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Energy Use Patterns and Energy Efficiency in Ethiopia

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 Energy Use Patterns and Energy Efficiency in Ethiopia
Naod mekonnen1,
1
Assistant Researcher, Ethiopian Economic Policy Research Institute, A.A, Po.box.11874,
Ethiopia,naod_fb@yahoo.com

Abstract — this paper basically tries to provide an explanation about the energy sector in Ethiopia. A
detail explanation was given about energy production, consumption and intensity in the country.
Moreover, energy demand forecast comparison is presented so as to come up with a sound conclusion
about the future energy in the country. On the other hand the section on energy efficiency deals with
alternative means’s of addressing energy inefficiency and meeting the growing energy demand. Finally,
the last section gives highlights on economic issues of energy efficiency.
Key words- Economic growth, energy demand, energy efficiency

I. Introduction

Ethiopia is still at low level of development of
energy infrastructure and access to energy. For
instance, while developing countries’ average for
Electric Power (kW Installed Capacity per 1000
persons) is 272, Ethiopia achieved only 8 kws. The
present total energy generation capacity is 1083
MW, also in terms of Electricity Consumption
(kWh per capita) in the year 2007, Ethiopia
averaged at 24 kWh while the developing countries’
average was 938 kWh.
Rapid population growth, low per capital income,
the recent boom in the construction sector, and
limited investment have led to increasing in
pressures on energy supplies in Ethiopia. Shocking
increases in the costs of various forms of energy,
and shortages of some resources, now cast energy
efficiency as an overarching issue in terms of the
environment, consumer pricing, employment, and
national security. In this paper, the author calls for
the continued development of new technologies,
supported by broader governmental policies and
programs, to meet growing energy demands in the
country.
II. Energy and Economic Growth
Energy does pay a significant role in fostering
economic growth. To begin with, it used to be
believed that there was no long run equilibrium
relationship between energy use and economic
growth especially in terms of employment and index
of industrial production [1]. However, the lack of a
long-run equilibrium relationship between gross
energy use and output alone does not necessarily
imply that there is no relation between the variables
[2].Few analysts believe that capital, labor, and
technical change play no significant role in
determining output. If these variables are integrated,
then there will be no co integration between energy
and output whether there is a relationship between
the latter two variables or not.
But as study advances it was evident that energy
is significant in explaining GDP. It was found that
there is co integration in a relationship between
GDP, capital, labor and energy [2]. For example a
study conducted on counties like India, Pakistan and
Indonesia proved the existence of co integration
between energy and GDP [3]. The many results in
the literature strengthen the conclusions that energy
is a limiting factor in economic growth. Shocks to
the energy supply will tend to reduce output [4].
Here we can conclude that energy plays a
significant role in the production of goods and
services, in promoting investment, in employment
creation and in activating trade via: (I)
industrialization, (ii) e-commerce, (iii) agricultural
markets and trade, (IV) increased productivity, (v)
small, medium, and micro-enterprises (SMEs), and
(VI) Job creation and income generation. Energy
use increases as more economic sectors develop and
more channels for flow are opened. Economic
diversity, as measured by the number of economic
sectors using energy and the equitability of flows
between them, generally, increases. As diversity
increases the efficiency of generating outputs with a
given amount of energy also increases [5].
A. The role of Energy in Ethiopia
According to a report by MOFED for the year
2006/07 value-added of Electricity and Water (at
constant market prices) was 2.02 billion Birr
(Fig.1).The value has been increasing over time.
However, the share of the sector, compared to
agriculture, industry and services, is still minimal
due to the low development of the sector (Fig.2).
 2,300,000
III. Energy Sector in Ethiopia: An Overview
2,100,000
1,900,000 Total primary energy consumption in Ethiopia
has increased from 965.5 (Btu per (2000) U.S.
Valu e ('000 B irr)

1,700,000
1,500,000 Dollars) in 1981 to 1517.1 (Btu per (2000) U.S.
1,300,000
Dollars) in 2006, with an average growth rate of
1,100,000
36.7%. (Fig.3)
900,000
700,000

500,000
6

7)
/9

/9

/9

/9

/0

/0

/0

/0

/0

/0

/0

6/
95

96

97

98

99

00

01

02

03

04

05

(0
19

19

19

19

19

20

20

20

20

20

20

st
ca
re
Fo
Year

Fig.1 Real GDP of Electricity, Gas and Water in

Ethiopia.

