Green Economy

Djibouti Embraces Renewables

0-50% Renewable Energy in 2 Years

The first-ever renewable energy project in Djibouti was approved this year, and its impact on the country's underdeveloped energy sector could be massive.

A general view of the Port of Djibouti is seen in Ambouli, Djibouti. REUTERS/Jonathan Ernst

A consortium led by the Africa Finance Corporation, the Dutch development bank FMO, Climate Investor One and local company Great Horn Investment Holdings SAS has announced the development of Djibouti’s first ever renewable energy project.

The 59MW wind farm will be located near the Goubet cove in the Gulf of Tadjoura, on a 395-hectare site, and should be operational by mid-2021.

Siemens Gamesa is the contractor hired for this USD63 million development, and will take care of the 17 wind turbines, the electricity interconnection solution, the civil works, and 10km of internal road and tracks, as well as maintenance of the farm.

The consortium has already signed a power-supply agreement with Djibouti’s national electricity company Electricité de Djibouti for a period of 25 years.

While renewable projects across Africa are becoming increasingly common in recent years, the Djibouti wind farm is special, not just because it is the country’s first renewable energy project, but because it will effectively double the country’s power generation capacity.

Currently, Djibouti’s power network has a nameplate capacity of about 120MW of thermal power generation, coming from power plants that burn heavy oil to produce the electricity meant to light a country of nearly one million people. However, as is so often the case in Africa’s dilapidated and under-maintained power grids, the country’s effective reliable power output is just about 57MW, according to Power Africa.

Therefore, this new wind farm could double the country’s power generation network.It is estimated that only 42% of Djibouti’s population has access to power, but that is a misleading figure in itself.

While 54% of people have power in urban areas, only 1% of Djiboutians have connections to the grid in rural areas, highlighting generation but also transmission and distribution shortfalls.

Djibouti rarely gets the credit it deserves for the efforts made in recent years to improve its legal framework and business environment. Between 2016 and 2018, the country went from being placed at number 171 in the World Bank’s Ease of doing business ranking to number 99.

While it fell back again to 112 in 2019, the progression is astonishing, and a direct result of governmental policy. Strengthened access to credit, better minority investor protections, the facilitation of insolvency resolutions, and the introduction of a minimum wage have been identified as some of the most meaningful transformations in recent years.

These changes have attracted investors and capital, as the new wind farm project shows, and now, a great expansion in infrastructure is expected in the country, particularly in the form of ports, free trade zones, and railways. These will place increased pressure on the country’s power sector, which needs to rapidly grow to answer demand.

The government, in partnership with Power Africa, has the goal of achieving 100% access to electricity by 2035, using exclusively renewable energy sources.

That makes sense, since Djibouti has no oil, gas, or coal reserves, but is endowed with relatively vast geothermal, wind, and solar generation opportunities. These could even, one day, see the small African nation become an effective power exporter, if they were to be properly harnessed.

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