Ethiopia: Why Ethiopia's Energy Future Is Optimistic –


Ethiopia has long realised the potential of its renewable energy. Hydro, solar, wind and geothermal resources are all contributing to in changing its economic fortune and that of its peoples. In light of these clean, abundant and feasible alternatives, the nation has engaged in the development of these energy resources, probably more than any of its peers in the region.

The available renewable energy resources, if developed, could not only help meet the local energy demand, but also bring additional revenue from energy exports to countries in the region.

Hence, Ethiopia has been aggressively working on the full packages of generating, transmitting and distributing power, using mixed resources to address the energy deficit in the country and beyond. Irrespective of ongoing massive efforts, however, it will likely take longer to clear the backlog of energy investment over the years. These became undone mainly due to conflicts, overlooking energy demand growth and the need for the people to see the nation balancing energy supply and demand.

Addressing the prevailing energy poverty, and increasing electricity access per capita of Ethiopians, need the full participation of the private sector and not just the efforts of the state.

This is whilst the contentious Great Ethiopian Renaissance Dam (GERD), Gibe strings and other power plants lead the generation of power in the country. The newly built transmission towers crisscrossed all over the country and the distribution lines being installed under the Universal Electricity Access Program (UEAP), are indicative of the high level of engagement in the power infrastructure.

The Ethiopian government’s pledge to spend 20 billion dollars on the power development programme in the second generation of the Growth & Transformation Plan (GTP-II), from 2015 to 2020, consistent with the country’s annual spending track record of two billion dollars for the past three years is another renewed commitment to the energy industry.

To achieve both the ambitious goals of meeting the local energy demand and exporting power to the neighbouring countries, Ethiopia should genuinely thrive to avoid putting the brakes on energy developments. A priority would be the timely reform of the national energy policy to remove any barriers.

Opportunities for creating public private partnerships are at the nation’s disposal to shape the energy future. The energy sector policy should be made wide enough to accommodate best business practices and to attain regional competitive standards, at least. Professionals and energy actors should be encouraged to participate in international and regional energy conferences and be proactive in promoting opportunities for investment in Ethiopia.

The new energy law enacted recently allows private developers to generate and sell power to the Ethiopian electricity utility. So far, Reykjavic Geothermal, the Icelandic company, signed a Memorandum of Understanding (MoU) with the Ethiopian government to generate 1,000Mw from geothermal reserves near Shashemene town.

Reykjavik, which plans to invest four billion dollars in the geothermal project, has signed the first power purchasing agreement in the history of the country. Others should also be allowed to follow suit to change the energy picture of the nation once and for all. The competitive environment will create many more advantages for the nation’s energy industry.

Investment in energy resources in Ethiopia seems promising for decades to come, though the financing initiatives of such magnitude remains a challenge. Yet, the global economic condition has its own role to play as to how and where the funding comes from.

The overall sluggish progress of the current world economy will increase the uncertainty of the financial resources Ethiopia is looking for. Despite the challenges, however, thanks to the relentless efforts of the government and all partners promoting investment opportunities, the current level of interest by international financiers to finance Ethiopian energy projects is getting better. This should be maintained in the times ahead.

Ethiopia’s entrance into the international capital market still has an important contribution to make. Funding massive infrastructure projects with local capacity has also been started, which is critical, particularly to controversial, but monumental projects.

The 300Mw Tekeze hydroelectric power plant, the tallest dam in Africa, 460Mw Tana Beles multipurpose hydroelectric power plant and the ongoing 6,000Mw GERD showcase the extent of the local capacity to build massive projects.

If the decline in oil price, about 70pc since the end of 2014, on the global market, which comprises about one fifth of Ethiopia’s total import cost, is sustained, the saving will be another plus to fund the power projects.

Although the country is endowed with abundant rainfall and many big rivers and hence hydropower has been taking the lion’s share of the investment in energy over the years, tapping other resources has also been taking ground recently. Good examples of how the government is busy growing the energy mix and inventing the future of the nation’s energy sustainability, include the Adama and Ashegoda wind farms rolling on the edges of Adama and in close proximity to Meqelle towns, respectively.

Also to be noted are the ongoing Alalloba-Tendaho and Aluto Langano geothermal power plants; the Reppi Waste to Energy conversion power plant in Addis Abeba. Other examples are off-grid solutions, such as photovoltaic systems and energy efficient cook stoves being distributed by Ministry of Water, Irrigation & Electricity (MoWIE).

