An Efficiency Opportunity at the Heart of Ethiopia’s Growth and Transformation

Implementing a set of simple efficiency regulations and programs today can help Ethiopia grow sustainably. By 2030, savings could be larger than the country’s total energy demand in 2014.

A Power Sector in Transition

Ethiopia’s economic development is often cited as a success story—with consistent growth of over 10 percent during the past decade, the country has made huge progress. The five-year Growth and Transformation Plans have driven large infrastructure investments in sectors such as power and transport, partly to attract investors to the industrial parks being built across the country.

Challenges notwithstanding, industrial production is expanding quickly. Combined with growth in the domestic and commercial sectors, as well as plans to export electricity to neighboring countries, Ethiopia’s electricity consumption is set to grow by a factor of five by 2030.

Historically, Ethiopia has provided its citizens with some of the cheapest electricity in the region—just $35 per megawatt-hour (MWh) at the flat rate, and much lower for smaller residential or larger industrial users (compared with $100–200/MWh for other countries in the region, and higher in many places). As the costs of energy production rise, and the government seeks to implement an ambitious National Electrification Plan, electricity tariffs will also rise to cover these costs. By investing in efficiency, large and small consumers can offset many of the impacts of these tariff rises.

Planning for Efficiency

The Ethiopian Energy Authority (EEA) is the national body tasked with developing energy efficiency programs. Working with EEA, and building on previous work and legislation, RMI mapped a list of high-priority and low-cost actions that can save 14 percent of Ethiopia’s end-use electricity demand in 2030; more aggressive energy efficiency programs could push these savings even higher.

Since its approval earlier this year, the Energy Efficiency Action Plan developed by RMI and EEA is now being used to prioritize and drive implementation of numerous programs including minimum energy performance standards and training and market development for energy management. These programs are designed to have multiplicative impacts:

• By implementing clear performance standards and using efficiency in government procurement, Ethiopia can reduce the costs of efficiency and drive voluntary uptake by rapidly maturing the market.
• Training energy specialists and creating demand for qualified professionals—initially through subsidies, then transitioning to regulatory requirement—can build a self-sustaining market in energy services.
• Identifying strategic technology areas and supporting manufacturers can build a local industry to supply efficient equipment and systems, starting with local manufacturers of injera stoves (mitads) and electric cookers.
• Developing a mature market and technical expertise helps to build a pipeline of investment projects in energy efficiency among large consumers.

Building for the Future

As Ethiopia’s economy grows and industrializes, there is an opportunity to put efficiency at the heart of this expansion and build it into new infrastructure—often at a lower cost than the alternatives.

A range of studies has shown that internationally, energy efficiency is cheaper than supply-side generation, and keeps getting cheaper as implementation scales up. Even with Ethiopia’s low energy costs, the energy efficiency opportunities in the Action Plan all pay back within months.

By ensuring power is used efficiently, Ethiopia can optimize the use of its energy resources, free up grid capacity for more connections, and export more energy to bring in foreign currency reserves. This will save money for consumers in the short term and reduce the cost of the whole electricity system in the long term.

The energy efficiency action plan being implemented by EEA is an important step in making these benefits real, but there is still a need for additional funding for some of the programs. Bilateral and multilateral development finance institutions could play a larger role in supporting Ethiopia’s efficiency opportunity.

For more information and to download copies of the energy efficiency regulations, policies and plans, visit the website of Ethiopian Energy Authority.