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EU Technical Assistance Facility

for the "Sustainable Energy for


All" Initiative (SE4ALL) - Eastern
and Southern Africa
Ethiopia: Proposed SE4All TA
Activities under NIP 2014-2020
European Commission
24 March 2014

inConsortiumwith

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020

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This document and its contents have been prepared and are intended solely for European Commissions
information and use in relation to the EU Technical Assistance Facility for the Sustainable Energy for All
Initiative (SE4ALL) Eastern and Southern Africa Contract no.336063.
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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March
2014 | 5127711

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020

Table of contents
Chapter

Pages

1.

Energy baseline situation

2.

Energy sector objectives of the Government of Ethiopia

3.

National Indicative Programme (NIP) 2014-2020

4.

Proposed SE4All TA activities in the energy sector

5.

References

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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March
2014 | 5127711

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020
(Please note that all information and proposed activities in this document are based on the reference
material mentioned in section 5. It is strongly recommended that the observations and conclusions are
verified and further detailed in direct discussion with relevant stakeholders in the country.)

1.

Energy baseline situation

With regard to SE4All objectives, the energy situation in Ethiopia is characterised as follows:
High reliance on traditional biomass resources; need for more efficient cook stoves. Despite high
number of new stoves distributed in the past; over 10 million households still lacking access to
improved and clean cooking.
Electricity generation mainly based on large central hydropower; very recent addition of utility-scale
wind power.
Significant progress has been made in recent years in expanding central generation capacity and
extending transmission and distribution lines.
Local self-generation of electricity primarily based on diesel generator sets.
Use of local Renewable Energy resources for electricity generation (PV, small hydropower, small
wind) still insignificant, although progress has been made in disseminating Solar Home Systems
(SHS) and implementation of micro-hydro systems.
Relatively high accessibility to electricity supply, but connectivity (customers connected) still low and
concentrated on urban areas and rural centres; very low electrification rate in rural areas with
dispersed population (around 5% of households).
Energy intensity has been reduced in recent years, but only few active measures to increase energy
efficiency have been implemented (mainly introduction of compact fluorescent lamps (CFLs)).
Dominant role of state-owned companies in electricity generation and transmission/distribution; no
participation of Independent Power Producers (IPPs) in the past (now expected to change).

2.

Low involvement of private sector in rural electrification supply.

Energy sector objectives of the


Government of Ethiopia

Within its five-year strategic plan 2011-2015, the Ministry of Water, Irrigation & Energy (MoWIE) has set
ambitious plans against baseline of 2010:

Doubling power generation capacity.

Doubling length of distribution network.

Increase length of transmission lines by 50%.

Doubling number of customers on the grid.

PV electricity to more than 3 million households (3 million solar lanterns and 150,000 SHS and
institutional solar systems).

Dissemination of 9 million improved cook stoves.

Increased production and use of biofuels.

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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March 2014 | 5127711

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020

3.

National Indicative Programme (NIP)


2014-2020

It has been agreed in the NIP that Energy will be phasing in as a new focal sector.
The NIP mentions the following priority areas for change in the energy sector:

Tariff adjustments.

Tapping external funding sources for investments in electricity generation and transmission,
including from the private sector.

Improving access to energy with a focus on income generating activities.

Diversification of the energy mix, with a focus on non-conventional Renewable Energy sources.

Electricity sector reform (liberalisation, support to the newly formed regulator, and regional trade with
neighbouring countries).

Energy efficiency to reduce reliance on biomass (notably firewood).

Sustainable Forest management.

Specific objectives:

Improve access to modern, safe and sustainable energy services.

Increase power production from renewables such as biogas, micro-to-mini hydro, geothermal, solar
and wind.

Improve energy efficiency in generation, transmission, distribution and consumption.

4.

Proposed SE4All TA activities in the


energy sector

Possible intervention/support areas are:


a.

