Source: REEEP Policy Database (contributed by SERN for REEEP)
This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.
Currently, Ethiopia has around 2,000 MW of installed power generating capacity, out of which 1,980 MW (99%) is generated from hydropower plants. The remaining 12 MW (0.6%) and 8 MW (0.4%) comes from thermal and geothermal sources respectively. According to the five year Growth and Transformation Plan (GTP), the country’s installed electricity generating capacity is expected to reach 10,000 MW by the end of 2014/15 from the current level of 2,000 MW. In the same year, the electricity coverage of the country will be 75%.
Ethiopia has a considerable renewable energy endowment, with an abundant hydropower potential, solar and geothermal, as well fossil fuels. Hydropower constitutes almost 92.5% of the total energy mix and thermal energy comprise of 7%. Despite the huge potential to exploit renewables; historically only a very small portion has been developed owing to lack of financial resources amongst other factors.
Even in urban areas, half the households rely on traditional biomass (wood, dung and agricultural residues) for cooking, and in rural areas, virtually all do (except for 0.2% who use kerosene, and 1.2% charcoal). While many nations in sub-Saharan Africa face similar challenges, Ethiopia ranks particularly low in terms of energy progress, 62nd out of 64 per the IEA’s 2011 Energy Development Index, with an EDI of 0.017. Ethiopia has made big strides in recent years, with 48.3% of towns and villages connected to the grid as of July 2012, according to the Ethiopia Electric Power Corporation.
Concerning electricity generation, renewable energy in Ethiopia has focused on large hydropower. However, much of the small hydro-power, solar and wind potential in Ethiopia is yet to be developed. The present energy mix greatly increases vulnerability to climate change and the poorest segment of the population is the most vulnerable. For example, reliance on fuel Wood and charcoal brings widespread land degradation, exposing bare soil to erosive rainfall and gulley erosion. The power generation sector only accounts for very low GHG emissions (less than 3% of total GHG emissions) as large hydropower accounts for over 90% of total power generation capacity in Ethiopia.
Power generation improved by around 230% between 2008 and 2012, with six hydroelectric and wind power projects coming online: Tekeze (2009, hydroelectric, 300 MW), Gibe II (2010, hydroelectric, 420 MW), Tana Beles (2010, hydroelectric, 460 MW), Amerti Nesha (2011, hydroelectric, 97 MW), Ashegoda (2012, wind, 30 MW), and Adama I (2012, wind, 51 MW). Additionally, four more projects (Gibe III, Ashegoda expansion, Adama II, and the Grand Ethiopian Renaissance Dam) are under construction. Their combined output would be nearly 8,150 MW. However, an inadequate power transmission system means that Ethiopia’s increased energy supply is not yet being utilized efficiently.
The energy policy places high emphasis on hydropower resource development and encourages energy mix with renewable such as solar, wind and geothermal to be developed given their cost competitiveness. Currently, hydropower, diesel and geothermal systems account for 88%, 11% and 1%, respectively of total electricity generation in the country.Close Energy sources
It is clear that great progress has been made, and the Ethiopian government is paying far more attention to sustainable energy access than a decade ago. Still, enormous challenges remain. For perspective, Ethiopia has 86 million people, and as of 2011, only 23% of households had electricity (Central Statistical Agency 2012); in rural areas, where the vast majority of the population lives, just under 5% of households were connected to the grid.Close Extend network
The Ethiopian power sector is over dependant on hydropower. The country need to diversify its energy sector and keep looking for other energy sources such as wind, geothermal and solar because its extreme hydropower dependence may leave its power sector vulnerable to drought, an increasingly risky scenario due to climate change. Falling reservoir levels may affect Ethiopian electricity consumers and export revenues (Asress, 2013).Close Capacity concerns
Ethiopia is a country on the brink of an energy revolution, but requires significant assistance to realize its potential, particularly in the areas of geothermal, wind and solar and biomass resources as long-term options for power generation for both local industrialization and as a potential source of FX earnings. In accordance with targets outlined in the GTP, the Ethiopian Electric Power Corporation (EEPCo) has set concrete plans to achieve 75% energy access by 2015 and aspires to become a regional power exporter and green energy hub for East Africa. In 2011, Ethiopia began 35 MW of power exports to Djibouti, estimated to generate USD 1.5 million per month, and is finalizing plans to begin exporting 100 MW of power to Sudan in early 2014.
