Ethiopia: The Water Tower Of Africa?

The 6,000 MW Grand Ethiopian Renaissance Dam on the Blue Nile River will be the biggest hydropower project in Africa when completed in 2018. It is part of an ambitious 25-year plan to ramp up hydroelectric capacity to 37,000 MW by 2037. Ethiopia is keen to establish itself as the ‘water tower of Africa’.

Ethiopia’s Rationale For Hydropower

Ethiopia’s desire for hydropower stems from the following goals:

  • To ensure energy security and support economic development.
  • To become less reliant on expensive imported oil for electricity generation and improve its trade balance.
  • To raise capacity, both for domestic generation, but more interestingly, to export surplus electricity to its neighbours – particularly Kenya – and establish itself as a regional energy hub.

Can Ethiopia Succeed?

Ethiopia has huge estimated hydropower generation potential of 45,000 MW (second only to the Democratic Republic of Congo in Africa, according to the World Bank).

Ethiopia has already inaugurated a 283km transmission line that has enabled Djibouti to import up to 60 MW of electricity. Ethiopia is currently earning a small amount of income from the deal and has gained access to Djibouti’s ports as a result.

Kenya is the main target of electricity exports, and its economy is growing quickly, thus generating demand for Ethiopian electricity.

China is stepping in to build transmission lines and infrastructure between industrial centres and to other countries.

Threats To Ethiopia’s Ambitions

Geopolitics: Egypt is very unhappy with Ethiopia having control of Nile water resources. The populations of Sudan and Kenya have also voiced concerns – but, equally, their governments are keen to import the electricity.

Environment: There are major concerns about the effects of damming rivers on the ecologically sensitive Lake Turkana in Kenya.

Financing and China: Because of concerns about environmental impact, the World Bank and African Development Bank (AfDB) have been wary about financing some of the latest large-scale projects. China has no such qualms and wants to expand its global influence through involvement in Nile resources. Interestingly, China is not in Ethiopia to tap natural resources (Ethiopia doesn’t really have any), but mostly for political gain. Ethiopia is strategically positioned, with a population of 90mn, and is the home of the African Union.

Further coverage of the renewable energy sector is available to subscribers at Business Monitor Online.

This blog is tagged to:
Sector: Country Risk, Infrastructure
Geography: Africa, Ethiopia, Kenya

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