140,000,000

120,000,000

100,000,000
G DP ('000 Birr)

80,000,000

60,000,000

40,000,000

20,000,000

-
99

00

01

02

03

04

05

06

07

08

Fig. 3. Trends in Primary Energy consumption

/

/
98

99

00

01

02

03

04

05

06

07
19

19

20

20

20

20

20

20

20

20

Year

Agriculture, Hunting and Forestry Manufacturing Energy consumption in Ethiopia is heavily

Electricity and Water Construction dependent on biomass energy (fuel wood, charcoal,
Services
wood waste wood, crop residues and animal dung,
Fig.2 GDP by Economic Activity at Constant Prices including biogas). The total final energy
(‘000 Birr) in Ethiopia consumption in 2006 was estimated at 794 peat
Jules. Biomass fuels consumed during the same
Ethiopia is a country with various energy period was about 50 million tones of wood
resources including hydro, geothermal, natural gas, equivalent (TWE) as it can be shown from (fig.4);
coal, biomass, solar and wind energy. The gross approximately 96% of the biomass fuel was
hydro-energy potential of the country is estimated at consumed by households.
650,000 GWh per year of which 25 percent
(160,000 GWh per year) could be economically
exploited for power. The gross hydropower 120%
potential is about 650,000 GWh/year [6-7].
100%

Resource Unit Amount 80%

Hydropower GWh/year 160,000 60%
Geothermal MW 5,000
Natural gas Billion m3 110 40%

Biomass Million tons 20%

Coal Million tons 300
0%
Solar kWh/ m2 per 5.20 Agriculture Service Household
day
Wind GWh/year 890,000
Fig .4.Biomass consumption by sector
Oil shale Million tons 250
Table.1. Energy Resources of Ethiopia On the other hand, as it can be shown on (fig.5)
Petroleum fuels are mainly used in the transport
sector (80 percent of the total consumption of
petroleum products) with a smaller share of the
demand from the household sector (kerosene for charcoal for cooking. In the previous surveys,
cooking and lighting) and industrial sector (fuel oil however, no household was reported to use charcoal
for thermal energy), the total petroleum as source of cooking fuel. About 71.1 percent of the
consumption in the 2006 was 1.45 million tones. total households use kerosene for lighting followed
by firewood (15.7 percent) and electricity (12.9
90% percent). A higher proportion of urban residents use
80%
70%
electricity (75.3 percent) for lighting, while the use
60% of kerosene (80.1 percent) and firewood (18.5
50%
40%
percent) are predominant in rural areas [8].
30% The next dominant sector is the transport
20%
10%
accounting for 6.1 percent followed by the services
0% sector which consumed about 3.6 percent. Energy
consumption in the agricultural and industrial
re

ld

t
ry
ce

or
ho
tu

st

sp
vi

du
ul

se
er

sectors was merely 0.9 percent and 0.5 percent of

an
ic

In
ou
gr

Tr
H
A

total final consumption, respectably. The

Fig.5 Petroleum consumption by sector
Total electricity consumption was about 2368
GWh for the same period (2006). When we look at
this by sector (for tariff purposes consumers are
grouped into five categories: Agriculture, service
households, industry, transport and service):
Electricity consumption was about: 33 percent by
households, 40 percent by industries and 26 percent
by service sector (Fig.6).
45%
40%
35%
agricultural sector in rural areas relies almost
entirely on human and animal power and to a
limited extent on commercial sources of energy like
diesel. Most rural cottage industries produce food
products or household goods such as clothes, woven
articles, wooden utensils, handicrafts, pottery and
metal products. These industries generally use very
little fuel and are largely labor intensive.
According to the data obtained from the Energy
Information Administration for a period that covers
1980 to 2006 shows that while primary energy
production has steadily rose over the reference
period, per capita total primary energy consumption
has not improved. The change in terms of index

30%
(1993=100) shows that primary energy production
25%
increased more than double while per capita energy
20%
consumption until the year 2002 was equal to the
15% level of 1980s (Fig.7). Similarly, there has not been
10% any meaningful improvement in energy intensity or
5%
efficiency i.e. the amount of energy consumed per
0%
economic value generated.
Agriculture Service Household Industry

Fig.6 Electricity consumption by sector.

