[Spread eepBp if you like it]. Recently, Ethiopian Electric Power reports successfully meeting a power demand of approximately 4300MW during the Easter holiday period, satisfying both domestic
Recently, Ethiopian Electric Power reports successfully meeting a power demand of approximately 4300MW during the Easter holiday period, satisfying both domestic needs and export commitments without any supply restrictions. This achievement is highlighted as a significant signal of a gradual increase in overall power demand. This growing demand comes at a time when Ethiopia’s installed electricity generation capacity is nearing 6,000 MW, with the vast majority (90%) currently sourced from hydropower.
While Ethiopia has made strides in increasing its electricity generation capacity, access to clean energy remains a significant hurdle for a large portion of the population. Approximately half of Ethiopians lack access to any form of clean energy, including both electricity and clean cooking solutions. For instance, in 2022, only 55% of the population had access to electricity, highlighting a substantial access deficit. Furthermore, the vast majority (around 96%) still rely on polluting fuels like firewood for cooking, with access to clean cooking fuels and technologies estimated at a very low rate. This disparity in access poses significant challenges for socio-economic development and public health.
Reflecting on my childhood over three decades ago in Ethiopia, I recall the daily task of collecting firewood for cooking. It is deeply concerning and unacceptable to witness children and women in Ethiopia today still burdened with the same laborious and environmentally damaging practice. After so many years and with the advancements made, it is a moral imperative to ensure that the next generation is not subjected to the same hardships and health risks associated with reliance on firewood for cooking. This enduring reality underscores the urgent need for renewed focus and accelerated progress in providing access to clean energy solutions across the nation.
Ethiopia’s significant energy access deficit, is now further compounded by burgeoning demands from high-consumption sectors. The rise of productive uses like agricultural processing, coupled with ambitions for power export, the expansion of data centers, the energy needs of AI, the growth of electric mobility, and even the emergence of Bitcoin mining, are creating substantial new loads. This surge in demand risks diverting the already strained attention and resources of the power utility away from the critical imperative of expanding basic energy access for millions of Ethiopians.
As per non- official sources,
Although the current pipeline of new power generation projects [ GERD and Koysha hydro power plants, Asela and AyshaI wind farms] appears limited, the increasing domestic energy demand, coupled with anticipated exports to Tanzania and Somalia, presents a potentially significant challenge. These rising consumption pressures could strain the national electricity grid and may also pose a risk to Ethiopia’s goals of expanding energy access to its population.
It is crucial to carefully monitor and strategically plan for this growing demand to ensure both economic growth through exports and reliable power for domestic use, without compromising the ambition of universal energy access.
Bridging the energy access gap for households and powering these new industries simultaneously demands an urgent and strategic approach to avoid exacerbating existing inequalities and hindering inclusive development.
While acknowledging the ongoing efforts by utilities and the ministry to bridge the energy access gap through initiatives like expanding and upgrading transmission and distribution infrastructure, deploying mini-grids and institutional solar solutions, and distributing smaller solar systems alongside cleaner cooking technologies nationwide, the reality is that these measures are currently insufficient to address the sheer scale of the energy poverty challenge facing Ethiopia. The progress, while commendable, is still a long way from providing clean energy access to the significant portion of the population currently living without it.
The ambitious goal of universal electricity access by 2030, as outlined in NEP2, is five years away—a typical government election cycle that is enough time for substantial progress. However, the current pace of expanding energy access is worryingly slow. With such a limited timeframe remaining, the sluggish status quo in energy access poses a serious threat to achieving this critical national objective.
A critical concern alongside the energy access deficit is the limited focus on diversifying Ethiopia’s energy sources. The national grid’s heavy reliance on hydropower, accounting for approximately 90% of its capacity, creates vulnerabilities. Despite the country possessing substantial untapped wind, solar, and geothermal resources, their contribution to the current energy mix remains minimal. This lack of energy diversification poses a significant risk to the stability and resilience of Ethiopia’s power supply and hinders the development of a more sustainable energy future.
While I personally support power exports as a means to foster regional economic integration, a significant point of contention remains regarding the transparency of power export pricing, especially considering the substantial infrastructure investments required. Furthermore, a critical question lingers: what will be the strategy in the event of a future power surplus within the region, as neighboring countries actively pursue their own energy security objectives by developing readily available solar, wind, and geothermal resources? Ensuring transparent pricing mechanisms and proactively planning for potential regional power dynamics are essential to guarantee the long-term viability and benefits of Ethiopia’s power export ambitions.