Ethiopia receives a solar irradiation of 5000 – 7000 Wh/m² according to region and season and thus has great potential for the use of solar energy. The average solar radiation is more or less uniform, around 5.2 kWh/m2/day. The values vary seasonally, from 4.55-5.55 kWh/m2/day and with location from 4.25 kWh/m2/day in the extreme western low lands to 6.25 kWh/m2/day in Adigrat area, Northern Ethiopia is still at its early stage.
Ethiopia has good wind resources with velocities ranging from 7 to 9 m/s. Its wind energy potential is estimated to be 10,000 MW. The Ethiopian National Meteorological Services Agency (NMSA) began work on wind data collection in 1971 using some 39 recording stations located in selected locations. Ever since the establishment of these stations, wind velocity is measured and data made available to consumers. However, the number of stations established, quality of data (in terms of comprehensiveness) and the distribution of the stations leaves much to be desired. On the basis of data obtained from existing wind measurement stations two important conclusions can be drawn:
Africa's biggest wind farm began production in Ethiopia in October 2013, aiding efforts to diversify electricity generation from hydropower plants and help the country become a major regional exporter of energy. The 210-million euro Ashegoda Wind Farm was built by French firm Vergnet SA with concessional loans from BNP Paribas and the French Development Agency (AFD). The Ethiopian government covered 9% of the cost.
Biomass & biogas
Ethiopia’s biomass energy resource potential is considerable. According to estimates by Woody Biomass Inventory and Strategic Planning Project (WBISPP), national woody biomass stock was 1,149 million tons with annual yield of 50 million tons in the year 2000. These figures exclude biomass fuels such as branches/leaves/twigs (BLT), dead wood and homestead tree yields. Owing to rapidly growing population, however, the nation’s limited biomass energy resource is believed to have been depleting at an increasingly faster rate. Regarding the regional distribution of biomass energy resources, the northern highlands and eastern lowlands have lower woody biomass cover. The spatial distribution of the "deficit" indicated that areas with severe woody biomass deficit are located in eastern Tigray, East and West Harerghe, East Shewa and East Wellega Zones of Oromiya and Jigjiga Zone of Somali Region. Most of Amhara Region has a moderate deficit but a small number of Woredas (districts) along the crest of the Eastern Escarpment have a severe deficit.
There is however an energy production potential from agro-processing industries (processing sugar cane bagasse, cotton stalk, coffee hull and oil seed shells). Up to date, no grid-connected biomass power plants exist. Several sugar factories have however been using sugar cane bagasse for station supply since the 1950s. A total of 30 MW of capacity surplus could be fed in the grid by sugar factories. Municipal waste and bio fuels on the other hand are barely used as energy resources. No estimation of municipal waste power production potential is available at the time, power production potential of landfill gas is estimated to be 24 MW. The current GTP plans to disseminate 25,000 domestic biogas plants, 10,000 vegetable oil stoves and 9.4 million improved stoves by 2015.
Ethiopia has an enormous potential for hydropower developments, while the total endowment of hydropower is estimated to be up to 45,000 MW per annum, only 3% of the country’s hydropower potential is currently being exploited.
In Ethiopia, estimated geothermal resource potential for power generation is about 5,000 MWe. So far, exploratory drilling has taken place in Aluto-Langano (1982 to 1985) and Tendaho-Dubti (1993 to 1998) geothermal fields. Detailed surface exploration has been completed in four other geothermal prospect areas (Corbetti, Abaya, Dofan Fantale and Tulu Moye).
