1.7.

Water and Energy Sector Policies

The energy policy issued in May 1994 outlines the need to rely mainly on
hydropower to increase the electricity supply, but to take advantage of
geothermal, solar, wind and other renewable energy resource wherever
appropriate.
The current policy of Ethiopia in water resource management has set the overall
objective of hydropower development as being to enhance efficient and
sustainable development of the water resource and meet the national energy
demand as well as catering for external markets to earn foreign exchange .
Some details of this policy are:
Ensuring that hydropower development projects are studies, designed, constructed, operated
and utilized on economically viable basis to an acceptable technical, environmental and
safety standards.
Ensuring that the negative environmental impacts of hydropower are mitigated to the
extent possible and that the positive environmental impacts are exploited as far as possible.
Encouraging involvement of the private sector in the development of hydropower.
 Efforts are now focusing on:

Rehabilitation of old hydro plants

Study of new hydro schemes; and
Construction of new hydro plants

The Ethiopian electric Power Corporation (EEPCo) is allowed to be

engaged in the business of generating, transmitting, distributing and
selling of electrical energy nationwide while upstream activities related to
hydropower project studies and design fall under the mandate of the water
sector according to the current policy of water management.
 1.7.1. Power Sector Reform

Ethiopian Electric Agency was established under proclamation No.

86/199.
The power sector reform is part of the general scheme of reforming the
economy, primarily through a shift from what was a command type
economic policy to a market oriented policy.
This aims to improve the efficiency and financial viability of the public
unity.
The following key reform measures have been taken:
Electricity proclamation (No. 86/97). Setting up the Regulatory Agency and
establishing the Agencys major duties and responsibilities as well as
licensing provisions for operators in the power sector, issued in July 1997.
EEPCo was re established as a public, commercial enterprise by a
Ministerial Council Regulation in 1997.
 The scope of private sector participation in power generation was
broadened by proclamation No. 116/1198.
Electricity operation (supply) Regulation was issued as a Ministerial
Council Regulation No. 49/1999 in May 1999.
 1.7.2. Challenges and Opportunities
Despite the abundance of water resource, Ethiopia is facing
considerable energy challenges.
Finance,
lack of an appropriate market,
lack of policy,
limited technical capacity and
completion for Trans - boundary water have been some of the major
constraints.
greatly increased attention to environmental concerns, particularly global ones
such as biodiversity are now big challenges and overshadowing essentially the
technical aspects of projects.
The concern for the social impact on local people is even greater, particularly
if resettlement is involved. There is a big emphasis for the need for a public
consultation and involvement of stakeholders including NGOs at all stage.
 Opportunities

A power sector reform has now been implemented and favorable

investment and sector policies are in place to encourage private
investment in the power sector.
The private sector has already shown great interest in hydropower
development.
In the last two years three independent power producers (IPPs) have signed
Memorandum of Understanding (MOUs) with the Ethiopian Electric power
Corporation.
Multilateral financing institution such as the African
Development Bank have shown interest in financing hydropower
investment projects through the NBI.