Ethiopian Energy^Power Business Portal,eepBp

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Assessment of Ethiopian Energy sector Reform: where it stands

(Vivien Foster, 2019), Rethinking Power Sector Reform in the Developing World report suggests that future power sector reforms should be shaped by context, driven by outcomes, and informed by alternatives with a clear departure from the normative 1990s power sector reform prescription which comprised a package of four structural reforms: Regulation (through the creation of an autonomous regulatory entity); Restructuring (entailing corporatization and full vertical and horizontal unbundling of the utility); Private sector participation (particularly in generation and distribution); Competition (ultimately in the form of a wholesale power market).

(AfDB, 2019), Revisiting Reforms in the Power Sector in Africa, asserts that the power sector in Africa still largely retains the traditional integrated monopoly utility structure, although many have included IPPs, despite the standard model Prescription of the reform targeting all segments of the power sector value-chain in Africa, and in very different ways pointing that the standard model reforms generally did not prioritize social and political goals of expanding access to electricity and clean energy sources, nor improving equity or affordability conditions.

Ethiopia being among the laggards in terms of implementing the standard policy prescription, it has taken the first few steps including setting up an independent regulator and vertically unbundling the state monopoly in to two separate utilities since the beginning of 2013. The reform process continues to unfold albeit a slow and cautious pace.

The constitution, the supreme law, ensures the right of every citizen to the ownership of private property, including the right to acquire, use and dispose of such property and the Commercial Code of the 1960(Under review) provides the legal framework for undertaking business activities in Ethiopia. The Investment Proclamation (Proclamation No 769, 2012) and its consequent amendment  (Investment Amendement No 824, 2014) then gives a foreign investor the right to own a dwelling house and other immovable property necessary for his/her investment.

The investment proclamation (Proclamation No 769, 2012) and investment regulation(Regulation No 270, 2012) that guide the energy investment among others rules that the transmission and distribution of electrical energy through the integrated national grid system is among the areas of investment reserved for the government or with joint venture with the government opening the generation sector for private investment for the first time in the country’s history.

The energy law and the energy regulation are then set in line with the investment proclamation and investment regulation. The energy proclamation (Proclamation No. 810, 2013), the subsequent energy law amendment (Energy (Amendment) Proclamation No 1085, 2018), the geothermal Proclamation (Geothermal Resources Develoepement Proclamation No 981, 2016), the energy regulation (Energy Regulation No 447, 2019), Electricity Operation Regulation No 49/1999 and the specific directives set by the energy authority clearly define the energy sector rules, regulations and institutional responsibilities and obligations.

The public private partnership, PPP, proclamation (PPP Proclamation No. 1076, 2018) further defines the role of the private sector, and recognizes them as an essential strategic partner to realize the country’s development objectives, including the infrastructure system and clearly sets the playing rules.

To date, both utilities, Ethiopian electric power, EEP, and Ethiopian electric utility, EEU, have entered in to partnerships with the private sector in a bid to strengthen the transmission and distribution infrastructure with public private partnership, PPP, business model following the reform process. Additional generation investment is expected to come from IPPs with a guaranty of the state owned utilities to be the power purchasers. The reform process has also resulted to the decentralization of Ethiopian Electric utility aligning the regional offices to the political regions.

Energy and Power Sector Institutions

The Ministry of Water Irrigation and Electricity, MoWIE, is responsible for setting the energy policy, planning, strategic oversight, sector financing, coordination of stakeholders and monitoring of the all the energy units in the country. The Directorate of Electrification, DoE, a functional expertise set up within the ministry, is tasked to coordinate the NEP2.0 program specifically designed to address the access challenge by 2025.

The energy proclamation paves the stage to the formation of Ethiopian Energy Authority tasked to licensing, energy efficiency, energy conservation and sector regulation among other responsibilities. The 2013 institutional reform also resulted in the first ever vertical unbundling of Ethiopian Electric Power Corporation, EEPCo, the state’s sole electric utility used to be charged to generate, transmit, distribute and sale of electricity in two new utilities of Ethiopian Electric Power, EEP, and Ethiopian Electric Utility. While the first has been mandated to generate and transmit electricity at a higher voltages, the latter has been charged to distribute and sale energy at the lower voltages covering the whole scope of responsibilities of EEPCo in combination.

