Ethiopia’s state-owned power company, Ethiopia Electric Utility (EEU), provides electricity to about three million customers across the country. The ultimate goal of EEU, and the Government of Ethiopia, is to extend electricity service to all of the nation’s 100 million citizens. However, there are challenges to making this goal a reality.
Barriers to Ethiopian Energy Service Expansion
Most of Ethiopia’s geothermal resources—that is, its vast underground reservoirs of steam and hot water—have yet to be tapped, which may result in delays in expanding electricity services to its citizens.
In addition, EEU faces a very difficult operating environment. Balancing cash flow is essential, but EEU is also subject to fluctuations that may hamper its operations. The utility purchases the energy it distributes from Ethiopian Electric Power (EEP), largely with funds that it collects from its customers on a monthly basis. If collections fall short—because customers are either unable or unwilling to pay for the electricity they use—then EEU incurs deficits. EEU estimates that these deficits currently amount to close to $100 million per year, further delaying grid development and services to the remaining unconnected Ethiopian consumers.
EEU’s most recent challenge has been the severe impact of COVID-19 on the utility’s revenue and delivery of service. The country’s partial lockdown and scaling down of economic and social activities has reduced demand for electricity—as of mid-July, Ethiopia has had nearly 10,000 cases of COVID-19 and 163 confirmed deaths. This potential loss of revenue could impact the ability of EEU to service existing debt and meet required operations budgets, thus constraining the quality and the extent of the services it provides. This would be especially problematic as EEU powers essential health services at nearly 200 hospitals in the Addis Ababa and Finfinne regions.