The current subdued levels of investment and economic activity, influenced by the prevailing security challenges, have resulted in a relatively limited operation and expansion of industrial and commercial power consumption centers. Progress in expanding grid access, as outlined in NEP2, has also been slower than anticipated. However, this lull in growth masks a critical reality: any improvement in the security situation is poised to trigger a significant surge in power demand. This creates a paradoxical situation where the necessary power infrastructure must be proactively developed and in place before this potential peak in demand materializes. Therefore, strategic and timely investment in power infrastructure is essential now to avoid a crippling energy deficit that would undermine future economic recovery and hinder the expansion of crucial electricity access.
Drawing a parallel to the current situation, South Africa and Zambia are currently grappling with hasty and expensive power supply solutions due to a lack of proactive planning. This reactive approach echoes Ethiopia’s own experience in the 2000s, where the country’s reliance on hydropower led to significant power shortages when dams underperformed due to insufficient rainfall.
As a stark reminder of the costs associated with such reactive measures, between 2009 and 2010, the Ethiopian Electric Power Corporation (EEPCO) was compelled to hire temporary diesel generators from Aggreko at an estimated cost of ETB 400 million to compensate for the energy shortfall.
This historical precedent underscores the critical need for Ethiopia to avoid similar costly and potentially disruptive last-minute solutions by strategically investing in a diversified and resilient power infrastructure in advance of anticipated demand increases.
Even in developed nations, central power grids are susceptible to vulnerabilities, as the recent widespread blackout in the Iberian Peninsula (Spain and Portugal) on April 28, 2025, clearly demonstrates. This event, which also briefly affected parts of France and Andorra, caused significant disruptions to transportation, communication, and essential services, even impacting hospitals. While the exact cause is still under investigation, this incident serves as a stark reminder that centralized power systems, regardless of a nation’s development status, are not immune to large-scale failures. This European event underscores the inherent complexities and potential fragility of interconnected grids, even when diversified, highlighting the importance of robust infrastructure and proactive risk management for all power systems let alone hydro dependent Ethiopia.
Given the slow progress in centralized grid expansion and the urgency of achieving universal energy access, decentralized grids present not only a viable alternative but also a crucial pathway to enhancing energy security for Ethiopia. However, the current regulatory reform in Ethiopia appears to systematically overlook the potential of peer-to-peer energy trading and behind-the-meter power sales to the main grid. This regulatory blind spot is a significant missed opportunity to leverage decentralized solutions for accelerating energy access and bolstering overall energy resilience.
Each month, Ethiopia incurs substantial costs, amounting to millions of dollars, to fuel diesel generators used across various sectors, including industries, hotels, hospitals, commercial hubs, irrigation and remote locations. The failure to enable peer-to-peer energy trading and the sale of behind-the-meter power to the main grid represents a significant missed opportunity with far-reaching negative consequences. This inaction not only perpetuates reliance on expensive and polluting diesel but also hinders the growth of distributed renewable energy and the potential for cost savings and grid stabilization.
While the existing regulations do permit the development of mini-grids for serving off-grid communities and encourage self-consumption decentralized systems as a cleaner alternative to expensive and polluting diesel generators, the latter approach has significant drawbacks. Firstly, the scale of self-consumption is often limited by available space and diverts capital from companies’ primary operations, particularly when they are already burdened with underutilized diesel generator assets. Secondly, establishing a reliable power supply for self-consumption necessitates separate licensing and specialized expertise, resulting in minimal interest from companies thus far. Therefore, while well-intentioned, the current self-consumption framework faces practical limitations that hinder its widespread adoption and impact on transitioning away from diesel power.
Despite the significant potential of peer-to-peer and behind-the-meter (including wheeling) energy sales to enhance grid stability and promote decentralized renewable energy adoption, these models remain restricted in Ethiopia. Current investment regulations exclusively reserve retail energy sales for the established utilities, and the energy regulator appears hesitant to facilitate, or even actively avoids enabling, the sale of surplus energy generated from decentralized sources back to the grid. This regulatory stance is stifling the growth of distributed generation and preventing the realization of a more dynamic, resilient, and potentially more accessible energy system for Ethiopia.