Ethiopian Energy Authority, EEA, Ethiopian Electric Power, EEP, and Ethiopian Electric Utility, EEU, are all accountable to the Ministry of Water Irrigation and Electricity, MoWIE.

Regional Energy Bureaus, REBs, will also play a key role in representing the states and local administrations’ interest in the overall energy sector planning and development. Enabling and engaging regional energy bureaus, REB, will have a tremendous impact on the energy access effort of the country rather than staying dependent on the central ministry’s decisions as the formers have local presence and knowledge especially in increasing modern cooking technologies where there is a culture significance for adoption of cooking technologies.    

Energy targets and current situation

The world is witnessing an energy transition towards renewables and sustainable energy sources driven by depleting primary energy reserves and due to the impacts of global warming. Ethiopia too is at a time of its own energy transition in three new dimensions: aligning to the global energy transition, the need to accelerate the electricity access coverage and the resilience of its infrastructure through diversification of the electricty supply, and most significantly the opening up of the sector for private participation.

The Growth and transformation plan, GTP, being the main guiding document of the overall development strategy of the country for almost a decade now, the country has made a commendable progress in terms of increasing the generation capacity (4300MW as of March 2019), the transmission and distribution infrastructure, the access coverage (44% as of March 2019), clean and modern cooking services and the last mile connectivity. Despite the progress made, Ethiopia still remains one of the primary examples of having the lowest level of energy access, clean and modern cooking services and per capita energy consumption in the world.

Most of the progress made in the electricity sector over these years was through a policy focused to a large extent on grid expansion and on large scale hydropower development, the public being the major sponsor of the investments consequently resulting in a rise in the public debt. For a country such as Ethiopia, the intervention of the public sector is critical given the real and perceived risks deterring investments in the sector but it is widely acknowledged that by leveraging the DFI grants, public and concessional finances, a much greater impact would have been achieved through a mix of business models, syndication and by engaging the private sector.

The country has now realized the importance of new business models and financing instruments to reach the ambitious goals of the GTP of ensuring sustainable, reliable, affordable and quality electricity service for all sectors in an environmentally sound manner and become a renewable energy hub in the Eastern Africa region by 2025, foreseeing an increase in electricity coverage from 60 to 90 % by 2020, and reaching a power generation capacity of more than 17 000 MW, a total length of distribution lines of 21728 km, a total number of customers (connections) of almost 7 million and an annual per capita energy consumption of 1269 kWh by 2020.

In light of these new realities and developments, the government issued a new National Electrification Strategy (NES, 2018) with a strategic focus and priority on last-mile connectivity. The NES identifies three key sector challenges that need to be tackled for the scale-up of connections: Institutional, Planning and technical and Financial. NES also considers the Government’s commitment as the key catalyst of change and overseeing institutions for the achievement of the universal electricity access development goal.

The NES strategy was then followed by the launch of the National Electrification Program, (NEP, 2019), outlining the Implementation Roadmap and the Financing Prospectus. The NEP program not only gave prominence to the rapid scale-up of connections in areas that are in the vicinity of the network but also set out the ambitious objective of ensuring universal electricity access by 2025 and it was therefore organized into three key areas of intervention:

  1. On-grid electrification targeting to reach 65% of the population by 2025
  2. Off-grid electrification (both stand-alone systems and mini-grids) targeting to reach 35% of the population by 2025
  3. Financing and institutional framework (to support the first two areas).

The NEP envisioned that the private sector would play a significant role in the implementation of the different components of the electrification program. In the off-grid sector, a combination of public sector and private sector led delivery mechanism were foreseen. Private sector, market-based off-grid solutions were anticipated in the more commercially viable rural areas. In deep rural areas, the private sector was also seen as a driving force but accompanied by necessary government support.

