senior level advisory role even if they are, individually, technical experts in geothermal related fields.

The SC will be chaired by representative of each country on rotational bases. SC will strategically guide/monitor the ARGeo project for meeting its overall objectives. In this context, the specific aspects that may be of interest to the Steering Committee to monitor and guide are:

• Oversee the management and administration of the project

• Provide strategic direction, adopt work plan and advice for project implementation

• Provide oversight of performance against targets and objectives

• Oversee the reporting of stakeholders on the direction and performance of the project, as well as other processes that need reporting and other disclosure requirements

• Monitor project management implementation of the plans and strategies of the project

• Discuss a methodological framework as well as guidelines prepared by the UNEP Project Manager (ARGeo), the ARGeo Advisory Technical Team (ATAT), including project-eligibility criteria,

• Review progress reports from the UNEP Project Manager and address any issue in this respect;

• Review monitoring and evaluation system and make recommendations regarding identified strengths and weaknesses of the project

• Respond to issues posed on amendments to the project design

• Respond to any requests from the UNEP Project Manager on budget and on competing priorities;

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• Review the project’s progress annually and recommend refinements to its structure, design and operation as appropriate to ensure the project meeting its overall objectives.

Role of the PMU

The PMU shall undertake the following tasks: • Convene the Steering meeting each six month, prepare the agenda and write the report. One

meeting on two will be held in teleconference the other in UNEP'offices in Nairobi; • Establish project management and monitoring guidelines for the PMU’s activities; • Coordinate and manage all activities related to sub-components 1 and 2 (regional network

and technical assistance); • Coordinate with international donors and organisations to seek for additional funding

sources for TA activities, particularly with regard to the second five year period of the project;

4.2 Relationship With Other Projects (GEF and others) The UNEP ARGeo component and AUC-KfW GRMF had an "IN PRINCIPLE" partnership agreement to work in direct partnership for meeting the objectives of supporting the development of geothermal activities and investments in the East African Rift System. This agreement was made in July 2011. Their agreement records the modalities and relevant activities of the AUC-KfW GRMF and the UNEP ARGeo component.

Both UNEP and AUC-KfW identified the following as areas of collaboration: (A) Regional Networking, Information Systems and Awareness Creation: (i) Eastern Africa Geothermal Database; (ii) Website, Outreach and communication material; (iii)Organization of regional geothermal forums; (iv) Policy Development and harmonization; and Capacity Building (institution and infrastructure). (B) Technical Assistance.

UNEP Technical Assistance component does the “up-stream” surface geo scientific investigation work aiming to target the best sites for drilling and to minimize “drilling failure risk”. Then, it would fully support the development of a pipeline of projects for submission to AUC-KfW GRMF. Furthermore, UNEP and GRMF will coordinate their surface exploration work, by sharing requests for surface exploration and make every effort to coordinate on this matter so as to optimize surface exploration to maximize the number of proposals promoted for investment. It was proposed that UNEP and AUC-KfW /GRMF shall develop a joint terms of reference for high level experts (Technical Advisory Team) to review geothermal proposals, surface exploration studies etc. for quality feasibility and selection.

Both shall share the costs of retaining the services of this high level group, and both parties shall participate in the deliberations of this high level group. UNEP will jointly implement the ARGeo program in coordination and with the support of the Governments of Djibouti, Eritrea, Ethiopia, Kenya, Tanzania and Uganda. This requires a close coordination with the Ministry of Energy and Water (Djibouti), Department of Mines, Ministry of Energy (Eritrea), Geological Survey of Ethiopia, the Ministry of Mines, and Ministry of Energy and Water (Ethiopia), the Ministry of Energy and KENGEN/GDC (Kenya), the Ministry of Energy and the Department of Geological Survey and Mines (Uganda), Ministry of Energy and Minerals Development (Tanzania). These agencies will participate in the ARGeo Program in collaboration with other national government

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agencies, institutes, universities, and national power utilities. The ARGeo Program also draws upon the geothermal experience and knowledge in Kenya (KENGEN/GDC) in terms of sharing their best practices, experience and knowledge with other ARGeo member countries.

Close collaboration is also established with KENGEN/GDC/UNU-GTP in their short geothermal course on surface exploartion studies training program in Kenya. UNEP is also involved in developing a regional training center on geothermal in Kenya by Iceland/KENGEN/GDC. UNEP works with BGR and ICEIDA in their technical assistance programme of the East Africa Region. A tight cooperation is established with the UNEP implemented "Yemen Geothermal Development Project", financed by the GEF Trust Fund up to 47%, whose main objective is to accelerate the exploration and the development of geothermal power use in Yemen. The above coordination and partnership is implemented through the PMU set up in Nairobi.

Since the idea of a regional geothermal facility was first discussed at the 2003 Nairobi conference, there has been renewed interest from the part of the countries and of potential investors in geothermal developments in East Africa. This interest has generated new initiatives in the East Africa Region such as the Scaling up Renewable Energy Programme (SREP). Its criteria are to scale up and diversify the renewable energy mix. As a pilot phase, this programme is providing support in accelerating geothermal resource development in the East Africa Region only to Kenya and Ethiopia. The program will help these countries in proving the technical possibility and viability of developing the country's considerable geothermal potential further, thereby increasing future investment confidence. Multi-lateral Agencies such as AfDB, WB, donors from various countries etc. finance the program. The fund is managed by Climate Investment Finance of the World Bank. SREP promotes both private and public interventions with high replication effect. This programme allocated about 50 M $USD for Kenya for the Menengai Geothermal Exploration Drilling. Similarly, SREP prioritized and selected the following programmes for funding in Ethiopia: (i) Clean Energy Capacity Building and investment Facility ( about 4M $USD); (ii) Aluto-Langano geothermal Field Development, and design of a long term Geothermal sector strategy that leverages private sector participation (about 26M$USD), and (iii) Assela Wind farm project (10M$USD). This programme can synergize and collaborate with the UNEP ARGeo project and take the advantage of complementarities for supporting the development of geothermal energy and related investments in the East African Region. Possible areas of collaboration could be: (1) Regional Networking, Information Systems and Awareness Creation: (i) Eastern Africa Geothermal Database; (ii) Website, Outreach and communication material; (iii) Organization of regional geothermal forums; (iv) Policy Development and harmonization; and Capacity Building (institution and infrastructure); and (2) Technical Assistance: UNEP Technical Assistance component does the “up-stream” surface geo-scientific investigation work aiming to target the best sites for drilling and to minimize “drilling failure risk” and therefore could support the development of a pipeline projects.

SECTION 5: STAKEHOLDER PARTICIPATION

The ARGeo project has been designed with stakeholder participation as a fundamental function.

Methods of Consultation

The ARGeo project blends a periodic consultative mechanism with a standing multi-stakeholder body.

• Consultative Mechanism: This takes the form of periodic regional conferences and meetings, as well as via the project’s web page and blog which allows for written comments and recommendations that are usually associated with specific government initiatives, especially planning and policy formulation.

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• Multi-stakeholder body: ARGeo maintains a project steering committee that will be maintained at the international level as a forum for coordination and information exchange on project progress and performance. The PSC will meet once a year and will include nominated representatives of the six ARGeo countries, UNEP, AUC-KfW, and the co-financing countries namely the USA, Germany, Iceland and other donor financiers. It will be chaired on a rotation basis by one of the countries representatives. Has a formal standing committee established between the principal.

In addition to these two forms of stakeholder participation, ARGeo also relies upon a permanent project management unit that will be established and steered jointly by UNEP and the World Bank at UNEP’s headquarters in Nairobi with the purpose of overall management and administration of ARGeo components implemented by UNEP. Other stakeholder participation areas include:

• ARGeo Advisory Technical Team (ATAT) established to provide neutral expertise and to guide and review surface assessments and pre-feasibility studies. It will be comprised of reputable international experts, selected on the basis of their experience and knowledge of geological and geothermal activities in East Africa and representing the various disciplines involved in geothermal development.

• National Project Management Unit (NPMU) will be established in each country comprising representatives from the National Executing Agencies, and relevant Ministries to ensure coordination at the national level. Each NPMU will establish a National and regional thematic working groups. This groups will be set up at the national and regional level as a support and coordination mechanism for the implementation of activities and also to ensure input from national institutions other than the National Executing Agencies. The NPMU will facilitate inter-agency coordination. Each country will designate a Governmental and Technical/Scientific representative. The NMPGs will establish National Advisory Groups.

SECTION 6: MONITORING AND EVALUATION PLAN

The project will follow UNEP standard monitoring, reporting and evaluation processes and procedures. Substantive and financial project reporting requirements are summarized in Appendix 7. Reporting requirements and templates are an integral part of the UNEP legal instrument to be signed by the executing agency and UNEP.

The project M&E plan is consistent with the GEF Monitoring and Evaluation policy. The Project Results Framework presented in Appendix 4 includes SMART indicators for each expected outcome as well as mid-term and end-of-project targets. These indicators along with the key deliverables and benchmarks included in Appendix 6 will be the main tools for assessing project implementation progress and whether project results are being achieved. The means of verification and the costs associated with obtaining the information to track the indicators are summarized in Appendix 7. Other M&E related costs are also presented in the Cost of M&E Plan and are fully integrated in the overall project budget.

The M&E plan will be reviewed and revised as necessary during start of the project inception workshop to ensure project stakeholders understand their roles and responsibilities vis-à-vis project monitoring and evaluation. Indicators and their means of verification may also be fine-tuned at the inception workshop.

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Day-to-day project monitoring is the responsibility of the Project Manager inside the Project Management Unit but other project partners will have responsibilities to collect specific information to track the indicators. It is the responsibility of the Project Manager to inform UNEP of any delays or difficulties faced during implementation so that the appropriate support or corrective measures can be adopted in a timely fashion.

The project Steering Committee will receive periodic reports on progress and will make recommendations to UNEP concerning the need to revise any aspects of the Results Framework or the M&E plan. Project oversight to ensure that the project meets UNEP and GEF policies and procedures is the responsibility to the Project Manager in PMU. The Task Manager will also review the quality of draft project outputs, provide feedback to the project partners, and establish peer review procedures to ensure adequate quality of scientific and technical outputs and publications.

At the time of project approval 100 percent of baseline data is available.

Project supervision will take an adaptive management approach. The Task Manager will develop a project supervision plan at the start of the project which will be communicated to the project partners during the launching workshop. The emphasis of the Task Manager supervision will be on outcome monitoring but without neglecting project financial management and implementation monitoring. Progress vis-à-vis delivering the agreed project global environmental benefits will be assessed with the Steering Committee at agreed intervals.

Project risks and assumptions will be regularly monitored both by project partners and UNEP. Risk assessment and rating is an integral part of the Project Implementation Review (PIR). The quality of project monitoring and evaluation will also be reviewed and rated as part of the PIR. Key financial parameters will be monitored quarterly to ensure cost-effective use of financial resources.

An annual management review or evaluation will take place on Dec 31 +180 as indicated in the project milestones. The review will include all parameters recommended by the GEF Evaluation Office for terminal evaluations and will verify information gathered through the GEF tracking tools, as relevant. The review will be carried out using a participatory approach whereby parties that may benefit or be affected by the project will be consulted. Such parties were identified during the stakeholder analysis. The project Steering Committee will participate in the mid-term review and develop a management response to the evaluation recommendations along with an implementation plan. It is the responsibility of the UNEP Task Manager to monitor whether the agreed recommendations are being implemented.

An independent terminal evaluation will take place at the end of project implementation. The Evaluation and Oversight Unit (EOU) of UNEP will manage the terminal evaluation process. A review of the quality of the evaluation report will be done by EOU and submitted along with the report to the GEF Evaluation Office not later than 6 months after the completion of the evaluation. The standard terms of reference for the terminal evaluation are included in the document. These will be adjusted to the special needs of the project.

The GEF tracking tools are attached as Appendix 14. These will be updated at mid-term and at the end of the project and will be made available to the GEF Secretariat along with the project PIR report. As mentioned above the mid-term and terminal evaluation will verify the information of the tracking tool.

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SECTION 7: PROJECT FINANCING AND BUDGET

7.1. Overall Project Budget

See Appendix 1

The contribution from GEF is presented in the budget below.

