Dr. Gebrehiwot Ageba, Program Director at Ethiopian Development Research Institute stressed that in order to achieve structural transformation, Ethiopia must work on the production and consumption of sustainable, inclusive and equitable energy. The exploitation of energy potential in the country is not proportional to the GTP II plan and the massive public investments.
"There are several Industrial Parks, Integrated Agro-Processing enterprises and rural transformation centers that have been constructed or are under construction. And then, there is also electricity powered rail transport so on and so forth," Gebrehiwot said, during the launching of the 2017 UNCTADs Least Developed Countries Energy Report.
He then reminded that electric coverage in the country still low and stands at 25 percent. While the distribution is higher in urban areas, it is much lower in rural areas which are nearly 10 percent of the national coverage.
"Consequently, inclusive transformation cannot be materialized as the energy distribution mostly excludes large section of the Ethiopian rural population, which is close to 75 percent," he says. Hence, energy transformation should prioritize the rural area to bring holistic transformation.
The country also has ambitious National Electrification Program (NEP) which was officially launched last week. The government has already secured some 400 million USD for the program from the World Bank.
"It is very ambitious. NEP is basically trying to achieve 100 percent electrification by 2025, five years earlier than the end of Sustainable Development Goals. But to achieve this goal, there are some issues that need to be addressed," he indicated.
Firstly, there is a need for diversification of the sources of energy as the current figures show that there is extreme (96 percent) dependence on the hydro energy. There are huge opportunities for diversification to other sources of renewable energy. The country has huge potential for wind, solar and geothermal energy, most of which remain unexploited.
According Gebrehiwot, these renewable energy sources offer opportunities for Ethiopia to power its growing industries to achieve structural transformation and generate foreign exchange from the export of clean energy. It is also additional input to achieve green economic development.
But, this ambitious goal requires huge investment. The domestic financing capacity is limited and this makes the need for foreign financing inevitable. There is a need to work extensively to attract Foreign Direct Investment (FDI) in power generation. But there are certain conditions that should be met to do so.
Typically foreign investors demand guaranteed market through the so called power packet agreement through which they require the government to pay all the energies that they generate, no matter what risk it has. In a way, they try to shift the risk to the public sector and this is not an easy condition.
Then again they insist to have an agreed tariff, typically in foreign currency. This could also be another strong condition. This means, naturally, the money or the profit that they generate domestically has to be repatriated.
Dr. Geberehiwot also discussed about access to clean energy for productive purposes and its affordability, especially in rural areas. A genuine structural transformation would require transforming the agriculture sector and the rural society.
Subsequently, rural energy access becomes crucial in that respect. But, given the size of the country and the topography, it is costly to reach remote areas especially if it is to be achieved through grid expansion. And the increasing cost would obviously have its own impact on the tariffs.
He also discussed the possibility of decentralized power generation in the alternatives such as off-grid, micro-grid, mini-grid and standalone sources of power. "But there are also issues that arise from this. One obviously is who bears the initial cost of investment. Is it through public fund or donors? In addition, the theoretical options also include private investment as business or public private partnership," he underscored.
Prime Minister Haile Mariam Desalegn officially launched the NEP, the government's action plan for achieving universal electricity access nationwide by 2025. "Of course, it is an ambitious plan and seems unfeasible" Dr. Engineer Sileshi Bekele, Minister of Water, Irrigation and Electricity told the media on the occasion.
"But that does not mean it is impossible. We are Ethiopians and can do what we believe we can do. Take for instance the Grand Ethiopian Renaissance Dam. Nobody expected that it would go this far. So, we have prepared implementation road map which will benefit about 4. 5 and seven million people through grid and off-grid respectively, unprecedented in the past."
He also said that there are also improvements in engaging the private sector. A case in point he mentioned is 100 megawatt project to generate electric power from wind. Rigorous discussions have been made to address the problems of the investors and attract investment to the energy sector.