World Bank Unveils $1.4 Billion Program To Modernize Ethiopia’s Energy Sector

The World Bank has unveiled a financial package of up to US$1.4 billion for the Power Sector Reform, Investment, and Modernization in Ethiopia program (PRIME), which will unfold in multiple phases over the next decade.

In its official announcement, the World Bank stressed that PRIME aims to bolster and expand Ethiopia’s electricity grid, enhance the financial sustainability of the sector, and stimulate renewable energy production through private sector engagement. Anticipated to serve the entire Ethiopian populace throughout its lifespan, the initiative is geared towards addressing vital infrastructure requirements and facilitating new electricity connections.

While acknowledging Ethiopia’s strides in electrification endeavors over the past decade, the World Bank highlighted the government’s accomplishments in extending grid coverage to nearly 60% of towns and villages. Nevertheless, challenges persist, with an electricity shortfall impeding socio-economic progress and hindering access to opportunities for many individuals.

Wendy Hughes, World Bank Regional Director for Infrastructure in Eastern and Southern Africa, emphasized the necessity of adopting a medium-term strategy to confront structural and operational obstacles in transforming Ethiopia’s electricity sector. She emphasized that the partnership between the World Bank and Ethiopia over the next ten years aims to attract private investment and other development partners to bolster the country’s electrification objectives.

Similarly, Ousmane Dione, World Bank Country Director for Ethiopia, Eritrea, South Sudan, and Sudan, underscored the importance of PRIME in modernizing and fortifying Ethiopia’s power sector. The program is poised to significantly elevate the quality of electricity provision, amplify renewable energy output, and mobilize private investments to sustain the nation’s rapid electrification pace.

According to the International Energy Agency (IEA), Ethiopia presently depends significantly on hydropower. Proposals to elevate capacity to 13.5 GW by 2040 would position Ethiopia as the second-largest hydroelectricity producer in Africa.

Expanding electricity access to all and electrifying productive activities will result in a quintuple surge in generation, with an even more substantial increase in alternative current (AC). Solar photovoltaic (PV) and geothermal sources are projected to contribute to nearly 45% of the power mix by 2040.

Furthermore, PRIME is expected to bolster Ethiopia’s resilience to climate change by diversifying its energy mix and tapping into its abundant clean energy resources such as solar, wind, and geothermal power.

The Ethiopian Electric Utility and Ethiopia Electric Power, both wholly government-owned public enterprises dedicated to advancing sustainable energy development in the nation, will oversee the implementation of the PRIME project.

Despite this boost from the World Bank, Ethiopia needs to secure significantly more investment into its energy production and distribution sector to meet full potential. According to the IEA, approximately $100 billion will be required over the next 20 years to achieve maximum electrification.