Taking the ongoing efforts across the nation for the energy infrastructure into consideration, CNN hailed Ethiopia’s energy resources as set to be among the most diversified in Africa.

Ethiopia has embarked upon the development of a climate resilient green economy strategy addressing climate change, adaptation and mitigation objectives supported by Global Green Growth Institute. The preparation of the strategy is articulated and highly anticipated to be integrated into Ethiopia’s GTP II. In this regard, Ethiopia is named among the first African country to tap the first ClimDev-Africa Special Fund (CDSF) securing a 1.1 million dollar deal with newly launched fund.

This financing will strengthen its climate information and early warning systems for climate resilient development and adaptation. Africa, in general, and Ethiopia, in particular, should seize the opportunity to benefit from the carbon trading, pushing their economies towards the green growth strategies.

To encompass the energy sector in a wider spectrum, the Ethiopian Electricity Agency, which used to be an autonomous federal organ to control the power sector, was changed to Ethiopian Energy Agency, with an extended mandate. It is accountable to the Ministry of Water, Irrigation & Electricity (MoWIE) and tasked to regulate the energy sector nationwide.

Pertinent to the government’s incentive and what has been happening in the economy elsewhere, the manufacturing sector, particularly small scale manufacturing, is expected to expand significantly. This in turn will drive high the ever rising energy demand. Unless the ongoing major power projects are made operational in a short span of time, the current double digit annual economic growth will pose a real setback to the businesses operating in the country.

Domestic electricity demand in Ethiopia currently is expected to grow by more than 32pc per year. For that matter, the current installed generating capacity of approximately 2,300Mw is far from meeting the rising demand.

The ongoing national grid infrastructure development project, when commissioned, is anticipated to boost the connectivity of the load dispatch centres and the overall grid network, but the integration of the central grid and distributed sources will remain an issue to be resolved in the times ahead. How smart are the smart metres to be assembled locally and introduced to the market determines the pace and the cost of the integration of the two.

A 10 million dollar contract that was signed between Information Network Security Agency (INSA) and Asseco S.A., proprietor of a polish IT Solution Company through Asseco Utility Management Solution (AUMS) and Enterprise Resource Planning solutions (ERP), is set to improve comprehensive energy billing and customer data base management systems. The Enterprise network solutions could be extended to help the power entities replace the much paper-dependent communication, a cause for red tape, blackmailing and ultimately delays, with a modern approach. For an investor accustomed to fast and modern approaches to communication, the long paper work may be a nightmare.

Once the interconnection of the power network becomes a reality, grid cyber security will be an issue which will not be overlooked. Even if it is not a concern at this point in time, grid cyber security is likely to be a major threat in the decades to come when everything goes online.

Considering grid cyber security in the power infrastructures design and implementation will help control the potential damage and minimize unnecessary and redundant costs to the nation. Getting to know the technology and enforcing application of standard equipment, at least in the upcoming power projects, will have unparalleled advantage to contain the potential threats to the grid network.

The collaborations of the power companies with the state’s educational institutions, like the case in the Adama wind farm where Addis Abeba University (AAU) was the project consultant, are crucial to the development of the industry. The energy sector should be supported with relevant studies, research and innovations to stand on its feet by its own and maximize benefits to the country’s 90 million people.

Power entities should set up independent expertise or consulting partners not only to be able to identify and address the real shortcomings in their operations, but also acquire best practices to move the efforts forward faster. The issue of expertise required to manage energy resources is not something to be postponed. Leveraging full features of modern technologies is also another frontier.

Many sources are suggesting that the existing old power infrastructure is poorly maintained. Although the plan to rehabilitate the major power plants, substations and transmission lines were included in the growth and transformation plan which expired at the end of 2015, most are either at the early stages or less than sufficient to increase the overall efficiency. This maintenance deficit may be an attractive business opportunity for businesses or investors particularly those who wish to come with their own initial finances, provided the government levels the operating ground in advance. The energy loss in Ethiopia is believed to be higher compared to the international average.

Government sources claim that the electricity coverage has reached 55pc, though other independent sources suggest a much lower figure. Even with the larger estimate, there is still half way to go to fully electrify the country.

Equally important is the quality of service. In spite of increasing production, power outages, particularly during peak hours, are becoming common. While the lowest electricity tariff rating in the continent is an important incentive to businesses in particular and the economy’s production in general, providing sufficient power at all times is an issue that requires immediate attention.

– A Power and Energy Practitioner

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