Ethiopia Gets Funds For Pilot Solar Minigrid Project

28 May 2024

The African Development Bank (AfDB) has approved US$8 million of funding to support the rollout of a pilot solar minigrid project under the Ethiopia Distributed Renewable Energy and Agriculture Modalities (DREAM) programme.

The programme is Ethiopia’s first private-sector-led initiative aimed at improving irrigation for small farmers. The pilot project will test the commercial viability and effectiveness of a business model integrating minigrids with agribusiness operations.

Three private developers will develop nine minigrids in three lots across the regions of Amhara, Oromia, Sidama and Southern Nations, Nationalities and Peoples (SNNP). According to an April project update, the preferred bidders are the US’ Renewvia, which will develop sites in the Oromia region; a team of France’s Engie and Uganda-based Equatorial Power, which will develop sites in Amhara; and Portugal’s RVE.Sol, which will develop sites in Sidama and SNNP.

The overall DREAM initiative aims to build 200 minigrids to replace diesel pumps and ensure year-round power for wells, pumps and distribution systems, providing water across 2 million hectares of farmland by 2030. This would make it the largest minigrid-powered irrigation system in Africa.

The programme is expected to result in more than 4,300 electricity connections, with over 290,000 people set to receive new or improved electricity access. Projections show the investment may support crop yield increases of 50-250%.

The government has prioritised the DREAM pilot project as a market demonstration activity and potential template for later scale-up to more than 100 identified agricultural commercial cluster sites. Its successful conclusion could also pave the way for scale-up and replication in other African countries.

DREAM was developed in collaboration with the Global Energy Alliance for People and Planet (GEAPP), which is providing co-financing, and Ethiopia’s Ministry of Water and Energy, Ministry of Irrigation and Lowlands, Ministry of Agriculture and the Agricultural Transformation Institute.

The total cost for the pilot is estimated at US$20.6 million, with GEAPP providing about US$11.4 million in grants. The private developers will provide a minimum of 10% of the minigrid capital expenditure in equity, estimated at US$1.2 million each. The AfDB funding will finance up to 50% of the cost of the minigrids in the form of concessional loans, grants and risk mitigation.The World Bank and European Investment Bank are also supporting the DREAM initiative. Companies also involved in the design development and implementation include the US’ Veritas Consulting, Keller-Bliesner Engineering and Odyssey Energy Solutions, and the Netherlands’ SNV.

“Water, energy and food are critical for our sustainable wellbeing,” said Ethiopia’s Minister of Water and Energy Habtamu Geleta. “The Ethiopian government is approaching the twin challenges of agricultural productivity and energy access with an integrated approach.”

Nearly half of Ethiopia’s 120 million population lacks access to reliable energy. According to the country’s National Electrification Programme (NEP 2.0), some 9.2 million households are best suited for electrification through renewable energy-based minigrids.