(Forbes) — Iceland and Ethiopia have a lot in common. Volcanism, mountains and some of the highest ratios of renewable power in their generation mix.
Despite being among a handful of countries worldwide that already derive the most of their electricity from renewable resources, Ethiopia’s power sector is vulnerable. It relies very heavily on hydropower but allowing that status quo to persist is risky. Between the political threats, Egypt is very unhappy about further damming of the Nile, and the climate change threat, something needs to change.
The World Bank agrees it would seem and last week it took action with a $200 million package designed to encourage the development of 1GW of wind and solar projects in the country.
With 45GW of installed hydropower capacity, a slightly misleading figure as these are of course not 100% efficient nor are they ever all running at the same time. According to 2012 data from the UN, peak demand in the country was less than 1.3GW.
But that figure is climbing rapidly. Electricity consumption per head of population trebled between 2000 and 2014. As of 2012, only 23% of the country was actually connected to the grid so as that figure rises, demand will be supercharged.
Expected increased variability in rainfall and greater demand on freshwater resources puts extra strain on reservoirs.
The World Bank’s Renewable Energy Guarantees Program (REGREP) will help the authorities in Addis Ababa to reform their regulatory framework and gear it up for private investment and ownership. It is hoped the package could draw in $1.5 billion of funds from Independent Power Producers (IPP) who would look to build and potentially operate the new generators.
“REGREP comes at this critical juncture and signals the Government’s commitment to comprehensive power sector reforms and a private sector-led renewable energy development program that has the potential to be one of the largest in Sub-Saharan Africa,” said Rahul Kitchlu, senior energy specialist at the World Bank.
The private sector is being increasingly welcomed to the power sector in Africa. This week Botswana canceled plans for 100MW solar tender that it hoped to run as a joint venture with a partner. It will now be re-written launched again next month with no government ownership at all.
“With the support of the World Bank Group, this program will create a platform for much-needed private sector participation in the crucial energy sector by lowering the risks of investing in Ethiopia,” said Carolyn Turk, World Bank Country Director for Ethiopia, Sudan and South Sudan.
In addition to policy support and regulatory adjustments, the Bank will also use its resources to identify the best possible sites for wind power giving the country a head start in development and planning.