Major types of cooking fuel used by all

households are firewood, leaves/dung cakes and
kerosene. At country level, about 81.4 percent of the
households use firewood, around 11.5 percent cook
with leaves/dung cakes and only 2.4 percent use
kerosene for cooking. The majority of rural
households use firewood (84.4 percent) and few of
them (12.7 percent) use leaves/dung cakes.
The use of modern source of cooking fuel such as
butane gas, electricity and kerosene for cooking is
uncommon in the rural areas (0.4 percent). Use of
kerosene is not very common in urban areas stands
at 13.8 percent following firewood (65.4 percent).
Charcoal (7.7 percent), electricity (2.4 percent) and Fig.7. Energy production, consumption and
leaves (5.3 percent) are also used rarely by urban intensity
households.
On the other hand, only 0.2 percent of the
households in rural areas are observed to use
B. Energy Demand Forecast Comparison
Demand Forecast Annual Annual
The development of energy demand will depend
projection period average average
on socioeconomic factors (demography,
growth rate growth rate
urbanization, growth and structural changes in the
(%) (%)
economy, etc), energy policy (energy prices,
EEPCO Electricity Petroleum
substitutions and energy rationalization measures,
etc) and also on the availability of funds for 1.Target 2005- 13.86
Scenario-ICS 2030 -
investment and for imports through which supply
can be increased. 2.Moderate 2005- 12.21
scenario – 2030 -
The energy demand is projected for twenty years
ICS
using energy consumption coefficients (i.e., energy
Ethiopian 2009-
intensity by end-use) and macro economic variables 2013
Petroleum 9
such as gross domestic product value added in all
Enterprise
productive sectors, population growth rates. The
Table.2. Energy forecast comparison for Ethiopia
demand for each type of energy source is projected
by sector and then aggregated to obtain the overall C. Implication of the Energy Demand Growth
energy demand. The energy consumption
coefficients are derived from the national energy Access to biomass fuels has declined significantly
balance for 1998 EC (2005/06 GC) and are assumed in almost all areas of the Country and even
to remain constant throughout the projection period. drastically in some parts. Such unsustainable woody
The national energy balance divides energy biomass harvesting will have serious economic,
consumption into households, agriculture, industry, social, and environmental repercussions. The
services, and transport sectors and energy sources burning of dung as fuel instead of using it as a soil
are grouped into biomass fuels, petroleum and conditioner is considered to cause a reduction in
electricity. grain production by some 550,000 tones annually
Two alternative scenarios were developed based [9]. In 1990, accelerated soil erosion caused by a
on PASDEP’s macroeconomic scenarios, i.e., a progressive annual loss in grain production
base-case ('MDGs–Consistent') scenario, and a estimated at about 40,000 tones, which unless
high-case ('MDGs Plus') scenario. Under the base- arrested will reach about 170,000 tones by 2010[9].
case scenario, real GDP is projected to grow at 7 The petroleum fuels demand growth coupled with
percent per annum and value added in agriculture, the rising world crude oil prices could seriously
industry, and services are expected to grow on worsen the country’s balance of payment. A recent
average by 6.2 percent, 12 percent, and 7.1 percent, projections shows that a growing share of export
respectively. The High-case scenario, on the other earnings will be spend on oil import (Table.3) .Oil
hand, assumes annual average real GDP growth rate import bill is projected to grow from US$1.44
of 10 percent and value-added in agriculture, billion in 2009/10 to over US$2.43 billion in
industry, and services at 6.4 percent, 18 percent, and 2013/14, that is, at average annual growth rate of 14
10.3 percent per annum, respectively. percent[10]. On the other hand, during the same
Demand projections by EEPCO and Ethiopian period, export earnings are projected to increase
Petroleum Corporation (EPE) were presented on from US$1.45 billion to US$2.45 billion or by
(table.2) petroleum fuels demand projected by EPE about 11.3 percent per year. Petroleum fuel imports