A 7.3 MWe geothermal pilot power plant has been installed at Aluto. This pilot plant is currently generating about 4 MWe. Feasibility study for the expansion of the Aluto Langano Geothermal power has been recently completed with the Japanese Overseas Development Assistance. On the basis of this study, drilling of four deep appraisal wells is planned for 2012 with the technical assistance of government of Japan and loan from the World Bank. The government is now working on expansion of the Aluto-Langano geothermal field to 70 MWe. The WB, AfDB and JICA are involved in financing expansion of this geothermal field. Other geothermal prospect areas in the Ethiopian Rift Valley that are at reconnaissance stage of exploration are: Teo, Danab, Kone and others.
In October 2013, Ethiopia signed a preliminary agreement with a U.S.-Icelandic firm for a $4 billion private sector investment intended to tap its vast geothermal power resources and produce 1,000 MW from steam.Close Renewable energy
The electricity losses through transmission and distribution in Ethiopia are around 20%, which is much higher than the international average of 12-13%. Most of the loss happens during distribution from the national grid to end users. The World Bank is financing projects to promote efficiency and the automation of distribution.
Low energy consumption and the use of renewable energy are important indicators for an environment-friendly and sustainable energy supply. A major problem is that biomass, which covers the majority of Ethiopia’s primary energy demand, is used in a very inefficient way, leading to deforestation and further environmental problems like soil erosion. Hence, the lack of access to modern energy services leads to traditional biomass use, and biomass use in turn leads to unsustainable environmental harm.
The Ethiopian Electric Power Corporation (EEPCO), founded in 1956, is the state-owned utility in charge of electric power generation, transmission, distribution, sales service in the country and maintenance of the national grid. The company has been undergoing various continued transformations, such as via Customers’ Management System (CMS), decentralization of Accounting and Billing system from once highly centralized down to the regional distribution offices, districts, and customer service centres (CSCs), and Prepayment (Metering) System, in an effort to realize its long term strategic vision of “becoming a centre of excellence in providing quality electric service to everyone’s doorstep and being competitive in energy export.”
Institutionally, Ethiopia has moved from a vertically integrated monopoly towards an autonomous entity that ensures transport and distribution and allows for private generation. EEPCO is mandated to encourage private investment in the energy sector and relevant laws were enacted in 2005 and 2007. Private sector power purchase agreements are negotiated with EEPCO. Independent Power Producers (IPP) are promoted to supply power through the Electricity Operations Regulations (49/1999), the letter of power sector policy (2003) and the Investment proclamation (280/2004).Close Ownership
Ethiopia has, for the first time in its history, opened up its electricity generation and distribution sector to private investors. The decision follows the ratification of a new proclamation by Ethiopia’s House of People’s Representatives last week. Prior to the new law, EEPCO was the sole organization in charge of power generation, transmission, distribution and sale of electricity in the country. However, now private power companies looking to invest in the industry can compete with EEPCO.
A newly established entity, the Ethiopian Electric Agency (EEA), will monitor private investments in the energy sector and is also expected to set prices for the private and state power distributors.
The government in Ethiopia split into two the Ethiopian Electric Power Corporation (EEPCO), one of the state owned giant public utilities and renamed it the Ethiopian Electric Power Office (EEPO) and Ethiopian Electric Service (EES). The two are tasked to undertake what industry analysts say is an over ambitious plan of becoming an international company. The government says it decided to split EEPCO after three years-long study and consultation with an international consultant. According to the new arrangement, Power Grid Corporation India (PGCI) took the management of the Ethiopian Electric Service (EES) on a two and half year contract. According to the contract, PGCI will carry out power feasibility studies to determine the highest needed voltage power capacities of transmission lines. The company won the contract for 21 million USD.Close Competition
The Government of Ethiopia has taken a number of policy measures in the last two decades related to energy, but there is limited evidence of specific policy or legislative action on renewable energy. Some frameworks have been constituted comprising of ancillary policies and legislation that will have measures contained therein with respect to renewable energy. Examples include, the 1994 National Energy Policy addresses the household energy problem by promoting agro-forestry, energy efficiency in biomass fuels and facilitating a move towards increased use of ‘modern’ fuels i.e. renewable sources. The Policy also seeks to encourage private participation in the energy sector development. Ethiopia’s national development plan -Growth Transformation Plan (GTP) 2011-2015), promotes Green Development Strategy with the aim of meeting the demand for energy in the country by providing sufficient and reliable power supply. The plan promotes an extensive hydropower expansion plan that includes the Blue Nile dam with electric generation capacity of 5,250 MW, sufficient for domestic use as well as for export. It also plans to expand the biofuel, wind and solar energy sector.
