Ethiopian energy policy, which includes the Rural Electrification and Universal Electricity Access Programme, has resulted in sizeable investment from the government and the donor community.
Over $780 million has been invested in the upgrading, maintenance and expansion of existing equipment as well as on new installations. Such efforts are set to improve the capacity and efficiency of the power sector in meeting current and future demand.
“The Ethiopian electricity industry has embarked on a growth trajectory,” notes Frost & Sullivan (power.frost.com) Industry Analyst Moses Duma. “Power sector reforms have attracted significant investments from the World Bank, the European Investment Bank, the African Development Bank and the government of Ethiopia.”
While the Ethiopian industry has been opened up to private participation, private companies are obligated to sell electricity to the state utility through power purchase agreements. Meanwhile, the utility is boosting its generation capacity through the construction of several hydro power plants.
Lack of adequate financial resources is hampering the growth of the Ethiopian electricity industry. The dearth of finances hinders the maintenance and servicing of archaic equipment currently in use. This lack of funds is a serious concern in a capital-intensive industry and threatens to stymie future expansion plans.
“With 98 per cent of its generation capacity being in hydropower, Ethiopia may face challenging times during droughts,” cautions Duma. “The majority of power plants in Ethiopia depend on water from the Nile and its tributaries. Financial constraints may also affect the ability of the utility to source diesel for generators when water levels are low.”
To meet this challenge, efforts should be undertaken to develop more thermal power plants in order to create a more balanced power generation mix.
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Strategic Analysis of the Ethiopian Electricity Industry