Ethiopia Needs 12-fold Jump In Electric Power Generation To Achieve Middle Income Ambitions: Paper

A new white paper by QRB Labs ICT Solutions PLC predicts that with the right policy reforms the country could generate three billion dollars in annual direct revenue from electricity sales by 2028, corresponding to a USD 40 billion USD long-term impact on the Gross Domestic Product (GDP).

The paper from the data center service provider based in Ethiopia estimates the country requires an electricity generation capacity of 100 Gigawatts (GW) to achieve middle-income status—a target that aligns with the current global average of one kilowatt per capita.

The nation’s current electricity generation capacity stands at 7,910 megawatts (MW), including power from the Grand Ethiopian Renaissance Dam (GERD), Ashebir Balcha, CEO of Ethiopian Electric Power (EEP), disclosed in a recent press conference.

He stated that once more turbines at GERD become operational, capacity will reach 9,000 MW.

EEP operates a 20,000 kilometer transmission network comprising 308 transmission lines, according to the CEO.

Data from the Ethiopian Investment Commission indicates demand for electricity in Ethiopia is growing by a third each year, while data from the World Bank indicates that nearly half of the country’s population lacks reliable access to electricity.

Demand is expected to continue its rapid growth, with the manufacturing sector alone forecast to need more than 31 billion kWh in 2030, more than seven times it did in 2013.

“In recent years, Ethiopia registered significant strides in electrification—growing from about two gigawatts just five years ago to close to eight gigawatts today. I hope this’s only the beginning of a much larger journey, because Ethiopia will need to reach around 100 gigawatt capacity to achieve middle-income status,” Nemo Semret (PhD), co-founder and CEO of QRB Labs ICT Solutions PLC, told The Reporter.

“The key point is that the real challenge lies not in generation, but in distribution. A good way to think about it is that during the rainy season, when hydropower generation is at its highest, we actually experience more power outages,” he said, adding, “This shows the problem is with the transmission and distribution network such as poles, transmission lines, and neighborhood distribution systems often getting damaged or overloaded—rather than a lack of generation capacity.”

Meanwhile, the study emphasizes that energy is a fundamental engine for prosperity, with 1 kWh of electricity estimated to generate approximately 0.40 USD in GDP.

Though EEP’s operational performance is strong, its financial statements point to fundamental challenges.

The utility has demonstrated robust growth in revenue, which expanded at 32 percent annually to over 27 billion Birr in 2024, and even more impressive growth in Earnings Before Interests, Taxes, Depreciation, and Amortization (EBITDA), which rose 35 percent in a year to 23.6 billion Birr, which indicates that the core business of generating and selling power is fundamentally sound and profitable on an operational basis.

However, these gains are offset by extremely high financing costs and depreciation from past capital investments, resulting in significant net losses that still amount to billions of Birr. The dichotomy between healthy operating margin and negative bottom line lies at the heart of the nation’s energy challenges, the report further states.

The rapid growth has also created geographic imbalances between supply and demand. As new generation sites such as GERD in the pipeline, transmission and distribution infrastructure often lags, creating pockets of “stranded energy”—power that’s generated but cannot reach end users, according to the report.

Conversely, urban and industrial sectors face congestion and instability as demand outstrips local capacity. The report argues that this stranded energy, which has almost zero marginal cost, represents a massive untapped revenue opportunity.

According to this reality, the report suggests three choices: subsidize the deficit from government funds, slow down new investment to prioritize debt repayment and pursue self-sustaining investment in electrification.

The last option, as per the report is, “The only viable forward to development and prosperity.”

For Ethiopia’s energy future, the white paper endorses a four-phase roadmap to transform the nation’s electricity pricing with a design to optimize the national grid, monetize currently wasted “stranded energy” and attract high-value demand.

The phased approach starts with geographic price differentiation, where power costs would vary by location—often cheaper in areas with excess capacity to attract new industries and more expensive in congested zones to manage load.

Market pricing through annual capacity auctions and allowing customers to bid for energy and revealing actual market demand constitute the second phase. The paper’s authors envision this system evolving into a real-time market, with prices adjusting hourly and every five minutes based on actual grid conditions.

The final phase pertains to integrating cross-border markets through the Eastern Africa Power Pool and exporting excess power at a premium.

The paper also lobbies in favor of cryptocurrency mining operations, which its authors claim can generate up to USD 500 million a year using solely stranded energy.