Turning potential into power

10 July 2006


Ethiopia finally seems to be starting to make the most of its massive hydroelectric potential. At least 85% of the water flowing through the Nile in Egypt comes from Ethiopia and the mountainous eastern African state relies almost exclusively on hydro schemes to provide its power requirements. However, the generating capacity at most of its hydroelectric power plants has fallen because of silting and the historically weak economy has resulted in limited investment in new schemes. The development of the Tekeze dam certainly marks a step in the right direction and now that work is underway on the Beles hydro scheme, the Ethiopian government is seriously talking about turning the country into a major electricity exporter.

The Ethiopian power sector is dominated by the state owned Ethiopian Electric Power Corporation (EEPCo), which controls generation, transmission and distribution in the country. The company has 745MW of generating capacity, of which 694MW is accounted for by hydro schemes. However, many power plants in the country are operating at less than their nameplate capacity because of a lack of maintenance work in previous years.

The head of public relations at EEPCo, Sendeku Araya, told journalists in April that his company plans to export electricity to foreign markets by 2010. He said: ‘By 2010, the construction of the Tekeze hydro power dam with a capacity of 300MW, Gilgele Gibe II with a capacity of 420MW and Beles hydro power dam with a capacity of 435MW will be completed.’ Neighbouring Djibouti, Kenya and Sudan are the most likely markets and the company estimates that it could earn tens of millions of dollars a year from exports.

The three schemes are being developed at a total cost of US$1.4B and represent the biggest investment ever in the Ethiopian power sector. The addition of 1155MW of new capacity will certainly revolutionise the country’s power sector. Part of the funding for the schemes is being provided by the Ethiopian government itself but the European Investment Bank (EIB) and the Italian government have also contributed financing. The Italian government has given Ethiopia a US$277M loan on easy terms to help finance the second phase of the Gilgele Gibe project. The first 184MW unit of the plant, which is located on the River Omo in the south, came into operation at the end of 2004.

The Tekeze hydro power project on the Tekeze river in the north of the country will be the highest dam in Ethiopia at around 185m. It is being developed by China National Water Resources and Hydropower Engineering Corporation (CWHEC), at a cost of US$350M. Construction work began in August 2002 and is expected to be completed by the end of 2007. When the contract was drawn up, it was the biggest Chinese investment in Africa since the construction of the Tanzania Zambia Railway (Tazara) in the 1970s. Apart from generating power, the project is designed to supply water to large areas of agricultural land, in one of the country’s main areas of coffee cultivation.

The government awarded Salini Costruttori the turnkey contract for the Beles project on the River Beles close to Lake Tana. In turn, the Italian firm has awarded the US$89.5M turbine supply contract to Austrian company VA Tech Hydro. Apart from designing, supplying and installing the four turbines at the underground site, VA Tech Hydro will supply all other electro-mechanical infrastructure required by what will be the biggest power plant of any kind in the country. The Beles scheme is scheduled for completion by the end of 2008. As well as providing 435MW of new generating capacity, in common with Tekeze it is designed to supply water for both residential and agricultural use in the region.

An even bigger plant could be developed at Kara Dobe in Oromo Province. In 2001, Ethiopia, Sudan and Egypt signed an outline agreement to build a series of dams in the area but there has been little progress to date. The construction of the first dam will cost in the region of US$800M and so EEPCo will certainly require external support if it is to develop the project. In September last year, the Ethiopian Ministry of Water Resources announced that a feasibility study on the dam was to be undertaken and the results are expected by the end of this year. No specific details on likely generation capacity have yet been released, but it would almost certainly be the biggest hydro scheme in Ethiopia.

Some smaller hydro schemes are also being developed. The 73MW Tis Abay II plant was completed on the river Abay in 2001, while the Finchaa scheme in the west of the country is being expanded by 34MW to 16 MW. MWH Global is overseeing the development of the latter. Three of the oldest hydro units in Ethiopia are to be overhauled. In January, EEPCo issued a tender for bids to modernise the Koka, Awash II and Awash III power plants, which were developed between 1960 and 1971.

Government policy

The main power grid in the country is known as the Inter Connected System (ICS), which connects the vast majority of power plants to the main towns. At present, there are eight hydro, twelve diesel fired and one geothermal plants in the ICS. EEPCo is making some headway on its long standing electrification programme and a number of towns have now been connected to the ICS, although there has been far less progress in rural areas. According to EEPCo figures, only 14.41% of the population had access to electricity in 2004, the latest year for which there are accurate figures.