A Climate Resilience and Green Economy (CRGE) strategy has also been set up which has the policy objective of expanding electricity generation from renewable sources of energy for domestic and regional markets. There is also the Electricity Feed-in-Tariff Law (2012) to encourage the diversification of the power mix in the national grid and thus making power supply more reliable and less prone to be affected by weather and market conditions. Additionally there is the Alternative Energy Development and Promotion programme to develop the country’s abundant renewable energy resources and technologies through adoption or innovation of new technologies.
Ethiopia was chosen as one of the first six pilot countries after submission of an expression of interest by the Environmental Protection Authority in June 2010. It then developed its final proposal in February 2012 and presented it for sub-committee approval in March 2012 at the CIF partner countries forum in Washington D.C. Ethiopia’s Scaling-Up Renewable Energy Program (SREP) was designed under the leadership of the government in coordination with the African Development Bank (AfDB), members of the World Bank Group (IBRD, IFC), other development partners, and key Ethiopian stakeholders. The output of this sub-committee is an “endorsement in principle” of the Ethiopia SREP component and future approval of actual amounts after MDB agreement of intended projects and specific project activities. Ethiopia is tapping $50 million (96% grant, 4% loan) for one geothermal (Aluto Langano, 200 MW) and one wind project (Assela, 120 MW), as well as a clean energy SME facility.
The current energy sector policy of the country aimed a five-fold increase in renewable energy production by the end of 2015, from a current 2,052 MW (52 MW added from wind in December 2012) to about10,000 MW and also targets to export power to neighbouring countries since power demand in Ethiopia is constrained by limited consumption due to underdevelopment. To meet the above target the Ethiopian government is aggressively constructing eight wind farms with total capacity of 1116 MW, one geothermal plant with capacity of around 70 MW and a number of hydropower plant projects, including the 1,870 MW Gilgel Gibe III dam on the Omo River, the 2,000 MW Gilgel Gibe IV dam and the 6,000 MW Grand Ethiopian Renaissance Damon the Blue Nile river. Currently, four wind farms are under construction and one wind farm with capacity of 52 MW power already completed in December 2012. According to EEPCo the longer-term plan is to hit a target of zero carbon emissions by 2025 with hopes that the private sector will play a pivotal role to help meet these goals (Asress, 2013).
National Biogas Programme (NBP) of Ethiopia
This programme was established in 2007 and works with EREDPC to promote the uptake of domestic biogas in selected regions in Ethiopia. The programme operates on a cost-sharing basis with other investors and donors. Results to date include over 1,200 biogas plants constructed and the programme is operating in 37 woredas. The model from the national biogas programme has been studied for its application to the national investment programme on improved cook stoves.
GiZ Energy Coordination Office (ECO)
Working with the Ministry of Water and Energy the ECO has since 2010 been working to promote renewable energy in Ethiopia. A key achievement includes that photovoltaic solar systems have been installed in 100 off-grid and remote public health centres and four community centres. In addition, Ethiopia's first solar technology training centre has been set up at Selam Vocational Training Centre, in Addis Ababa, in collaboration with the Ethiopian Alternative Energy Promotion and Development Centre, four pilot micro-hydropower plants have been constructed in three villages of the Southern Nations, Nationalities and People's Region, with a total capacity of 125 kW, and to date more than 650 small-scale producers of improved, energy-efficient cooking stoves have become established in 310 districts and seven regions which has led to the sale of an additional 500,000 cook stoves. This project will work closely with the GiZ Energy Coordination Office.
