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Ethiopia’s sustainable energy transition

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Ethiopia’s sustainable energy transition
A new World Bank program is set to strengthen and expand the electricity network and enable renewable energy generation through private sector participation in Ethiopia. Image credit: Matthew Henry from Unsplash.

Ethiopia’s sustainable energy transition

Ethiopia is on track to increase power generation capacity to 17GW within the next decade.

Ethiopia intends achieving this ambitious goal by prioritising the development of all available energy resources. The country’s current installed power generation capacity is measured at 5.2GW.

According to the World Bank, Ethiopia has the third largest energy access deficit in Sub-Saharan Africa with about half the population still without access to reliable electricity.

However, over the last ten years, Ethiopia has expanded the grid network coverage to nearly 60% of towns and villages. Yet the electricity deficit in Ethiopia continues to hamper development.

According to Wendy Hughes, World Bank Regional Director for Infrastructure for Eastern and Southern Africa the transformation of the electricity sector in Ethiopia requires a medium-term approach to address interlinked structural and operational challenges and send a strong signal to the private sector.

Ethiopia’s sustainable energy transition
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Program to expand electricity network (Ethiopia’s sustainable energy transition)

A new World Bank program is set to strengthen and expand the electricity network and enable renewable energy generation through private sector participation in Ethiopia.

Through this program, the World Bank will partner with Ethiopia over the next 10 years with a financing envelope of up to USD1.4-billion to help the government crowd in other development partners and the private sector, says Hughes.  

Hughes explains that the Power Sector Reform, Investment and Modernization in Ethiopia program (PRIME) will be implemented over several phases.

“The first phases will prioritise critical infrastructure investments and sector reform actions to improve the overall ability of electricity utilities to add new connections while the latter phases of the program will focus on mobilising private sector participation in the power sector.

Ethiopia has the potential to generate more than 60GW of electricity from hydroelectric, wind, solar and geothermal sources.

Potential to generate 60GW (Ethiopia’s sustainable energy transition)

Hydropower remains the dominant source of energy in the country, contributing about 90% of the country’s electricity, exemplified by projects like the 6GW Grand Ethiopian Renaissance Dam and the 2.1 GW Koysha Hydro Power dam by the Omo River.

In January 2024, the dam was 94% complete, and once operational, it will become the largest hydroelectric power plant in Africa.

Meanwhile, Ethiopia’s wind sector is growing with projects such as the Ashegoda and Adama wind farms – generating more than 350 MW in total.

The state-owned Ethiopia Electric Power (EEP) signed a USD600- million deal in December 2023 for a new 300MW wind farm in the eastern Somali region with UAE-based project developer AMEA Power.

In the solar industry, the EEP signed an agreement with the International Finance Corporation to advise on developing up to 500 MW of solar power under the World Bank’s Scaling Solar program – an initiative that supports solar expansion worldwide.

The government views private sector collaboration as a catalyst for project development and companies are invited to join the market through public-private partnerships and independent power producer programs.

Alongside wind and solar, the country’s geothermal potential is estimated at over 10 GW. There is a projected USD35-billion investment pipeline planned for Ethiopia and Kenya to develop geothermal in the East African Rift, highlighting the potential in this area.

By 2050, these two countries are expected to produce 90% of the planned 13 GW of geothermal energy in Africa.

Meanwhile, the African Development Bank (AfDB) allocated USD8-million this month to support Ethiopia’s Renewable Energy and Agriculture Modalities mini-grid program, developed in collaboration with the Global Alliance for People and Planet and key Ethiopian government bodies.

This initiative aims to integrate mini-grids with agribusiness operations, with up to 50% of the program’s funding sourced from the AfDB-managed Sustainable Energy Fund for Africa, providing concessional loans, grants and risk mitigation.

Additionally, the AfDB has approved a USD104-million grant for a transmission project aimed at enhancing Ethiopia’s electricity supply.

The project involves constructing 157 km of transmission lines and associated substations near the cities of Harar, Jijiga, and Farem.

Gas presents new investment opportunities (Ethiopia’s sustainable energy transition)

While renewable energy constitutes a primary energy source for the country, the confirmation of seven trillion cubic feet of natural gas in the Ogaden Basin by the government in 2022 has opened up new investment avenues for energy companies. A largely undeveloped sector, natural gas stands to transform both the country and broader region’s energy matrix.

“Ethiopia is taking a proactive stance in fostering sustainable energy development and collaboration with international stakeholders. The country is leading a just energy transition, prioritising the development of all available energy resources.

“Offering a wealth of opportunity for natural gas and renewable energy players alike, Ethiopia stands to play a central role in meeting East Africa’s demand for energy in the long-term,” says NJ Ayuk, Executive Chairman of the African Energy Chamber.

Ethiopia’s Minister of Water and Energy Habtamu Itefa Geleta will attend the upcoming African Energy Week (AEW): Invest in African Energy Conference 2024. During the event Minister Geleta will unpack the country’s energy potential, engaging with investors and regional counterparts.

Ethiopia’s sustainable energy transition

Ethiopia’s sustainable energy transition
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