In line with NES and NEP, there are also notable progresses made in the energy sector reform agenda including liberalizing the energy sector for private participation (PPP Proclamation, 2018), establishment of an independent regulator (EEA , 2014), vertically unbundling the state utility, strengthening the institutional capability of the key stakeholders with a goal of massively scaling up the solar, wind, and geothermal power generation capacity in addition to the traditional hydropower base.

Ethiopia is largely dependent on hydro and sufficient investment in all available resources is essential to maintain the energy security. There are commissioned wind power plants and ongoing geothermal and utility scale solar projects intended to diversify the energy mix. There are, however, real concerns of missing deadlines in the negotiation phases of the solar and geothermal projects and it is not a good sign for the overall growth of the energy sector. By effectively managing the timing of the power and water flows, and sufficiently investing on the widely available intermittent energy sources, the country can leverage the hydro power plants as storages ultimately sustaining the energy supply.  

In terms of access to modern cooking services where the sector lags behind most, Ethiopia targets dissemination of fuel efficient stoves to 3 million households, promotion of biogas systems to 0.8 million households, and use of other alternative fuels (electricity, LPG, solar) by 1 million households by 2030. (SNV Ethiopia, 2018), Review of Policies and Strategies Related to the Clean Cooking study finds out that Solid biomass fuels (fuelwood, charcoal, animal dung, and crop residues) are the main sources of cooking for more than 90% households in Ethiopia; modern bioenergy in the form of biogas and ethanol are used only by fewer than 20,000 households throughout Ethiopia; rural households are nearly totally dependent on biomass fuels (less than 3% use fuels other than biomass); urban households use a more diverse range of fuels – however, even in urban areas more than 80% depend on biomass fuels and Only 10% of households use energy saving stoves (for baking) and penetration of other modern and clean cook stoves is well below 10%; In rural areas fewer than 6% use improved and clean cook stoves.

In the energy efficiency dimension, Ethiopia needs to do more from policy to implementation. As Dr. Fatih Birol, iea’s Head, put it, “some countries are blessed with natural resources: but there is one energy resource that everybody has: energy efficiency. This resource is at the disposal of Ethiopia and energy efficiency improvement will be materialized only if the regulator could develop a strategy and effectively implement it across the consumer groups and industries. The energy loss is believed to be high in Ethiopia and there is a lot of room for improvement. Setting standards to appliances, enforcing them effectively and putting in place a cost reflective tariff could help improve the overall energy efficiency in the country. The energy efficiency target would be cost effective if it is centrally managed and monitored with a periodic target and incentives mechanism.  

Despite the potential, the level of penetration of productive uses of new energy sources other than the grid is still low. (GOGLA, 2019), Productive use of off-grid solar: appliances and solar water pumps as drivers of growth report, acknowledges that as the off-grid solar market expands, the number of products and applications are increasingly being put to productive uses ranging from the use of small solar systems in households for mobile phone charging, to lighting, sound and television in bars and restaurants, refrigeration and cooling, to SWPs for irrigation, agri-processing, and various industries such as carpentry, tailoring, welding and looming clearly PUE providing another market for off-grid solar alongside domestic use, drives income increases through improved productivity, and supports job creation and economic diversification.

Mainly driven by the government’s strategic focus on irrigation, the Ministry of Finance of Ethiopia (MoF) has approved the imports of agricultural mechanization, irrigation and animal feed technologies, and equipment to be tax-free aimed at enhancing the agriculture sector. By removing duty and taxes on imports the government provides incentives to invest in the importation and local production of these technologies (ATA, 2019). Further policy, regulatory and directives clarity and unified enforcement of the rules across all concerned stakeholders would help maximize the intended outcome boosting productivity and creation of more jobs in the energy value chain. 

Planned Financing Sources for Programs and projects

Acknowledging the massive investment need in the electricity infrastructure development and to ensure sufficient financing for the planned targets, the government made a shift in policy favoring the private sector participation. For instance, (NES, 2018) made IPPs the preferred implementation modality for most power generation projects, unless a financing package with very concessional loans can be presented.

