Overview 

Ethiopia has abundant renewable energy resources and has the potential to generate over 60,000 megawatts (MW) of electric power from hydroelectric, wind, solar and geothermal sources. As a result of Ethiopia’s rapid GDP growth over the previous decade, demand for electricity has been steadily increasing. Despite Ethiopia’s energy potential, the country is experiencing energy shortages and load shedding as it struggles to serve a population of over 110 million people and meet growing electricity demand that is forecast to grow by approximately 30% per year. With some of the projects are still under construction, the country currently has approximately 4,500 MW of installed generation capacity. There is a plan to exponentially increase the power generation capacity to 17,000 MW in 10 years.  

  

Energy Resource Potential of Ethiopia  

                         Source: Ethiopian Electrical Power   

  

Ethiopia Electric Power (EEP) is charged with maintaining more than 14 hydropower and three wind power plants throughout the country. EEP will instead focus on management of existing power generation plants, substations and transmission lines, with all new power generation projects to be developed through Public Private Partnerships (PPPs) and Independent Power Producers (IPPs).  

 

Approximately 90% of the installed generation capacity is from hydropower, while the remaining 8% and 2% is from wind and thermal sources, respectively. The hydro dominated systems have been severely affected by drought, and the GOE is now working to diversify the generation mix with other sources such as solar, wind, and geothermal that will result in a more climate-resilient power system. Currently all hydropower dams are producing well below their stated capacity. An assessment has been conducted to propose rehabilitation and optimization of their output.  The Grand Ethiopia Renaissance Dam (GERD), with a projected installed capacity of 5,150 MW, is under construction by the Ethiopian Government and is 84% complete as of February 2022.  In February 2022, one of the dam’s turbine start generating 375 megawatt power of electricity. The GOE has prioritized construction of the GERD, which is intended to serve as an engine for industrialization, economic development, and hard currency earnings through the export of electricity.  

  

The Government of Ethiopia is also constructing Koysha Hydo Power dam by the Omo River, which will be the second largest in Ethiopia next to the GERD. The total investment cost for this project is 2.5 billion Euro. As per a June 2022 report, the expected time frame to finalize this project is three years with a capacity 2,170 MW of power. Currently 39% of the project is completed.  

  

The Metahara solar IPP project is expected to generate 100 MW after the signing of a Power Purchase Agreement (PPA) and approval of the Implementation Agreement (IA) between Enel Power, an Italian firm, and the GOE. Enel will develop and operate the project. A Saudi firm, ACWA Power, has won a tender to develop two solar power projects, valued together at $300 million, in the Afar and Somali regional states with a combined capacity of 250MW.  ACWA Power offered 2.526 U.S. cents/kwh for power generated at the two sites, Gad and Dicheto.   

  

The GOE is also working with the private sector to implement the Corbetti and Tulu Moye geothermal projects. Although, the two directly negotiated geothermal contracts were originally signed for over 1,000 MWs with 500 MWs, respectively in 2017, the GOE recently renegotiated these contracts to reduce the capacity to 150 MW each for Corbetti and Tulu Moye. In March 2020, the Power Purchase Agreements (PPA) and Implementation Agreements (IA) were signed between GoE, and Corbetti and Tulu Moye.  The total investment required to develop these projects is approximately $1.2 billion.  The signing of these two projects pave the way for upcoming geothermal projects and creating opportunities for U.S. IPP developers.  

  

Ethiopia exports electricity to Djibouti and Sudan (up to 100 MW to each). There is a plan to increase power exports up to 400 MW to Djibouti due to a growing demand in the country.  Ethiopia, through EEP, has a PPA to export up to 400 MW of power to Kenya. In May 2022, Ethiopia signed an MoU with South Sudan to export 100 MW of power over the next three years.   

 

According to the GOE’s recently launched National Electrification Program (NEP) 2.0, 44% of the country has access to electricity (33% on-grid, 11% off-grid).  There is a plan to achieve 100% electrification in 2025. This will be through 65% from the grid and 35% from off-grid.  

