The electric power purchase agreement between Kenya and Ethiopia, which was signed last month in Naivasha, Kenya, in the presence of outgoing president Uhuru Kenyatta, was lauded as a significant achievement for both nations.
It was a much awaited agreement as the countries had previously spent USD 1.3 billion on the transmission infrastructure with funding from the World Bank and the African Development Bank (AfDB). The transmission line connects the two nations across a distance of 1,068 km, of which 437 km are within Ethiopia’s border and the rest are in Kenya.
Many people, including officials from the Ethiopian Ministry of Finance, were heard remarking on how this 25-year agreement will provide Ethiopia with a sizable market base, demonstrating how Ethiopia is indeed the region’s electric powerhouse.
Full power transmission will start at the beginning of November this year after the transmission line has undergone testing. Given that Kenya demanded lower pricing and even less power, stating they wouldn’t need the entire 400MW until the renegotiations were finished last month, the administration had found it difficult to reach a settlement.
The countries agreed to transfer up to 400 megawatts (MW) of power, but for the first five years, only 200MW of electricity will be transferred. Until the seventh year, Kenya will receive 400MW of power for 18 hours each day, and then 400MW of power for 24 hours each day.
Even though Kenya wanted a price as low as 0.05 USD per kilowatt hour (KWh), the initial price for electricity sales was 0.07 USD. However, they have finally settled on a final price of 0.065 USD per KWh. It is almost similar with what Ethiopia charges Djibouti, which is between 0.06 and 0.07 USD per KWh.
Ashebir Balcha, chief executive officer (CEO) of Ethiopian Electric Power, says his company’s primary plan is to export more power to its neighbors in order to generate foreign exchange.
The process EEP officials go through to secure export deals had not been without challenge, as Ashebir explained. Finalizing export deals with neighbouring countries usually take a long time, in most cases, consuming more than year. Setting up transmission lines also require a huge budget, which require securing finance from external lenders, a process that can take over a year. .
“From the foreign currency we generate, we mainly plan to expand the local grid,” Ashebir told The Reporter.
Ethiopia earned 95.4 million USD in revenue during the last fiscal year from the export of 1,700 GW (gigawatts) of electricity to just Djibouti and Sudan. Although both countries have contracts to acquire 100MW of electricity each, not all of it was being transferred to them.
While Sudan has requested Ethiopia to export up to 1,000MW of electricity, a funding has been already secured to construct another transmission line connecting Ethiopian with Djibouti.
About 1,109GW was exported to Sudan generating the 54.6 million USD, and 611GW was exported to Djibouti. As Kenya joins the list of nations that are purchasing power from Ethiopia, the export revenue is anticipated to increase significantly the next year.
The office of Ashebir has also signed memorandums of understanding with other nations, including South Sudan and Somaliland. Additionally, talks are in progress with other nations like as Tanzania, Burundi, and Rwanda, bringing the total number of nations interested in Ethiopia’s electricity to eight.
With electricity coverage of less than half percent, 18 plants in Ethiopia currently have the capacity of producing 4,500MW of electric power, excluding the Grand Ethiopian Renaissance Dam (GERD). Two turbines at GERD that went operational will give the country additional production capacity of 750MW, but can produce 540MW currently.
Officials say Ethiopia is exporting only the surplus from what had been distributed locally. Distributing all the produced power internally takes huge investment, as Ashebir explained. “We will still have to work more on the access to power for the general public,” he confessed.
One of the concerns that officials, including Ashebir, have is that the government won’t be able to immediately distribute all the power produced by GERD, which is expected to be finished in two and half years. “The public should be patient with us for the distribution,” he said.
In the eyes of experts like Tigabu Atalo, an independent energy consultant, exporting the generated electricity is a wise move as the forex can help the country to expand distribution lines across the country.
“The reality is that we have bigger potential than what we are using now. This surplus should be exported, instead of waiting until it is wasted, to help tackle the local distribution constraint,” Tigabu said.
The infrastructure built between the countries is no bad too, as the expert explained. It is a two way benefit on which Ethiopia can be able to get electricity back, should there be a power surplus in the neighboring countries and a shortage occurs in Ethiopia.
On the issue of power cuts to industries and areas with enough distribution lines, Tigabu considers a problem could be on the strength of transmission lines and capacities of sub-stations.
“There is no question that the first priority is meeting the local demand, but it is important to question if the lines in place are good enough, and sub-stations have enough capacity,” he said.
The Ethiopian Electric Utility expected a two billion birr budget from the government every year in order to increase its customer base and ensure adequate distribution to the general public. But for the past two years, the government was supplying not even over half of what was needed.
Last year, Ethiopia produced about 15,487GWh power, over 96 percent of this total produced power was from hydropower, at 14 of the 18 power plants. Wind and geothermal power plants follow.
Power generation options such as geothermal, wind and solar by the private investors, as well as gas to energy, are all being considered by the government to secure abundant power generation and assure accessibility to the public, according to Ashebir.
“For its big potential, better sustainability, massive energy capacity, and its advantage of not being affected by weather, we are considering geothermal as the next big power option,” Ashebir said. But the biggest challenge for it is the investment cost because up to 3km should be dug, he added.
Mikael Alemu, managing partner CEO of 10 Green Gigawatt for Ethiopia, an initiative working on off-grid electricity solutions, advocates for the decentralized renewable solutions to assure energy abundance in Ethiopia.
For him, generating electricity through off-grid mechanisms like solar is the best way forward.
“In my opinion, 50 percent of the country should be off-grid with 10-50MW of solar energy supporting regional cities and industrial facilities via rooftop installations or solar panels installed high above the ground,” he said.