Innovative risk finance solutions: Insights for geothermal power development in Kenya and Ethiopia

The paper examines how insurance can mitigate high resource and drilling risks to attract private sector investment in geothermal energy, specifically focusing on capacity-building efforts in Kenya and Ethiopia.

• Geothermal development faces significant financing barriers due to high field development costs and risks associated with resource exploration and drilling, which deter private sector investment.
• Insurance mechanisms can bridge the financing gap during the feasibility and development drilling stage, potentially offering a leverage ratio of up to 60:1 on public funds.
• In Kenya and Ethiopia, geothermal development is predominantly funded by the public sector, indicating a strong need to mobilise private finance to meet growth targets.
• Stakeholder consultations in Kenya and Ethiopia revealed a prior lack of understanding of geothermal risk mitigation instruments, but a strong interest from developers, local insurers, and commercial banks in adopting such products.
• Direct donor-funded projects often bypass domestic insurance industries, which prevents the transfer of skills and knowledge to the local economy.
• To scale up geothermal investment, international institutions should provide targeted technical assistance, use concessional finance to avoid market distortion, and employ insurance to target specific risks to crowd in private capital.

APA

Rolffs, P., Richardson, J., & Amin, A.-L. (2017). Innovative risk finance solutions: Insights for geothermal power development in Kenya and Ethiopia. Climate and Development Knowledge Network. https://cdkn.org/sites/default/files/files/CDKN_Parhelion_Working_Paper_Pr3.pdf

Chicago

Rolffs, Paula, Julian Richardson, and Amal-Lee Amin. Innovative risk finance solutions: Insights for geothermal power development in Kenya and Ethiopia. Climate and Development Knowledge Network, 2017. https://cdkn.org/sites/default/files/files/CDKN_Parhelion_Working_Paper_Pr3.pdf.

Wikipedia

{{cite report |last1=Rolffs |first1=Paula |last2=Richardson |first2=Julian |last3=Amin |first3=Amal-Lee |title=Innovative risk finance solutions: Insights for geothermal power development in Kenya and Ethiopia |publisher=Climate and Development Knowledge Network |date=February 2017 |url=https://cdkn.org/sites/default/files/files/CDKN_Parhelion_Working_Paper_Pr3.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rolffs2017innovative, author = {Rolffs, Paula and Richardson, Julian and Amin, Amal-Lee}, title = {{Innovative risk finance solutions: Insights for geothermal power development in Kenya and Ethiopia}}, institution = {Climate and Development Knowledge Network}, year = {2017}, month = feb, url = {https://cdkn.org/sites/default/files/files/CDKN_Parhelion_Working_Paper_Pr3.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }