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Story Highlights
  • Ethiopia has committed to transforming its entire energy sector to provide access to adequate and reliable electricity to all.
  • ESMAP has spurred this transition through sector reviews, an investment prospectus and a geospatial plan that helped lay the groundwork for World Bank financing.
  • In parallel, ESMAP’s Global Wind Atlas is helping to open the door to private sector companies to scale up renewable energy projects.
Spurring Energy Sector Transformation in Ethiopia

Ethiopia is on its way to transition to a middle-income country. Access to adequate and reliable electricity will play a crucial role in its journey.

While Ethiopia’s main grid covers 80% of its population, only 30% of households have access to electricity, making Ethiopia the second highest access deficit country in Sub-Saharan Africa.

The government is committed to reaching universal energy access by 2025. Yet, the approach so far focused mostly on infrastructure development rather than service delivery. New investments are needed to support comprehensive strategies encompassing grid and off-grid solutions, private sector participation, and a push for using the country’s vast renewable energy resources.

With support from the World Bank and ESMAP, the government of Ethiopia has launched a major reform of its energy sector to implement its vision of universal electrification.

In 2015, ESMAP funded the “Ethiopia Energy Sector Review and Strategy”, a three-year study to provide solid sector diagnostics and identify actions for reform. Based on the study, the government developed the National Electrification Program (NEP), which was launched by Ethiopia’s Prime Minister in November 2017.

The NEP sets forth a plan to scale up connections at a rate that has rarely been attempted in the region before. It includes a fast-paced grid connection program to increase connectivity nearly five-fold from today, to over 14 million households (or 65% of the population) by 2025. An off-grid access program – whose rollout is currently being developed with ESMAP’s help – will target the remaining 5.7 million households in remote communities with individual home solar systems and mini grids to ensure that no one is left behind. Another priority will be to provide access to reliable electricity services for education and health facilities. As part of the NEP, ESMAP also supported an investment prospectus to guide investments in the sector.

The rollout of new connections will be based on the latest GIS (geographic information system) platform supported by ESMAP, that uses geospatial data to identify which technology would be best suited, based on location.

As the plan is rolled out equitably across the country, it will enhance quality of life of rural households and support economic growth. But providing modern energy services for over 10 million households within 8 years will not be an easy task. Financing requirements for the first five years of the NEP’s implementation alone, is estimated at around US $1.5 billion.

The NEP underpinned the programmatic approach developed under the new World Bank project – the Ethiopia Electrification Program (ELEAP). With this project, the World Bank is leveraging nearly $700 million towards the NEP’s targets, of which $375 million will be provided through IDA credits. This will directly finance electrification for over one million households.

Ethiopia is one of the few countries in the world whose grid is powered 100% by renewable energy-based generation, mostly from hydropower. To diversify supply, the government plans to promote alternative sources of renewable energy, such as solar and wind, by engaging the private sector. Opening the door to private sector participation in renewable energy projects will help bring in commercial capital and sustainable financing structures, increase technical know-how, and improve sector performance, while freeing up public resources.

To facilitate private sector engagement, the government utilized ESMAP’s Global Wind Atlas to identify areas with high potential for resource development across the country. In collaboration with the government of Denmark, ESMAP is now financing wind measurements in 17 priority sites.  The resulting high-quality wind resource assessments is expected to pave the way for the preparation of bankable wind energy projects, which will be supported under the second phase of the upcoming Renewable Energy Guarantees Project.

Finally, the government is putting in place institutional reforms focusing on gender equity and citizen engagement to strengthen the capacity of utilities to manage the massive scale-up of connections. In this context, ESMAP supported a gender analysis for the sector, which informed the design of the “Closing Gender Gaps Across the Ethiopia Energy Sector” initiative”, a transformational approach promoted across a US$1.5 billion portfolio of World Bank energy projects in Ethiopia.

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The World Bank and ESMAP support to Ethiopia follows the same long-term, comprehensive engagement in Kenya. You can read more about Kenya’s experience here.