Improved access to modern, safe and sustainable energy services

Support to the promotion of stand-alone and mini-grid systems through strengthening of the Rural
Electrification Fund that has been established to provide technical and financial support for such
systems with participation of electricity cooperatives and private sector. In particular private investors
will need to be guided in setting up bankable business plans, doing prefeasibility studies, and
attracting state guarantees.
(Rationale: The Universal Electrification Access Program (UEAP) has primarily expanded the national electricity
grid to urban areas, while large rural areas remain unserved; connection rate in rural areas only 4.9%. The grid
expansion plan will not reach large rural areas due to high costs).

Support in defining rules for the operation of off-grid rural electrification systems (mini-grids), in
particular in terms of supply quality, connection fees, energy supply tariffs, power purchasing
agreements from independent generators, etc.
(Rationale: The regulator Ethiopian Energy Authority has been recently reorganised and given new mandates.
Currently no regulation exists for rural electrification (needs to be verified)).

Support to improving current electricity supply in rural areas, which is unreliable and expensive.

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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March 2014 | 5127711

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020
(Rationale: The mainly diesel-based rural electricity supply faces many blackouts and varying quality due to
badly maintained systems, lack of technical capacity, etc.; tariffs are usually higher than in urban areas)

Support in setting up long-term plans for grid extension and off-grid supply of electricity.
(Rationale: To attract private investment in off-grid electricity supply it is essential that long-term guarantee
exists that their investment will not be stranded due to competition from central grid by unexpected extension of
transmission and distribution lines; it is therefore necessary that long-term planning for on- and off-grid rural
areas takes place.)

b.

Diversifying energy mix and mobilising RE

Support in setting up competitive tenders for utility-scale wind and PV projects by IPPs (possibly also
including hydropower), including design of model Power Purchase Agreements (PPAs)
(Rationale: Example of South Africa; in the past all wind projects have been realised by the state-owned utility
with substantial donor support; with regard to model PPAs see also draft ToR of February 2014.)

TA support for selection of sites for hybrid mini-grids (diesel in combination with RE sources),
feasibility studies, definition of operating conditions and tariffs, selection of operators, financial
support mechanisms (see Small Power Producers (SPP) Tanzania); support in converting existing
diesel-based mini-grids to hybrid generation (in particular through use of mini-hydro plants).
(Rationale: Large areas of Ethiopia can only be electrified through local grids; the involvement of private
investment in isolated rural electrification grid has been limited in the past; diesel-based systems have shown
high costs and insufficient reliability)

Support in developing standards for all types of solar electricity systems and their components.
(Rationale: Solar electric systems have not always shown high quality in the past. Standards have played a role
in donor-funded procurements, but are not generally applied.)

TA to the introduction of interconnection rules (grid codes) and feed-in payment mechanisms for
small-scale grid-connected RE systems
(Rationale: Distributed grid-connected RE systems operated by private investors are currently unknown. An
Electricity Feed-in-Tariff Law of 2012 exists, but apparently is not being applied.)

Support in establishing new businesses and financing mechanism for basic supply of electricity to
Base of Pyramid (BoP) customers for lighting and communication (e.g. solar lanterns and micro PV)
(Rationale: A large proportion of the population does not have sufficient financial means in the foreseeable
future. They will have to rely on rudimentary electricity provision for basic needs, in accordance with their
income capacities and in line with current expenditures for energy. In order to achieve the GoE targets, upscale
of the market is needed with new business actors and adequate financing schemes.)

Support in investigating opportunities for electricity (co-)generation in the sugar industry and other
agro-industrial sectors based on biomass residues for self-supply and electricity export to the grid
(Rationale: Ethiopia is planning to expand the sugar cane harvest significantly, in particular for the production of
bio ethanol. Unlike in other African countries, sugar factories do not yet export excess power from burning of
bagasse to the national grid. Also other agroindustrial sectors may have potential for generating electricity
and/or heat from indigenous biomass resources.)

c.

