Dams and hydropower in Ethiopia

Ethiopia considers itself the powerhouse of Africa due to its high hydropower potential. Only a fraction of this potential has been harnessed so far. In 2009 less than 10% of Ethiopians had access to electricity and the country was plagued by power outages. In order to overcome this situation, the government has embarked on an ambitious dam building program. Three hydropower plants with a combined capacity of 1.18 GW were commissioned in 2009 and 2010 alone, more than doubling the previous installed capacity of the country. The largest hydroelectric plant in Ethiopia, Beles, began initial operation in May 2010. Contracts for five more large dams have been signed. Once completed, which is expected to be around 2015, these dams would increase the installed capacity by more than 11 GW from less than 1 GW in 2008. The construction of more large dams is foreseen in a Master Plan that aims to bring capacity to 15 GW. While this increase is enormous, it is barely equivalent to the capacity of all power plants in Portugal. Power demand in Ethiopia is constrained by poverty, and the country thus plans to export power to Sudan, Kenya, Djibouti and even Yemen or Egypt. The benefits of the dams are not only limited to hydropower. Many dams are multi-purpose dams that are also designed to provide water for irrigation and flood control. However, hydropower is expected to be the main benefit of the dams.

The construction of large dams entails many tangible and intangible costs. The financial cost itself is already substantial. Resettlement adds to the social costs of the dams. Sedimentation from unchecked erosion in the upper watershed of rivers reduces the lifespan of reservoirs. Environmental costs are imposed on communities living downstream of the dams in Ethiopia. And neighboring countries, in particularly Egypt, see their historical water rights affected and threaten to take action against the dams. The almost exclusive reliance on hydropower makes electricity generation vulnerable to droughts, which may be exacerbated by climate change. Earthquakes can also endanger the dams and associated tunnels. There were a total of 16 recorded earthquakes of magnitude 6.5 and higher in Ethiopia's seismic active areas in the 20th century.^[1] Last but not least, the dams are built in an environment of poor governance: Most contracts have been awarded without competitive bidding, raising the suspicion of corruption. The above concerns have hampered access to financing from international financial institutions, slowing down the dam building program.

Weighing the benefits and costs of large dams is far from easy. The following sections describe the impacts of the dams in more detail as objectively as possible, in order to provide a basis for such an assessment by the reader.

List of dams and hydropower plants

Name	Installed capacity	Commissioning	Basin	Contractor	Financing	Cost	Remarks
Fincha	134 MW	1973	Fincha (Blue Nile)				also for irrigation
Gilgel Gibe I	180 MW	2004	Gilgel Gibe River	Salini (bid)	World Bank	$331m
Tekezé	300 MW	2009	Tekeze (Atbara)	Sinohydro Corporation (bid)	Chinese	$365m	out of production because of drought; also for irrigation
Beles	460 MW	2010	Lake Tana (Blue Nile)	Salini (no bid)	Ethiopian government		Irrigation of 140,000 ha
Gilgel Gibe II	420 MW	2010	Omo River (no dam, fed by GG I)	Salini (no bid)	Italy and EIB	Euro 370m
Gilgel Gibe III	1,870 MW	2012-13	Omo River	Salini (no bid)	Italy	Euro 1.55bn	faces stiff environmental criticism
Fincha Amerti Nesse (FAN)	100 MW	planned	Fincha (Blue Nile)	China Gezhouba Group Co. (CGGC)	Exim Bank of China	$276m
Halele Worabese	440 MW	2014	Omo River	Sinohydro Corporation	FairFund?	Euro 470m
Gilgel Gibe IV	2,000 MW	2014	tributary of the Omo River	Sinohydro Corporation	Chinese	$1.9bn
Chemoga Yeda	278 MW	2013	tributary of the Blue Nile, near Debre Markos	Sinohydro Corporation	Chinese	$555m	Will consist of 5 interconnected dams
Genale Dawa III	256 MW	awarded in 2009	between Oromo and Somali state	Chinese CGGC	Chinese	$408m	Feasibility study by Lahmeyer with funding from the AfDB
Grand Ethiopian Renaissance Dam	5,250 MW	2014	Blue Nile River	Salini	Government	Euro 4.8 billion	Awarded without competitive bid

Other projects included in the 25-year Master Plan of the national power utility EEPCO:

• Tekeze II 450 MW,
• Genale Dawa IV 256 MW,
• Karadobi 1600 MW; prefeasibility study by Norconsult-Lahmeyer financed by a grant from Norway is complete; the dam will be located on the Blue Nile and it expected to export power to Sudan and possibly to Egypt ^[2]
• Border 800 - 1200 MW, located on the Blue Nile.
• Mandaya 2400 - 2800 MW, located on the Blue Nile.