  

The GOE recognizes that partnership with the private sector via IPP agreements for power generation is crucial to meeting the country’s energy needs.  All of EEP’s PPP and IPP procurements are now conducted through the Ministry of Finance PPP Directorate with EEP’s participation. Under the Global Procurement Initiative, the U.S. Trade and Development Agency (USTDA) has provided a grant to develop a procurement manual for EEP that incorporates full life cycle cost analysis. Power Africa has assisted EEP with the development of IPP tender documents and the legal and regulatory IPP framework. In 2018, Ethiopia enacted a proclamation to regulate PPP arrangements in an effort to attract investment and in recognition that the private sector is essential to supporting the country’s economic growth and improving the quality of public services, particularly in infrastructure.    

  

Power Africa Support:  

Power Africa is a market-driven, U.S. Government-led public-private partnership aiming to double access to electricity in sub-Saharan Africa. It offers tools and resources to private sector entities to facilitate doing business in sub-Saharan Africa’s power sector.  The Electrify Africa Act of 2015 Institutionalized Power Africa. Learn more about the full Power Africa toolbox or other opportunities offered by Power Africa. 

To help achieve Ethiopia’s goals of expanding access to electricity under the GTP and  NEP 2.0, Power Africa supports the development of new IPP generation and connections, rehabilitation of the distribution system and  financially viable utilities, and delivering power to the majority of the population living off-grid.  This support is delivered through wide-ranging technical assistance in cooperation with  multilateral financial institutions and other development partners.  In support of the private sector, Power Africa has assisted with new IPPs and the transition to competitive tendering, as well as strengthening the capacity of the energy regulator.    

Energy sector support in Ethiopia is in line with Power Africa 2.0 objectives, which include advancing sustainable development through private sector led partnerships; promoting economic prosperity; and an increased focus on the enabling environment, transmission, and distribution. Technical assistance provided includes:  

• Developing laws and regulations that will facilitate private-sector investments through IPPs in geothermal, solar, wind, hydro, and biomass generation projects.   

• Supporting Ministry of Finance’s PPP Directorate use of a competitive and transparent procurement process for IPP generation projects.  

• Introduction of the national grid code and support to the Ethiopian Energy Authority (EEA) in its implementation and enforcement.  

• Support to improve the commercial performance of the utility and decrease aggregate losses.  

• Strengthening the ability of EEA to determine tariff rates, and issue energy licenses and permits.  

• Support to off-grid electricity planning and assist the government in preparing and approving off-grid regulations such as Mini-grid development Directive and Cost of Service manual.  

• Supporting the Eastern Africa Power Pool to promote cross border power trade between Ethiopia and other member countries.  

• Assisting EEP and Ethiopian Electric Utility (EEU) with the planning, operation, and maintenance of generation, transmission, and distribution systems as the grid is expanded. Developing a process for EEU to improve distribution.  

   

Renewable Energy Market (‘000)    

Source: National Bank of Ethiopia and EEP  

  

Leading Sub-Sectors     

• Engineering services to supply more renewable energy sources, such as wind, solar, geothermal, as well as hydropower, are desired in Ethiopia.  
• Supply and/or manufacturing of, sub stations, hydro turbines, electric and electrical cables, transformers, transmission equipment, electric meters, and expertise are desired.  

  

Opportunities  

The GOE has opened the renewable energy sector for private sector involvement in competitively tendered IPP hydro and solar projects.  

In addition to the generation of power from renewable energy sources, aging power plants, substations and transmission lines require substantial maintenance and overhaul so as to increase the overall efficiency. These maintenance requirements are key business opportunities for U.S. businesses or investors.  

  

For specific details on the tender announcements and instructions, please refer to Ethiopian Electric Power Company’s website   

Resources  

Ethiopia Electric Utility (EEU) (www.eeu.gov.et)  

  

Ministry of Water, Irrigation, and Energy   

  

The World Bank Group