There are a number of challenges that have hindered the development and full scale harnessing of some of the crucial energy resources in Ethiopia. The more conventional challenges have to do with capacity barriers including technical, technological, economic and institutional weaknesses. However, perhaps the stronger barrier is political. The Horn of Africa region has, and still is experiencing one of the worst political instabilities in the continent. The adverse impacts of political conflicts are both national as well as regional in nature. Nationally, in addition to consuming important resources that could have been invested in the overall development of the country, internal political instability locks up parts of a country with good prospects of energy or other economic resources making such areas unsafe, insecure and hence, inaccessible by potential developers. It is an unfortunate fact that crucial economic resources such as oil are usually situated in conflict ridden parts of a country or a region.
Regionally, political instability (actual or perceived) makes the evolution, development and economic integration of regional energy/power markets an unattractive option and the task formidable. This challenge is, of course, on top of the natural preferences of national governments ‘not to rely on imported energy sources’ beyond a certain point. It is this second set of challenges (regional market integration) that the EEPCo is facing currently with its plan of exporting power to a few neighbouring countries.
More than 80% of Ethiopia’s 85 million people live in rural areas. The vast majority of these people are dependent on traditional fuels (wood, dung and crop residue), often using inefficient end-use appliances. For many, this combination of fuels barely allows for fulfillment of the basic human needs such as proper nutrition, warmth and light, let alone the possibility of harnessing energy for productive uses which might begin to permit escape from the cycle of poverty. The most important challenge that hampers the development and exploitation of biomass energy resource emanates from its very nature, i.e. it does not lend itself easily for applications beyond basic physiological needs of cooking, heating and lighting.
Other factors and key issues that adversely affect the exploitation of biomass energy resources in Ethiopia are:
- An unsustainable biomass resource base: although biomass is said to be a renewable resource, the rate of extraction usually exceeds that of planting, resulting in increased environmental degradation.
- Lack of coherent policies: Well-thought and coherent policies that guide activities in the biomass energy sector are lacking.
- Lack of institutional capacity: Capable institutions with clear mandates and long-term oriented programs of action are lacking.
- Wasteful energy utilization: Biomass energy use is characterized by inefficient energy utilization in the household sector. Previous energy efficiency improvement efforts are confined to urban areas at the expense of rural areas where the majority lives.
- Free-good nature of biomass energy: In most parts of rural Ethiopia, biomass is still a ‘free-good’ that can be obtained by free (no cost) collection. This is known to have served as a disincentive to consumers to conserve biomass energy.
- Land tenure: In Ethiopia, land is publicly owned with farmers having user rights. This is believed to have reduced farmers’ appetite to invest in longer-term land development including tree growing.
- Subsidized kerosene: Understandably, kerosene, as a cooking fuel, is subsidized on equity and environmental grounds. Such subsidy is well known to have distorted the market against biomass fuels.
-> See also Country Situation - Biomass
In the context of a developing country such as Ethiopia, it is an undeniable fact that technological backwardness and lack of internally raised finance are important barriers hindering the development and exploitation of hydro/energy resources. However, in today’s rapidly globalizing world, if both technology and finance are unavailable locally they could be secured internationally with relative ease. Therefore, the key barriers to the exploitation of hydro resources in Ethiopia have more to do with other factors. Among these are:
- The absence of "anchor load" demand in rural areas. Rural settlements in Ethiopia are highly scattered resulting in dispersed demand, which in turn makes the supply of electricity prohibitively expensive to remote rural areas.
- Rural demand for electricity is not only dispersed, but electricity consumption is also very low, which makes returns on investment less attractive. As a result, expanding access to electricity, particularly rural electrification through continuous grid extension alone has proved not only a daunting task but also an uneconomic one.
- Persistent and rampant political instability in the Horn of Africa sub region is a key issue that has hindered cross-border electricity trade which possibly could lead to the evolution and development of integrated regional energy market pool.
- The fact that donors and financiers are reluctant, understandably though, to support politically sensitive projects such as the hydropower projects on international rivers is a serious issue affecting exploitation of hydro resources to its fullest extent in Ethiopia.
