Ethiopia is among the two countries in Africa earmarked for a feasibility study to explore the potential of electricity cooperative business models.
The study being undertaken by the African Development Bank will take place in Ethiopia and Nigeria. This is part of the Bank’s goal of achieving universal electricity access across Africa by 2025.
“The effort is Currently, power shortages diminish the region’s GDP growth by 2-4% per year, holding back job creation and poverty reduction efforts.” A statement from AfDB reads in part.
According to export.gov, Ethiopia has abundant renewable energy resources and has the potential to generate over 60,000 megawatts (MW) of electric power from hydroelectric, wind, solar and geothermal sources.
As a result of Ethiopia’s rapid GDP growth over the previous decade, demand for electricity has been steadily increasing. Despite Ethiopia’s huge energy potential, the country is experiencing energy shortages as it struggles to serve a population of over 100 million people and meet growing electricity demand which is forecast to grow by approximately 30 per cent per year.
The study, funded by the South-South Cooperation Trust Fund, will be conducted by the National Rural Electric Cooperative Association (NRECA) International over three months. NRECA will consider regulatory, legal, technical and socio-economic factors that impact the creation of electric cooperatives in the two countries.
Electricity cooperatives are tax-exempt businesses set up and owned by the consumers who benefit from the services provided in generation, transmission and/or distribution. They are used in many parts of the world to provide last mile connections to rural areas through grid extensions and cooperative enterprises. Where successful, they also improve rural electrification, while creating sustainable businesses.
Speaking at the kick-off meeting, Batchi Baldeh, the Bank’s Director of Power Systems Development, thanked the South-South Cooperation Trust Fund for financing the initiative.
“This study is timely and aligned with the Bank’s New Deal for Energy in Africa. We look forward to working with NRECA International to execute the study, and to leverage its extensive experience in electricity cooperative business models to pave the way for the implementation of transformational projects across Africa” he said.
Power Africa fact sheet notes that the Government of Ethiopia has set ambitious goals to become a middle-income country by 2025, which includes aggressive power generation and connections targets. The government has determined that private investment is critical to achieve new generation targets beyond 2015 as concessional loans for government owned/operated generation facilities have decreased significantly.
With Power Africa assistance, the GoE has gained experience with Independent Power Producer (IPP) projects through negotiation of the unsolicited Corbetti and Tule Moye Geothermal Projects and the competitively tendered Metahara Solar Project. Power Africa also assisted the government with developing the legal and regulatory IPP framework that has lowered financing risks. Major hurdles still exist, namely: the utility must become a creditworthy purchaser of electricity for IPPs; tariff rates must be reformed to allow for full-cost recovery; the dated transmission and distribution system, suffering from high losses and frequent outages, must be rehabilitated; efficient planning and operation/maintenance of the grid must be undertaken as it is expanded and new connections are added to keep up with new generation; and electrification of off-grid populations must be addressed.
Underscoring the importance of Government cooperation and commitment, Mr Baldeh added that the cooperatives rely on strong partnerships among governments, rural/local communities and development partners for implementation and success.
“We selected Nigeria and Ethiopia following dialogue with their respective ministers of energy during the Bank’s Africa Energy Market Place held in July 2018, where they expressed their governments’ commitment to improve rural access through established models. We rely on this cooperation to explore this innovative model of delivering our High 5 to light up and power Africa”, said Baldeh
The Proshare Ecosystem notes that in Nigeria, electricity has now become too expensive in Nigeria yet the distribution companies are asking for more.
“They want to increase tariff. The Generating Companies (GENCOs) are complaining that they are not allowed to recover their costs and also they cannot produce the volumes that make sense. The DISCOs are complaining that many people at the grassroots refuse to pay them and that government owes them. The GENCOs also complain that the DISCOs owe them. The TCN (Transmission Company), is managing broken infrastructure and often begs the GENCOs not to generate too much power else the system shots down entirely. We have more than 10 total system collapses this year alone. The consumers complain that the DISCOs are not sending meters and therefor engage in arbitrary billing. The Meter Manufacturers complain that they don’t get paid for meters supplied to DISCOs. The entire system is broken. We need new thinking.” Reads an excerpt from the site.
Findings of the study will inform the viability of plans to pilot the model in the selected countries, in May this year.