World Bank’s Board of Directors approved a US$ 200 Million loan to Ethiopia on Thursday, May 29, 2014. The loan is extended to develop Ethiopia’s potential geothermal sites at Aluto and Alaloband sites, in the rift valley of the Afar State.Two of World Bank’s trust funds, International Developmental Association (IDA) and Scaling Up Renewal Energy Program (SREP), are expected to finance the loan.

World Bank’s Country Director, Guang Zhe Chen , said “In addition to energy security, the project will support Ethiopia’s efforts to build a climate change resilient green economy, by developing renewable energy sources with low carbon emission”.

The project is going to be carried out in two phases which will develop two geothermal sites; Aluto and Alaloban sites. During the first phase it is expected to establish an institutional framework for geothermal development. And during the second phase, there will be generation of electricity from the steam resources developed in the first phase.

The power from the geothermal plants will serve the grid with electricity. In addition to this, it will allow more households and businesses to connect at affordable rates.

According to the World Bank, the power from the plants will also provide energy to existing commercial consumers currently affected by the energy ration from insufficient generation capacity.

One of World Bank’s trust funds SREP was established with the aim of scaling up the deployment of renewable energy solutions and expand renewables’ markets in the world’s poorest countries. It is a targeted program of the Strategic Climate Fund. It aims to pilot and demonstrate the economic, social and environmental viability of low carbon development pathways. And among the eight pilot countries, Ethiopia is one of them.

According to the geological survey of Ethiopia, the nation’s total geothermal resource potential is estimated to be 500 Megawatt.

Source: Fortune