Financial costs

The financial costs of large dams in Ethiopia that have been completed since 2009 and are scheduled to be completed until 2014 is estimated at about US$ 11 billion, or about one third of Ethiopia’s annual GDP. This does not include the cost to build transmission lines and to expand the distribution grid.

Given very low electricity tariffs in Ethiopia, the dams are not likely to generate a large financial rate of return, except if generation is subsidized by the government which itself is cash-strapped. Since many dams will be financed through loans, the heavy investment program - to the extent it is not being financed directly by the government outside the balance sheet of the national power utility EEPCo - could jeopardize the financial health of EEPCo. If the utility should become bankrupt, loan guarantees from the Ethiopian government would be called, thus imposing a potentially high financial cost on the government in addition to the investment subsidies from the government for the construction of the dams. Furthermore, the Central Bank of Ethiopia has issued bonds to finance the construction of the Millennium Dam, the largest of all dams in Ethiopia. These subsidies have a high opportunity cost, since the scarce government funds are not available for other investments in education, health, agriculture or forestry.

Delays and technical challenges

Large hydropower projects are prone to delays. The dams built in Ethiopia are no exception to the rule and all have been delayed by at least one year. A complex geology has been one of the reasons for the delays, leading to landslides and tunnel collapses. The Gibe II dam has been affected by such problems even after its completion, when a tunnel collapsed and put the hydropower plant out of service for several months.

Demand risk

The distribution network in Ethiopia is being rapidly expanded. The national power utility predicts an increase in demand of 15-20% per annum. However, it is possible that supply will outstrip effective demand once major dams such as Gibe III will have been completed around 2013. Electricity is currently highly subsidized in Ethiopia. In order to repay the loans for dam construction, electricity tariffs would have to be increased, which in turn would reduce electricity demand per capita which is already low due to the high level of poverty in Ethiopia.

The ability to export power to neighboring countries depends on the availability of transmission lines with sufficient capacity and of the willingness to buy electricity at the price offered. In 2010 transmission lines were under construction to Sudan with financing from the World Bank (200 MW) ^[3] and to Djibouti with financing from the African Development Bank (200 MW).^[4] Sudan has just completed a large dam at Merowe with a capacity of 1,250 MW, which substantially increases its installed capacity, and may not use the full amount of electricity foreseen to be exported from Ethiopia. In any case, the two transmission lines would provide the capacity to export only 7% of the expected installed capacity in 2015.

A study for a 500 MW transmission line to Kenya has been completed. However, financing for the line has not yet been secured.

Resettlement

There has been no estimate of the overall number of people that would have to be resettled to make room for dams and reservoirs in Ethiopia. Since most dams are to be built in narrow valleys, the areas to be inundated are not as large as, for example, in the case of Lake Nasser in Egypt. Lake Nasser covers an area of more than 5,000 km2 and displaced more than 60,000 people. Resettlement at Gibe I has been implemented satisfactorily according to the World Bank, in compliance with the institutions’ resettlement policies.^[5] However, the NGO International Rivers conducted a survey of resettled families finding that many of the 5,000 resettled people complain about the living conditions at the resettlement sites.^[6]

Siltation

Ethiopia’s rivers carry a high silt content, due to heavy erosion which is accelerated by deforestation and inappropriate agricultural practices on steep mountain slopes. The reservoir of one of Ethiopia’s oldest large dams, the Awash dam commissioned in 1966, is close to reach the end of its useful life due to siltation. While most of the newly constructed dams are much larger than the Awash dam and thus have a longer lifetime, they will also ultimately silt up. Estimates of the lifetime of the dams are not available. There have been few efforts to manage the watersheds upstream of the new dams through terracing or reforestation.

Droughts

Hydropower generation is vulnerable to droughts. The first large hydropower plant in Ethiopia, the Tekeze dam, was out of production for most of its first year after commissioning because of drought. The distribution of dams over two different river basins reduces somewhat the risk of drought, which nevertheless remains substantial. The Ethiopian government has awarded contracts for wind parks in 2010. However, their size is small compared to the hydropower plants and more than 95% of the future installed capacity in Ethiopia is from hydropower, despite a large potential for wind, solar and geothermal power.

