Ethiopia’s first 100 MW auction to conclude in June; scaling solar tender to follow in the summer

The session on Ethiopia that took place this week during the Africa Energy Forum in Copenhagen, Denmark was rather cheerful.

Ethiopia's minister of water, irrigation and electricity, Seleshi Bekele, started his presentation by saying the country has made huge progress in offering electricity access to its citizens. So, the minister said, from less than 300 MW of installed capacity 13 years ago, the country has now installed 4284 MW of power generation capacity. Of this, 3810 MW come from hydro installations, 324 MW from wind, 7 MW is geothermal energy and there is also 143 MW of diesel power generation.

However, the government has now developed a five year energy plan seeking to diversify its energy mix and increase the country's electrification rate, added the minister.

Geographic access to the electricity grid in Ethiopia today extends to 56% of the country. “Given that 35% of our population is rural”, said Bekele, “we look for both grid-connected and off the grid investments too”.

Solar PV tender
Based on the government's energy plan for the years up to 2020, Ethiopia has prioritised 300 MW of solar PV projects dispersed across three sites; 820 MW of wind power to be located in four sites; 570 MW of geothermal power to be developed in four sites; and an extra 3879 MW of new hydro plants in eight different sites.

The main investment vehicle for the new renewable power generation projects will be independent power purchase (IPP) contracts, Bekele told the Africa Energy Forum.

Regarding solar specifically, the Ethiopian minister said the country is currently running a tender for the 100 MW Metehara project, which initially attracted more than 60 bids. Five bids have been shortlisted and a final decision is expected to be announced by the end of June, the minister revealed.

Furthermore, the International Finance Corporation (IFC), which is a member of the World Bank, is expected to announce a new solar PV tender for Ethiopia within the summer via its so-called scaling solar program.

Rahul Kitchlu, a World Bank senior energy specialist and country portfolio leader based on the World Bank's Addis Ababa office, told pv magazine that the IFC is currently undertaking the pre-bid due diligence for the tender.

We work together with the IFC, which collects all the data and prepares the tender documents so that the scaling solar projects are financable, said Kitchlu. So, this work is almost ready now but the IFC is waiting firstly for the Mehara tender to fully roll out, added Kitchlu. This is because the tender for the Mehara project can serve as a sort of a pilot tender with useful lessons to be learned about investors' appetite for Ethiopia, explained the World Bank analyst.

pv magazine has reported before that Ethiopia is seeking to tender up to 500 MW of solar PV via the scaling solar program and the first such tender will concern about 200 MW to 250 MW of capacity.

The IFC aims to standardise the scaling solar tender process for the whole of the African continent, and works carefully to minimise all financial transaction risks related to the tendered projects.

Hydro energy for back-up?
Speaking at the Forum, Henrik Breum, the Danish Energy Agency's program coordinator for accelerating wind power generation in Ethiopia, told the Ethiopian minister that Ethiopia can expand on wind and solar capacities relying on hydro energy for back up. This is what we do in Denmark too (relying on Norway's hydro reserves) when the wind doesn't blow, Breum said.

What is needed though, Breum added, is for Ethiopia's government to develop a regulatory policy framework that attracts private sector investment.

Sohail Barkatali, a lawyer at London-based firm Hogan Lovells, who also participated in the panel, said that there is some comfort about energy law in Ethiopia because the country already has a lot of regulations in place. However, Barkatali added, there is also a new IPP law under preparation, which hasn't been issued yet but currently rests in the parliament.

Other Forum speakers noted that although the country's double digit GDP growth in the last years means that power demand is increasing, they also pointed out that the electricity tariffs are not cost reflective and this might undermine the sector's sustainable growth.

There was not any talk in the panel session regarding Ethiopia's recent political turmoil that might add further risks.