Dissemination of solar lanterns both in the official and non-informal channels is widespread in Ethiopia. However, the country remains laggard in the End-user financing models for larger solar home systems which are witnessed as one of the biggest electricity access accelerators in the whole of Eastern Africa region and elsewhere.

NES provided recommendations for immediate interventions and highlighted the need to define a national electrification policy indicating targets and timetables for the connections rollout (grid and off-grid); the roles and responsibilities as well as coordination of sector institutions and stakeholders (including the private sector); and adequate and sustained funding for the duration of the programs.

In terms of financing the programs, the government estimated a public sector cost of USD1.5 billion out of the USD6 billion total financing requirement over the five years period to realize the NEP-IRM program targets. The public sector allocated close to USD1billion for the grid expansion, USD478 million for the off grid sector and USD 48 million for technical support with a significant void expected to be filled by the private sector out of the anticipated syndication of about USD 6 billion total financing requirement . The government plans to mobilize the financing required for the implementation of the program from the end user connection fees, government equity, grants and concessional loans from the development partners, social and climate financing sources. The plan also envisioned to ensure the long term financial health and viability of the electricity sector by revising the retail tariff framework and cross subsidizing the sector from export revenue ultimately maintaining a positive sector cash flow and easing the debt service obligations of the overall sector.

Table 1.0: Summary of program financing requirements (2018-2022)(Public share)

Source: National Electrification Program, 2017

Despite the forthcoming opportunities, the current available reference of how the private sector could be part of the game is gloomier; neither localized, exhaustive and well organized tools and instruments are available. As I laid out in a (Research Proposal on Financing and Business Model impact: Assessment on Ethiopia’s National Electrification program, 2019) , a research proposal for OAP2019 module, identifying all financing sources, combination and mix of instruments targeting the energy sector would help build transparency and de-risk investment throughout the energy value chain.

Just for a general perspective, (Energizing Finance Report Series, 2019) An annual report developed by Sustainable Energy for All in partnership with Climate Policy Initiative that includes Ethiopia as one of the high impact countries, HIC, countries with the highest gaps in energy access, puts the Percentage of population without access to electricity at( 56%, 2017) and the Percentage of population without access to clean cooking solutions at ( 97%, 2017). Despite the huge access gap, the financial commitment remains insufficient, the report finds out.

Current Business models Being Practiced

Given the new developments such as the country’s liberalization agenda, the NES and NEP, new business models and financing mechanisms are on the horizon in the electricity sector against the historical sole public sector led development. To realize the stated targets, the NES wish to deploy a combination of public and private, Grid and Off-grid, and a mix of all technologies based on a geospatial least cost approach and mobilizing all sectors. The Government of Ethiopia has gained PPP transaction experiences while preparing a transparent and competitive procurement framework (auction based bidding process) for private sector investments in the energy sector ;the Metehara 100MW utility scale solar project, Gad and Dicheto 250MW utility scale solar project, recording the lowest bid price, and the ongoing geothermal projects as the key and recent examples. Establishing a transparent and coherent framework for competitive IPP energy tenders is work in progress, where the Government of Ethiopia is currently supported by different donors, and where good coordination with the overall PPP framework is also needed as pointed out in NES.


Electrification business models: Grid extension

Until very recently, Ethiopia’s electricity sector has been sponsored by the public sector where every aspect of the electricity gird expansion was solely owned and executed by the vertically integrated government owned electric utility. The land mark Universal Electricity Access Program, UEAP, which run from 2007-2015 is the best example as it was the major program responsible for increasing the access coverage in the country. The government sponsored the program by allocating the financing from its own sources and through funding obtained from the development partners. In addition to its own internal work force (on-force), the private sector was also a major partner in the access expansion program on a design build and transfer subcontracting business model subjected to the utility’s program office approval at every stage of the implementation.

At the power plant, transmission and substation construction side, EPC contracting played a key role with vendor financed debt instruments coupled with a small fraction of additional financing from the government’s own sources.