for five years (2009 - 2012) grows by 9 percent per will absorb 99 percent of export earnings in
year. It was assumed that the annual growth rates 2013/14, compared to 89 percent in 2009/10. Thus,
for all petroleum fuels would be same. EEPCO’s petroleum fuel imports will pose important
projections are for 35 years, from 2005 to 2030 and constraints on the Country’s development efforts by
two scenarios are developed: target scenario and diverting meager foreign exchange earnings from
moderate scenario. The demand projections are other investment programs.
disaggregated by ICS and SCS and also by sectors.
Under the target scenario, the aggregate demand for
electricity under the ICS is grows at 13.86 percent
per year during the projection period while under
the moderate scenario the corresponding figure is
12.21 percent (Table 2).
 2009 2010 2011 2012 2013 better technologies and dissimilation mechanisms
Trade balance -7,015 -6,954 -7,183 - -8,444 of efficient cooking appliance. Here we can take
7,819
Exports of 1,616 1,795 1,987 2,211 2,467
the case of “mirt” stove: At the end of 2008, an
goods estimated 400,000 stove have been disseminated
Imports of 8,631 8,749 9,170 10,02 10,910 throughout the Country. The fuel saving of Mirt
goods 9
stove is 48 percent.
Oil 1,444 1,665 1,915 2,161 2,434
The wide-scale dissemination of this stove will
Capital goods 3,284 3,103 2,984 3,099 3,109
decrease the demand for firewood, crop residues
Oil as % of
exports 89% 93% 96% 98% 99% and animal dung. Assuming that the penetration
Oil as % of rate increases from 2.3 percent in 2008 to 5
Imports 17% 19% 21% 22% 22% percent in 2010 and 44 percent in 2030, this will
Table.3Petrolium import bill including the projected result in savings of 4.7 million TWE or 5.2 percent
trends. of the projected household biomass energy
demand in 2030. The dissemination of the stove
Assuming EEPCOs planned power generation will also have the added benefits of reduced fuel
projects are implemented as scheduled, electricity collection times, indoor air pollution, and GHGs.
supply will increase from the current levels of 2400
The program will also create employment and job
GWh to 26,000 GWh in 2018 (Fig.8). Under the
PASDEP High-growth scenario (where GDP is opportunities for stove producers. Assuming an
projected to grow at 10 percent per annum), the emission factor of 1.6 tCO2e per tone of wood, the
demand for electricity will increase by 14 percent potential GHG emission reduction would be 413
each year and will result in power supply deficit of thousand tCO2e in 2010 and 6.2 million tCO2e in
about 3,500 GWh in 2025. However, under the 2030.
BAU scenario, where the demand electricity On the other hand one of the potential electricity
increases by 11.6 percent per year, power deficit efficiency measures in buildings is replacement of
will occur after 2025. the incandescent light bulbs with energy saving
To sum up, in the absence of additional investment compact florescent lamps (CFLs). Compared to
in power supply and in demand management incandescent lamps of the same luminosity, CFLs
measures, the power deficit will result in power require less energy and last longer. CFLs use
rationing. This will have severe economic and social about 20 percent of the energy equivalent
impacts including decline in aggregate GDP and incandescent lamps. Lighting accounts for 25
sectoral value added, employee lay-offs, reduced percent and 20 percent of the demand for
government revenues, and reduced exports, among electricity by households and the service sectors.
others. Power shedding will also force businesses Switching from incandescent lighting to CFLs
and households to switch to less efficient and should therefore result in significant reduction in
inconvenient imported energy sources (such as
peak-hour electricity demand. Assuming a
diesel generators sets, candles, and dry battery cells).
complete phasing-out of incandescent light bulbs
This again will pose important burden on the
Country’s balance of payments. It is therefore over the period 2011-2016 in the household and
essential that the planned power generation projects service sectors, about 20 GWh will be saved
be implemented as scheduled and that new power during the first year and nearly 600 GWh in 2016.
generation plants be initiated soon.

