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Ethiopia’s energy diversification drive

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Ethiopia’s energy diversification drive
With about 126.5 million people (2023), Ethiopia is the second most populous nation in Africa after Nigeria, and one of the fastest-growing economies in the East African region, with an estimated 7.2% growth in FY2022/23. Image credit: Mulugota Wolde from Unsplash

Ethiopia’s energy diversification drive

Ethiopia has embarked on a strategic diversification of its energy mix.

In April 2024, the Ethiopian government and the World Bank signed loan agreements worth USD1.72-billion to enhance the country’s electricity and water supply. Ethiopia is Africa’s largest hydropower market.

Under the agreement, USD523-million will be allocated to expand the country’s electricity network and boost renewable energy generation. More than USD500-million will be directed towards facilitating the movement of food to markets.

Meanwhile, the African Development Bank approved a USD104- million grant to finance a transmission project to improve Ethiopia’s electricity supply.

The project will involve the construction of 157km of transmission lines and will include associated substations near the cities of Harar, Jijiga and Farem.

Ethiopia, along with Zimbabwe, signed intergovernmental agreements with Russia in July 2023 to establish a legal framework for the development of nuclear energy in the African country.

The Ethiopian government also signed a grant agreement with Denmark during the same month which would see the mobilisation of about USD10-million towards developing the Danish-Ethiopia Energy Partnership and phase one of the Ethiopian Danish Water Sector Cooperation.

Growth in Ethiopia (Ethiopia’s energy diversification drive)

With about 126.5 million people (2023), Ethiopia is the second most populous nation in Africa after Nigeria, and one of the fastest-growing economies in the East African region, with an estimated 7.2% growth in FY2022/23.

The East Africa region covers 13 countries with overlapping memberships in four African Union-recognised regional economic communities.

The 13 countries are Burundi, Comoros, Djibouti, Ethiopia, Eritrea, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda.

Despite it fast growing economy, Ethiopia remains one of the poorest countries in East Africa, with a per capita gross national income of USD1,020. Ethiopia aims to reach lower-middle-income status by 2025.

Ethiopia’s strong growth rate builds on a longer-term record of growth over the past 15 years where the country’s economy grew at an average of nearly 10% per year, one of the highest rates in the world.

According to the World Bank, growth in Ethiopia was led by capital accumulation, in particular through public infrastructure investments.

Ethiopia’s real gross domestic product (GDP) growth slowed down from FY2019/20 to FY2021/22 due to multiple shocks including Covid-19, with growth in industry and services easing to single digits.

However, agriculture, where over 70% of the population is employed, was not significantly affected by the Covid-19 pandemic, and its contribution to growth slightly improved compared to previous years.

The consistently high economic growth over the last decade resulted in positive trends in poverty reduction in both urban and rural areas.

The World Bank states that the share of the population living below the national poverty line decreased from 30% in 2011 to 24% in 2016 and human development indicators improved as well.

“However, gains are modest when compared to other countries that saw fast growth, and inequality has increased in recent years. Furthermore, conflicts in various parts of Ethiopia risk undermining the economic and social development progress the country has achieved.”

Climate change threatens development prospects (Ethiopia’s energy diversification drive)

In February 2024, the Ethiopia Country Climate and Development Reports (CCDR) was released, sharing findings regarding the increasing impact of climate change that are threatening Ethiopia’s development prospects.

The report notes that annual average losses to gross domestic product (GDP) are expected to range between 1-1.5% of GDP and to rise to 5% by the 2040s, potentially pushing millions more Ethiopians into poverty (press release).

The new analysis also points to opportunities for growth and increasing prosperity from climate-informed development policies.

These are especially visible in agriculture where, with the support of reforms, Ethiopia can potentially shift from being a net importer of agricultural commodities to generating sizable surpluses of as much as 20% (relative to domestic demand), with climate change, especially under potentially warmer and wetter conditions, increasing these surpluses to 25%.

Ethiopia at energy conference (Ethiopia’s energy diversification drive)

Ethiopia’s Minister of Water and Energy Habtamu Itefa Geleta will participate at the South Sudan Oil & Power (SSOP) 2024 conference and exhibition. Minister Geleta is expected to share his country’s experience in developing clean energy capacity and call for more power infrastructure investments

At SSOP 2024, Minister Geleta is expected to discuss the Ethiopian government’s plans to diversify its energy mix while delivering a consistent supply of power and unlocking opportunities that will stimulate public and private sector participation in the East African energy landscape. For more information about how you can participate in South Sudan’s biggest energy event, visit https://SouthSudanOilPower.com.

Organised by Energy Capital & Power, SSOP 2024 positions South Sudan at the center of investments and partnership in the East African energy landscape. Taking place in Juba on June 25-28, the conference and exhibition invites investors to explore and engage with opportunities across the hydrocarbons, renewable energy and power sectors. To sponsor or participate as a delegate, please contact sales@energycapitalpower.com.

Ethiopia’s energy diversification drive

Image credit: Mulugota Wolde from Unsplash  

Ethiopia’s energy diversification drive
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