Table 13: GEF budget in US$m Project

Components Expected Outcomes

Expected Outputs

GEF Financing UNEP Total

1. Regional Networkinginformation systems andcapacity building

Strengthened infrastructural andinstitutional capacities that will support and coordinate implementation of the activities s, website and knowledge based geothermal database developed

Increase the information base and technical capacity in the region , raise awareness about appropriate policies and regulatory and legal frameworks for geothermal development. Fully operational information network hubs in each country.

1,000,000 1,000,000

2. Technical Assistance

Support to surface exploration to at least four priority geothermal prospect areas. Economically viable and scientifically sound proposals ready for submission to GRMF with minimized drilling risks. Some specific investment proposals are expected to emerge.

Confirmation of priority prospects, prefeasibility studies

3,372,334 3,372,334

3. Project Management

377,666 377,666

Total 4,750,000 4,750,000

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Figure 4: ARGeo GEF budget fund flow

7.2. Project Co-financing

During works of PDF-B and PDF-C, co-financed by the Governments of Germany, Iceland, Italy and in-kind contribution of UNEP, an important volume of co-financing have been negotiated (years 2004 and 2005). That reflects the strong support to the project provided by various international donors as well as the commitment of the targeted countries themselves.

At present, due to withdrawal of the World Bank ARGeo Component RMF, the content of the project and its implementation arrangements have been changed. Originally, the ARGeo Project was started by UNEP, the German Development Bank (KfW) and the GEF. Support for the design of the regional geothermal program has been provided by the GEF through a PDF B activity, KfW and the Ministry of Environment of the Government of Italy. Due to Council decision the World Bank was brought on board to manage the RMF. Now the WB withdrew from implementation of its project component: RMF. This organisation change, leads to the change of project implementation and co-financing.

In response to the WB withdrawal, UNEP proposed to pursue the project in partnership with the AUC-KfW GRMF. In this amended ARGeo project, the AUC-KfW GRMF takes over the mission initially fulfilled by the World Bank. The countries supported by UNEP will submit their geothermal project development proposals to the already approved and funded AUC-KfW GRMF which has established a Euro 50 Million Grant Fund (Equivalent to about 65 M$USD).

GEF Trust Fund

$ 4.75 M

UNEP-DTIE

$4.75 M

Regional Network: $1M

Technical assistance: $ 3.35M

PMU

$ 0.4 M

RN & TA

$ 4.35M

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The present state of co-financing for the UNEP ARGeo component is summarized in the following table using the co-financing of participating countries, AUC-KfW GRMF and other partners.

Table 14. Overview of co-financing

Source of Co-finance Amount (USD)

Participating countries 6,850,000 Iceland (ICEIDA) 249,052Germany (BGR) 1,600,000 IAEA 312,600 UNEP-ROA 250,000 AUC-KfW (GRMF) 65,000,000TOTAL CO-FINANCE 74,261,652

Germany (BGR )

BGR will participate in the frame of Geotherm II: Capacity Building, on-the-job-training, strengthening institutions, assistance in geothermal exploration, TA in drilling proposals, applications for drilling insurances, liaison between project partner countries and investors, policy advice & awareness, information exchange on geothermal exploration and use.

Iceland International Development Agency (ICEIDA) ICEIDA will support the project in both components of: (i) Regional Networking, Information Systems, and (ii) Technical Assistance components.

International Atomic Energy Agency Peaceful application of nuclear energy in surface investigations. A letter of intent sent to DTIE

UNEP-ROA Project management support

Participating countries Participating recipient countries will commit to the project a total $US 6.8 million, in the form of staff time, office facilities, vehicles, laboratory facilities, field crews for technical work (geophysics, geochemistry, surveying, testing etc.) participation to regional conferences and SC meetings, documents, reports and cartography, and equipment.

Investments – Leveraged Financing Preliminary discussion with a number of partners potentially interested in financing the investment components of the project have resulted in positive reactions. These partners will be following ARGeo’s developments and participate to or observe conferences and SC meetings. Among them, the USAID, the African Development Bank, the French Agency for Development (AFD), the Climate Investment Fund of the Scaling up Renewable Energy Programme (SREP) have declared their interest in principle. In addition, UNEP ARGeo Project has also been presented to the “United Nations Foundations of Sustainable Energy for All Program” which has expressed its interest in

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principle. The upcoming biennial conference of ARGeo (ARGeo-C4) is considered as one of the key activities of the 2012 International Year of Sustainable Energy for all.

In addition, it should be noted that a number of private developers has shown interest to be part of this project.

Parallel co-financing – ARGeo’s catalytic action

Since the idea of a regional geothermal facility was first discussed at the 2003 Nairobi conference, there has been renewed interest from the part of the countries and of potential investors in geothermal developments in East Africa. This interest has generated new initiatives, or strengthened ongoing ones, AUC-KfW GRMF, Scaling up Renewable Energy Programme (Ethiopia and Kenya), the WB and AfDB support in expansion of the Aluto-Langano geothermal field, the acceleration of the negotiations between the Government of Djibouti and a private sector partner, a number of private developers to invest in the development of geothermal energy in the East Africa Region.

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Appendix 1: Budget by project components and UNEP budget lines

2010 2011 2012 2013 2014 2015 2016 TotalProject No: GFL-2328-2721-4B12 US$ US$ US$ US$ US$ US$ US$ US $

10 Project personnel component

1100 Project Personnel Title Grade w/m1101 Programme mgr. and Senior geothermal expert 18 858 123 542 170 000 170 000 170 000 170 000 170 000 992 400 1199 Total 18 858 123 542 170 000 170 000 170 000 170 000 170 000 992 400

1200 Consultants1201 - - - 25 000 25 000 - - 50 000 1202 47 952 61 40 000 40 000 40 000 15 000 6 987 190 000 1203 - - 25 000 - - - - 25 000 1204 - - 40 000 - - - - 40 000 1205 - - 20 000 20 000 20 000 10 000 10 000 80 000 1206 - - 35 000 35 000 35 000 - - 105 000 1299 Total 47 952 61 160 000 120 000 120 000 25 000 16 987 490 000

1300 Administrative support Title Grade w/m1301 Programme assistant and junior expert - - 31 000 31 000 31 000 31 000 31 000 155 000 1399 Total - - 31 000 31 000 31 000 31 000 31 000 155 000

1600 Travel on official business1601 11 802 11 494 7 650 7 650 7 650 7 650 7 650 61 546 1699 Total 11 802 11 494 7 650 7 650 7 650 7 650 7 650 61 546

1999 Component Total 78 612 135 097 368 650 328 650 328 650 233 650 225 637 1 698 946

20 Subcontract component

2100 Sub-contracts (MOUs/LOAs for cooperating agencies)2101 - - 10 000 10 000 10 000 - - 30 000 2102 - - 40 000 40 000 40 000 - - 120 000 2199 Total - - 50 000 50 000 50 000 - - 150 000

2200 Sub-contracts (MOUs/LOAs for supporting agencies)2201 Organization of regional geothermal forums 12 500 - 15 000 15 000 15 000 15 000 15 000 87 500 2202 Regional progam Policies & Regulatory framework - - - - - - - - 2203 Evaluation of institutional capacities - - 25 000 - - - - 25 000 2204 ARGeo geothermal training - - 80 000 80 000 - - - 160 000 2299 Total 12 500 - 120 000 95 000 15 000 15 000 15 000 272 500

2300 Sub-contracts (for commercial purposes)2301 Internet site update and maintenance - - - 7 500 7 500 7 500 7 500 30 000 2302 Surface exploration contracts - - 800 000 800 000 450 000 - - 2 050 000 2399 Total - - 800 000 807 500 457 500 7 500 7 500 2 080 000

- 2999 Component total 12 500 - 970 000 952 500 522 500 22 500 22 500 2 502 500

30 Training component

3200 Group training3201 Regional group trainings - 198 79 802 80 000 80 000 - - 240 000 3299 Total - 198 79 802 80 000 80 000 - - 240 000

3300 Meetings/conferences (Title)3301 Steering commitee meetings 7 111 26 953 10 000 10 000 10 000 10 000 10 000 84 064 3302 IGA & GRC conferences - - - 5 000 5 000 5 000 4 350 19 350 3303 ARGeo conference (biennial) - - 35 000 - 35 000 - 35 000 105 000 3399 Total 7 111 26 953 45 000 15 000 50 000 15 000 49 350 208 414

3999 Component Total 7 111 27 151 124 802 95 000 130 000 15 000 49 350 448 414

Expenditures

Institutional Capacities Framework Assistance

Preparation of agreementsTechnical support to countries

Review of existing projects and PPPWebdesign consultantCountry proposal development

Implementation readiness buildingTechnical Advisory Body

Travel Project Manager

Page 99: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

63

40 Equipment and premises component

4100 Expendable equipment (items under USD1,500 each)4101 Office supplies - - 600 600 600 600 600 3 000 4199 Total - - 600 600 600 600 600 3 000

4200 Non-expendable equipment4201 Computer and dedicate softwares - - 19 390 - - - - 19 390 4299 Total - - 19 390 - - - - 19 390

4300 Premises (rent)4301 Office rental - - - - - - - - 4302 Maintenance of premises - - - - - - - - 4399 Total - - - - - - - -

4999 Component Total - - 19 990 600 600 600 600 22 390

50 Miscellaneous component

5100 Operation and maintenanace of equipment5104 Rental and maintenance of the office equipment - - - - - - - - 5199 Total - - - - - - - -

5200 Reporting cost5201 Printing/publication - - 2 000 2 000 2 000 2 000 2 000 10 000 5299 Total - - 2 000 2 000 2 000 2 000 2 000 10 000

5300 Sundry5301 Communications (telex, telephone, fax) - - 1 000 1 000 1 000 1 000 1 000 5 000 5302 Postage 204 - 200 200 200 200 200 1 204 5303 Local transport - - 100 100 100 100 100 500 5399 Total 204 - 1 300 1 300 1 300 1 300 1 300 6 704

5400 Hospitality5401 Hospitality reception - - 200 200 200 200 246 1 046 5399 Total - - 200 200 200 200 246 1 046

5500 Monitoring and Evaluation *5501 Mid-term evaluation - - - - 20 000 - - 20 000 5502 Final evaluation - - - - - - 40 000 40 000 5599 Total - - - - 20 000 - 40 000 60 000

5999 Component Total 204 - 3 500 3 500 23 500 3 500 43 546 77 750

Direct COST 98 427 162 248 1 486 942 1 380 250 1 005 250 275 250 341 633 4 750 000

Page 100: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

64

App

endi

x 2:

C

o-fin

anci

ng ta

ble

The

follo

win

g ta

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prov

ides

for a

bre

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UN

EP p

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(all

figur

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mill

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$US)

:

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Am

ount

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MF)

65,0

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CO

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AN

CE

74,2

61,6

52

Page 101: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

65

GE

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Page 102: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

66

40E

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52

Page 103: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Annex 1

67

Appendix 3: Incremental cost analysis

All participating countries in ARGeo are experiencing increasing electricity demand growth (either through natural population growth, national grid expansion plans, or rural electrification programs). At the same time, current generation capacities are limited (or are already surpassed) such that supply no longer meets the increasing demand. The viable technological choices to meet this demand include diesel generation, hydropower as well as renewable energies (wind, solar, and geothermal). As shown elsewhere, diesel generation, though practical, is increasingly expensive. Hydropower, both large and mini scale has raised doubts due to recent droughts and silting. Of the remaining technologies, only geothermal offers the promise of a long term, environmentally benign and low cost energy source. GEF financing at this juncture can provide an important stimulus and an operational structure for promoting the needed development of this renewable energy resource.

Two scenarios are identified:

• Baseline scenario: Geothermal exploration and utilization is continued (or not) in the different ARGeo countries depending upon national priorities and policies. The most likely general energy production development in the ARGeo countries would include:

• continued reliance on large scale, installed hydropower and diesel generation for the national network,

• continued reliance on small, diesel power production sets in off-grid areas which despite relatively low capital investment costs, demonstrate high operating costs, especially with imported fuel prices.

• continued “electricity gap” between urban electrified zones and off-grid, rural areas that exacerbates poverty differences and stifles the development of small scale industries;

• continued emission of greenhouse gases;

• the slower adoption and development of these clean and renewable energy technologies in the region.

