Addis Fortune (Addis Ababa)

Ethiopia: Increase in Electricity Tariffs Required to Realise Power Generating Projects

Ethiopia will need to increase its domestic electricity tariff by 400pc in order to realise its planned 28 power generating projects over the next 25 years.

The 1.5 million-dollar expansion masterplan study, financed by the World Bank and conducted by Parsons Brinckerhoff - a multinational engineering and design consultancy firm - was undertaken as a tool to put guidelines onEthiopia's ambition to increase its power capacity from the current 2,300MW to 37,000MW by 2037.

This would require 156 billion dollars spread over the next 25 years, which amounts to around 48 billion dollars in current money, the study claimed. The study recommended that a large increase in export tariffs is necessary, or else the current domestic tariff of 0.028 dollars a kWh must increase to more than 0.14 dollars a kWh.

Ethiopiacurrently exports electricity for 0.07 dollars a kWh, but even raising this to 0.10 dollars - a 43pc increase - would still require a domestic rate of 0.13 dollars a kWh. This is because the study projects exports of 5,300MW by 2037, up from the current 200MW. Though this is a large jump, the study recommended a rise in the export tariff in order to ease the strain on the domestic tariff.

The study was tabled for discussion on November 26 and 27, 2013, in the presence of representatives from the World Bank and the African Development Bank, as well as diplomatic communities from North America andEurope.

The issue of securing finance seemed to be the concern of the participants, as well as Mihret Debebe, chief executive officer (CEO) of the EEPCo. Given that the government does not subsidise the sector, the Corporation is expected to source the financers.

As a result, the Corporation is eyeing financers from international financial institutions and the private sector, as well as loans from the Ministry of Finance and Economic Development (MoFED).

Among the participants, some commented that the project is too ambitious and far from recognising the financial capacity of the country.

The Corporation does not, however, agree with the view that it is unrealistic. The government "badly needs to see the project realised", according to Mihret.

"What would happen if we listened to everything that others say?" He said in an interview with Fortune. "We would not even reach 800MW."

In order for the GDP to grow at a rate of 10pc per annum, the electricity demand that rises by 24pc annually must be addressed, according to the available estimation at the Corporation.

Currently, the Great Ethiopian Renaissance Dam (GERD), with 6,000MW; the Gilgel Gibe III, with 1,870MW and the Genale Dawa III, with 254MW, are the hydropower plants under construction. They are expected to be completed by 2017 for the GERD, and 2015 for the other two.

By 2019, total generation is expected to reach 9,265MW, according to the study, which is five times larger than the 1,843MW that was available in 2012.

"To have great electric power capacity is to have great political sovereignty as well. To this effect, we will continue expansion," Mihret said.

Parsons Brinckerhoff will amend the study based on feedbacks from the two-day meeting and deliver the final report to the Ministry of Water and Energy (MoWE) by January 2014.

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