- Access to electricity in Ethiopia and Djibouti is now to be increased through regional cooperation in the energy sector. Power trade will give Ethiopians access to the relatively large electricity coverage in Djibouti, while it will give Djiboutians access to much cheaper electricity from Ethiopia.
In Djibouti, half of the population already has access to electricity, making the country a regional leader. Power is however expensive, mostly produced on imported oil. In Ethiopia, on the other hand, only one eighth of the population has access to the relatively cheap hydroelectric power, which furthermore is heavily underdeveloped.
A more functional region power market is believed to reset much of these ills. When power flows freely across the Ethiopian-Djiboutian border, prices will adjust and power supply will increase, economists hold.
Those willing to pay more for power in Ethiopia, can buy the imports from Djibouti, which in any way will have to become cheaper to compete with electricity produced in Ethiopia. The existing market and distribution network in Djibouti and possibilities to sell power at higher prices will further promote investments in developing new hydroelectric power plants in Ethiopia.
To facilitate this development, the Ethiopian Electric Power Corporation (EEPCo) and Electricité de Djibouti (EdD) are to start their joint "Multinational Power Interconnection Project" in January 2005. The full power integration between the two neighbours is expected to be finalised by mid-2009.
As part of this project, authorities expect a large increase in electricity access in Ethiopia - from 13 percent in 2003 to 20 percent by 2012 - and in Djibouti - from 49.5 percent in 2003 to 60 percent by 2015. Power is expected to be provided at more affordable prices in the entire region as a result of the project, thus contributing to improve electricity access.
Despite Ethiopia's huge hydroelectric potential, the exploitation rate is only about 2 percent. Ethiopia' power system is predominantly hydroelectric based and production cost is low. Ethiopia hopes to attract investors in its underdeveloped hydroelectric energy sector by liberalising regional power supplies.
In the case of Djibouti, the country primarily depends on oil-fired electricity generation. Consequently, the unit cost of power production in Djibouti is significantly higher than in Ethiopia. Power prices in Djibouti also are very unstable, following international oil market prices.
For Djibouti, as opposed to Ethiopia, the project implies reduced future investment in the power sector and reduced requirement of spinning reserve. The power interconnection is to permit harmonisation of investment programmes between Ethiopia and Djibouti.
Authorities in Djibouti and Ethiopia see the increase in electricity access as a major goal in development and poverty reduction. Small scale industries in various sectors depend on electrification in both countries and rural societies need an affordable power supply to improve education and health care.
The "Multinational Power Interconnection Project" today achieved major international financing as the African Development Fund (ADF) approved two loans totalling US$ 59 million to the governments of Ethiopia and Djibouti. This amount is set to finance the "consulting services required for supervision of construction of the project, institutional support and for auditing of the project accounts," according to ADF.
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