Business case of Ngozi geothermal power project, Mbeya, SW-Tanzania

Abstract

The objective of the study is to present a preliminary business case of Ngozi hightemperature geothermal field for power generation. The field is ranked as the topmost promising prospect in the country and stands as a flagship project of Tanzania Geothermal Development Company (TGDC). The Ngozi high-temperature field has undergone copious geo-scientific studies since late 1970s at different level, the most recent one being in March 2016 in collaboration with Geothermal Development Company (GDC) of Kenya. Following the vulnerability to hydrology and adverse impacts of climate changes on the hydroelectric power generation, the Government of Tanzania is currently undertaking strong impetus to diversify the energy mix to attain a more robust and resilient modern energy supply to foster the desired socio-economic transformations. Thus, it intends to move the country closer to achieving middle-income status, as envisioned in the National Development Vision 2025. A number of electricity supply industry policies, reforms and implementation strategies are in place to recognise the mandatory requirement of developing geothermal resources and the power is anticipated to contribute up to 200 MW by 2025.

The preliminary preparation of this business case is therefore a humble attempt to highlight rudimentary issues in the development of Ngozi geothermal power project and will be used as a tool to subsequently make sound financial decisions on the further commitment of funds between 22 and 32 million USD in the exploration drilling phase to meet an attractive return on investment during exploitation of resource. The two risks, geological and financing, were seen to be much more prominent and require further mitigation measures in place prior to the execution of the project. The single-flash technology which is considered the mainstay of the geothermal power industry and by far the most installed power technology, was the chosen work cycle with two scenarios of project implementation strategy, namely directly a 50 MW power plant, or first building a 5 MW modular wellhead plant before building a 50 MW conventional power plant. The overall conclusion on the scenarios realised is that a step wise development of 5 MW modular wellhead plant then a 50 MW plant has lower risks, more technical and environmental benefits and reasonable financial returns. This is realised on the Net Present Value of 6 million USD with Internal Rate of Return of 16% on equity, hence a highly recommended sustainable development alternative.