This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 10/30/2019

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 105 million people and meet growing electricity demand that is forecast to grow by approximately 30% per year.

                     Energy Resource Potential of Ethiopia

ResourceUnitExploitable ReserveExploited Percent
HydropowerMW45,000<5%
Solar/daykWh/m24 – 6<1%
Wind: Power
Speed
GW
m/s
100
>7
<1%
GeothermalMW<10,000<1%
WoodMillion tons112050%
Agricultural wasteMillion tons15-2030%
Natural GasBillion m31130%
CoalMillion tons3000%
Oil shaleMillion tons2530%
                         Source: Ethiopian Electrical Power

Under GTP II (2015-2020) the government has planned to increase the installed generation capacity by an additional 5,000 MW by 2022. Based on updated planning projections from Ethiopian Electric Power (EEP), the forecasted total installed generation capacity will be 10358 MW by 2022. EEP is charged with maintaining more than 14 hydropower and three wind power plants throughout the country, but has announced that EEP will not develop or operate new power generation facilities going forward. EEP instead focus management of existing power generation plants, substations and transmission lines, with all new power generation projects to be developed as Independent Power Producers (IPPs).

Ethiopia’s Growth and Transformation Plan I (GTP) outlined a 15-year plan with three 5-year phases to transform Ethiopia from a developing country to a middle income country by 2025. Under GTP I (2010-2015), the goal had been to increase the installed generation capacity from 2,000 MW to 10,000 MW primarily through hydro power projects. With some of those projects still under construction, the country currently has approximately 4,500 MW of installed generation capacity.
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 Government of Ethiopia (GOE) is now diversifying the generation mix with other sources such as solar, wind and geothermal that will result in a more climate-resilient power system.

The Metahara solar IPP project is expected to generate 100 MW following signing of the Power Purchase Agreement (PPA) and approval of the Implementation Agreement (IA) by the GOE. Enel Power, an Italian company, will develop and operate the project. The GOE is also working with the private sector to implement the Corbetti and Tulu Moye geothermal projects with over 1,000 MW of combined generation capacity. Amendments to the geothermal and Public Private Partnership (PPP) Proclamations by the House of Peoples Representatives is the last critical step to conclude these two 520 MW projects. On August 19, 2018, Africa’s first waste to energy facility, with a generation capacity of 25 MW of electricity, was inaugurated in Addis Ababa and started producing power. This facility has the capacity to consume 420,000 tons of trash per year. The Grand Ethiopian Renaissance Dam (GERD), expected to be the largest dam in Africa and to generate 6,450 MW of electricity at full capacity, is reportedly 67% completed. 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.

Ethiopia exports electricity to Djibouti and Sudan (up to 100 MW/each). There is a plan to increase power exports to Djibouti up to 400 MW due to a growing demand in the region. Ethiopia is also negotiating a PPA to begin power export to Kenya for up to 400 MW.
Construction of an Ethio-Kenya transmission line is expected to be completed in late 2019. The total transmission line length has reached 17448 km. and 4000 km of the transmission line remains under construction. This will increase the total transmission line length to 21448 km in two years. According to the GOE’s recently launched National Electrification Program 2.0, 44% of the country has access to electricity (33% on-grid, 11% off-grid). However, over half of the on-grid consumers do not have a formal connection,  3.8 million households.  

The GOE recognizes that partnership with the private sector via IPP agreements for power generation is crucial to meeting the country’s needs. EEP has developed procurement processes to select contractors and is awarding projects using a competitive bidding process. 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. The procurement manual was launched in June 2018 during the visit of Gil Kaplan, Under Secretary of Commerce for International Trade. Power Africa has assisted EEP with the development of IPP tender documents and the legal and regulatory IPP framework. In February 2018, Ethiopia enacted a proclamation that will 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. Following this proclamation, the PPP Directorate under Ministry of Finance approved 14 power projects which includes five major hydro and eight solar IPPs at the cost of $5.3 billion for a total generation capacity of 3000 MW. Out of the eight solar projects approved by the PPP Board, two have already reached the bidding stage through the International Finance Corporation (IFC) supported Scaling Solar program. These will be developed in Afar Regional State and Somali Regional State with a combined capacity of 250MW (125 MW each) at a cost of $150 million each. IFC plans to provide both financial and technical supports for these projects, and has recently expanded Scaling Solar to cover the remaining six solar projects on the approved PPP list. The Expression of Interest for these new projects was issued in May 2019.

Power Africa Support:
To help achieve Ethiopia’s goals of expanding access to electricity under the Growth and Transformation Plan and National Electrification Program 2.0, Power Africa supports the development of new generation and connections, rehabilitation of the distribution system, self-sufficient 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 international finance institutions and other development partners. In supporting the entry of the private sector, Power Africa has assisted with new IPPs and the transition to competitive tendering, as well as strengthened 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 includes:
•              Developing laws and regulations that will facilitate private-sector investments through IPPs in geothermal, solar, wind, hydro, and biomass generation projects.
•              Supporting EEP’s use of competitive and transparent procurement process for IPP generation projects.
•              Assisting EEP and Ethiopian Electric Utility (EEU) with the planning, operation, and maintenance of generation, transmission, and distribution systems as the grid is expanded.
•              Introduction of the national grid code and support to the Ethiopian Energy Authority (EEA) in its implementation and enforcement.
•              Developing a process for EEU to improve distribution efficiency and assist with the introduction of “smart grid technology”.
•              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.
•              Supporting the Eastern Africa Power Pool to promote cross border power trade between Ethiopia and other member countries.

For more information on the Power Africa strategy to address key challenges in Ethiopia’s electricity sector and their support for private sector investment in energy, please refer to: https://www.usaid.gov/powerafrica/ethiopia.

Renewable Energy Market                                             
 
Unit: USD ‘000
2017
 
2018
 
     2019
 (estimated)
    2020
(estimated)
Total Market Size1,408,797 1,401,669
 
1,968,6262,263,919
Total Local Production151,263 
394,560
518,400596,160
Total Exports84,000                    80,468
 
92,538
 
106,419
 

Total Imports
1,341,534
 
  1,087,5771,542,764
 
1,774,178
Imports from the United States98,321
 
 67,523
 
77651.45
 
89299.17
 
Exchange Rate:
 
22.4428.79  

Source: National Bank of Ethiopia and EEP

Leading Sub-Sectors  
•              Engineering services to supply more renewable energy sources, such as wind, solar, geothermal, biomass (municipal landfills, organic waste) as well as hydropower, are highly desired in Ethiopia.
•              Supply and/or manufacturing of drilling rigs and associated equipment, 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. This maintenance works are priority 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:  www.eep.gov.et/.
Please refer to the Project Financing section of Chapter 7: Trade and Project Financing for specific project opportunities.

Web Resources
Power Africa
United States Agency for International Development
https://www.usaid.gov/powerafrica/ethiopia
Ethiopian Electric Power (EEP)
http://www.eep.gov.et/
Ethiopia Electric Utility (EEU)
www.eeu.gov.et
Ministry of Mines
www.mom.gov.et/
Ministry of Water, Irrigation, and Energy
http://www.mowie.gov.et/
The World Bank
http://www.worldbank.org

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Ethiopia Energy Trade Development and Promotion