The Board of the African Development Fund has given the nod to a $348 million (Sh30 billion) funding of a $1.26 billion electricity highway project between Kenya and Ethiopia.
Due for commissioning in November 2017, the project involves the construction of a 1,068 kilometres high-voltage direct current 500 kV transmission line between the two countries.
It also includes putting up of associated converter stations at Wolayta-Sodo (Ethiopia) and Suswa (Kenya), with a power transfer capacity of up to 2,000 MW.
The project is intended to promote power trade and regional integration, contribute to the Eastern Africa Power Pool (EAPP) countries' social and economic development, and reduce poverty in those countries.
"With the approval of this project, we have solidified our position as the key strategic partner for East African countries in the power sector. Our involvement in the project has included a leading role in the preparation of the project and financing some of the feasibility studies required to appraise the project and make it bankable," said Gabriel Negatu, AfDB's regional Director in charge of East Africa.
The project has been co-financed with the World Bank, the French Development Agency (AFD) and the two governments of Kenya and Ethiopia.
This key inter-country power link comes at a time when demand for electricity in the East African region has steadily risen relative to supply, leading to occasional severe power shortages.
The integration of the power systems of the EAPP will enable the development of Ethiopia's large hydropower resources for the export market and address power shortages throughout the region. The project will position Ethiopia as the main powerhouse and Kenya as the main hub for power trade in the East African region.
However, it is anticipated that power will flow in both directions: from Ethiopia to East African countries all the way to the Southern African Power Pool in the short term, and/or from the Eastern and Southern Power Pools to Egypt and Sudan in the long run.
In Kenya alone, the additional power injected into the national grid will enable the supply of electricity to an additional 870,000 households by 2018, and a cumulative total of 1,400,000 additional households by 2022, of which 18 percent will be located in rural areas.
Businesses and industries will also benefit, with around 3,100 GWh of additional energy by 2018, increasing to around 5,100 GWh by 2022.
"The East African region is blessed with abundant energy resources which have remained untapped for some time, in particular hydropower and geothermal. With the implementation of this flagship project, energy resources can be pooled at the regional level to create a regional electricity market through power trading," Thierno Bah, AfDB's Senior Power Engineer said.
"The two electricity companies, Ethiopian Electric Power Corporation (EEPCO) in Ethiopia and Kenya Electricity Transmission Co. Ltd (KETRACO) in Kenya, will also benefit from additional revenues from carbon credits with the innovative Clean Development Mechanism (CDM) methodology developed by the Bank and recently approved by the CDM methodology panel," he added.