I am well aware of the ongoing discussions between the utilities and the regulator regarding wheeling and enabling retail-level energy sales, but the progress towards implementation is frustratingly slow. I previously engaged in an extensive conversation with a regulatory expert to understand the rationale behind maintaining the restrictions on retail energy sales, especially considering their significant potential to drive solar energy adoption. However, the explanation provided was not convincing. The protracted nature of these discussions and the lack of a clear justification for hindering retail energy sales raise concerns about missed opportunities to accelerate the deployment of distributed renewables.
Globally, the most common and straightforward business model in the energy sector involves generating electricity and selling it directly to the grid and/or end consumers. However, with the notable exception of large-scale power generation projects operating under the Public-Private Partnership (PPP) framework, Ethiopia’s energy market operates differently, deviating from this widely adopted model. This suggests a unique or more restricted approach to energy sales compared to international norms.
The wholesale sector for smaller solar systems in Ethiopia remains restricted [aware of the ongoing whole sale reform even if not yet materialized] to domestic companies. This reservation limits the potential for broader market reach and wider distribution of these crucial systems across the nation, hindering efforts to improve energy access, particularly in remote areas. Accelerating the opening up of the wholesale market could potentially attract more investment, increase competition, and ultimately accelerate the deployment of affordable solar solutions to a larger segment of the population.
Companies in the energy sector typically adopt a diversified approach to their business, strategically navigating the inherent risks and opportunities associated with various energy sources and their respective value chains. This multi-faceted perspective allows them to capitalize on different market dynamics and mitigate potential downsides within the complex energy landscape. The existing limitations on both the wholesale market and direct retail energy sales in Ethiopia significantly constrain the level of participation and investment from companies within the energy sector. These restrictions essentially reduce the avenues through which businesses can profitably engage in energy generation and distribution.
In other African nations, companies are successfully securing funding to pilot “Energy as a Service” (EaaS) business models, with the aim of scaling solutions that address issues of affordability and service quality in the energy sector. I believe it is crucial for Ethiopian stakeholders to explore these alternative business models, and for the regulatory framework to be adapted to support their implementation. Learning from these experiences could offer valuable pathways to improve energy access and service delivery in Ethiopia.
While Ethiopian public authorities frequently state that the government is pursuing a dual public and private sector-led growth model, the reality on the ground in the energy sector tells a different story. Apart from Engineering, Procurement, and Construction (EPC) contractors and distributors of small-scale solar and cooking systems, there is a notable absence of active private sector participants across the entire energy value chain, from generation to distribution and sales. This limited private sector involvement starkly contrasts with the stated policy of a mixed-economy approach.
The Public-Private Partnership (PPP) framework was introduced in early 2018 with the aim of attracting private sector investment into Ethiopia’s power generation sector. However, even after eight years, its practical viability remains unproven. Given that energy infrastructure projects are long-term investments spanning 25 to 30 years, potential investors carefully consider not only immediate risks but also unforeseen challenges that may arise over the project’s lifespan. It is only when the government fully grasps this long-term investment perspective that private sector engagement will materialize and meaningfully develop the country’s power industries.
I recently came across an insightful LinkedIn post by Birhanu Beshah Associate Prof. & former CEO, ERC, which, when translated, conveyed the idea that “if the government shares the burden of the private sector, its own burden would have been a lot easier.” I found Professor Birhanu’s observation interesting as it resonates with the current challenges facing Ethiopia’s energy sector.
Beyond the well-documented policy and regulatory obstacles, the growth of Ethiopia’s energy sector is further impeded by institutional weaknesses, tax burdens, technical limitations, financial constraints, and cumbersome procedures. If the government were to actively share in addressing these multifaceted challenges, it would likely lead to a significant acceleration in energy access expansion, consequently alleviating public grievances. A more collaborative approach, where the government partners with stakeholders to overcome these hurdles, holds the key to unlocking the energy sector’s potential in diversification and improving the lives of Ethiopian citizens.
ESMAP estimates that a cumulative 1.2 billion tons of CO2 emissions can be avoided if the global addressable market of 217,000 mini grids are built by 2030 (ESMAP 2022, p. 52). Reflecting on the Ethiopian context, it became clear to me that the country is overlooking significant data by failing to track and record the numerous renewables [hydro, wind and solar energy] based energy productions across the country.
In my opinion, this lack of a cohesive strategy puts Ethiopia at a disadvantage in quantifying and accounting for CO2 emission reductions, thereby limiting our capacity to secure climate funding for future development, a crucial aspect given the anticipated expansion of renewables [ hydro, wind and solar] energy systems.
