The Ethiopian Electric Utility (EEU) has announced the implementation of the highly delayed electric tariff adjustment that supports its financial stability and access to finance for projects to improve its services.
The tariff adjustment that was studied and put on shelves for over a decade had begun application about two years ago with different implementation phases until December 2021.
Shiferaw Telila, CEO of EEU, told Capital that
the revenue increment creates the confidence of lenders, who provide finance for projects including rehabilitation work. Previously we were not on prudent financial situations to access loan from banks. Banks demand the financial statement and if it is not sound no bank is interested to provide money. This has however now improved and has become promising because of the tariff change. For instance we are undertaking 8 billion birr worth of rehabilitation works in Addis Ababa, which is financed by loan,” he added. Since the tariff adjustment came into force some extra amount of revenue has been earned that could allow EEU to some extent fulfill required equipment and logistics.
The CEO reminded that previously the tariff was very small and could not enable the undertaking of other expansion and network rehabilitation works excluding covering operation cost due to that most of the city networks including Addis Ababa were not having the capacity of the current power demand and also the network was outdated that led for frequent power interruptions and poor operation.
Affordable electricity is a fundamental driver of economic activity. We see this in countries where cheap electricity has allowed them to create entire industries. Iceland doesn’t have any aluminum, but is the largest producer of aluminum per capita in the world. Why? Because Iceland has some of the cheapest electricity rates in the world: five US cents per kilowatt hour (kWh) for commercial customers. Affordable electricity is critical for every scale of business, from the aluminum smelting companies in Iceland, to the 600 million people in Africa who still lack access to power. Those 600 million need electricity to light their homes and run their businesses.
For markets where diesel costs less than $1.50 per liter, as is the case in much of rural Africa, businesses cannot afford to use electricity at prices above $0.50 per kWh to run agricultural machinery like a grain mill or a water pump. Above that level, a grain miller or farmer may resort to using a diesel generator or, more likely, will do the work by hand. But the economics of rural electrification makes it challenging to provide electricity below that price, and so diesel machinery continues to dominate the rural off-grid market.
Cross-subsidized tariffs are needed to make rural electrification affordable
The cost of electricity, typically measured by the levelized cost of energy (LCOE), is much higher for rural customers than for urban and peri-urban customers. Rural customers are remote and often more dispersed, and so have higher logistics and infrastructure costs to connect and service. This is true whether electricity is provided through main grid connections, mini-grids, or solar home systems.
Prominent French companies are showing interest to invest in Ethiopia in the area of energy, logistics, and telecom sector, French Ambassador to Ethiopia, Remi Marechaux said. In an exclusive interview with ENA, Ambassador Remi Marechaux said the number of French investors operating in Ethiopia has now reached 55 which is twice the number some five years ago.
The companies are mainly engaged in energy including geothermal and hydro business development as well as manufacturing sector which is important to encourage import substitution, the Ambassador said. French companies are also very much keen to invest in the field of logistics, energy, transport and telecom sector in Ethiopia, he stated.
The Embassy is working to attract more investors to Ethiopia through various mechanisms, the ambassador pointed out. In this regard, he added that several events will be organized including an event called ‘Mission-Africa’ which will happen in France on November. A visit by the largest French investor union to Ethiopia, which is scheduled for January next year, is also part of this initiative, ambassador Remi Marechaux said.