The Government is in the process of finalizing a Feed-in-Tariff proposal, which is expected to pass into law shortly, aimed at facilitating the deployment of renewable technologies, providing investment security and market stability to private RE investors. Incentives such as waiver of import duties, grant of tax holidays on dividends and interests incomes are on the table for negotiations. In addition to encouraging investment, such measures should contribute to lowering the cost of electricity supply and allow affordable tariffs.Close Energy debates
Ethiopia is an active participant of the Energy, Environment and Development Network for Africa (AFREPREN/FWD). The network is a registered Non-Governmental Organization (NGO) based in Nairobi, Kenya, with vast expertise on energy in East and Southern Africa and some experience in West and North Africa. AFREPREN/FWD brings together African energy practitioners, professionals, researchers, investors and policy makers from Africa who have a long-term interest in the development of cleaner energy services for Africa as well as energy research/capacity building and the attendant policy-making process.Close Energy studies
Ministry of Water and Energy (MWE)
The MWE is the federal institution responsible for development, planning, and management of energy resources as well as for creation of policies, strategies, and programs. The MWE develops and implements laws and regulations for the energy sector, provides technical support to regional energy bureaus and offices, and signs international agreements. Following the government’s restructuring of agreements in 2010, all duties and responsibilities of the former Ethiopian Rural Energy Development and Promotion Centre (REDPC) were transferred to new departments under the MWE, including the Alternative Energy Development and Promotion Directorate (AEDPD). Within the MWE, a Rural Electrification Fund has been established with the goal of debt financing small-scale rural energy initiatives.
Responsibility for the development and deployment of small scale renewable energy technologies lies within the responsibility of the Ministry of Water and Energy which has led the development of the off grid rural electrification master plan.
Other institutions that play a key roles in the energy sector include the Ministry of Finance and Economic Development (MoFED) in charge of public finances, the Ministry of Trade which is involved in the petroleum pricing system, the Ministry of Mines in charge of upstream hydrocarbon and geothermal resources exploration, the Environment Protection Agency in charge of regulating the environmental aspects of energy development activities.Close Role of government
Rural Electrification Executive Secretariat (REES)
Under the supervision of the AEDPD, REES is entrusted with the responsibility of supporting and promoting off-grid rural electrification projects through cooperatives and private sector operators acting outside the national grid. REES manages the Rural Electrification Fund (REF).
Regional Energy Agencies
Regional energy agencies are government bureaus responsible for promoting and facilitating programs that disseminate modern energy technologies.
Ethiopian Rural Energy Development and Promotion Centre (EREDPC)
Policy issues related to rural energy are the responsibility of the EREDPC. This department is focused on the issue of rural electrification, primarily through the expansion of the national grid. To date, the EREDPC has played a limited role in the promotion of small scale off grid renewable energy technologies and access to modern energy services.
In order to fulfil the country’s ambitious plans of expanding the use of biofuel, wind and solar energies and overcome barriers such as the low rate of electrification, the vastness of the country and the rugged topography coupled with the scattered settlement of residential areas that makes grid-based electrification too costly, the government has set up institutional and financing (Rural Electrification Fund) frameworks to facilitate and accelerate off-grid rural electrification particularly through solar PV and mini/micro hydropower development. The Rural Electrification Fund (REF) provides concessional loans to diesel (85% loan with an interest rate of 7.5%) and renewable energy projects (95% loan with zero interest rate). In order to favourably promote the renewable energy projects, REF provides 20-30% capital subsidy of the investment costs to project developers on a reimbursement basis. REF has distributed solar PV systems to 100 rural schools, 200 health facilities, and 600 households.Close Energy procedure
The Ethiopian Electric Agency (EEA, http://ethioelectricagency.org), established in June 1997, regulates operations in the electricity supply sector, including licensing and ensuring safety and quality standards.
