Ethiopia invites bids for two utility-scale solar projects

From the newsletter

The Ethiopian government is inviting bids for the construction of two utility-scale solar PV projects, Gad II (125 MW) and Weranso (100 MW), under a Public-Private Partnership (PPP) framework. While historically reliant on hydropower, Ethiopia aims to diversify its energy mix by pursuing all renewable energy sources.

• The application period runs until April 12th, 2025. It is open to international bidders and applications must be delivered to the office of the Public-Private Partnership Directorate General (PPP DG).

• This initiative is part of Ethiopia's ambitious plan to more than double its installed electricity generation capacity to 13,000 MW within the next three years.

More details

• Ethiopia has an installed electricity generation capacity of about 5,200 MW, with over 90% coming from hydropower. While wind and solar are still nascent markets with limited installed capacities, solar is gaining prominence. The government is leading in utility-scale solar projects, aiming to connect more than 50 million people who currently lack access to electricity.

• To achieve universal electrification, Ethiopia will need to utilise all its abundant renewable energy resources, which have the potential to generate over 60,000 MW of electric power from hydroelectric, wind, solar, and geothermal sources. Currently, it has tapped only about 8.7% of this potential, with just about 20 MW of installed solar capacity.

• Ethiopia's location near the equator provides it with significant solar potential, receiving an average of around 6-8 hours of sunlight per day. Cities like Addis Ababa even experience higher sunshine hours, approximately 8.1 to 9.8 hours of sunshine daily.

• Further supporting its solar ambitions, Ethiopia recently signed a cooperation agreement with Israel on renewable energy development projects, with an emphasis on solar energy. This partnership will help expand Ethiopia's solar energy capacity and contribute to its electrification goals.

• With global solar panel prices declining, the technology is becoming increasingly attractive. Ethiopia's abundance of baseload energy from hydro and geothermal sources makes solar even more appealing, as these resources can complement each other for a stable grid. Solar can provide power during peak sunshine hours, while hydro and geothermal ensure a consistent supply at other times.

• The disparity in electricity access between urban and rural areas in Ethiopia (currently at 94% for urban and 43% for rural areas) necessitates customised solutions. Decentralised solar solutions, particularly mini-grids, can be highly effective in providing affordable electricity to unconnected communities. These mini-grids can be integrated to support rural economic activities and boost local agricultural industries. A similar scheme has been successfully adopted in Kenya, which currently has over 500 mini-grids, with the majority being solar-powered.

• Ethiopia also exports electricity to neighbouring countries, including Kenya, Djibouti, and Sudan, with PPAs in place and plans to increase export capacity. Diversifying its energy mix through solar and other renewables enhances energy security and allows Ethiopia to meet both domestic and export demands.

Our take

• Ethiopia's integration of solar energy projects into its energy mix offers an opportunity to stabilise its power grid against any eventual climate-related impacts that might affect its hydropower generation. Hydropower and solar resources are abundant at different times. When there is excess hydropower, the sun is typically down, and conversely, when there is excess solar generation, hydropower is usually lower. This allows for complementarity between the technologies, contributing to a stable and secure grid.

• Diversifying its energy mix to include solar also puts Ethiopia in a better position to supply cheap electricity to its neighbouring countries with which it has electricity export agreements. This way, Ethiopia stands to benefit from increased export revenue.

• Having cheap electricity will not only be good for the export market but also for attracting industries that want to establish their presence in Ethiopia. Clean electricity will act as an incentive for companies who export their products to markets demanding low-carbon production of goods.