• Alternative (GEF – scenario): GEF financing for specific activities (UNEP components 1&2) allows for the development of the ARGeo facility, the regional development and utilization of geothermal resources, and the reduction of GHG via the substitution over petroleum-based alternatives. At a minimum, one pilot project (already identified) is developed in each of the 6 participating countries.

The incremental cost of the ARGeo project is the cost of the Alternative (GEF – scenario) minus the costs of already existing programmes and activities supported by regional governments, etc in the Baseline scenario. The proposed GEF financing would serve to cover these incremental costs.

Baseline activities include all planned geothermal investments in Kenya (late) as well as in Aluto Langano (Ethiopia). Geothermal development in the other countries are practically non existent, so baseline will be considered as zero. At the outset, all of the ARGeo geothermal investments are considered to essentially replace any future planned fossil fuel based production and therefore would be incremental to the existing baseline in the ARGeo countries.

Page 104: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

68

Incr

emen

tal c

ost t

able

Proj

ect C

ompo

nent

B

enef

its/C

osts

B

asel

ine

Scen

ario

A

ltern

ativ

e (G

EF

-) sc

enar

ioIn

crem

ent

1.1

Esta

blis

hmen

t of a

Reg

iona

l Net

wor

k

Act

ivity

1.1

Reg

iona

l Mee

tings

of t

he

Wor

king

Gro

ups

Glo

bal E

nviro

nmen

tal

Ben

efits

Phys

ical

, hum

an, p

olic

y an

d da

ta re

sour

ces a

re d

evel

oped

in

depe

nden

tly in

the

diff

eren

t A

fric

an R

ift v

alle

y co

untri

es.

Reg

iona

l mee

tings

allo

w fo

r th

e co

ordi

natio

n of

act

iviti

es

and

the

exch

ange

of

info

rmat

ion

in th

e A

RG

eo

coun

tries

. D

atab

ases

, for

ums,

train

ing

and

eval

uatio

n of

po

licie

s con

cern

ing

geot

herm

al e

nerg

y ar

e co

ordi

nate

d.

Setti

ng u

p in

stitu

tiona

l stru

ctur

e to

pro

mot

e an

d fa

cilit

ate

regi

onal

m

eetin

gs o

f wor

king

gro

ups a

nd

cont

ribut

ing

to p

artic

ipat

ion

cost

s.

Dom

estic

Ben

efits

In

suff

icie

nt re

gion

al

inte

grat

ion

+ kn

owle

dge

base

co

ncer

ning

dev

elop

men

t and

ex

ploi

tatio

n of

geo

ther

mal

en

ergy

reso

urce

s

Loca

l exp

erts

are

abl

e to

ex

chan

ge a

nd le

arn

from

re

gion

al c

ount

erpa

rts.

New

in

form

atio

n, k

now

-how

and

ex

perti

se a

re g

aine

d fr

om

regi

onal

inte

ract

ion.

Hum

an

reso

urce

is sh

ared

.

Dev

elop

men

t of g

eoth

erm

al

reso

urce

s pla

ced

in a

coh

eren

t, re

gion

al c

onte

xt.

Inte

ract

ion

and

exch

ange

s occ

ur w

ith d

ata,

pe

rson

nel,

and

polic

y.

Act

ivity

1.2

Reg

iona

l Inf

orm

atio

n Sy

stem

Glo

bal E

nviro

nmen

tal

Ben

efits

Impo

rtant

dat

a on

geo

ther

mal

re

sour

ces i

n th

e re

gion

exi

st o

n pa

per a

nd in

diff

eren

t lo

catio

ns.

Inve

stm

ent i

n eq

uipm

ent,

data

m

anag

emen

t, in

tern

et a

cces

s an

d or

gani

zatio

n fa

cilit

ate

com

paris

ons a

nd b

ackg

roun

d re

sear

ch to

dev

elop

ge

othe

rmal

reso

urce

s in

the

regi

on.

Key

dat

a fo

r inv

estm

ent,

deve

lopm

ent p

lann

ing

deci

sion

s is

mad

e re

adily

ava

ilabl

e to

st

akeh

olde

rs (r

egio

nal e

xper

ts,

offic

ials

, inv

esto

rs, e

tc).

Page 105: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

69

Proj

ect C

ompo

nent

B

enef

its/C

osts

B

asel

ine

Scen

ario

A

ltern

ativ

e (G

EF

-) sc

enar

ioIn

crem

ent

Dom

estic

Ben

efits

K

ey in

form

atio

n on

dom

estic

w

ells

and

kno

wle

dge

of

regi

onal

tech

niqu

es/k

now

-how

is

dev

elop

ed/s

hare

d am

ong

stak

ehol

der.

Exis

ting

dom

estic

dat

a is

or

gani

zed

and

mad

e ac

cess

ible

. N

atio

nal a

genc

ies

and

stak

ehol

ders

trai

ned

and

know

ledg

e ba

se in

crea

sed.

The

circ

ulat

ion

of k

ey

geot

herm

al d

evel

opm

ent

info

rmat

ion

amon

g A

RG

eo

coun

tries

incr

ease

s. T

his

info

rmat

ion

can

be u

sed

in

regi

onal

com

paris

ons,

natio

nal

plan

s and

pro

ject

pre

para

tion.

Act

ivity

1.3

Reg

iona

l For

ums a

nd

Inte

rnat

iona

l Out

reac

h

Glo

bal E

nviro

nmen

tal

Ben

efits

Cur

rent

ly, o

nly

limite

d re

gion

al o

r int

erna

tiona

l for

a ex

ist t

hat p

rom

ote

mer

its o

f ge

othe

rmal

reso

urce

s.

Parti

cipa

tion

in re

gion

al

conf

eren

ces a

nd o

utre

ach

prog

ram

mes

incr

ease

s. M

ore

stak

ehol

ders

bec

ome

awar

e of

ge

othe

rmal

dev

elop

men

t po

tent

ial.

A se

ries o

f reg

iona

l eve

nts,

conf

eren

ces i

s pla

nned

to ra

ise

cons

ciou

snes

s con

cern

ing

geot

herm

al re

sour

ce

deve

lopm

ent.

Dom

estic

Ben

efits

In

suff

icie

nt k

now

ledg

e ab

out

geot

herm

al re

sour

ce

deve

lopm

ent p

oten

tial e

xist

s in

the

coun

tries

and

in

tern

atio

nally

.

Inte

ract

ion

and

exch

ange

s w

ith in

tern

atio

nal a

nd re

gion

al

expe

rts.

Exch

ange

of

expe

rtise

.

Exch

ange

s and

link

s are

es

tabl

ishe

d be

twee

n pr

ofes

sion

als

and

othe

r sta

keho

lder

s in

the

regi

on.

Act

ivity

1.4

Reg

iona

l Tra

inin

g an

d C

apac

ity B

uild

ing

Glo

bal E

nviro

nmen

tal

Ben

efits

Geo

ther

mal

reso

urce

s re

pres

ent a

rela

tivel

y la

rge,

yet

un

tapp

ed re

sour

ce in

the

Afr

ican

rift

valle

y. O

ngoi

ng

expe

rienc

e w

ith th

e re

sour

ce

use

curr

ently

exi

sts i

n K

enya

an

d Et

hiop

ia.

Reg

iona

l, an

d in

tern

atio

nal

expe

rtise

and

kno

w-h

ow

conc

erni

ng g

eoth

erm

al e

nerg

y is

shar

ed a

nd tr

ansf

erre

d th

roug

hout

the

regi

on.

Trai

ning

occ

urs i

n th

e re

gion

th

roug

h fo

rmal

cla

ss se

tting

s and

on

-the-

job,

dire

ct tr

aini

ng fo

r ex

istin

g pr

ojec

ts.

The

hum

an

capa

city

for d

evel

opin

g an

d ex

ploi

ting

this

rene

wab

le

reso

urce

incr

ease

s.

Page 106: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

70

Proj

ect C

ompo

nent

B

enef

its/C

osts

B

asel

ine

Scen

ario

A

ltern

ativ

e (G

EF

-) sc

enar

ioIn

crem

ent

Dom

estic

Ben

efits

In

suff

icie

nt k

now

ledg

e of

the

pote

ntia

l for

geo

ther

mal

re

sour

ce e

xplo

itatio

n.

Trai

ning

in g

eoth

erm

al

expl

oita

tion,

regi

onal

kn

owle

dge

base

incr

ease

d

Expe

rts a

nd st

akeh

olde

rs in

all

coun

tries

are

aw

are

of th

e po

tent

ial f

or g

eoth

erm

al

prod

uctio

n.

SUB

TO

TA

L C

OM

PON

EN

T I

50

0,00

0 4,

804,

660

1,00

0,00

0

GEF

: 1,

000,

000

Co

finan

cing

: 3,3

04,6

60

Proj

ect C

ompo

nent

/ A

ctiv

ity

Ben

efits

/ C

osts

B

asel

ine

Scen

ario

A

ltern

ativ

e (G

EF

-) sc

enar

io

Incr

emen

t

2. T

echn

ical

Ass

ista

nce

Act

ivity

2.1

Po

licy

fram

ewor

k an

d tra

nsac

tion

advi

ce

Glo

bal E

nviro

nmen

tal

Ben

efits

Som

e tra

nsac

tion

will

be

lead

by

pro

ject

dev

elop

ers a

nd

coun

tries

will

look

into

the

pote

ntia

l. Pr

ogre

ss w

ill b

e sl

ow.

Gov

ernm

ents

will

be

info

rmed

an

d a

cond

uciv

e po

licy

envi

ronm

ent f

or g

eoth

erm

al

deve

lopm

ent w

ill a

ppea

r.

Con

ditio

ns fo

r geo

ther

mal

de

velo

pmen

t are

in p

lace

.

Dom

estic

Ben

efits

Tr

ansa

ctio

ns w

ill n

ot le

ad to

su

cces

s; la

ck o

f fin

anci

ally

so

und

prop

osal

.

Neg

otia

tions

will

take

into

ac

coun

t nat

iona

l int

eres

ts a

nd

prio

ritie

s whi

le re

achi

ng

agre

emen

t.

Cle

ar ru

les f

or p

rivat

e se

ctor

en

gage

men

t and

dea

l clo

sure

for

geot

herm

al p

roje

cts..

Act

ivity

2.2

R

esou

rce

Expl

orat

ion

Glo

bal E

nviro

nmen

tal

Ben

efits

App

roxi

mat

ely

2.5

to 1

5 G

W

of g

eoth

erm

al e

nerg

y re

sour

ce

pote

ntia

l exi

sts i

n th

e A

fric

an

Rift

val

ley

regi

on.

So fa

r, on

ly

220

MW

of t

his p

oten

tial h

as

been

tapp

ed (

Ken

ya &

Et

hiop

ia)

Up-

stre

am e

xplo

rato

ry st

udie

s of

ficia

lly c

onfir

m th

e re

sour

ces o

f sel

ecte

d,

iden

tifie

d w

ells

in A

RG

eo

coun

tries

.

Supp

ortin

g ex

plor

atio

n an

d co

nfirm

atio

n fe

asib

ility

stud

ies

valid

ate

geot

herm

al p

oten

tial i

n se

lect

ed si

tes.

A to

tal o

f 500

MW

of

reso

urce

s con

firm

ed.

Page 107: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

71

Proj

ect C

ompo

nent

/ A

ctiv

ity

Ben

efits

/ C

osts

B

asel

ine

Scen

ario

A

ltern

ativ

e (G

EF

-) sc

enar

io

Incr

emen

t

Dom

estic

Ben

efits

Pr

e-in

vest

men

t and

feas

ibili

ty

stud

ies a

re a

t var

ious

leve

ls o

f ad

vanc

emen

t in

the

diff

eren

t co

untri

es.

Iden

tifie

d an

d su

itabl

e pr

ojec

ts

are

deve

lope

d to

a w

orka

ble,

pr

e-fe

asib

ility

stag

e.

Rea

listic

pot

entia

l for

geo

ther

mal

re

sour

ce e

xplo

itatio

n id

entif

ied.

Act

ivity

2.3

Sup

port

fo

r ela

bora

tion

of

bank

able

pro

posa

ls

Glo

bal E

nviro

nmen

tal

Ben

efits

Not

onl

y ba

sic

data

is n

ot

avai

labl

e fo

r the

ela

bora

tion

of

bank

able

pro

ject

s but

the

num

ber o

f pro

ject

s is r

educ

ed

due

to p

erce

ived

hig

h ris

ks b

y in

vest

ors/

pote

ntia

l fun

ders

.