Another important issue to note in the Ethiopian electricity sector is that electricity generation is almost entirely hydro-based. Out of a total of about 2060 MW installed capacity, 88% is hydro giving Ethiopia a strong clean and renewable energy base (compare Ethiopia Energy Situation). Unfortunately, however, this means that existing methodologies designed to support Clean Development Mechanism (CDM) project activities in the electricity generation sector are not in favor of Ethiopia. In other words, since Ethiopia’s electricity generation is predominantly hydro-based, it is very difficult to design financially attractive fuel substitution/electricity projects that are eligible for CDM financing support.
-> See also Hydropower in Ethiopia
Photovoltaic (PV) market assessments made in recent years (IGAD, EPV.Com, SWERA) unequivocally indicate that there exists enormous potential market for PV in Ethiopia. According to the studies, there is compelling evidences that indicates that there is a significant opportunity for PV in Ethiopia. Among these are:
- A population of nearly 85 million, more than 80% of which is rural and un-electrified
- A considerable size of the rural population living in high-agricultural-potential and cash-crop-growing areas.
- Extremely low electrification rates, with only 12% of the population having access to electricity and almost non-existent access in all rural and some urban areas.
- The scattered settlement pattern in rural Ethiopia makes rural electrification options other than PV extremely unattractive.
- The GoE is committed to the development of the rural agricultural sector through the adoption of a twin-track rural electrification strategy (grid-based and off-grid) to accelerate rural growth through expansion of electricity access by the rural sector. GoE has also established a rural electrification fund to facilitate and support off-grid rural electrification projects.
- Awareness about PV technology and its application (12VDC) has improved over the past few years as a result of a few PV projects that were undertaken in some parts of the country.
Some of the most important challenges and barriers that still need to be addressed include:
- inadequate technical skills,
- lack of innovative financing mechanism to draw-down upfront cost of systems,
- inadequate awareness among policy makers as well as consumers,
- lack of clear and coherent policy, and hence, institutional capacity to facilitate commercialization of the technology, and
- poor linkages between the national level suppliers/dealers and local level retailers and technicians.
-> See also Solar energy in Ethiopia
In the past, owing to technological limitations globally, wind speed of less than 5 m/s were considered too slow to generate electricity. Due to this and other technological constraints compounded with economic ones, application of wind energy was confined to water-lifting. Several dozen wind turbines have been put up and installed by NGOs for water-lifting in the water-scarce central Rift Valley region over the past three decades.
As of 2007, the Ethiopian Electric Power Corporation (EEPCo) was undertaking a wind energy project with the aim of installing two 50+MW wind farms in two separate locations with highest wind potential in the country. If completed successfully, this project is going to be the first of its kind in the country to generate over 100 MW of electricity from wind.
-> See also Wind Energy in Ethiopia
Given Ethiopia’s geological similarities with and proximity to the oil-rich Middle East Region - and more recently the South Sudanese oil fields, the potential for existence of fossil fuel deposits could be remarkable. According to official study results known so far, however, it is only the eastern lowlands (Hilalla oil and Kalub gas) that are coming to fruition at the moment. There are several factors hindering both the exploration and exploitation of fossil fuels in Ethiopia. The most notable among these are as follows:
- Remote Locations: Usually, sites with promising deposits of fossil fuels are located at remote locations where there is no adequate infrastructure. Besides, the fact that the demand centers such as urban households, business and industries are located in the central parts of the country makes it difficult, or at least more expensive, for some fossil fuels (in case of Ethiopia LPG from Kalub gas fields) to be a viable alternative.
- Free-good Nature of Traditional Fuels: In rural Ethiopia, where some 80% of the population reside, traditional fuels (firewood, agricultural waste and animal waste), which meet almost entire domestic (physiological) energy needs, are freely collected. This pushes energy prices artificially down, making it difficult for alternative fuels to compete.
- Persistent Political Instabilities: Areas which are said to have some potential for fossil fuel deposits are often infested with political strife. In fact, it is often the presence (perceived or actual) of the resource that is said to be fuelling conflicts in such areas. This is what the economists call “the resource curse”. Such conflicts hinder not only the exploration works but also the development and exploitation of the resources in the area. Classic examples are the case of ONLF assault (May 2007) on foreign and local workers in Ogaden where close to 80 people were killed; and the case of Gambella where hundreds of lives were lost in 2003.
- GTZ (2007): Eastern Africa Resource Base: GTZ Online Regional Energy Resource Base: Regional and Country Specific Energy Resource Database: II - Energy Resource.