First Power Sector Reform Investment and Modernization in Ethiopia (PRIME-1) Resettlement Framework (RF)

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Ethiopia faces the third highest electricity access deficit in Sub-Saharan Africa with an access rate of 51 percent in 2020[1], even as the Government and the utilities have made some concerted efforts to expand access. Over 56 million people lack electricity access, with the majority in rural areas (93 percent of urban houses are connected versus 40 percent of rural households – mainly through standalone solutions). More than half of those connected to the grid are not formally registered as consumers with the utility. Per capita electricity consumption in Ethiopia is 69 kWh compared to the world average of about 3,131 kWh. The National Electrification Plan (NEP) launched in 2017 and further elaborated in 2019 (NEP2.0) presented an investment roadmap for achieving universal access by 2025 through grid and off-grid solutions, and 96 percent on-grid access by 2030. Despite well-performing World Bank-funded access expansion projects, the broader NEP program is delayed by nearly a decade and is constrained by limited funding, weak implementation capacity, limited contractor capacity, and the need to import key electrification materials.

Ethiopia has invested substantial public resources in expanding its hydropower capacity, but additional generation investments will be needed by 2030. With 98 percent of the generation coming from clean sources (mainly hydropower and some wind energy), Ethiopia’s near-complete reliance on green electricity is an outlier in the region and makes it vulnerable to hydrological variations which may be exacerbated by climate change. Installed capacity has more than quadrupled between 2009 and 2022 (reaching 5,340 MW) and will reach about 13,000 MW by 2028. While the system will have surplus generation over the coming years, additional capacity will be needed that must be initiated already.

To achieve universal access, energize faster economic growth, and establish Ethiopia as a regional electricity hub, the sector utilities have identified large investment needs. The Power Sector Reform, Investment, and Modernization in Ethiopia Multi Phase Programmatic Approach (PRIME MPA) will make concerted efforts to accelerate public investments in network strengthening and risk-mitigate private investments in non-hydro Renewable Energy (RE) generation by establishing models that can leverage financing from other donor partners. The program will complement ongoing projects on last-mile access (grid and off-grid), IDA payment guarantees for private investments in renewable energy, and regional electricity trade. In parallel with the above investments, the PRIME program will support a reform trajectory encompassing structural and operational reforms. The program will construct the upstream network infrastructure necessary to enable a tripling of the formal utility connections from 4.5 million (18 percent rate of formal grid electrification) in FY22 to 15 million (52 percent) in FY32 under ongoing and upcoming electrification engagements and a connection regularization scheme.

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