Stud

ies a

re c

arrie

d ou

t in

a co

here

nt, m

anne

r with

the

supp

ort o

f a re

gion

al st

ruct

ure.

.

Ban

kabl

e pr

opos

als s

erve

as a

ba

sis f

or n

egot

iatio

n of

fina

ncia

l pa

ckag

es.

Dom

estic

Ben

efits

Pr

iorit

y pr

ojec

ts a

re a

t di

ffer

ent l

evel

s of

deve

lopm

ent.

Prio

rity

proj

ects

are

dev

elop

ed

for s

ubm

issi

on to

AR

Geo

fin

anci

ng m

echa

nism

and

to

the

bank

ing

sect

or th

erea

fter.

Parti

cipa

ting

coun

tries

gai

n ac

cess

to A

RG

eo su

ppor

t m

echa

nism

s.

Act

ivity

2.5

A

RG

eo T

echn

ical

A

dvis

ory

Team

Glo

bal E

nviro

nmen

tal

Ben

efits

Des

pite

exi

sten

ce o

f ge

othe

rmal

reso

urce

s in

the

regi

on, k

now

ledg

e co

ncer

ning

ex

ploi

tatio

n of

the

reso

urce

s is

limite

d an

d no

t eve

nly

dist

ribut

ed. L

imite

d ac

cess

to

expe

rtise

at i

nter

natio

nal l

evel

Inst

itutio

nal s

truct

ure

in w

hich

in

tern

atio

nal a

nd re

gion

al

expe

rts e

xcha

nge

info

rmat

ion

eval

uate

pro

ject

s and

pro

mot

e ge

othe

rmal

exp

loita

tion

in

AR

Geo

regi

on.

Inst

itutio

nal s

truct

ure

crea

ted

whi

ch fa

cilit

ates

the

exch

ange

of

info

rmat

ion

and

the

prom

otio

n of

ge

othe

rmal

ene

rgy.

Fac

ilita

tion

of A

RG

eo fi

nanc

ing

mec

hani

sm.

Ris

k re

duct

ion

mec

hani

sm a

s sa

fegu

ard

to th

e us

e of

RM

F re

sour

ces.

Dom

estic

Ben

efits

N

o pa

nel e

xist

s to

eval

uate

ge

othe

rmal

ele

ctric

ity

prod

uctio

n pr

ojec

ts.

Pane

l exi

sts f

or n

atio

nal

expe

rts to

exc

hang

e in

form

atio

n an

d pr

omot

e ge

othe

rmal

inst

alla

tions

.

Nat

iona

l exp

erts

obt

ain

stru

ctur

e to

pro

mot

e ge

othe

rmal

in

stal

latio

ns.

SUB

TO

TA

L S

UB

CO

MPO

NE

NT

2

2,80

0,00

0 12

,606

,991

3,

350,

000

Co

finan

cing

6,4

56,9

91T

otal

: 9,8

06,9

91

Page 108: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

72

Proj

ect C

ompo

nent

/ A

ctiv

ityB

enef

its/

Cos

ts

Bas

elin

e Sc

enar

io

Alte

rnat

ive

(GEF

-) sc

enar

io

Incr

emen

t

3. G

eoth

erm

al R

isk

Miti

gatio

n Fa

cilit

y A

ctiv

ity 3

Es

tabl

ishm

ent o

f G

eoth

erm

al R

isk

Miti

gatio

n Fa

cilit

y

Glo

bal E

nviro

nmen

tal

Ben

efits

No

risk

miti

gatio

n Fa

cilit

y ex

ists

for t

he e

xplo

ratio

n of

ge

othe

rmal

site

s. P

rivat

e in

vest

ors r

eluc

tant

to in

vest

up

fron

t sum

s. H

owev

er so

me

dono

rs a

ct b

ilate

rally

in a

n un

coor

dina

ted

man

ner.

Pote

ntia

l inv

esto

rs fo

r res

ourc

e co

nfirm

atio

n al

so li

mit

thei

r co

ntrib

utio

n.

Iden

tifie

d ge

othe

rmal

pro

ject

s ar

e ev

alua

ted

and

stru

ctur

ed to

sh

are

risks

bet

wee

n pu

blic

and

pr

ivat

e pa

rtici

pant

s.

Geo

ther

mal

Ris

k M

itiga

tion

Faci

lity

esta

blis

hed,

priv

ate

inve

stor

s fee

l mor

e co

nfid

ent i

n sh

arin

g ris

ks o

f ge

othe

rmal

exp

lora

tory

wor

k.

Dom

estic

Ben

efits

G

eoth

erm

al re

sour

ces r

emai

n la

rgel

y un

tapp

ed. P

oten

tial

proj

ects

are

unp

repa

red.

A

s a re

sult,

cou

ntrie

s hav

e to

in

vest

472

MW

in G

eoth

erm

al

at U

SD 3

000

per K

W. T

his

resu

lts in

cap

ital c

osts

of $

1.5

billi

on

Spec

ific,

geo

ther

mal

, re

new

able

ene

rgy

reso

urce

s ar

e ev

alua

ted

and

prep

ared

to

be e

xplo

ited.

GEF

fund

ing

and

KfW

- GR

MF

will

leve

rage

ad

ditio

nal i

nves

tmen

t to

deve

lop

972

MW

of

geot

herm

al u

nder

the

alte

rnat

ive.

Giv

en su

cces

sful

exp

lora

tion

resu

lts,

geot

herm

al re

sour

ces o

f 500

MW

are

ex

ploi

ted,

gen

erat

ing

less

CO

2th

anfo

ssil

fuel

sour

ces.

SU

BT

OT

AL

SU

BC

OM

PON

EN

T 3

1,

500,

000,

000

1,56

3,50

0,00

0 63

,000

,000

GE

F 0

Co

finan

cing

63,

000,

000

Page 109: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Annex 1

73

Incremental Cost Analysis:

The principle of an Incremental Cost Analysis is important to the justification of GEF funded projects. Get’s mandate is to provide “new additional grant and concessional funding to meet the agreed incremental cost of measures to achieve agreed global environmental benefits in the GEF focal areas.” This annex provides the details of the ARGeo Program.

The Business as Usual Scenario

The UNEP ARGeo Project focusses on removing barriers, establish the necessary legal, institutional and regulatory framework necessary to attract international investment and development and help in capacity building in collaboration with the AUC Regional Programme and AUC-KfW GRMF . The GRMF will provide much needed reduction in the upfront risk of reservoir confirmation drilling.

The six East African Rift Zone countries that make up the core ARGeo Program (Eritrea, Ethiopia, Djibouti, Kenya, Tanzania and Uganda) all have significant potential for, but for the most part undeveloped, high enthalpy geothermal resources capable of providing upwards of several thousand MW (> 15,000 MW of electrical power). However, without significant investment in capacity building and exploration and reservoir confirmation, the region will, in all likelihood, continue to be dependent upon increasing use of fossil fuels in light of increasing demand for electricity-estimated to be upwards of 10% per year throughout the region and a reduction in hydro power capacity due to extended drought in several of the countries. In many areas served by mini grids supplied by diesel generators, electricity is available only a limited number of hours per day. Such lack of electricity is a major reason for the extensive and increasing poverty in the region and depletion of the regions forest resources. A country such as Eritrea is 100% dependent upon fossil fuels for electricity production causing a major drain on foreign exchange. In Eritrea, cost are somewhat lower $0.10 to $0.15 per kWh, but with increasing demand for petroleum based fossil fuels prices will necessarily increase dramatically. In Ethiopia, Tanzania and Uganda, hydro power projects are under construction or are being considered and will continue to supply increasing amounts of electricity in these countries although dependence upon increasing amounts of hydro power also presents a potential long term problem should the region continue to experience extended periods of draught requiring serious cut backs in hydro power production. For example, Tanzania is already facing power shortages due to draught and is turning to greater and greater dependence upon fossil fuelled generation to make up the deficit. In Rwanda, there is lack of generation capacity by falling hydro production due to low lake levels and rapidly growing electricity demand, with demand growth in 2007 of 25%. Despite severe load shedding, given that lake levels have fallen to a minimum since January 2004, 40% of Rwanda‘s electricity demand cannot be served. Geothermal and methane has been highlighted as potential capacity contributors in the future.

Kenya has the only significant development of geothermal energy and the approximately 212 MW represents only approximately 14% of the national capacity. Kenya remains extremely dependent upon fossil fuel and hydro based electricity generation. In the baseline scenario the region will continue to be dependent upon increased use of fossil fuel, have increased dependence upon draught prone hydro power projects and continue depletion of forest resources. Geothermal will continue to be of increasing interest throughout the region because of its high capacity and availability factors, indigenous nature (the only indigenous resources available in Eritrea and Djibouti) and positive impact upon the balance of trade, cost competitiveness and environmental benefits (reduced CO2 and other criteria air pollutants). Kenya will most certainly continue to develop its geothermal potential in those areas where resource confirmation has already taken place. Other countries of the region will continue to make progress in identifying promising geothermal prospects with assistance from such donor organizations as ICEIDA, USAID, SIDA, BGR etc. Such efforts will most likely be restricted to geochemical and geophysical prospecting, geologic mapping and possibly the drilling of shallow wells for temperature gradient measurements and heat flow calculations. Although all are extremely important steps that will eventually lead to reservoir confirmation and power production, little real progress toward substantial development of the regions extensive geothermal potential could be expected to take place without the initiation of a substantial program directed at facilitation of reservoir confirmation drilling and the development of an investment climate attractive to international investors and developers.

Page 110: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Annex 1

74

Global Environmental Benefits and Strategic Fit

The overall objective is to remove the barriers to renewable energy technologies in order to contribute to the mitigation of green house gas emissions. However, the Global Environmental Benefits (GEB’s) comprise a number of dimensions beyond GHG emissions such as conservation of biodiversity, mitigation of deforestation, avoidance of expanded land degradation and other climate change mitigating factors.

The main objective of the ARGeo Program is to contribute to CO2-emission reduction by increased and accelerated development of geothermal resources for power production, industrial process and other thermal applications. However, accompanying benefits related to reduction in deforestation, reduction in criteria air pollution, increases in industrial output and associated decreases in poverty levels must all be seen as positive impacts of developing the regions geothermal potential.

Incremental Reasoning the Role of GEF

The exploration for and development of geothermal resources for power generation or direct use purposes is a multi year process involving multiple disciplines requiring extensive expertise and experience and with rapidly increasing cost and risk in order to confirm and then develop an economically utilizable resource. Because of this, there is a real need to not only establish a legal, institutional and regulatory framework that encourages taking those risk and investing what will eventually be millions if not tens of millions of dollars that is required to confirm and develop the reservoir and ultimately the energy conversion facilities, but to also mitigate a portion of the upfront risk of the most costly and high risk phase of the reservoir confirmation process. To accomplish these two objectives, it is critical that programs be instituted that address the requirements of foreign investment and development, focus upon the establishment of in-region expertise and experience and provides risk mitigation for a significant percentage of the cost associated with reservoir confirmation. The Get’s role is crucial to initiate activities that will help to make easier and to speed up the development of geothermal energy in the countries participating in ARGeo’s project.

Results Framework

The results will be quantifiable based upon the level of increased domestic and foreign investment in the region, number of projects that move forward to reservoir confirmation and ultimately to the number of new sites that are confirmed and the amount of electrical power or thermal energy that is produced.

The Role of Co-financing

Co-financing is a critical and fundamental element of the ARGeo Program. The average cost of a 500 MW Gap will be in excess of 750 million dollars, an order of magnitude greater than the GEF funding available. However, the GEF funding, together with assistance from donor organizations such as ICEIDA, USAID, SIDA and BGR, will serve as a catalyst by providing coverage for the capital intensive upfront high risk reservoir confirmation drilling and by helping to establish in-region expertise and the regional legal, institutional and regulatory infrastructure that is necessary to attract foreign investment and development. Once a viable reservoir is confirmed, conventional financing will be much easier to obtain as the other critical element of a successful geothermal project, the power purchase agreement will almost assuredly be available given the positive attributes of geothermal power-high capacity and availability, competitive pricing and significant environmental benefits. In addition, geothermal provides a needed diversification of power supply while at the same time avoiding the export of needed foreign exchange for the purchase of costly fossil fuels.

