Working Paper 309

Power Sector Reforms and Promotion of Renewable Energy and Efficiency in Ethiopia

Mengistu Teferra

Executive Summary

This paper attempts to look back and assess the extent to which power sector reforms in Ethiopia have addressed the issue of renewable energy and efficiency. To this end, the origins of power sector reforms in Ethiopia, the legal and regulatory framework now governing the power sector, the trends and barriers in the use of renewable energy technologies, the extent to which power sector reforms have enhanced efficiency have been looked into. Finally, strategies (regulatory, technological and financial) for the enhancement of renewable energy use and efficiency improvement have been indicated.

Hydropower, a renewable energy, features high in Ethiopia’s power sector. Its continued development is perceived as essential given the extremely low level of current electricity generation, demand forecasts at hand, and the abundance of hydropower resources. Although new hydro capacity additions take precedence over efficiency improvements, Ethiopian Electric Power Corporation (EEPCO), the national utility, is undertaking a "demand side management project" with a view to study demand side management (DSM) opportunities in the industrial, commercial and residential sectors. System losses are currently as high as 18%. There is need to reduce the supply system losses to a level below 15%.

Effective intervention in demand side efficiency improvement can only come about through the private sector, by way of market forces. A basic condition that has to be met in the successful dissemination of efficient technologies is one of ensuring that the technologies result in financial savings for the user, without any compromise on the level of service. An example of such an instance in Ethiopia is the growth in sales of charcoal saving "Laketch" stoves in the 1990s. 

Solar PVs are widely used in telecommunications stations. Their widespread use in rural Ethiopia would require an approach, which would also address poverty reduction. Poverty reduction can be effected through the productive use of modern energy services. The options for the productive use of modern energy forms in the rural context are, however, not all clear. A thorough study has to be undertaken to define the available options.

To date the extensive use of solar water heaters in Ethiopia is limited. Major users include high-income households (who can afford the installation costs), NGOs (who use the heaters in boarding schools, etc.), and hotels. The category of consumers is believed to increase with the rise in electricity tariffs.

The barriers limiting the use of solar water heaters and cogeneration would have to be studied further. Strategies for enhancing the use of solar water heaters would have to involve the private sector as a key player. The strategies can emulate the techniques used in the successful dissemination of the "Laketch" charcoal stove. Such strategies must address and encompass technological, economic as well as social dimensions.

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