A newly established entity, the Ethiopian Energy Agency (EEA) will replace the Ethiopian Electricity Agency (EEA) to encompass the energy sector in a broad spectrum. The regulatory body will control private energy investments in the country and will also set prices for the private and state power distributors. According to the new law that was ratified by the House of People’s Representatives in November of 2013, the EEA will be headed by a board of directors and the board will review tariff proposals for the national grid and submit them to the Council of Minister’s for approval. Moreover, the board will approve off-national-grid tariffs directly without any approval from higher bodies.Close Energy regulator
The Electricity Proclamation No. 86/1997 of June 1997 established the EAA as an autonomous federal government organ, becoming fully operational since the beginning of 2000. EEA, through the General Manager, is accountable to the Ministry of Infrastructure. The General Manager is appointed by the government through recommendation of the Minister of Infrastructure. Budgeting for the EAA comes from allocated government funds and licence fees.Close Degree of independence
The Ethiopian Electric Power Corporation (EEPCo) is mandated to encourage private sector investments in the energy sector and related proclamations were enacted in 2005 and 2007. Private sector power purchase agreements (PPAs) are negotiated with EEPCo. Independent Power Producers (IPPs) are encouraged to enter the market through the Electricity Operations Regulations (49/1999), the letter of power sector policy (2003) and the Investment proclamation (280/2004). The regulatory framework in Ethiopia provides a reasonable level of support for geothermal power project developers who can buy geothermal exploration licenses and concessions from the government. MWE has also introduced feed-in tariff legislation that will establish the rates and conditions for independent power producers to sell electricity to the national grid. However, the bill has gone through several revisions and it is not clear when it will become law.Close Regulatory framework
The EEA is striving to fulfil the expansion of efficient, economical electricity supply and equitable distribution; through the Regulation No 49/1999 issued by the Council of Ministers, the directives prepared by the Ministry of Infrastructure and the procedures of the Agency itself, so as to play a key role in contributing to the efforts to bring about the rapid socio-economic development of the country.Close Energy regulation role
Energy generation and delivery in Ethiopia involves a wide range of state and non-state actors. Clearly, there is a need for a strong leading institution to harmonize and coordinate all efforts. While the national grid (the “Interconnected System” or ICS is the sole responsibility of Ethiopia Electric Power Corporation (EEPCO), the Ministry of Water and Energy is responsible for off-grid rural electrification, and the two institutions follow different approaches. Although technically, EEPCO functions under the Ministry of Water and Energy, in the two-track rural electrification strategies there is no integrated master plan, implementation strategy, or clear resource planning methodology.Close Regulatory barriers
M.B. Asress et al.: Wind energy resource development in Ethiopia as an alternative energy future beyond the dominant hydropower. Renewable and Sustainable Energy Reviews 23(2013) 366–378. Available at www.elsevier.com/locate/rser
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GEF (2012): Promoting Sustainable Rural Energy Technologies (RETs) for Household and Productive Uses Available at http://www.thegef.org/gef/sites/thegef.org/files/gef_prj_docs/GEFProjectDocuments/Climate%20Change/Ethiopia%20-%20(5501)%20-%20Promoting%20Sustainable%20Rural%20Energy%20Technologies%20(R/Sustainable_Renewable_Energy.pdf Accessed 27th February
Ethiopian Investment Agency (2013): Ethiopian Investment Guide Available at http://www.ethemb.se/TEXT%20files/Investment_Guide%202013.pdf Accessde 27th February
US Commercial Service (2013): Doing Business in Ethiopia: 2013 Country Commercial Guide for U.S. Companies Available at http://photos.state.gov/libraries/ethiopia/956093/PDF%20Files/CCG-Ethiopia-Final.pdf Accessed 27th February
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Reuters.com (2013): Ethiopia opens Africa's largest wind farm to boost power production Available at http://www.reuters.com/article/2013/10/26/us-ethiopia-electricity-windpower-idUSBRE99P04Z20131026 Accessed 27th FebruaryClose References