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Ann

ex 1

75

Arr

ange

men

ts fo

r re

sults

mon

itori

ng

Tar

get V

alue

s D

ata

Col

lect

ion

and

Rep

ortin

g A

RG

eo P

rogr

am O

utco

me

Indi

cato

rs

Bas

elin

e Y

R1

YR

2 Y

R3

YR

4 Y

R5

Freq

uenc

y an

d R

epor

ts

Dat

a C

olle

ctio

n In

stru

men

ts

Res

pons

ibili

ty fo

r D

ata

Col

lect

ion

Act

ors w

ith c

onfir

med

in

vest

men

ts (V

alue

of

inve

stm

ents

, or P

roje

cts i

nves

ted,

or

Pot

entia

l exp

lore

d)

220

MW

Ann

ually

U

tility

and

gov

ernm

ent

stat

istic

s Ta

sk T

eam

Am

ount

of C

O2 e

mis

sion

s tha

t w

ill b

e po

tent

ially

miti

gate

d

A

nnua

lly

Surv

eys a

nd g

over

nmen

t st

atis

tics

Task

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m

Inte

rmed

iate

Out

com

e In

dica

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N

umbe

r of g

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erm

al re

sour

ce

site

s with

con

firm

ed e

nerg

y po

tent

ial t

hrou

gh R

CD

0 1

2

3 4

Ann

ually

Pr

ojec

t por

tfolio

dat

a Ta

sk T

eam

Impr

oved

tech

nica

l, fin

anci

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nd

com

mer

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pla

nnin

g

0

1 2

3

Ann

ually

A

nnua

l rep

orts

PM

U

Num

ber o

f per

sonn

el su

ppor

ted

by

on th

e jo

b tra

inin

g 0

2 8

13

18

24

Ann

ually

A

nnua

l rep

orts

IG

A

Esta

blis

hmen

t of r

egio

nal c

hapt

er

of th

e IG

A

0

Reg

iona

l ch

apte

r es

tabl

ishe

d

A

nnua

lly

Ann

ual r

epor

ts

IGA

Proj

ect (

Phas

e 1

of A

PL) O

utco

me

Indi

cato

rs

Bas

elin

e Y

R1

YR

2 Y

R3

YR

4 Y

R5

Freq

uenc

y an

d R

epor

ts

Dat

a C

olle

ctio

n In

stru

men

ts

Res

pons

ibili

ty fo

r Dat

a C

olle

ctio

n

Pote

ntia

l of T

enda

ho g

eoth

erm

al

field

con

firm

ed

Pote

ntia

l of

Tend

aho

geot

herm

al

field

un

know

n

Surf

ace

expl

orat

ion

stud

ies

NA

N

A

NA

N

A

On

a pe

riodi

c ba

sis (

or re

al-

time

basi

s as n

eede

d) a

nd in

th

e fo

rm a

gree

d fo

r the

pro

ject

[f

orm

and

tim

ing

to b

e in

clud

ed in

the

Gra

nt

Agr

eem

ent].

Vra

ious

geo

scie

ntifi

c in

vest

igat

ion

inst

rum

ent

(Rem

ote

sens

ing,

Gas

and

flu

d ge

oche

mis

try,

Geo

phys

ice

(MT,

TEM

, G

ravi

ty

Rec

ipie

nt

Pote

ntia

l of K

ibiro

geo

ther

mal

C

onfir

med

Po

tent

ial o

f K

ibiro

ge

othe

rmal

fie

ld

unkn

own

Surf

ace

expl

orat

ion

stud

ies

Pote

ntia

l of

Alid

geo

ther

mal

fiel

d co

nfirm

ed

Pote

ntia

l of

Alid

ge

othe

rmal

fie

ld

unkn

own

Su

rfac

e ex

plor

atio

n st

udie

s

Pote

ntia

l of S

ilali

geot

herm

al fi

eld

Pote

ntia

l of

Sila

li ge

othe

rmal

fie

ld

unkn

own

Su

rfac

e ex

plor

atio

n st

udie

s

Am

ount

of C

O2 e

mis

sion

s tha

t w

ill b

e po

tent

ially

miti

gate

d

A

nnua

lly

Cal

cula

tions

Ta

sk T

eam

Page 112: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Annex 1

76

Appendix 4: Results Framework

Results Framework

ARGeo Program DO Program Outcome Indicators Use of Project Outcome Information

Increased investments in geothermal development in the Rift Valley - Number of actors with

confirmed investments. Value of investments, private investment in geothermal development in ARGeo countries and more than $USD 750 million by project end. An increased percentage of the funding is leveraged from regional and intercontinental institutions.

Assess the quality and suitability of the geothermal resources for geothermal power production.

Global Environmental Objective: Potential for greenhouse gas

emissions reduction

Avoided GHG emissions of 2.3 millions tons per annum.

Contribution into Operational Program # 6: Promoting the Adoption of Renewable Energy

Intermediate Program Outcomes

Intermediate Outcome Indicators

Use of Intermediate Outcome Monitoring

Increase the amount of confirmed geothermal resource available in the African Rift Valley region

Number of geothermal resource sites with confirmed energy potential through Resource Confirmation Drilling

Assess the functioning of the RMF and make any needed changes

Access to commercial financing increased

Number of bankable drilling operations target

Present positive drillings for commercial financing of GtPP

Improved technical, financial and commercial planning

- Number of feasibility studies - Number of project

implementation and business planning,

- Number of financial analysis, - Number of TA for bidding and

contract preparation

Assess the need for post-drilling technical assistance and make any needed adjustments to the ARGeo Program

Capacity building in GtE generation technologies

Number of personnel supported by on the job training

Access the capacity needs for GtPP construction, commissioning, management, operation and maintenance as well as well field management and operation.

Regional and International GtE technical cooperation improved.

Establishment of regional chapter of the IGA

Integrate international know how on geothermal knowledge into the region and develop means for information exchange and joint efforts to attract investors.

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Ann

ex 1

77

App

endi

x 5:

W

ork

Plan

and

Tim

etab

le

Ye

ar

Mo

nth

JJ

AS

ON

DJ

FM

AM

JJ

AS

ON

DJ

FM

AM

JJ

AS

ON

DJ

FM

AM

JJ

AS

ON

DJ

FM

AM

JM

on

th

No

.P

roje

ct

Ma

na

ge

me

nt

&

Co

ord

ina

tio

nIn

cep

tion m

eetin

g a

nd

repor

tS

teerin

g C

om

mitt

ee m

eetin

gs

Prog

ress

repo

rts-M

arc

h 31

and

Dec

31 +

30d

a ys

Annu

al A

udit

Repo

rt-D

ec

31+1

80 d

ays

Annu

al c

o-fina

nci

ng

Repo

rt-

Dec

31+

30da

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tabl

ish M

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yst

emEx

pend

iture

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ort-

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h,Ju

ne,S

ep a

nd

Dec

31+

30da

ysEv

alua

tion:

Mid

-ter

m a

nd

Fin

al

Prog

ress

Rep

orts

to

Co-

finan

cier

sPr

oject

Impl

emen

tatio

n R

evi

ew

UN

EP tea

m m

eet

ings

+ m

inute

s of

meet

ings

GEFS

EC

Com

muni

cat

ions

(Ince

ptio

n, M

idte

rm a

nd

Com

pletio

n)

1 R

eg

ion

al

Ne

two

rk1-

1 C

reat

ion o

f a R

egio

nal

Netw

ork

of

Geo

therm

al

Agen

cie

s1-

2 C

reat

ion o

f th

e R

egio

nal

In

form

atio

n S

yst

em1-

3 R

egi

ona

l For

um f

or th

e Ex

chan

ge o

f In

form

atio

n1-

4 R

egi

ona

l Tra

inin

g a

nd

Capa

city

Build

ing

AR

Ge

o P

roje

ct: a

ctiv

ity, t

as

k, o

utp

ut

20

13

20

14

20

15

Pro

jec

t o

utp

uts

20

16

Page 114: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

78

1-5

Reg

iona

l Pro

gram

for

Prom

otio

n of

Pol

icie

s an

d R

egul

ator

2 Te

chni

cal A

ssis

tanc

e

2-1

Tech

nica

l ass

ista

nce

inst

itutio

nal s

etup

and

te

chni

cal c

apac

ity

2-2

Supp

ort i

n th

e ex

ecut

ion

of s

urfa

ce e

xplo

ratio

n ac

tiviti

es

2-3

Acce

ss to

regi

onal

or

inte

rnat

iona

l sup

port

serv

ices

2-

4 E

valu

atio

n of

in

stitu

tiona

l cap

aciti

es fo

r th

e re

gula

tion

2-5

Rev

iew

exi

stin

g pr

ojec

t &

PP

P

3 Pi

lot s

ites

deve

lopm

ent

Eritr

ea -

Alid

Et

hiop

ia -

Tend

aho

Keny

a - S

ilali

Rw

anda

- Bug

aram

a

Ta

nzan

ia -

Mbe

ya

Uga

nda

- Kib

iro

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Ann

ex 1

79

App

endi

x 6:

K

ey d

eliv

erab

les a

nd b

ench

mar

ks

Obj

ectiv

es a

nd O

utco

mes

O

bjec

tivel

y V

erifi

able

Indi

cato

rs

Mea

ns o

f Ver

ifica

tion

Impo

rtan

t ass

umpt

ions

Glo

bal O

bjec

tive:

R

educ

tion

of th

e gr

owth

rate

of

GH

G e

mis

sion

s fro

m fo

ssil

fuel

use

in

the

Afr

ican

Rift

Val

ley

coun

tries

th

roug

h ge

othe

rmal

ene

rgy

expl

oita

tion

The

tech

nica

l, ec

onom

ic fi

nanc

ial,

envi

ronm

enta

l and

soci

al fe

asib

ility

of

geot

herm

al e

nerg

y is

con

firm

ed.

Geo

ther

mal

ene

rgy

is c

onsi

dere

d a

viab

le

elec

trici

ty g

ener

atio

n op

tion

thro

ugho

ut th

e re

gion

. A

void

ed G

HG

em

issi

ons o

f 0.9

mill

ion

met

ric to

n pe

r yea

r.

Mon

itorin

g an

d ev

alua

tion

repo

rts o

n av

oide

d G

HG

em

issi

ons;

of

ficia

l pub

licat

ions

Geo

ther

mal

ene

rgy

deve

lopm

ent i

s gi

ven

prio

rity

by G

over

nmen

ts o

ver

ther

mal

pow

er p

lant

s ove

r the

nex

t 10

-20

year

s, an

d G

over

nmen

ts w

ill

focu

s on

the

long

-term

solu

tion

of

geot

herm

al d

evel

opm

ent a

s a b

ase

load

gen

erat

ion

mix

.

Proj

ect O

bjec

tive:

To

faci

litat

e in

vest

men

ts in

ge

othe

rmal

pow

er p

rodu

ctio

n in

the

Rift

Val

ley

by a

ddre

ssin

g fin

anci

al,

inst

itutio

nal,

info

rmat

ion,

and

re

sour

ce c

onfir

mat

ion-

rela

ted

barr

iers

cur

rent

ly fa

cing

geo

ther

mal

re

sour

ce d

evel

opm

ent i

n th

e re

gion

.

Num

ber o

f geo

ther

mal

ene

rgy

inve

stm

ents

in

the

regi

on b

asel

ine:

472

MW

by

2016

, 1

proj

ect c

omm

issi

oned

by

2014

with

an

othe

r 4 in

pre

para

tion:

Min

imum

of 1

00

MW

inst

alle

d.

5 pr

ojec

ts c

omm

issi

oned

by

2016

(eg

wel

l he

ad u

nits

) with

at l

east

500

MW

inst

alle

d.

Site

vis

its, m

onito

ring

and

eval

uatio

n re

ports

on

geot

herm

al e

nerg

y in

vest

men

ts m

ade;

off

icia

l pu

blic

atio

ns

Polit

ical

stab

ility

in th

e re

gion

. Pr

ivat

e se

ctor

nee

ds fo

r inv

estm

ent

secu

rity

are

met

by

Gov

ernm

ents

. G

over

nmen

ts a

re w

illin

g to

im

plem

ent p

olic

ies a

nd m

easu

res

need

ed fo

r geo

ther

mal

dev

elop

men

t.