Consequently, it is time to consider a centralized system to effectively track and record all initiatives, regardless of their deployment approach. It is my view that there is no other institution than the Ministry of Water and Energy [unless the regulator and/or ministry of planning are involved] to establish such capabilities in-house.
A significant omission in Ethiopian energy discussions, despite its substantial positive and negative implications, is the petroleum sector. Petroleum products constitute over a third of Ethiopia’s annual commodity imports, a trend unlikely to decrease in the near future. Therefore, it is essential to integrate petroleum-related topics into energy discussions, whether exploring local exploration opportunities or analyzing the impact of imports, to gain a comprehensive and contextual understanding of Ethiopia’s energy landscape. Ignoring the petroleum sector creates a blind spot in the broader energy narrative and hinders a holistic approach to energy planning and policy.
Having worked in Ethiopia’s petroleum sector, I’ve observed a highly regulated fuel market. The government controls the import of petroleum products [except lubricants] from international markets, sets the distribution and retail fuel prices with very narrow profit margins. This tight control effectively limits opportunities for private sector investment and participation throughout the petroleum market. Dynamically designed regulations that enable, rather than control, markets lead to societal benefits.
Achieving widespread access to clean cooking solutions in Ethiopia is currently hindered by institutional fragmentation and ambitious targets that are difficult to reach without integrating natural gas, biogas, reliable fuel supply chains, and other alternatives. Given the global renewed emphasis on exploring all available energy sources, this presents a timely opportunity for Ethiopia to comprehensively investigate a diverse range of options, including hydro, wind, geothermal, solar, petroleum, natural gas, hydrogen, coal, and nuclear power, to address its energy deficit in general and the consequential clean cooking challenges in particular.
Ethiopia has seen significant expansion of electricity access nationwide thanks to the Universal Electricity Access Program (UEAP), which ran from roughly 2005 to 2015, and the ongoing National Electrification Plan (NEP2.0), implemented since 2019.
To bring light to millions more, the “mission300” initiative is within reach, provided Ethiopia acts promptly to prioritize collaboration and partnerships among the powerful players. And when I say Ethiopia, I mean, the government, the regulator, the energy ministry, private sector, industry associations, development partners, academia, practitioners, financial institutions and civil society organizations all together.
This Mission300 endeavor provides an avenue for authentic engagement with the private sector, the examination of numerous economical energy alternatives to diversify our energy portfolio, and the provision of electricity to communities at all levels. Ethiopia should make the most of this.
The Universal Electricity Access Program (UEAP) fostered the emergence of many local electricity actors, but their growth was tragically cut short when the government exclusively channeled all projects to Chinese companies. To avoid repeating this damaging pattern, it’s a strong recommendation that Mission300 embraces a collaborative approach where every stakeholder has a vital role.
In the wake of Ethiopia’s financial sector reforms, bank mergers are seen as vital for competitive strength against incoming foreign entities. A parallel and equally critical opportunity now beckons for private sector energy companies. By merging their capabilities, they can amplify their competitive edge domestically, regionally, and on the world stage, while simultaneously becoming pivotal drivers of Ethiopia’s energy security and universal access, particularly in the face of waning development assistance. The time to join forces and secure their future – and Ethiopia’s – is now.
Energy access initiatives tend to leave behind communities in hard-to-reach areas. To address this, appropriately designed differentiated result-based financing and subsidy mechanisms can motivate relevant parties to prioritize and respond to the specific needs of these populations.
While development institutions offer crucial technical support, its fragmented nature, sometimes leading to wasteful duplication, hinders progress. To truly benefit Ethiopia’s energy sector, it’s essential for the Energy Ministry to centralize and direct all development assistance, including World Bank funds, ensuring clear accountability and maximizing the impact of these vital resources.
To meet Ethiopia’s growing energy demands and significantly improve energy access, the country needs to adapt its regulations to reflect real-world conditions and actively dismantle existing barriers. A comprehensive view of the energy sector, coupled with a diversification of energy resources, is crucial. Furthermore, a balanced approach to power trade alongside prioritizing energy access for all citizens is essential. The article strongly advocates for collaboration and the unification of efforts within the energy sector, leveraging the efficiency of the private sector, and utilizing the Mission300 initiative as a catalyst for progress. By embracing these strategies, Ethiopia can effectively bridge the energy access gap and secure its energy future.
END. Join the writer on LinkedIn
Ethiopian Energy Portal is a digital energy magazine that strives in creating an energy active society in Ethiopia and beyond.
Join our social pages or do subscribe to our newsletter to hear from us.
