Ethiopia has seen a surge of activity in recent years, with the government commissioning over 1GW of large hydro and 80MW of wind since 2009, and contracting several more projects. It has also finalised terms with its first independent power producer (IPP) for up to 1GW of geothermal power.
The power generation mix is dominated by large hydro, which accounts for approximately 80% of the 2.3GW of installed capacity. The government’s guiding Growth and Transformation Plan 2010-15 aims for 10GW of hydro power by 2015 – largely based on the 6GW Grand Ethiopian Renaissance Dam Project – while a draft ministry plan sees 24GW overall capacity by 2030. For its part, the state utility is targeting 37GW by 2037 in a draft update to its 25-year master plan, originally introduced in 2000. There have also been attempts to update the 20-year old National Energy Policy to provide a coherent strategy. The country has serious ambitions to become a major regional exporter of power based on its abundant energy resources. Renewables (excluding large hydro) currently make up just under 20% of the mix, with the largest share going to wind energy, followed by small hydro.
Ethiopia’s power sector was until recently under the control of the state owned monopoly utility, the Ethiopian Electric Power Corporation (EEPCo). In late 2013, EEPCo was split into two, with Ethiopian Electric Power retaining control of generation and transmission and Ethiopian Electric Services taking charge of distribution. Both remain state owned, though three Indian companies have been contracted to manage the latter. The 2013 legislation also established a new Ethiopian Energy Authority (EEA) to replace the existing Ethiopian Electric Agency, with expanded regulatory power, among them the permitting of IPPs and tariff scrutiny. The new law also established an Energy Efficiency Fund under the EEA’s remit.
In 2015, the country may see an additional 223MW of renewable energy commissioned, increasing its total to 640MW. The largest contribution will be from wind power, which will add 153MW.
While Ethiopia has vast geothermal resources, the technology remains untapped with only 7MW installed. In 2015 a power purchase agreement was concluded for the first 500MW from the Corbetti project – the country’s first IPP (the goal is to expand that project to 1GW eventually).
The government is working on its second Growth and Transformation Plan for 2015-20. Under the new plan it expects to invest $20bn over those years and increase overall installed capacity to 15GW. While there are no hard targets for renewables, geothermal and wind remain target areas for further investment.
Ethiopia offers import duty exemptions on solar equipment, but importers report that the lack of technical standards has allowed the market to be flooded with substandard products. Manufacturers are eligible for a range of tax incentives but the country has not yet attracted significant clean energy manufacturing.
The country has had a biofuels blending mandate in place since 2008 when it introduced a 5% ethanol blend. The government planned to increase the blend to 20% in January 2015 but cancelled the increase due to delays in the commissioning of ethanol plants.
Score Summary
Ethiopia scored 1.17 in Climatescope 2015, placing it 26th on the list of countries overall. This was a drop of seven places compared with 2014. The country’s highest ranking was on Low-Carbon Business & Clean Energy Value Chains Parameter III.
On Parameter I, Ethiopia finished 30th overall. It was supported by the presence of a rural electrification programme and energy access policies, including targets and tax incentives.
On Clean Energy Investment and Climate Financing Parameter II, the country placed 25th. The country’s relatively low average cost of debt was a positive factor, but clean energy investment dropped to less than $10m in 2014 from $840m a year earlier.
Ethiopia’s relatively high score on Parameter III saw it ranked 16th overall, helped by the presence of 14 service providers.
On Greenhouse Gas Management Activities Parameter IV, the country scored below average. Its strongest performance was in the Carbon Offsets category.