The integrated national electrification planning, NEP2.0, to be implemented between 2018 and 2030 targets to reach to 65 percent of the population through on-grid access benefiting those households located within 2.5 km from the existing grid, with a cumulative achievement of about 15 million grid-connected households 2025 accounting the population growth within that period. The on-grid road map intends to reach the targeted population through combinations regularization, densification, intensification, and extension mechanisms.

Connections in need of regularization—Meter loading is a well-known phenomenon in Ethiopia, which was quantified for the first time to amount to about 3.8 million households. These HHs have been identified as the difference between the customer accounts reported by EEU in 2019 (3.1 million HHs), and the number of HHs with grid access identified by the 2017 MTF survey and new access baseline (6.6 million HHs) plus the 300,000 connections achieved in 2018 (for a total of 6.9 million HHs). These customers are currently paying for the electricity consumed, but they are unmetered and often connected through unsafe service drops. Based on EEU estimates, the individual cost of regularization amounts to US$100 and the overall cost of the regularization program is US$380 million. Regularization will be part of the 2025 on-grid targets.

Densification—within 1 km from the existing grid, where about 4.5 million HHs will reside by 2025 and about 6 million HHs will be located by 2030, cumulatively. These households will require mostly low voltage (LV) network-related capital expenditures—such as service drops, household metering, and possibly shared pole top transformers. The average cost per connection is of US$222, ranging from the cost of a connection drop only to a limited LV network. The overall cost of the densification program is about US$1 billion by 2025 and US$1.3 billion by 2030 with population growth.

Intensification between 1–2.5 km from the existing grid, where about 3.7 million HHs will reside by 2025 and almost 4 million households will be located by 2030. These households will also require some limited MV extension for an average cost per connection of US$600 and an overall cost of the “proximate” extension program at about US$ 2.2 billion by 2025 and US$2.3 billion by 2030.

Extension—ranging from 2.5 and 25 km from the existing grid, serving almost 8 million HHs by 2030. These households are located farther away from the existing infrastructure and will therefore require incremental MV lines for an average cost of US$1,000 per connection, where connection costs range from US$900–1,300 depending on the location of households. The overall cost of the grid extension program is nearly US$8 billion and is expected to take place between 2025–2030.

Electrification business models: Micro-grids

Until very recently, the level of penetration of micro grid solutions has been very low in Ethiopia. The only good experience of micro grids in Ethiopia are the few diesel based micro grid sites in the remote locations of the country owned and managed by the utility itself. Realizing the micro grid potential and limitations of the grid, the government is now integrated micro grid solutions in its National electrification planning, NEP2.0,and implementation road map as a least cost option for a segment of the population that could not be served either by the grid or the stand alone systems in the foreseeable future. The Ethiopian Electric Utility, EEU, is currently piloting multiple mini-grids with the same model of the grid expansion. It is, however, placing additional management complexity to its distribution infrastructure which will again raise questions on its long term sustainability.

As part of the integrated electrification planning spanning from 2018 to 2025, NEP2.0 targets to reach about 5 million HHs (Off-grid access—Mid-term pre-electrification) benefiting those residing between 2.5–25 km away from the existing grid, who are expected to be connected by the grid at least cost after 2025 (between 2025 and 2030) contributing to 31 percent of access in the country. The plan envisions that the eventual delineation of the geo-spatial location, number, and nature of prospective beneficiaries will be determined in coordination with the scale and speed of grid developments. These beneficiaries will be served by off-grid solar and mini-grids systems in support of productive uses and social services (health and education) with public, cooperative, and private sector implementation.

Electrification business models: Stand-alone system

Close to 80 percent of the population of Ethiopia lives in the rural areas, the population density of which is very low in most places making the country one of the ideal places for off-grid solutions particularly standalone systems. Even before the government institutes formal regulations and support mechanisms for off grid alternatives, the rural people took the initiative to purchase standalone systems mainly solar lanterns through the informal channels. NGO supported solar home systems were also introduced to health centers and primary schools up until the government realized the potential of off grid solutions and become part of the game. As of February 2019, the government claims 11% of access from off-grid solutions.