Imm

edia

te o

bjec

tives

/out

com

es

1. E

nhan

ced

inst

itutio

nal c

apac

ity,

enha

nced

kno

wle

dge

and

awar

enes

s of

the

pote

ntia

l and

requ

irem

ents

for

geot

herm

al d

evel

opm

ent i

n th

e R

ift

Val

ley

at th

e re

gion

al a

nd n

atio

nal

leve

ls, o

ptim

al u

se o

f res

ourc

es in

th

e re

gion

(hu

man

, ins

titut

iona

l, eq

uipm

ent)

Reg

iona

l exp

ertis

e us

ed in

inte

grat

ed

geot

herm

al d

evel

opm

ent (

surf

ace

expl

orat

ion

stud

ies,

expl

orat

ion,

geo

ther

mal

fie

ld o

pera

tion)

By

the

end

of th

e pr

ojec

t 30

regi

onal

exp

erts

w

ill b

e w

orki

ng in

the

prep

arat

ion

of p

re-

feas

ibili

ty st

udie

s;

By p

roje

ct e

nd a

noth

er 2

0 ex

perts

will

be

spec

ializ

ed in

pre

parin

g pr

e-fe

asib

ility

st

udie

s. Li

ttle

inte

rnat

iona

l sup

port

will

be

need

ed.

Rep

orts

and

dat

a co

mpi

led

by th

e na

tiona

l an

d re

gion

al w

orki

ng

grou

ps a

nd th

e PM

U a

s pa

rt of

the

mon

itorin

g of

pr

ojec

t im

pact

s; te

chni

cal

pape

rs b

y ex

perts

in th

e re

gion

; M&

E re

ports

.

Nat

iona

l ins

titut

ions

are

abl

e to

reta

in

train

ed st

aff;

inst

itutio

ns ta

ke

resp

onsi

bilit

y fo

r sha

red

equi

pmen

t; in

stitu

tions

rem

ain

mot

ivat

ed to

shar

e in

form

atio

n, k

now

ledg

e an

d da

ta

with

the

regi

on a

nd tr

ust t

he

capa

bilit

y of

regi

onal

exp

erts

.

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Ann

ex 1

80

The

abov

e is

ach

ieve

d th

roug

h tra

inin

g pr

ogra

mm

e (o

n th

e jo

b, ta

ilor m

ade

and

form

al a

t lea

st o

nce

per y

ear a

s wel

l as

exch

ange

pro

gram

mes

) and

aw

aren

ess

focu

ssed

mee

tings

at l

east

1 p

er y

ear a

t m

inim

a.

Inpu

ts fo

r fea

sibi

lity

wor

k fr

om re

gion

al

expe

rt an

d ag

enci

es w

ill g

o fr

om n

il as

ba

selin

e to

16%

at p

roje

ct e

nd.

The

geot

herm

al p

oten

tial r

ecei

ves i

ncre

ased

at

tent

ion

from

bila

tera

l and

mul

tilat

eral

de

velo

pmen

t age

ncie

s, an

d ge

othe

rmal

ag

enci

es o

utsi

de th

e re

gion

as e

xpre

ssed

by

finan

cial

and

in-k

ind

cont

ribut

ions

;

Incr

ease

d nu

mbe

r of t

echn

ical

pap

ers f

rom

th

e re

gion

subm

itted

to c

onfe

renc

es a

nd

jour

nals

on

geot

herm

al a

ctiv

ities

in th

e R

ift;

From

1 p

aper

per

yea

r afte

r 2 y

ears

to 2

pa

pers

per

yea

r on

aver

age

for t

he re

mai

ning

of

the

proj

ect.

Prev

ious

ly u

nava

ilabl

e da

ta a

nd in

form

atio

n is

mad

e av

aila

ble

and

used

in th

e pr

epar

atio

n of

pre

-fea

sibi

lity

stud

ies;

All

data

is

avai

labl

e on

the

proj

ect w

ebsi

te se

t up

with

in th

e U

NEP

net

. B

est e

quip

men

t is s

hare

d in

the

regi

on:

Seis

mog

raph

s, G

ravi

ty m

eter

s, M

agne

to

met

ers,

Mag

neto

tellu

ric E

quip

men

t, TE

M,

Mas

s spe

ctro

met

er, I

CP-

EMS,

Ato

mic

A

bsor

ptio

n et

c.

PMU

repo

rts a

nd

eval

uatio

n fo

rms f

rom

pa

rtici

pant

s.

Partn

ersh

ips b

etw

een

inte

rnat

iona

l and

nat

iona

l fir

ms.

Mem

oran

dum

of

unde

rsta

ndin

g be

twee

n U

NEP

and

the

dono

rs

Publ

icat

ions

UN

EP n

et a

nd d

irect

ory

and

reco

rd o

f vis

its.

Ref

eren

ce to

equ

ipm

ent i

n pr

e-fe

asib

ility

stud

ies a

nd

Page 117: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

81

impo

rt/ex

port

docu

men

ts.

2. P

riorit

y pr

ospe

cts a

re c

onfir

med

th

roug

h su

rfac

e ex

plor

atio

n to

a

stag

e th

at e

xplo

ratio

n dr

illin

g ca

n co

mm

ence

and

goo

d qu

ality

ap

plic

atio

ns b

ased

on

pre-

feas

ibili

ty

stud

ies a

re su

bmitt

ed to

the

GR

MF

Ris

k M

itiga

tion

Fund

.

At l

east

4 o

f pre

-fea

sibi

lity

stud

ies a

nd

appl

icat

ions

revi

ewed

by

the

ATA

T by

yea

r 1

and

out o

f the

se a

t lea

st 3

are

of s

uffic

ient

go

od q

ualit

y to

be

subm

itted

to th

e G

RM

F w

ith a

pos

itive

revi

ew fr

om th

e A

TAT.

A

t lea

st 6

pre

-fea

sibi

lity

stud

ies t

o th

e A

TAT

out o

f whi

ch 4

are

forw

arde

d to

the

G

RM

F.

Rep

orts

by

PMU

repo

rts

and

offic

ial r

ecor

ds o

f de

cisi

ons m

ade

by th

e A

TAT

and;

M&

E re

ports

.

The

resu

lts o

f the

surf

ace

expl

orat

ion

reco

mm

end

drill

ing;

the

publ

ic a

nd

priv

ate

sect

or is

abl

e to

acc

ess t

he

AU

C-K

fW G

RM

F.

3 Le

gal a

nd re

gula

tory

fram

ewor

k ar

e co

nduc

ive

of g

eoth

erm

al

deve

lopm

ent a

nd g

over

nmen

ts h

ave

the

capa

city

to e

ffic

ient

ly n

egot

iate

w

ith th

e pr

ivat

e se

ctor

Cle

ar ru

les o

n lic

ensi

ng, c

once

ssio

ns, P

PAs

and

envi

ronm

enta

l and

soci

al im

pact

as

sess

men

ts in

pla

ce in

1 c

ount

ry b

y m

id

proj

ect a

nd in

3 c

ount

ries a

t pro

ject

end

.

Info

rmed

dec

isio

ns m

ade

by g

eoth

erm

al

deve

lopm

ent a

genc

ies a

nd m

inis

tries

. N

egot

iatio

ns b

etw

een

gove

rnm

ents

and

pr

ivat

e se

ctor

resu

lt in

dea

l clo

sure

and

the

trans

actio

n co

st is

redu

ced

by 2

5% o

ver t

he

lifet

ime

of th

e pr

ojec

t.

Expe

rienc

es d

ocum

ente

d an

d sh

ared

dur

ing

regi

onal

mee

tings

onc

e a

year

. The

w

orks

hop

wou

ld in

volv

e m

inis

try d

irect

ors,

min

iste

rs a

nd re

gula

tory

age

ncie

s hea

ds a

s w

ell a

s util

ities

rele

vant

repr

esen

tativ

es.

Lega

l and

regu

lato

ry te

xts

adop

ted

and

offic

ially

pu

blis

hed.

Rec

ords

from

G

over

nmen

t off

icia

ls a

nd

the

priv

ate

sect

or.

4.Pr

ivat

e se

ctor

inve

stm

ents

are

ca

taly

zed

thro

ugh

the

build

ing

of

relia

ble,

robu

st a

nd su

stai

nabl

e pu

blic

-priv

ate

sect

or re

latio

nshi

ps

Feas

ibili

ty st

udie

s are

of s

atis

fact

ory

qual

ity

to th

e pr

ivat

e se

ctor

/inve

stor

and

to fi

nanc

ial

inst

itutio

ns. T

his r

esul

ts in

fina

ncia

l clo

sure

fo

r 3 p

roje

cts b

y pr

ojec

t end

.

Priv

ate

inve

stm

ents

in g

eoth

erm

al

deve

lopm

ent i

n A

RG

eo p

artn

er c

ount

ries

US$

60

mill

ion

are

com

mitt

ed b

y th

e pr

ivat

e se

ctor

at m

id p

roje

ct.

US$

750

mill

ion

by p

roje

ct e

nd.

M&

E re

ports

R

epor

ts b

y PM

U

Par

tner

gov

ernm

ents

’ con

tinue

d co

mm

itmen

t to

priv

ate

sect

or

parti

cipa

tion

in g

eoth

erm

al

deve

lopm

ent

Fund

ava

ilabi

lity

with

par

tner

go

vern

men

ts fo

r geo

ther

mal

pla

nt-

inve

stm

ents

Suff

icie

nt in

tere

st b

y pr

ivat

e

Page 118: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

82

An

incr

easi

ng p

erce

ntag

e of

the

fund

ing

is

leve

rage

d fr

om n

atio

nal a

nd re

gion

al

finan

cial

inst

itutio

ns.

Targ

et a

t mid

pro

ject

: 10%

Ta

rget

at p

roje

ct e

nd:

20%

inve

stor

s with

app

ropr

iate

tech

nica

l an

d fin

anci

al c

apac

ity

5. P

roje

ct m

anag

emen

t, M

&E,

and

in

form

atio

n di

ssem

inat

ion

M

&E

serv

e as

a b

asis

for a

dapt

ive

man

agem

ent w

ith a

dvic

e fr

om th

e st

eerin

g co

mm

ittee

. Th

e pr

ojec

t is m

entio

ned

in a

t lea

st o

ne

rele

vant

inte

rnat

iona

l pub

licat

ion

such

as t

he

IGA

new

slet

ter a

nd/o

r inv

itatio

n to

In

tern

atio

nal G

eoth

erm

al c

onfe

renc

es.

Add

ition

al c

o-fin

anci

ng a

nd le

vera

ged

finan

cing

. AR

Geo

mod

el is

repl

icat

ed, a

nd

othe

r cou

ntrie

s in

the

Rift

wan

t to

join

.

Dec

isio

ns o

f the

stee

ring

com

mitt

ee.

Lette

rs; e

xpre

ssio

ns o

f in

tere

st.

Out

puts

O

bjec

tivel

y V

erifi

able

Indi

cato

rs

Mea

ns o

f Ver

ifica

tion

Impo

rtant

Ass

umpt

ions

1.

1 R

egio

nal N

etw

ork

of

geot

herm

al a

genc

ies e

stab

lishe

d in

th

e re

gion

in su

ppor

t of t

he p

roje

ct

and

as a

n in

stru

men

t to

prom

ote

the

optim

al u

se o

f res

ourc

es in

the

regi

on

Reg

iona

l act

iviti

es a

re im

plem

ente

d in

a

colla

bora

tive

man

ner,

info

rmat

ion,

and

ex

perti

ses a

re sh

ared

acr

oss t

he re

gion

. N

atio

nal a

ctiv

ities

ben

efit

from

regi

onal

ne

twor

k in

puts

whe

re a

ppro

pria

te.

Rep

orts

and

dat

a co

mpi

led

by n

atio

nal

proj

ect c

oord

inat

ors

show

s evi

denc

e of

re

gion

al c

olla

bora

tion

and

linka

ge; r

epor

ts fr

om

regi

onal

mee

tings

; M&

E re

ports

.

