The Ethiopian government, in realization of the productivity enhancing effect of infrastructure, has pursued an ambitious infrastructure expansion program for the past fifteen years. It is investing heavily in roads, telecom, power as well as social infrastructure in schools, health services and water supply. In the past five years power sector development has taken off with several large power projects going into construction.
Electricity is a critical economic infrastructure. If not delivered where and when needed serious damage ensues for the economy. Considerable potential output has been lost due to power cuts in the past few years. Potential losses from power disruption will increase in the future as the economy grows and the relative contributions of the industry and service sectors increase in the economy. Power supply must increase as rapidly as demand to avoid such losses and to ensure sustained growth. This is the rationale upon which the government is accelerating its investment in expanding the power system: system capacity will double within a year and is planned to quadruple before 2015.
Development of power infrastructure is capital intensive and thus difficult to finance in capital poor countries such as Ethiopia. Development of power infrastructure can also have significant environmental and social impacts and risks. These factors point to the need for sound strategies and planning for the power sector. Shortcoming in good strategies and plans will result in inadequate supply or costly over investment. Both reduce benefits: under investment curbs economic expansion, over investment ties resources that could be invested elsewhere. While good strategies and plans are essential in all countries they are critical in developing countries because of their limited access to power which constrains their growth, scarce capital, and fragile social and environment conditions.
The Ethiopian power system is highly hydropower biased where hydropower accounts for 95% of total system generation. The midterm expansion plan to 2015 contains mainly hydropower plants thus increasing the hydropower share to nearly 100%. There are benefits and risks with such high specialization: the benefits are mainly in low economic cost of generation, improving technical and managerial capability to design, develop and manage hydropower projects, potential for export; the risks are related to the vulnerability of the power system to natural hazards and in its social and environmental impacts. These risks and impacts are considerable and must be averted and mitigated.
Vulnerability of the power system and its potential environmental and social impacts can be mitigated through diversification of the power generation mix. Diversity is attained when the generation mix has variety in the number of options it can utilize (the number of power plants in the system), disparity among the options (different generation sources and technologies), and balance in the contribution of the options. Ethiopia has a number of options for diversifying the power generation mix. In addition to hydropower, Ethiopia has considerable resources in geothermal, wind, biomass, solar, coal, and natural gas. It also has the option of power exchange with neighbouring countries. Ethiopia’s power system security depends on creating a balanced generation mix from these resources.
This report has made a preliminary assessment of the economic, environmental and social benefits and costs of the options outlined above. The finding is that an integrated least-cost plan in the context of Ethiopia will consist of DSM programs, low-cost indigenous supplies, and power exchange within the East African Power Pool. A balanced mix of these measures will improve the diversity of the power system and reduce its vulnerability to natural and economic uncertainties. The main findings from this preliminary assessment are:
a. DSM measures are generally the lowest cost option and also have positive environmental and social impacts and no political risks;
b. Large hydropower plants are the least-cost option among supply alternatives; hydropower costs 40% less than the next least-cost alternative (geothermal). However, large hydropower can have significant environmental and social impacts; considerably more than the rest of the alternatives;
c. Geothermal, wind and solar energy have low environmental, social and political impacts and risks. Geothermal is also economically attractive; wind can be viable compared to thermal plants on the grid; but solar will be an expensive option for the grid;
d. Power from biomass residues is an economically competitive supply option; it also has positive environmental impacts;
e. Coal and natural gas power plants are economically competitive with the more expensive large hydropower plants; coal mining can have significant environmental impacts, especially if the mining area has special features (such as high biodiversity or it is ecologically sensitive);
f. Power exchange with neighbouring countries can moderate impacts of power production deficits and surpluses provided that neighbouring countries have either surplus capacity or their demands are complementary to Ethiopia’s.
The integrated plan should have diversity not only in the supply mix but also in suppliers as well. For this reason the integrated plan should encourage Independent Power Producer (IPP) engagement in the power sector on and off the grid. IPPs can consist of state and private companies. In the Ethiopian context, the role for state companies as IPPs can be considerable especially for biomass based generation (sugar estates from bagasse, municipalities from land fill gas). Private IPPs can engage in hydropower, geothermal, biomass, wind and solar based supply for the grid and for off-grid.
The environmental and social risks and impacts of hydropower and other power infrastructure development can be considerable. There is need to consider environmental and social risks at the strategy and policy level for the power sector. Power sector development strategy and plans may be aided with the Strategic Environmental Assessment (SEA) process which is a tool for setting of objectives, generating alternatives and scenarios, impact analysis and weighting of different alternatives based on multiple development objectives (ADB and SEI, 2008). Lessons can be learnt from countries with similar experience as Ethiopia such as Vietnam in this regard.
Environment and social risks and impacts must first be avoided where possible then mitigated when unavoidable. All possible strategies must be explored before implementation and when the option with the least cost and risk is chosen it must be accompanied with full prevention and mitigation measures.
This report is an assessment of risks and opportunities of the Ethiopian power sector in terms of supply diversity and security. The report is organized into five chapters. The first chapter provides the background for the study including demand growth and power system expansion plans of the government. Chapter 2 gives an overview of the Ethiopian power sector including installed capacity, generation and sales. In chapter 3 the benefits and risks of a hydropower biased power system development strategy are discussed. Chapter 4 outlines potential for mitigating risks for the power system through diversity by identifying alternative generation options and demand management opportunities. Chapter 4 also introduces a new and more appropriate framework for assessment of these alternatives. Finally, in chapter 5, conclusions and recommendations are presented. (To be published)
Please download the pdf file here
