Overview

Energy is one of the most significant sectors for Ethiopia’s economic growth and development and is expected to increase significantly in the medium run.  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.  Additionally, in 2022 the GOE certified the presence of seven trillion cubic feet of natural gas reserves in the Ogaden Basin.

Ethiopia’s current 5,200 MW of installed generation capacity reaches less than 60% of the country’s population.  The GOE plans to increase power generation capacity to 17,000 MW in 10 years, but electricity demand may still outstrip supply owing to continued economic development and population growth.  

Source: Ethiopian Electrical Power

Approximately 90% of the installed generation capacity is from hydropower, while the remaining 10% is from wind and thermal sources (8% and 2%, respectively).  The GOE has prioritized construction of the Grand Ethiopia Renaissance Dam (GERD), which with a projected installed capacity of 5,150 MW, is intended to serve as an engine for industrialization, economic development, and hard currency earnings through the export of electricity. As of March 2023, the GERD’s construction was 90% complete.  In February 2022, one of the dam’s turbines started generating 375 megawatts of electricity.  The GOE is also constructing the Koysha Hydo Power dam by the Omo River, which will be the second largest in Ethiopia next to the GERD with a capacity 2,170 MW.   

Meanwhile, the country’s current hydropower systems have been producing below their stated capacity due to drought. The GOE is now working to diversify the generation mix with other sources such as solar, wind, and geothermal that will result in a more climate-resilient power system.  The GOE is working with the private sector to implement two geothermal projects in Oromia, one in Corbetti and another in Tulu Moye.  Although the two directly negotiated geothermal contracts were originally signed for over 1,000 MWs with 500 MWs, respectively in 2017, the GOE recently renegotiated these contracts to reduce the capacity to 150 MW each for Corbetti and Tulu Moye.  In March 2020, the Power Purchase Agreements (PPA) and Implementation Agreements (IA) were signed between the GOE and Corbetti and Tulu Moye consortia.  The total investment required to develop these projects is approximately $1.2 billion.  The signing of these two projects paves the way for upcoming geothermal projects and creating opportunities for U.S. IPP developers. 

The GOE sees partnering with the private sector as a critical component to expanding energy output. All new power generation projects to be developed through public private partnerships (PPP) and independent power producer (IPP) agreements, while Ethiopia Electric Power (EEP), a state-owned entity, focuses on management of existing power generation plants, substations and transmission lines.  All of EEP’s PPP and IPP agreements are administered through the Ministry of Finance PPP Directorate with EEP’s participation.  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. 

Despite its energy deficit, Ethiopia exports electricity to Djibouti, Sudan, and Kenya to generate foreign exchange. There is a plan to increase power exports up to 300 MW to Djibouti due to a growing demand.  Ethiopia, through EEP, has a PPA to export up to 400 MW of power to Kenya.  In May 2022, Ethiopia signed an MoU with South Sudan to export 100 MW of power over the next three years.  

Power Africa Support

Power Africa is a market-driven, U.S. Government-led public-private partnership that aims to double access to electricity in sub-Saharan Africa.  It offers tools and resources to private sector entities to facilitate doing business in sub-Saharan Africa’s power sector.  The Electrify Africa Act of 2015 Institutionalized Power Africa.  Learn more about the full Power Africa toolbox or other opportunities offered by Power Africa.

To help achieve Ethiopia’s goals of expanding access to electricity under the GTP and the NEP 2.0, Power Africa supports the development of new IPP generation and connections, rehabilitation of the distribution system and financially viable utilities, and delivering power to a majority of the population living off-grid.  This support is delivered through wide-ranging technical assistance in cooperation with multilateral financial institutions and other development partners.  Power Africa has assisted with new IPPs and the transition to competitive tendering, as well as strengthening the capacity of the energy regulator.  Energy sector support in Ethiopia aligns 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 provided includes: 

• Developing laws and regulations that will facilitate private-sector investments through IPPs in geothermal, solar, wind, hydro, and biomass generation projects.  
• Supporting Ministry of Finance’s PPP Directorate use of a competitive and transparent procurement process for IPP generation projects. 
• Introduction of the national grid code and support to the Ethiopian Energy Authority (EEA) in its implementation and enforcement. 
• 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 and assist the government in preparing and approving off-grid regulations such as Mini-grid development Directive and Cost of Service manual. 
• Supporting the Eastern Africa Power Pool to promote cross border power trade between Ethiopia and other member countries. 
• Assisting EEP and Ethiopian Electric Utility (EEU) with the planning, operation, and maintenance of generation, transmission, and distribution systems as the grid is expanded. Developing a process for EEU to improve distribution. 

Source: National Bank of Ethiopia and EEP 

 Leading Sub-Sectors    

• Engineering services to supply more renewable energy sources, such as wind, solar, geothermal, as well as hydropower
• Supply and/or manufacturing of sub stations, hydro turbines, electric and electrical cables, transformers, transmission equipment, electric meters
• Technology to create smart transmission and distribution systems
• Technology for grid management. 

Opportunities 

The GOE issues tenders for several renewable energy projects with the tender evaluation process focusing on quality and project experience.  The GOE is also open to proposals for power development projects using Independent Power Purchase (IPP) agreements for the sale of power from renewable energy resources (geothermal, solar, wind, and biomass).  USAID Power Africa supported the development of a regulatory framework for IPP agreements.  The first 150 MW IPP geothermal power generation project agreement has been signed with Corbetti, under a BOOT (build, own, operate, and transfer) agreement.  The PPA sets out the commercial terms for a project of up to 150 MW split into two phases of 50 MW and 100 MW.  The GOE has also signed a Power Purchase Agreement (PPA) with developers to build a second 150 MW IPP, at Tulu Moye.

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. These maintenance requirements are key 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.  

Resources 

Ethiopia Electric Utility (EEU) http://www.eeu.gov.et/

Ministry of Water, Irrigation, and Energy  

The World Bank Group