As part of the integrated electrification planning spanning from 2018 to 2025, NEP2.0 targets to reach about 1 million households (about 4 percent of the population-with Off-grid access—Long-term deep rural HHs)) benefiting those located beyond 25 km from the existing grid who are located in progressively remote and scattered settlements and villages that are less likely to be served in a cost- and time-effective way by grid connectivity. These households in deep-rural areas will be priority targets for electrification, as they are not expected to be connected at least-cost by the grid by 2030 and will contribute to the achievement of 35 percent of off-grid access by 2025. This component is planned to be implemented with public funding support (Minimum Subsidy Tender supporting mechanism) and combined public, cooperatives, and private implementation.


Figure 7. The NEP integrated grid and off-grid components 

 Source: (NEP2.0, 2019)


(ESMAP, 2019), Mini Grids for Half a Billion People: Market Outlook and Handbook for Decision Makers report highlights that globally connecting 490 million people by 2030 will require utilities and private companies to develop and operate more than 210,000 mini grids and several important changes to the mini grid ecosystem to enable and scale up their portfolios including use of geospatial analysis to create national electrification strategies and mini grid portfolios for investment; workable mini grid regulations and enabling business environments that make it easier for mini grid companies to do business; stronger institutional frameworks; increased access to finance from investors and development partners and training and skills-building initiatives and effective community engagement strategies. The same report for Ethiopia shows that 57.6 percent of grid-connected households face 4–14 outages a week, and 2.8 percent face more than 14 outages a week and mini grids can provide a service that consistently exceeds the level of service provided by the main grid.

In addition, (USAID Power Africa, 2019), PAOP Off-Grid Solar Market Assessment of Ethiopia report timely finds out that Ethiopia’s pico-solar sector has seen strong growth in the last few years, with the most growth pertaining to systems ranging in size from 0 to 1.5 watt-peak (Wp) systems where large systems over 20 Wp have seen virtually no sales. The report identifies the closed trade system in the country, which does not allow foreign companies to be involved in the distribution of solar systems, as well as the lack of access to foreign exchange, which limits cash flow in the country, thereby limiting sales growth as the main barriers and the lack of financial services and access to banking, especially in rural areas where 65 percent of Ethiopian adults are “unbanked,” as additional limiting factor to growth in the off-grid sector in Ethiopia.

Refining the policy and regulatory frameworks for the off-grid sector in time will help de-risk investments and enhance private sector participation. In the current situation, how the private sector would be engaged in the off-grid sector is too vague and would not do much unless the country takes improvement measures. The off-grid sector generally needs government intervention given the ability and willingness to pay imperatives in the rural population. Sufficient lessons could be taken from the neighboring countries where the off-grid systems are creating more jobs and economic gains beyond basic lighting. 

As the cost of mini-grids and standalone systems continues to decline coupled with the low reliability of the main grid, consumers will be forced to deploy their own DRE sources posing a potential risk to the utility of losing larger income brackets. It is also a time for the regulator to shape the policy and regulatory frameworks of how to deal with such inevitable futures including putting in place a solution for grid integration issues for two way power flows, electric vehicle, EV, infrastructure demands and a cost reflective tariff in all access paths.

The government of Ethiopia has a strategic intention of integrating the power infrastructure to the neighboring countries in east Africa region and beyond. Sudan, Kenya and Dijibouti are already connected and there has been an interest to connect more countries in the future for potential cross border power trade. Against the common perception of the public where there is a claim to export power before meeting local demand, the power infrastructure is built to serve power a flow in either direction whenever there is supply and demand gap.  

The Business Climate and Initiatives for Improvement

(RISE, 2016), Regulatory Indicators for Sustainable Energy for Ethiopia Report indicated where Ethiopia stands in terms of regulation and planning of electricity access (78), energy efficiency (25), renewable energy (41), Clean cooking (N/A) and overall score of 48 out of hundred. As a contrast, the report too shows access to electricity (43%, 2016), access to clean cooking (4%, 2016), total renewable energy consumption (92%, 2015), and energy intensity (14%, 2011) clearly indicating the huge gap between policy and implementation where doing business challenge or putting policy in to practice is still difficult in Ethiopia’s energy sector.