In o

rder

to a

chie

ve o

utpu

t 1.1

N

atio

nal g

eoth

erm

al a

genc

ies a

re

coop

erat

ive

and

are

prep

ared

to sh

are

info

rmat

ion

and

reso

urce

s.

1.2

Reg

iona

l inf

orm

atio

n sy

stem

set

up a

nd st

reng

then

ed n

atio

nal

info

rmat

ion

base

is c

reat

ed a

nd

used

.

Agr

eed

and

impl

emen

ted

data

col

lect

ion

and

man

agem

ent p

lan;

web

site

cre

ated

; sy

nthe

sis o

f all

geot

herm

al re

sear

ch

unde

rtake

n in

the

Rift

Val

ley

prep

ared

and

av

aila

ble

to u

sers

; met

adat

a ba

se a

nd

inve

ntor

ies c

reat

ed a

nd a

cces

sibl

e on

the

web

site

; new

slet

ter p

ublis

hed

bi-a

nnua

lly;

geot

herm

al c

ompe

ndiu

m p

ublis

hed.

M&

E re

ports

; pro

gres

s re

ports

; web

site

; met

a-da

taba

se a

nd in

vent

orie

s;

new

slet

ters

; geo

ther

mal

co

mpe

ndiu

m; p

ublis

hed

pape

rs.

In o

rder

to a

chie

ve o

utpu

t 1.2

In

puts

are

rece

ived

from

all

partn

ers

and

natio

nal g

eoth

erm

al a

genc

ies.

1.3

Reg

iona

l for

ums,

AR

Geo

bi

enni

al c

onfe

renc

es, a

re c

reat

ed fo

r A

t lea

st tw

o w

ell-a

ttend

ed a

nd su

cces

sful

co

nfer

ence

s org

aniz

ed b

y na

tiona

l C

onfe

renc

e pr

ocee

ding

s;

anno

unce

men

ts a

nd

In o

rder

to a

chie

ve o

utpu

t 1.3

G

over

nmen

ts a

nd p

roje

ct p

artn

ers

Page 119: GEF finance geothermal 2012 djibouti remplace by tazania 05 31-2012 id2119 council letter

Ann

ex 1

83

the

exch

ange

and

shar

ing

of

expe

rienc

e, re

sear

ch, a

nd te

chni

cal

adva

nces

, and

out

reac

h to

in

tern

atio

nal a

nd re

gion

al

geot

herm

al e

vent

s is i

ncre

ased

geot

herm

al a

genc

ies t

ake

plac

e in

the

first

fiv

e ye

ars o

f the

pro

ject

; at l

east

2 o

ral a

nd

post

er p

rese

ntat

ions

are

mad

e by

the

coun

tries

oth

er th

an K

enya

at i

nter

natio

nal

and

regi

onal

geo

ther

mal

eve

nts.

artic

les i

n ge

othe

rmal

ne

wsl

ette

rs; t

echn

ical

pa

pers

and

pos

ters

su

bmitt

ed to

inte

rnat

iona

l an

d re

gion

al g

eoth

erm

al

even

ts; p

rogr

ess r

epor

ts;

M&

E re

ports

rem

ain

com

mitt

ed to

the

regi

onal

ap

proa

ch in

itiat

ed a

nd su

ppor

ted

by

Ken

ya.

1.4

Reg

iona

l tra

inin

g an

d te

chni

cal

capa

city

bui

ldin

g pr

ogra

mm

e re

spon

ding

to th

e ne

eds a

nd

expe

ctat

ions

of t

he c

ount

ries,

and

mak

ing

optim

al u

se o

f hum

an

reso

urce

s and

on-

goin

g ex

plor

atio

n ca

mpa

igns

in th

e re

gion

to b

uild

te

chni

cal c

apac

ity.

One

tech

nica

l tra

inin

g co

urse

per

yea

r is

held

, atte

nded

by

geot

herm

al p

rofe

ssio

nals

fr

om a

ll th

e co

untri

es; a

t lea

st tw

o ge

othe

rmal

pro

fess

iona

ls fr

om o

utsi

de th

e co

untry

tak

e pa

rt in

eac

h ex

plor

atio

n

cam

paig

n in

the

regi

on; t

hree

tech

nica

l w

orks

hops

hel

d on

topi

cs se

lect

ed b

y th

e na

tiona

l geo

ther

mal

age

ncie

s.

Trai

ning

cou

rse

and

wor

ksho

p ev

alua

tion

and

repo

rts; r

epor

ts a

nd d

ata

com

pile

d by

pro

ject

staf

f an

d pa

rtner

s; p

rogr

ess

repo

rts; M

&E

repo

rts

In o

rder

to a

chie

ve o

utpu

t 1.4

N

atio

nal g

eoth

erm

al a

genc

ies

com

mun

icat

e th

eir t

rain

ing

need

s;

agen

cies

lead

ing

the

expl

orat

ion

cam

paig

ns a

re c

omm

itted

to tr

aini

ng

geot

herm

al p

rofe

ssio

nal s

taff

from

th

e re

gion

out

side

the

coun

try w

here

th

ey ta

ke p

lace

. 1.

5 R

egio

nal p

rogr

amm

e fo

r aw

aren

ess r

aisi

ng a

nd th

e pr

omot

ion

of p

olic

ies a

nd

regu

lato

ry fr

amew

orks

nee

ded

for

geot

herm

al d

evel

opm

ent a

nd p

rivat

e se

ctor

inve

stm

ent

Ana

lyse

s, br

iefs

and

pol

icy

guid

ance

do

cum

ents

on

polic

ies a

nd re

gula

tory

fr

amew

orks

nee

ded

for g

eoth

erm

al

deve

lopm

ent a

nd p

rivat

e se

ctor

inve

stm

ent

reac

h po

licy

mak

ers;

at l

east

one

regi

onal

m

eetin

g he

ld fo

r pol

icy-

mak

ers,

regu

lato

ry

agen

cies

, util

ities

and

oth

er re

leva

nt

inst

itutio

ns, f

ocus

ing

on p

ublic

-priv

ate

partn

ersh

ips,

finan

cibi

lity,

risk

-sha

ring,

and

po

licie

s and

regu

lato

ry fr

amew

orks

.

Mee

ting

eval

uatio

n an

d re

ports

; pro

gres

s rep

orts

; fe

edba

ck fr

om p

artn

ers,

and

stak

ehol

ders

.

In o

rder

to a

chie

ve o

utpu

t 1.5

Po

licy-

mak

ers a

re re

cept

ive

to th

e ne

ed fo

r sta

ble

polic

ies a

nd

inst

itutio

nal f

ram

ewor

ks a

nd

regu

latio

ns.

2. T

echn

ical

Ass

ista

nce

2.1

Tech

nica

l ass

ista

nce

and

finan

ce

prov

ided

for t

he c

onfir

mat

ion

of

prio

rity

pros

pect

s ide

ntifi

ed in

the

pipe

line,

thro

ugh

surf

ace

expl

orat

ion

Num

ber o

f prio

rity

pros

pect

s ass

esse

d th

roug

h su

rfac

e ex

plor

atio

n.

Tech

nica

l rep

orts

; dat

a re

ports

on

reso

urce

ex

plor

atio

n re

sults

; pr

ogre

ss re

ports

; PSC

re

ports

.

In o

rder

to a

chie

ve o

utpu

t 2.1

G

over

nmen

ts re

mai

n co

mm

itted

to

geot

herm

al e

xplo

ratio

n an

d de

velo

pmen

t and

pro

vide

the

nece

ssar

y su

ppor

t to

expl

orat

ion

cam

paig

ns.

2.2

Join

t Geo

phys

ical

Imag

e (J

GI)

an

d ot

her e

quip

men

t in

the

equi

pmen

t poo

l are

use

d in

ex

plor

atio

n in

the

regi

on.

Join

t Geo

phys

ical

Imag

e (J

GI)

equ

ipm

ent i

s us

ed in

eac

h co

untry

whe

re g

eoph

ysic

s as

sess

men

t is u

nder

take

n O

ther

poo

led

equi

pmen

t is m

ade

avai

labl

e w

hen

requ

ired.

Prog

ress

repo

rts; t

echn

ical

re

ports

on

expl

orat

ion

resu

lts

In o

rder

to a

chie

ve o

utpu

t 2.4

JG

I equ

ipm

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ex 1

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Team

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Appendix 7: M&E plan Work plan and corresponding budget

UNEP M&E plan Work plan and corresponding budget

Type of M&E activity Responsible Parties Budget US$ Time frame

Project management PMU 377,666 Full project duration

Measurement of Means of Verification for Project Progress and Performance

(measured on an annual basis)

Oversight by GEF Technical Advisor and PMU

Measurements Steering Committee

Implementing Agency-UNEP DTIE

To be determined as

part of the Annual Work

Plan's preparation.

Annually

Steering Committee Meetings

PMU 84,064 Annually

Periodic status reports PMU None Half year progress reports and financial expenditures

Technical reports PMU None Half year report

Project Implementation Review (PIR)

DTIE Task Manager with input from ROA Project Manager

Subsumed under PMU

Annually

External Mid term and Terminal Evaluation

Evaluation and Oversight Unit, UNEP

60,000 At the end of project implementation

Technical & Scientific evaluation of project proposals and surface exploration studies

ATAT 105,000 Annually

Final Project Report PMU Subsumed under

PMU

At least one month before the end of the project

TOTAL indicative COST 626,730

Appendix 8: Reporting requirements

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Due date Format Responsibility Inception Report 1 month after project

inception meeting PMU

Expenditure report accompanied by explanatory notes

PMU DTIE Finance

Cash Advance request and details of anticipated disbursements

PMU

Progress report Half-yearly PMU

Audited report for expenditures for year ending 31 December

Yearly on or before 30 June

Executing partner

Inventory of non-expendable equipment

Yearly on or before 31 January

PMU

Co-financing report Yearly on or before 31 July

PMU

Project implementation review (PIR) report

Yearly PMU, DTIE

Minutes of steering committee meetings

Yearly (or as relevant) PMU

Final report 6 months of project completion date

PMU

Final inventory of non-expendable equipment

PMU

Equipment transfer letter PMU

Final expenditure statement

3 months of project completion date

PMU, ROA Finance

Mid-term review or Mid-term evaluation

Midway through project PMU, EOU

Final audited report for expenditures of project

6 months of project completion date

Executing partners

Independent terminal evaluation

report 6 months of project completion date

EOU

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Appendix 9: Decision-making and organizational flowchart

UNEP/DTIE

(Coordination team &Implementing Agent)

ARGeo Technical Advisory Team(ATAT)

Independent and neutral geothermal experts

UNEP/ROA Project Management Unit

(PMU)

Executing agent for Regional Networking &TA

ARGeo Steering Committee Members (SC)

ARGeo Countries, UNEP, AUC-KfW, Donors and Supporters

� Overall guidance to partner institutions and monitoring of progress and performance

� Consider applications for new member countries of ARGeo

� Administrative work � Regional knowledge

sharing � Screens country specific

and regional TA proposals � Management of ATAT

Advice

Advice

NPMU-Rwanda

NPMU-Eritrea

NPMU Ethiopia

NPMU Kenya

NPMU Tanzania

NPMU Uganda

GEF Report

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Project Steering Committee A Project Steering Committee (PSC) will be maintained at the international level as a forum for project direction, coordination and information exchange on project progress and performance. The PSC will meet once a year and will include nominated representatives of the six ARGeo countries. UNEP, the co-financing countries namely the Iceland, USA, Germany, Italy and France. It will be chaired on a rotation basis by one of the countries representatives.

Project Management Unit (PMU)

The PMU is established and steered by UNEP. The PMU was set up at UNEP Regional Office for Africa in Nairobi with the purpose of overall management and administration of ARGeo components implemented by UNEP. It may provide technical support to public applicants during project preparation to assist them in meeting ARGeo’s eligibility criteria and will provide an evaluation report on any project application.

Terms of Reference and working Procedure

ARGeo Advisory Technical Team (ATAT) ATAT experts will provide neutral expertise to guide and review surface assessments and pre-feasibility studies.

The overall objective of ATAT is: (i) to enhance the quality of “proposal” (or TOR) for the surface exploration studies received from ARGeo Countries for financial assistance, and (ii) to evaluate results of surface exploration studies. The required enhancement would help to focus the “proposal” to lead to identification of the best sites for exploration wells for ultimate development. In turn, the output of such studies will facilitate ARGeo member countries to prepare and propose economically viable and scientifically sound (with minimized drilling failure risks) projects for exploration drilling to the RMF.