Overarching issues

Support to further elaborate the National Energy Policy.


(Rationale: It exists only a rudimentary draft of the NEP of 2013. This draft needs further enhancement, before
going into Cabinet).

Support in further elaborating the SE4All National Action Plan.

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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March 2014 | 5127711

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020
(Rationale: The SE4All National Action Plan has been drafted, but needs further inputs and reflections and has
to be discussed with various stakeholders.)

Support in formulating the next Growth and Transformation Plan (GTP) 2016-2021 and setting of
new targets
(Rationale: The current GTP will end in 2015, a successor programme needs to be drafted and approved.)

Support in progress monitoring, incorporating the tracking mechanism developed in the framework of
SE4All
(Rationale: The monitoring system for tracking progress in programme implementation is currently not adequate
and needs to be enhanced, while indicators may need to be adjusted.)

d.

Energy Efficiency improvement

Support in setting up Energy Efficiency Programmes and Incentives, including minimum


performance standards.
(Rationale: Currently there are no sufficient EE programmes and incentives in place to make better use of
energy; the viability of using and enforcing standards needs to be verified; the newly formed Ethiopian Energy
Authority is mandated to issue EE standards and design, execute and coordinate adequate related measures,
including provision of information, certification of auditors, etc.; see ToR of February 2014.)

Assist in the management of the newly formed Energy Efficiency and Conservation Fund
(Rationale: A Fund has been established for the purpose of providing loans and financial support to
persons/legal entities involved in energy efficiency and conservation activities; collection of fund income and
funding mechanisms through adequate programmes need to be established; see ToR of February 2014.)

Assist in setting up EE and conservation strategies at national and sector levels, including national
action plans and regulations (EE act), and in developing monitoring systems for measuring progress
(Rationale: The Ethiopian Energy Authority has been mandated to formulate EE and conservation strategies at
national and sectoral levels, and to evaluate the implementation of same; see ToR of February 2014.)

Support measures for the reduction of technical and non-technical losses in transmission and
distribution of electricity
(Rationale: Currently, losses are in the range of 23%. In order to increase the financial performance of the stateowned utilities responsible for transmission and distribution, it will be necessary to reduce those losses through
adequate means.)

5.

References

EU Commission: Terms of Reference for Technical Assistance in support of the implementation of


the Ethiopian Energy Authority Program of Activities 2014-2020, draft of February 10, 2014

EU-Ethiopia: National Indicative Programme (NIP) for Ethiopia 2014-2020, Final Draft, 28 January
2014

Federal Democratic Republic of Ethiopia/Ministry of Water and Energy: Scaling-up Renewable


Energy Program Ethiopia Investment Plan, January 2012

Federal Democratic Republic of Ethiopia/Ministry of Water, Irrigation and Energy: Updated Rapid
Assessment and Gap Analysis on Sustainable Energy for All (SE4All): The UN Secretary General
Initiative, December 2013

Federal Democratic Republic of Ethiopia: Ethiopias Climate-Resilient Green Economy (CRGE),


September 2011

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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March 2014 | 5127711

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020

International Institute for Environment and Development (iied): Scaling up Renewable Energy
Programme (SREP) in Ethiopia a status review, September 2013

Ministry of Finance and Economic Development: Growth and Transformation Plan (GTP) 2010/112014/15, September 2010

National Energy Policy, draft of 2013

Presentation of the Draft SE4All National Action Plan, Addis Ababa, February 19, 2014

Stockholm Environment Institute (SEI), Working Paper 2013-09, Mainstreaming Sustainable Energy
Access into National Development Planning: the Case of Ethiopia, December 2013

World Bank: Electricity Access (Rural) Expansion Project, Implementation Completion and Results
Report, August 28, 2013

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Atkins Ethiopia: Proposed SE4All TA Activities under NIP 2014-2020 | Version 1.0 | 24 March 2014 | 5127711

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