Impacts on downstream communities

Little is known on the impact of the dams on downstream communities in Ethiopia. In the case of the Lower Omo River, hundreds of thousands of nomads will be affected because the flood recession agriculture on which their livelihoods are based would disappear once the Gibe III dam will be completed. The government says it plans to provide irrigation for the communities, but specifics are not known. The transformation of nomads into sedentary farmers is a complex social process that has not been very successful in the past, including in past projects in Ethiopia. Furthermore, irrigation projects tend to be implemented much slower than dam construction projects, so that it is likely that any future benefits would materialize years after previous livelihoods will have been destroyed.

Transboundary impacts

Almost all of the dams planned by Ethiopia are either located in the Nile River basin or on the Omo River. Both rivers are shared with Ethiopia’s neighbors and for none of them an international water sharing agreement exists. Ethiopia participates in the Nile Basin Initiative, a forum for dialogue with the other Nile riparians.

While hydropower does not consume water, the filling (impoundment) of reservoirs reduces the water flow once. In addition, evaporation from the reservoir surfaces constitutes a permanent loss of water from the river. Irrigation also consumes water that is not available any more for downstream uses.

The Blue Nile and the Atbara both drain to the main Nile River. Ethiopia has no agreement with Egypt or Sudan about the sharing of the river’s water. Egypt says that its historic water rights would be violated by dams in Ethiopia and that its water security would be affected. Egypt and Sudan concluded a water sharing treaty in 1959. The agreement does not consider the water rights of other Nile riparian states. It has never been recognized by Ethiopia. It is not known exactly to what extent dams in Ethiopia would reduce the flow of water to Sudan and Ethiopia. Assuming an evaporation rate of 1 meter per year, an irrigated area of 200,000 hectares and a combined reservoir area of 1,000 km2, the flow of the Nile could be reduced by 3 billion cubic meters per year, equivalent to about 5 percent of the current allocation of Egypt under the 1959 agreement.

The Omo River flows to Lake Turkana in Kenya. Kenya has not expressed concerns about downstream impacts on Lake Turkana, although NGOs have done so.

Governance

Contracts to build the first dams in Ethiopia constructed under the government of Meles Zenawi, who came to power in 1991, have been awarded after competitive bidding. This is the case of the Gilgel Gibe I dam built by the Italian firm Salini under World Bank financing and the Tekeze dam built by the Chinese firm CWHEC with Chinese financing. Both contracts were awarded in the 1990s. However, soon afterwards the Ethiopian government changed its policy and decided to award contracts directly without competitive bidding. Since then, all construction contracts for dams and associated infrastructure have been awarded directly, giving rise to the suspicion of corruption. Three large contracts have been awarded directly to one firm, Salini Costruttori of Italy. Five more large contracts have been awarded to two Chinese firms.

The NGO International Rivers reports that “conversations with civil society groups in Ethiopia indicate that questioning the government’s energy sector plans is highly risky, and there are legitimate concerns of government persecution. Because of this political climate, no groups are actively pursuing the issues surrounding hydropower dams, nor publicly raising concerns about the risks. In this situation, extremely limited and inadequate public consultation has been organized” during the implementation of major dams.^[7]

References

1. ^ Earthquake Risks in Addis Ababa and other Major Ethiopian Cities - Will the Country be Caught Off-guarded?, by Samuel Kinde, PhD, March 2002
2. ^ Ministry of Water Resources:BARO AND KARADOBI HYDROPOWER PROJECTS, accessed on May 23, 2010
3. ^ World Bank:Ethiopia/Nile Basin Initiative Power Export Project : Ethiopia-Sudan Interconnector, November 20, 2007
4. ^ AfDB:U.S.$ 33 Million Approved for Ethiopia-Djibouti Power Interconnections Project, 8 October 2008
5. ^ World Bank:Ethiopia - Second Energy Project, Implementation Completion and Results Report, 29 June 2006.
6. ^ International Rivers: What Cost Ethiopia’s Dam Boom?, February 2008, p. 17-21
7. ^ International Rivers: What Cost Ethiopia’s Dam Boom?, February 2008, p. 13-14