Executive summary

Ethiopia is one of Africa’s largest and fastest-growing economies, which is reflected in its increasing regional influence and growing global presence. Major infrastructure investments are reinforcing and transforming the national energy landscape. This strong development vision aligns with Ethiopia’s rising role as a regional and international leader.

Landmark projects such as the Grand Ethiopian Renaissance Dam (GERD) are not only major engineering achievements but also a step change in generation capacity, energy security and regional co-operation. Ethiopia hosted the Second Africa Climate Summit in 2025 and will host the 32nd Conference of the Parties (COP32) in 2027, placing the country at the centre of global climate negotiations at a time when the international discussion is shifting from target-setting to implementation, including large-scale electrification and investment.

Stronger institutions, better co-ordination and more robust data are essential for advancing Ethiopia’s energy agenda. Energy policy often intersects with transport, industry, agriculture and other domains, making policy coherence essential to avoid fragmentation and support the implementation of the government’s objectives. A dedicated cross-ministerial co-ordination platform led by the Ministry of Water and Energy (MoWE) could help align priorities and ensure that energy considerations are more systematically integrated into related sectors. Responsibilities for regulation, standards and licensing are spread across institutions, with unclear roles complicating the processes for investors and market participants. Further clarifying and formalising the mandates of ministries, regulators and public institutions could reduce duplication, strengthen accountability and improve decision making. Numerous institutions compile energy data, and the broader system remains fragmented. This weakens the consistency of national energy statistics, particularly for demand-side data and less well-covered, but crucial areas such as biomass use, off-grid systems and small‑scale generation. Strengthening demand-side data collection through existing household and enterprise surveys, alongside a clearer national plan for publishing energy data, would improve transparency, policy tracking and evidence-based decision making.

Ethiopia’s power sector is becoming increasingly central to the country’s economic and social development. Generation capacity has expanded rapidly in recent years, enabling a growing set of strategies covering electricity access, clean cooking, transport and industrial development. A strong and integrated power system planning framework is essential to ensure that expanding electricity generation delivers reliable, affordable and efficient service to a growing economy. High grid losses and low grid reliability reduce utility revenues and continue to hold back investment potential, as well as the implementation of national plans. Foreign exchange constraints and exchange rate volatility further complicate system planning by creating uncertainty about the cost and availability of the imported equipment, spare parts and technologies needed for grid expansion, maintenance and new generation projects.

Ethiopia’s energy security depends on diversifying its energy mix, deepening regional integration and broadening its response to rising demand. With a fast‑growing economy and population projected to reach 225 million by 2050, energy demand is expected to rise sharply, especially in buildings and transport, making secure and reliable energy supply increasingly critical. Traditional biomass still dominates total energy supply, while reliance on imported petroleum products creates fuel import risks, and a hydropower-dominated electricity system leaves the country exposed to hydrological and climate risks. Accelerating the deployment of solar, wind and geothermal while exploring the prudent use of domestic natural gas would help build a more balanced and resilient system. Ethiopia’s growing role in regional electricity trade, including through the Eastern Africa Power Pool, offers an opportunity to improve flexibility and reliability, increase export revenues, and reinforce its position as a regional energy hub.

Ethiopia has made substantial progress in electricity access over the past two decades. The national electricity access rate increased from around 12% in the early 2000s to about 35% in 2024. This progress accelerated after 2015 as policy shifted from grid expansion alone towards last-mile connections and a stronger mix of on‑grid and off-grid solutions. Despite these gains, around 85 million people still lack access to electricity under the IEA’s basic service definition, and access remains highly uneven, with urban access far ahead of rural areas. Ethiopia now aims to reach a 75% access rate by 2030 under the National Energy Compact and achieve universal access by 2035 under the National Electrification Program 3.0 (NEP 3.0). The main challenge is ensuring that access is reliable and affordable and supports higher electricity use. Grid reliability and service quality remain weak, constraining household consumption, productive uses and broader economic development, while upfront connection costs continue to prevent many households from connecting even where the grid is nearby. Off-grid solutions, including mini-grids and solar home systems, will be important for reaching remote communities, but their scale-up remains constrained by affordability, financing and regulatory challenges. Achieving Ethiopia’s electricity access targets will, therefore, require not only more connections but also targeted grid modernisation, stronger affordability measures and greater support for viable off-grid delivery models.

Ethiopia’s energy system is already strongly shaped by renewables. In 2024, renewable energy accounted for about 90% of total energy supply, of which 86% was bioenergy. Renewables supplied almost all electricity to the national grid. Hydropower remains the backbone of the power system, underpinned by the GERD, which has substantially increased generation capacity and reinforced Ethiopia’s position as a regional electricity supplier. Ethiopia benefits from high-quality solar and wind resources, as well as substantial untapped geothermal potential, which could help diversify the electricity mix, reduce dependence on hydropower and strengthen resilience. Geothermal could provide firm and dispatchable renewable power, while solar and wind could complement seasonal variations in hydropower output. However, deployment of these technologies has so far progressed more slowly than planned, reflecting challenges related to financing, infrastructure, institutional co‑ordination, foreign exchange limitations and project implementation. Ethiopia is also exploring the development of domestic biofuels as part of a broader strategy to strengthen energy security and decarbonise the road transport and aviation sectors. Expanding renewable technologies for productive uses in agriculture and industry, including solar irrigation, agrivoltaics and the direct use of geothermal heat, could improve productivity, reduce dependence on diesel and support rural development.

Ethiopia has made significant progress in expanding access to clean cooking. The number of people with access to modern cooking solutions is now 9 million higher than it was in the early 2000s, when only about 2.5% of urban residents used clean cooking solutions. However, rapid population growth has also meant that, despite gains in absolute numbers, overall access rates have improved only modestly. Ethiopia thus has one of the lowest clean cooking access rates in the world, with around 120 million people still relying on traditional cooking methods in 2024. Of those, around 8% rely primarily on charcoal, used mainly in urban areas, while roughly 92% depend on firewood. Ethiopia has set ambitious targets of 58% by 2030 and 76% by 2035, with electric cooking and advanced biomass stoves expected to account for most new access. Meeting these targets would extend clean cooking solutions to approximately 91 million people. Success also depends on integrating clean cooking objectives into power sector planning, particularly to anticipate additional demand and manage grid reliability concerns. At the same time, affordability remains one of the main barriers to the clean cooking transition in Ethiopia. For many households, the upfront cost of clean cookstoves and equipment remains prohibitive. While some transitional biomass and biogas solutions can be affordable, broader uptake of advanced biomass and electric cooking requires targeted financial support, consumer financing and stronger supply chains.

To date, investment patterns highlight progress and remaining challenges. In the power sector, financing has been dominated by the public sector and concentrated in electricity access and grid-connected renewable projects, with development finance institutions playing a central role and commercial finance remaining limited, particularly outside generation. In clean cooking, historical investment has been comparatively modest and heavily grant-based, covering only a small fraction of future needs under the National Clean Cooking Roadmap. Ethiopia has improved its broader investment environment through macroeconomic and regulatory reforms, including measures to ease foreign exchange constraints and strengthen the framework for private participation, including foreign investment. However, barriers to investment remain, as shown by a persistently high cost of capital. Further reforms to improve bankability, reduce investor risk and expand the use of concessional and blended finance remain essential.