The reliance on hydroelectric generating capacity has left the power sector vulnerable to reduced production during the dry season or during the all too regular prolonged droughts. Yet while some African countries, such as Tanzania, have sought to tackle this problem by developing thermal power plants in order to create a more balanced generation mix, EEPCo has decided to greatly increase its hydro generating capacity. Its reasoning seems to be that if droughts cut production at hydroelectric plants in half then it should double its capacity to cope with the cuts. Any excess electricity can be exported when there is plenty of water in order to generate further revenues.

Also in contrast with some reforming African governments, Addis Ababa has decided to retain EEPCo as a state owned company. Foreign firms have been awarded large contracts to develop new plants but EEPCo remains in control of most new plants, although there is some private sector management. The country’s first hydro independent power producer (IPP) was completed in 2004. The 150MW Gojeb scheme was developed by Ethiopian construction company Mohammed International Development Research Organisation and Companies (Midroc), which has concluded a power purchase agreement (PPA) for all output with EEPCO. A second private sector plant is being built in the southern Oromo Province. The Genale hydro scheme will have capacity of 162MW and is being built under a 30 year build operate transfer (BOT) contract, although Italian firm Enerco has the option to extend this for another 30 years.

A new transmission line is being developed to link Shehedi in Ethiopia with Gedaref in Sudan at a cost of US$68M and is expected to be completed by 2010. The interconnector’s project manager, Tesfaye Batu, said: ‘When the project is completed Ethiopia will earn US$30M a year for the export of 200MW of low cost hydro power to neighbouring Sudan, which is intended to replace the costly thermal generation which it is currently using.’

Another 283km 230kV transmission link is to be put in place to connect Dire Dawa in Ethiopia with Djibouti. An agreement confirming the development of the project was signed by the governments of the two countries in Addis Ababa in April. The line is expected to be completed in 2009 and the first exports could be transmitted within a year, while some towns in Ethiopia will also be able to access electricity via the interconnector for the first time. The African Development Bank (ADB) is providing much of the US$61.6M development costs.

However, there has been no final decision as yet on constructing an interconnector between Ethiopia and Kenya. Following a meeting between the two sides in March, Araya of EEPCo said that a preliminary agreement had been signed by the power companies and governments involved, although a second meeting will be required later this year in Kenya to discuss the details of the venture.

The diversion of water by the new hydro schemes for irrigation could provoke anger from Egypt. The Tekeze project has been on the drawing board for many years but potential investors were scared off by belligerent noises from Cairo. Under the current complex web of colonial era treaties, almost all water in the Nile Basin is reserved for the use of Egypt and Sudan, so the Egyptian government has consistently opposed the diversion of any water upstream.

This position seems understandable but unreasonable given the scarcity of water resources in the other eight countries within the Basin, including Ethiopia. Cairo appears to have recognised that a fairer division is required, particularly as there is little short of declaring war that it could do to stop the construction of dams upstream. It has therefore formed the Nile Basin Initiative (NBI) with the other governments in the region in an effort to reach a negotiated settlement. It will be interesting to see what impact the various Ethiopian dams have on the Nile’s water flows but there is little doubt that the country is emerging as a major force in African hydroelectric power generation and that it will become a major electricity exporter within a few years.



Meeting the targets
In 2001, EEPCo laid out a number of targets that were to be reached by the end of 2006. At present, the company seems to be on course to achieve many of them, particularly with regard to generating capacity. To increase: power generation capacity from 327 MW to 647 MW; energy generation capacity from 1367 MWh to 2587 MWh; transmission density from 20 km/1000 sq km to 32/1000 sq km; number of electrified towns from 458 to 651; number of customers from 594,267 to 749,627; energy sales from 1314 MWh to 1900 MWh; energy production from 1599 MWh to 2314 MWh; per capita energy consumption from 28 kWh to 32 kWh; percentage of population having access to electricity from 13% to 17%. To reduce transmission losses from 17.8 % to 15 %; the billing lag (meter reading to billing) from 85 to 30 days; average length of wait for service hook-up from 90 days to 30 days. In 2001, EEPCo laid out a number of targets that were to be reached by the end of 2006. At present, the company seems to be on course to achieve many of them, particularly with regard to generating capacity. To increase: • Power generation capacity from 327MW to 647MW. • Energy generation capacity from 1367MWh to 2587MWh. • Transmission density from 20km/1000km2 to 32/1000km2. • Number of electrified towns from 458 to 651. • Number of customers from 594,267 to 749,627. • Energy sales from 1314MWh to 1900MWh. • Energy production from 1599MWh to 2314MWh. • Per capita energy consumption from 28kWh to 32kWh. • Percentage of population having access to electricity from 13% to 17%. To reduce • Transmission losses from 17.8 % to 15 %. • The billing lag (meter reading to billing) from 85 to 30 days. • Average length of wait for service hook-up from 90 days to 30 days.



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