(Ease of Doing Business in Ethiopia, 2020), a World Bank doing business indicator report, ranks Ethiopia 159 out of 190 economies clearly showing the amount of work the country needs to work to improve the doing business environment, encourage investment and private sector participation. The amount of investor and business startup fatigue is tremendous. The Ministry of trade, MoT, and Ethiopian investment commission, EIC, are working on initiatives to improve the doing business environment, yet at a low pace given the prevailing challenges businesses have been facing. The ability and lowering the cost of digitalizing operations in government enterprise is one of the key areas that can help improve transparency and confidence in the private sector.      

Cost of Energy Supply and Electricity Tariff

A World Bank report (Making Power Affordable for Africa and Viable for Its Utilities, 2016) best captures the situation in Ethiopia’s electricity sector where it indicated a very big gap between the electric supply cost and the cash collected. The revenue collected from electricity sales barely covers the operating expenditure and almost all the capital expenditure is covered by the government in the form of public debt both from foreign and local sources.


Fig 6. Comparison of electric supply costs with cash collected in 2014 U.S. dollars per kWh billed,

Source: (Making Power Affordable for Africa and Viable for Its Utilities, 2016)


With the current very low tariff regime, the utility mandated to expand the grid is in a very difficult financial situation to discharge its grid expansion responsibility fully let alone to invest in the off-grid systems. Despite the improvement measures being taken including deploying ERP systems, the very high management and technical losses, the widely common practice of power theft and the low institutional capacity are still exacerbating the situation as a vicious cycle.

The situation of the regulator has also been similar in many circumstances putting itself under different competing interests: low institutional readiness, political interference and low GDP per capita of consumers on the one hand and putting in place a cost reflective tariff that could support access expansion on the other hand.

The utility could use cross subsidization mechanism to support access coverage expansion. It would, however, be marginal given the larger proportion of unconnected population as compared to the population already connected to the national grid. The dispersed settlement of the rural population in Ethiopia would also make grid expansion costlier and it is critical for the stakeholders to devise new business models and approaches to address the energy poverty in the rural and deep rural populations.

After 12 years or so, the utility adjusted the electricity tariff starting from December 2018 that will again be revised every year for up to four years in a bid to lead to a cost reflective tariff in the long term. Questions are, however, being raised by the consumers given the tariff adjustment does not lead to an automatic provision of reliable power supply.   

Job Creation Potential of the energy industry

(IFC, 2019), Creating Markets in Ethiopia: Country Private Sector Diagnostic report assessed the landscape of the private sector , its investment potential and export performance of Ethiopia. The report too identifies the specific constraints to enabling the potential of the private sector as a driver of productivity growth and job creation where the energy sector is mentioned as one of the key enabling sectors among finance, logistics, ICT/telecommunication, transport, health and education. It is apparent that energy in turn is an enabler by itself to the other key enablers in addition to the main productive sectors.

(GOGLA, 2018), Employment opportunities in an evolving off-grid solar market report identified four main parts of the off-grid solar value chain, from initial technology acquisition and manufacturing, to sales and distributing of products, to technical installation, through to customer support and after sales services with a huge potential in creating high-value employment in the solar energy value chain alone. For Ethiopia, the off-grid solar sector is a clear example of the potential of creating more jobs and gain economic opportunities if the market barriers and constraints are sufficiently addressed in time.

So far, despite the decade’s long double digit economic growth, the ability of job creation in the energy and power sectors has not been as much as the investment for two essential reasons. One the one hand, the public institutions have been awarding major power infrastructure projects to foreign companies on a turnkey basis which keeps high value jobs to foreign expertise indirectly crowding out the local private sector and its ability to create more jobs. On the other hand, the off-grid sector has been less developed due to lack of policy focus and regulatory issues and as a result it failed to create more jobs. A change of course has to come if the country wishes to create opportunities for the burgeoning youth. End user financing options such us Pay as You Go systems are real opportunities for financial technology providers, merchants, mobile users, banks, MFIs and end users alike if the energy sector is lead in a holistic approach, for example.       

