Financial Times, February 16, 2014 6:53 pm
By Katrina Manson in Addis Ababa
In a region where religious differences often lead to political tension and the threat of violence, there is one area where they help: electricity exports.
Ethiopia, with its predominantly Orthodox Christian tradition, consumes less power during its weekends, leaving a surplus for export to Muslim neighbours Djibouti and Sudan, where Sunday is a working day. The two countries also require more energy at night to mitigate searing heat, while temperate highland Ethiopia needs more during the day.
“When they have heavy load we have a light load so it works out well,” says Miheret Debebe, former head of Ethiopia’s state power company who is now energy adviser to the prime minister.
This flexibility is one part of an ambitious 25-year master plan to transform the country into one of the top, and cheapest, power suppliers in Africa.
The prize: potentially $1bn a year in revenues from renewable power for Ethiopia and cheap supplies for a region short of electricity to power much-needed industrial production. The downside: some of the prohibitively expensive projects are also controversial, including a giant dam on the Blue Nile.
As part of a $22bn African Union backed project to develop a pan-continental electricity highway by 2020, Ethiopia plans to increase its power exports to Djibouti, Kenya and Sudan, and establish grid links to South Sudan, Uganda, Rwanda, Tanzania and even to Yemen across the Red Sea.
Donald Kaberuka, president of the African Development Bank (AfDB), says it is the first time an African government has looked “at energy as an export sector the way you export gold, and it’s going to be a huge advantage for them”.
The electricity master plan, due to be released this year, aims to boost power exports from 223MW a year now to at least 5,000MW, according to people familiar with the discussions. In Europe, 1,000MW is enough to power nearly 1m homes.
“Energy is a very strategic sector for us – Ethiopia is going to be the renewable energy hub of the region,” Mr Miheret says in an interview in Addis Ababa.
The AfDB and the World Bank are providing financing to help electricity exports from Ethiopia, including $1.5bn for a newly opened grid link to Kenya with the capacity to transport up to 2,000MW of power.
Kenya has signed a memorandum of understanding to buy about 400MW per year and Ethiopia is in talks with Tanzania for a similar deal. It is also in talks with Yemen to export 100MW, via Djibouti and a submarine cable, and discussing a link with South Sudan.
Despite frequent blackouts at home, Ethiopia’s potential power production capacity from hydro as well as geothermal, wind and solar energy may be more than 60,000MW, according to official estimates.
That is equal to roughly half the total current installed capacity in Africa of 147,000MW and would make it one of the continent’s top potential electricity producers, alongside South Africa and the Democratic Republic of Congo.
Mr Miheret hopes Ethiopia’s master plan will provide “project bankable studies” that will attract private sector investment to turn potential into reality.
US-Icelandic company Reykjavik Geothermal has signed a $4bn deal to build a 1,000MW geothermal plant, the continent’s largest, by the beginning of the next decade. A 120MW wind farm, again the continent’s biggest, started turning late last year thanks to a $290m French investment.
Financing, timelines and politics will determine whether the grand plan to transform Ethiopia into an electricity exporter is realised, however. A World Bank study published last year shows project time over-run typically exceeds targets by 130 per cent, twice as much as in Zambia and more than famous laggard Tanzania.
Energy is part of its regional strategic plan. So [Ethiopia] becomes an energy superpower and along the way it also gains political clout
Within three years, Ethiopian officials say, power generation capacity will reach 11,000MW, up roughly fivefold from 2,300MW today, if two large, and controversial, hydropower projects keep to schedule.
Most of the new production capacity is expected to come from the $4.8bn Grand Renaissance Dam, a 6,000MW hydropower project.
The first phase of the project, which could be completed in 2017, will generate about 700MW by the end of this year. Officials say the project is on course, with more than 30 per cent completed. The dam is so controversial it has elicited threats of violence from Egyptian officials who fear its reduce the Nile’s flows downstream. The third phase of another dam, known as Gilgel Gibe, will deliver 1,870MW next year.
If it all comes off, Ethiopia may also be the beneficiary of another sort of power. “Energy is part of its regional strategic plan,” says a senior regional official. “So [Ethiopia] becomes an energy superpower and along the way it also gains political clout” in Africa.