Specifically, ATAT experts would: (i) conduct a scientific and technical evaluation of project proposals submitted to UNEP for technical and financial assistance; (ii) provide guidance and advice in selecting the most appropriate exploration methods to solve the problems/issues identified by the country in its “proposal”, and (iii) evaluate individual studies, and provide guidance, on the “conceptual models” of the concerned geothermal system that should be targeted to select the best sites for deep exploratory wells.

(B) Work Methodology for ATAT

The UNEP ARGeo Component would be the implementing Agency with supervision responsibility for the ATAT’s activities related to the surface exploration studies through integrated geoscientific investigations. The experts (individually or in combination, as appropriate in each case) would:

• Assess the geological, geochemical, geophysical and other relevant aspects for scientific and technical content

• Confirm whether the data and information provided is sufficient to form an opinion. •• Alternatively, suggest complementary surface investigations that should be undertaken;

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• Address the unresolved issues/gaps; and provide guidance in defining and applying various exploration methodologies for assessing and analyzing the unresolved issues projects from a scientific and technical point of view.

• Provide interpretative comments on how each result improves and expands the knowledge of the resource and implications of this with respect to the design and location of wells;

• Critique the siting of wells; provide second opinion on siting of wells. • Comment and advise on proper environmental management during, and after, surface

exploration studies • All data related to surface exploration studies made available to the members of ATAT are

confidential and shall not be published before receiving a written authorization from the ARGeo member countries and UNEP PMU.

(B)Meetings of ATAT

• UNEP Project Manager will call meetings of one or more ATAT experts, as and when required.

• The meetings may also be held for “technical reviews” or for detailed discussion or a forum to assist UNEP’s decision-making.

• Meetings may take place by teleconference or in person. • The schedules of these meetings will be agreed adequately in advance. • ATAT experts will be provided the Agenda for the meetings in addition to pertinent

documents relating to that person's area of expertise. This will be done adequately in advance of the meeting so that the experts become adequately familiar with these materials before the meeting.

(c) Reporting requirements

• ATAT experts may be required (when requested) to prepare and submit the following reports to UNEP PMU who shall circulate them:

o Draft Report (ATAT experts will establish the format (structure and contents) of the Draft report for approval by UNEP Project Manager.

o Final Report (The report shall summarize all the activities of the concerned experts of ATAT and list the main findings and recommendations).

(d) Appointment

ATAT experts will be reputable international and regional experts, selected on the basis of their

experience and knowledge of geothermal activities in East Africa or areas of similar geological

environment. The ATAT experts will represent the various geothermal science disciplines involved in

geothermal exploration including geology, hydrogeology, geochemistry, and geophysics,

• The work of these experts will be coordinated by the UNEP Project Manager. • The ATAT experts will be appointed for two years with a possibility for renewal.

(e) Qualification Requirements:

Education: A professional degree in earth or physical sciences from a recognized University

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Experience:

o A minimum of 20 years’ experience in geothermal technology (exploration) with specialization in geology, geochemistry, geophysics or any other relevant geothermal fields.

o Fluent in both written and spoken English

o Has professional Experience in a geological setting similar to that of the East Africa Rift System

o Be recognized as an expert in his/her field through publications, memberships in

appropriate professional societies, or honors and awards received for works.

National Project Management Unit (NPMU)

National Project Management Unit will be established in each country comprising representatives from the National Executing Agencies, and relevant Ministries to ensure coordination at the national level.

Role of the Steering Committee

The main role of any Steering Committee for a project is to play a supervisory role to guide implementation of a project. This is an adequately senior level role focusing on broad issues of implementation and monitoring. It is not a “technical” role.

The SC defines the purpose of the project, its strategic intent, objectives, and its values. Both the purpose and values should be clear, concise and achievable. SC ensures that procedures and practices in place protect the Project’s assets and reputation.

Members of the ARGeo SC are senior representatives of: UNEP, AUC, KfW, ARGeo member countries, Donors and Co-financiers. The actual members nominated to the Steering Committee are expected to play this senior level advisory role even if they are, individually, technical experts in geothermal related fields.

The SC will be chaired by representative of each country on rotational bases. SC will strategically guide/monitor the ARGeo project for meeting its overall objectives. In this context, the specific aspects that may be of interest to the Steering Committee to monitor and guide are:

• Oversee the management and administration of the project

• Provide strategic direction, adopt work plan and advice for project implementation

• Provide oversight of performance against targets and objectives

• Oversee the reporting of stakeholders on the direction and performance of the project, as well as other processes that need reporting and other disclosure requirements

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• Monitor project management implementation of the plans and strategies of the project

• Discuss a methodological framework as well as guidelines prepared by the UNEP Project Manager (ARGeo), the ARGeo Advisory Technical Team (ATAT), including project-eligibility criteria,

• Review progress reports from the UNEP Project Manager and the RMF Manager and address any issue in this respect;

• Review monitoring and evaluation system and make recommendations regarding identified strengths and weaknesses of the project

• Respond to issues posed on amendments to the project design

• Respond to any requests from the UNEP Project Manager on budget and on competing priorities;

• Review the project’s progress annually and recommend refinements to its structure, design and operation as appropriate to ensure the project meeting its overall objectives.

Role of the PMU

The PMU shall undertake the following tasks: • Convene the Steering meeting each six month, prepare the agenda and write the report. One

meeting on two will be held in teleconference the other in UNEP'offices in Nairobi; • Establish project management and monitoring guidelines for the PMU’s activities; • Coordinate and manage all activities related to sub-components 1 and 2 (regional network and

technical assistance); • Coordinate with international donors and organisations to seek for additional funding sources

for TA activities, particularly with regard to the second five year period of the project;

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Appendix 10: Standard TORs for Terminal EvaluationObjective and Scope of the Evaluation The objective of the terminal evaluation is to examine the extent and magnitude of any project impacts to date and determine the likelihood of future impacts. The evaluation will also assess project performance and the implementation of planned project activities and planned outputs against actual results.

Methods This terminal evaluation will be conducted as an in-depth evaluation using a participatory approach whereby the UNEP/DGEF Task Manager, key representatives of the executing agencies and other relevant staff are kept informed and consulted throughout the evaluation. The consultant will liaise with the UNEP/EOU and the UNEP/DGEF Task Manager on any logistic and/or methodological issues to properly conduct the review in as independent a way as possible, given the circumstances and resources offered. The draft report will be circulated to UNEP/DGEF Task Manager, key representatives of the executing agencies and the UNEP/EOU. Any comments or responses to the draft report will be sent to UNEP / EOU for collation and the consultant will be advised of any necessary or suggested revisions.

Key Evaluation principles. In attempting to evaluate any outcomes and impacts that the project may have achieved, evaluators should remember that the project’s performance should be assessed by considering the difference between the answers to two simple questions “what happened?” and “what would have happened anyway?”. These questions imply that there should be consideration of the baseline conditions and trends in relation to the intended project outcomes and impacts. In addition it implies that there should be plausible evidence to attribute such outcomes and impacts to the actions of the project.

Sometimes, adequate information on baseline conditions and trends is lacking. In such cases this should be clearly highlighted by the evaluator, along with any simplifying assumptions that were taken to enable the evaluator to make informed judgments about project performance

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Appendix 11: Co-financing commitment letters from project partners

1. Co-financing letter Rwanda

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2. Co-financing letter Eritrea

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3. Co-financing letter Ethiopia

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4. Co-financing letter Kenya

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5. Co-financing letter Tanzania

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6. Co-financing letter Uganda

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7. Co-financing letter ICEIDA

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8. Co-financing letter BGR

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9. Co-financing letter IAEA

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10.

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Co-financing letter AUC

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11. Co-financing letter UNEP

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Appendix 12: Endorsement letters of GtEF National Focal Points 1. Letter of interest Rwanda (endorsement letter to be submitted)

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2. Endorsement letter Eritrea

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3. Endorsement letter Ethiopia

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4. Endorsement letter Kenya

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5. Endorsement letter Tanzania

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6. Endorsement letter Uganda

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Appendix 13: Procurement plan

The GEF funds will be disbursed through contracts or Letters of Agreement (LoA) between UNEP and the ARGeo partner's organizations and individual consultants, in accordance with UNEP rules and procedures. The national partner institutions will contribute to the various thematic components modules depending on their respective expertise and financial capability.

Final allocations, by project components, will be finalized during the inception phase of the project, depending on the final allocation of tasks between partners.

Component 1 Regional Network Consultants will be selected for:

• Job training as well as training courses in and outside of the ARGeo region; • Development of an appropriate legal environment for sustainable private sector participation

in geothermal development; • Carrying out marketing activities and tendering processes.

Computers and softwares, necessary for the installation of the East African Geothermal Database and Website and of the national consultation points, will be bought for the National Project Management Unit (NPMU) in accordance with the procedures of UNEP

Component 2 Technical Assistance

The TA calls for the completion of resource assessments leading to the commercialization of the geothermal project investments in the region. At the initial stage, in each country, the geothermal resources characterizations will need to be carried out on different selected sites. The most promising sites will be selected for in-depth characterization works that will conduct to a sound basis for investment decision from private or public developers.

A. Geological update and reconnaissance study (partly completed in project preparatory phase).

Consultants will be selected for: • Conducting hydro geological and surface thermal studies of the sites to determine, discharge,

permeability, temperature and geothermal fluid expected flow rate; • Conducting geological/petrological/geochemical studies to determine tectonic & vulcanologic

framework, geothermometry to analyze the genesis of fluids, environmental impact of fluids, etc.

B. Pre-feasibility study on selected sites

Consultants will be selected to realize: • Geophysical studies and interpretation (e.g. MEQ, VES, TEM, MT); • Temperature distribution map utilizing data measured in existing wells (if available); • Risk assessment of seismic activity; • Select the best drilling locations by analysis of results and data.

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Appendix 14: Tracking Tools Project Indicator How it will be monitored &

measuredWhen Where expected

to be captured & who is responsible

GHG emissions reduced through geothermal energy production.

Baseline: zero reduction Target: post project near term: 500 MW Long term: 5000 MW, GHG emissions from electricity generation (tons CO2eq) Number of drilled geothermal wells

Towards the end of the project after conducting the pre-feasibility study (2016)

Feasibility Study & Marketing Strategy

Reduced dependency on fossil fuels for electricity production, reduced cost of electricity, entry of Independent Power Producers based on geothermal production. Observed electrification rate. Prices paid by consumers.

Calculating the share of expected generation of electricity from geothermal vs. from conventional sources

Existence of agreements or regulatory framework that allows IPP.

~8 ¢ US$/kWh (depends on the operating cost of the plant)

End of project (2016)

By 2014

By 2014

Marketing strategy and investment proposals

Responsibilities: national utilities and NEAs

Implementation of adequate environmental monitoring instrument(s) to track direct and indirect pollution reduction activities of the project.

Copies of environmental impact assessment for each of the 4 sites chosen for drilling and development.

Mid-2013 and onward

Environmental monitoring will continue for at least a year after drilling ceased

TORs for the contractors

EIA government license

Agreement with local institution for after-drilling environmentalmonitoring

Responsibility: UNEP, contractors, local government

Existence of international geothermal developers interested in ARGeo project opportunities.

Existence of interested electricity buyers.

Number of interested developers approaching the local governments for investment in geothermal and having MoU/agreement with local utilities to buy electricity into the grid or for use locally

By 2013 Reports of the NEAs

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Project Indicator How it will be monitored & measured

When Where expected to be captured &

who is responsible Existence of local trained and knowledgeable staff on technical issues concerning geothermal energy and development and electrical networks.

Hours of training events dedicated to geothermal, number of national staff participating in the actual technical work of contractors. Number of staff participating in regional/international conferences, and number of technical papers published in reviewed scientific periodicals/publications

The project intend to expand knowledge to all stakeholders such as NEAs, Investment Authority and Universities

Special report about training component embedded in project annual reports.

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Appendix 15: Project Proposals received from Four ARGeo member Countries

Appendix 16: Geothermal Risk Mitigation Facility for Eastern Africa (Kindly refer to PDF attachment)

Enclosed.