IV. Addressing Energy Efficiency:

Alternative Energy use.

It is difficult to address energy efficiency issues

with out giving detail analysis to the energy use
patterns in the country. As it was presented in the
paper, the country energy use pattern is
characterized by, high use of biomass fuel, high
import oil bill and high growing energy demand.
The patterns of energy uses have indicated that
96% households cover their energy demand from
biomass fuel. Domestic cooking with biomass
with inefficient and improperly ventilated stoves
and kitchens results in high indoor air pollution
and energy inefficiency. Thus we should have
Fig. 8 Household Power Demand with and without
Phasing-out of Incandescent Light Bulbs Forces
Shaping
Energy
use

Industrial Commerc Transport Electricity Residenti

sector ial sector sector sector
al Sector

Economic -Building - Chosen Electricity -Building

out put Features level of generatio characteri
- Size mobility n process stics
Lighting, -model of -energy
heating, transport mgmt

Fig.9 Services Sector Power Demand with and

without Phasing-out of Incandescent Light Bulbs
The other alternative way is substituting
gasoline and kerosene with ethanol, The benefits
of substituting gasoline and kerosene with ethanol
include saving of scarce foreign exchange by
reducing gasoline and kerosene imports,
employment generation and new income streams
for rural population from sugar-cane and ethanol
production, reduced GHG emission.
Ethanol is used in cars as additive to gasoline, in
flexible fuel (FF) cars or in dedicated ethanol
engines. Currently, the Government has mandated
a 5% gasoline blend starting from October 2008.
Ethanol will also substitute for kerosene for
cooking on a liter for liter basis. Ethanol is being
used both for transport as well as for cooking.
V. Economic Issues of Energy Efficiency
Some energy services can be provided by several
different energy commodities. For example homes
could be heated using electricity, natural gas and
wood. Each can be converted to thermal energy i.e.
energy commodities are typically economic
substitute for one another. One of the very
advantages of substitutability is that it will increase
efficiency. But substitutability is limited to available
energy conversion technology.
On the other hand as it can be seen from fig. given
the level of development and complexity of the
economy, there are five factors shaping energy use
patterns. These are industrial sectors, commercial
sector, residential sector, transport sector and
electricity generation.
Fig.10.Forces shaping energy use
A. Factors of Efficiency Failures
Even though 100% efficiency can not be
achieved, there are many sources of efficiency
failures .the major sources of efficiency failures are
summarized below.
1) Externalities of energy use: - there are many
externalities to energy use; the most prominent ones
are risks of energy price shocks (e.g. oil and
petroleum) and the global climate change.
2) Prices below marginal cost:-market failures
contribute a lot as a factor of efficiency failure. Here
we can take the case of non time differentiated
electricity pricing.
3) Incomplete Technology option: Technical
innovations tend to introduce more energy using
appliances to households and energy saving
techniques to industry [4]. In developing countries
were technologies are under developed the level of
energy inefficiency is higher than counties with
better technologies.
VI. Conclusion
Energy demand projections for the coming two
decades indicate that while there is a gradual shift
towards modern fuels (electricity and petroleum
fuels); biomass fuels will remain the dominant
source of energy. The demand for electricity as
estimated by EEPCO and the demand for
petroleum as estimated by Ethiopian Petroleum
Enterprise fuels will grow at 11.6 percent and 9.3
percent per year, respectively, and their relative
shares in the aggregate national energy balance in
2030 will increase to 6 percent and 23 percent. The
demand growth will have serious economic, social
and environmental repercussions. Access to biomass
fuels has declined significantly. The depletion of
forest resources will also have adverse impacts on
soil moisture, recycling of soil nutrients, and
conservation of water, soil and wild life. Also, there
will be considerable strain on the economy in terms
of bearing the burden of oil imports. Similarly,
substantial investment will be required to meet the
growing electricity demand. Here are some policy
issues to address:
1) Along-side the power supply expansion,
sufficient attention need to be given to demand
management/fuel substitution measures such as
promotion of industrial energy efficiency, energy
saving lamps, and solar water heaters. Equally
important is minimization power system losses.
2) Improve the efficiency of use of petroleum fuels
through demand measures.
3) Promote ethanol for domestic cooking
Promote substitute fuels: electricity, kerosene, LPG,
coal briquettes, etc
4) Enhance bio-fuels development as substitute for
imported petroleum fuels
5) Energy sector-oriented research on technology
generation and adaptation need to be strengthened in
both public and private sector institutions.
6) Development of energy information system to
enable evidence-based energy sector planning and
monitoring.
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