Gender Balancing and Mainstreaming

The participation of women in the energy sector as much as it is the case in other STEM and infrastructure sectors is very low. In lieu of the huge gender gap in the energy sector, there are strategic initiatives on balancing gender by the government and the respective ministries. With the help of the World Bank Group, the country is pioneering a new model to promote equality between men and women both in the institutions’ workforce and the consumer groups as it works toward universal electricity access, NEP2.0 being the primary example.


Overall, a shift in the mindset of all the players, government institutions in particular,   is desirable if we have to see the energy sector play its enabling role to the general economy; shaping policies and programs in creating more decent jobs, generating additional income gains without excluding the rural segment of the population, reducing the health and environmental imperatives, and closing the gender gap.

It is widely common to see utilities act as the only entities which protect the public interest without a sufficient regard of the missed opportunities of not being served. So long as they run their affairs as a commercial entity in commercial terms, leaving the protection of the public interest to the regulator, it would be a benefit to themselves, the private sector, the consumers, and the economy and more importantly to the larger mass of the population still hungry for any form of access to energy.   

Entrepreneurs need to be encouraged to be bold enough to try new technologies and business models, learn and unlearn methodologies quickly, build and manage the fast evolving knowledge across all economic sectors to be successful and impactful in the energy sector.

Ethiopian Week of Water and Energy, #EWEW, was hosted in June of this year by the Ministry of Water, Irrigation and Energy, #MoWIE. The platform was engaging and relevant to enable #MoWIE and other government organizations, academics from universities and research centers; private sector practitioners, development partners, NGOs, and international experts to join together to explore contemporary agendas, emerging directions and future challenges that are at the forefront of the country’s water and energy strategies and policies. It would be a benefit and relevant for the energy sector if the platform continues to engage the stakeholders and private sector on a regular basis.

A dubbed homegrown USD10 billion economic reform of the government planned to be implemented in three years’ time, anchors the private sector to create more jobs and considers the energy sector as one of the key enablers to the overall economy. It is, however, essential to continue to reform the sector to realize the stated objectives.

With the current pace of progress, it will be hardly possible to meet most of the key energy policy objectives by 2030 let alone by 2025, and in consequence it will have a knock on effect on other sector policy objectives and generally on the growth of the economy. It has been said loud and clear that the economy needs enough and reliable energy, people need access to any modern form of energy for lighting, cooking  productive uses to create more economic opportunities and reduce the health and environmental imperatives and it is the right time to have a new rigor and approach to move forward faster


You may find the PDF format here or the PDF including quoted materials 


So you have a bit of an understanding of the make of the energy sector in Ethiopia, I shared this write up to you. For a deeper understanding, I encourage you to continue to refer the quoted reports which are provided here so that you have the general perspective only.




AfDB. (2019, September 19). Revisiting Reforms in the Power Sector in Africa. Retrieved from African Developmenet Bank Group:

ATA. (2019, May 19). MoF Approves Tax Free Imports of Agricultural Mechanization, Irrigation and Animal Feed Technologies. Retrieved from Ethiopian Agricultural Transformation Agency, ATA:

Ease of Doing Business in Ethiopia. (2020). Doing Business. Retrieved from The World Bank:

EEA . (2014). Regulation to Establish the Ethiopian Energy Authority. Retrieved from

Energizing Finance Report Series. (2019, October 22). Energizing Finance . Retrieved from se4all:

Energy (Amendment) Proclamation No 1085. (2018). Resources: Energy(Amendment) Proclamation No 1085/2018. Retrieved from Ethiopian Energy Authority:

Energy Regulation No 447. (2019). Resoirces: Energy Regulation No 447. Retrieved from Ethiopian Energy Authority:

ESMAP. (2019, June 25). Mini Grids for Half a Billion People: Market Outlook and Handbook for Decision Makers. Retrieved from The World Bank Group:

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