1. SOME EXAMPLES OF GEOTHERMAL DEVELOPMENT POLICY AND LEGISLATION Mr. Getahun Demissie Geothermal Energy Consultant African Union Commission Addis Abeba, Ethiopia GetahunD@africa-union.org www.africa-union.org AUC-RGP Working Group Meeting 19-23 September, 2011 Kampala, Uganda

2. Energy Use in Africa is the world/s lowest and structurally least developed Africa has13% of the Word’s population and oil production, but consumes about 3.5% of both the worlds electricity and oil; Only 25% of population has access to electricity Less than 10% of its hydro- and 1% of its geothermal resources are developed Conditions in countries of the AUC-RGP region are even less favorable; biomass fuel use makes up >90 of total energy consumption. The region however has the largest hydro and geothermal resource potential of the continent

3. The countries are members of the Eastern and Southern Africa power pools The AUC-RGP is thus intended to be executed in a region where the two power pools seek to unify the national power supply system for Optimum electric power development Increased access to electricity Ensuring security of power supply etc Geothermal power development needs to be subject to national policies and legislations that are mutually coherent among the subscribing countries, and in tune with the two power pools.

4. Some principal elements of policy: Energy Policy: Priorities, mixes, alternative uses, seeing long term least cost solutions; Geothermal Policy: determination of its role Social Policy: Access for social welfare, environmental protection, economic productivity, employment, land and water use; Economic Policy: energy pricing, market access, fiscal impositions, exchange controls; Financial Policy: energy development financing; Administration: Regulation, right of tenure

5. Some principal elements of policy2 Investment options: the variety of modalities, re investments in: Reconnaissance Surface exploration Exploration drilling Field development Steam production: e.g. GDC plan Power generation: e.g. Kengen Transmission Distribution & sale IPP, PPP, BOO, BOT

6. A private investors entry is subject to his evaluation of the risks and expectation of benefits Technical risk: availability of an exploitable resource –Mitigated by government providing exploration information- subject to circumstances, –Reliable due diligence by investor important Nontechnical risks: security of tenure, predictability of returns on investment Mitigated by the regulatory mechanisms set up buy government: The law and the enforcer

7. Main Legislative Issues Geothermal resources development is commonly administered under mining legislation Resource Ownership and sale of right: A wide variety of provisions; E.g. owned by the: owner of the land surface: Iceland. Owner has sole right of sale or lease citizens but administered by the state: Ethiopia, state may sell right of exploitation State: Philippines, State responsible for exploiting it but constitutionally barred from selling right to exploit to non-Philippinos

8. Philippine natural resources law as applied to geothermal appears problematic The constitution allows the President to procure technical or financial assistance for developing natural resources. It appears that foreign companies involved in geothermal development are by law contractors and not IPPs. Litigation is known to have occurred. Presidential authority has enabled the Phillipines to be the owner of the second largest geothermal electricity generation industry

9. Whatever the differences in legal ownership among the three examples all have become large scale power producers using geothermal energy The ideal situation may be: 1.Resource ownership in its natural state by the people or the state 2.Passing to the resource developer upon the resource’s removal from its natural state.

10. Primary Government (Licensing Authority) Concerns re prospective licensee: Does the prospective licensee have the technical skills and financial resources to perform as per terms of license? Will he agree to observe all laws? License conditions: separate prospection, exploration, exploitation licenses or all in one ‘Cradle to grave’ or predetermined duration

11. Thank you for your attention