Challenges of Hydropower Development in Ethiopia since 1991: An Examination of Inherent Factors

Abstract

This study examines the inherent factors that have hindered hydropower development in Ethiopia, drawing on qualitative data from 50 key informants in the energy, water, and foreign affairs sectors, as well as documents and secondary sources. The findings of the study show that hydropower development in Ethiopia since 1991 has faced multiple and mutually reinforcing challenges. These include geopolitical hurdles, financial barriers, limited private sector investment, vulnerability to climate change, and project delays. First, the trans-boundary nature of Ethiopia's rivers has led to geopolitical barriers, causing tensions and conflicts with downstream countries. These issues have delayed hydropower projects and discouraged lenders and the private sector from participating. Second, financial barriers arise from the high initial capital-intensive nature of hydropower projects and the reluctance of international financial institutions to finance large-scale developments due to socio-environmental concerns and trans-boundary impacts. Third, private sector investment remains limited. Fourth, Ethiopia's heavy reliance on hydropower makes it vulnerable to climate-related hazards, further complicating its development trajectory. Finally, project delays and long lead times further hindered the pace of hydropower development. Therefore this study suggests that to unlock the vast hydro potential of the country there is a need to address these challenges by establishing a legal and institutional mechanism for trans-boundary water management, incentivizing private sector involvement, investing in alternative energy sources to diversify the energy mix, and effective project administration to mitigate delays.