Ethiopia Solar Energy Target Market Analysis

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Ethiopia's Solar Energy Market
Technical Report · November 2009
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Project Development Programme East Africa
Ethiopia’s Solar Energy Market

Target Market Analysis
www.renewables-made-in-germany.com
www.german-renewable-energy.com
Target Market Analysis
Ethiopia’s Solar Energy Market
Authors
Megen Power
Melessaw Shanko
Integrated Energy Solutions (IES):
Mark Hankins
Anjali Saini
Paul Kirai
November 2009
Editor
Deutsche Gesellschaft für Technische

Zusammenarbeit (GTZ) GmbH
On behalf of the
German Federal Ministry

of Economics and Technology (BMWi)
Contact
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Potsdamer Platz 10, 10785 Berlin, Germany
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Email: pep-ostafrika@gtz.de
Web: www.gtz.de/projektentwicklungsprogramm
Web: www.exportinitiative.bmwi.de
This Target Market Analysis is part of the Project Development Programme (PDP) East Africa. PDP East Africa is implemented
by the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) on behalf of the German Federal Ministry of Economics
and Technology (BMWi) in context of the Export Initiative Renewable Energies. More information about the PDP and about
renewable energy markets in East Africa: www.gtz.de/projektentwicklungsprogramm
This publication, including all its information, is protected by copyright. GTZ cannot be liable for any material or immaterial
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All contents were created with the utmost care and in good faith. GTZ assumes no responsibility for the accuracy, timeliness,
completeness or quality of the information provided.
Target Market Analysis: Ethiopia’s Solar Energy Market V
Content
1 STATUS QUO OF THE SOLAR ENERGY SECTOR............................................................. 1
1.1 Brief Solar Sector Overview ............................................................................................................... 1
1.2 Major Market Segments .................................................................................................................... 2

1.2.1 The Solar PV Market .......................................................................................................................... 2
1.2.2 The Solar Water Heating Market ...................................................................................................... 5
1.3 Local Capacities ................................................................................................................................. 6

1.3.1 Solar PV ............................................................................................................................................. 6
1.3.2 Solar Water Heating (SWH) ............................................................................................................... 7
2 MARKET POTENTIALS .......................................................................................................... 7
2.1 Overall Sector Outlook....................................................................................................................... 7

2.1.1 Solar PV ............................................................................................................................................. 7
2.1.2 Solar Water Heating (SWH) ............................................................................................................. 11
2.2 Undeveloped Solar Market Opportunities ........................................................................................12

2.2.1 Solar Hybrid PV Systems ................................................................................................................. 12
2.2.2 Grid Connected PV Systems ............................................................................................................ 14
3 SOLAR-SPECIFIC REGULATION AND FRAMEWORK .................................................. 14
3.1 Policies and Regulations ...................................................................................................................15

3.1.1 General Policies and Regulations .................................................................................................... 15
3.1.2 Technology-Specific Considerations................................................................................................ 16
3.2 Applicable Public Sector Support / Financing Mechanisms and Sources ...........................................17
4 BUSINESS PARTNERS AND COMPETITORS .................................................................. 18
4.1 Overview of Solar Key Market Players ..............................................................................................18
4.2 Overview of Major and/or Most Emblematic Solar PV Projects ........................................................23

Target Market Analysis: Ethiopia’s Solar Energy Market VI
List of Tables
Table 1: Main Market Segments of the Existing Solar PV Markets........................................................................ 2
Table 2: Outline of the Sales of Solar Water Heater and the Market Structure ..................................................... 6
Table 3: Solar PV Off-Grid Market Potential in Ethiopia ........................................................................................ 8
Table 4: Number of Customers and Electrified Towns until 2006 ........................................................................ 13
Table 5: Summary of Estimated Undeveloped Market Potential for Solar Hybrid PV Systems ........................... 14
Table 6: Cost Estimates and Funding Sources for Off-Grid Electrification (in Million €) ...................................... 15
Table 7: Organisations Involved in the SWH Market ........................................................................................... 19
Table 8: List of Relevant Importing Companies in the Solar PV Market .............................................................. 20
Table 9: List of Consultants, NGOs and Non-Governmental Projects in the Solar PV Market ............................ 21
Table 10: Government and Public Sector Projects .............................................................................................. 22
Table 11: Major PV Projects ................................................................................................................................ 23
Currency
1 USD = ETB 13.50 (May 2010)

1€ = ETB 16.63 (May 2010)
Measurement
W Watt Wp Watt peak Wh Watt hour

kW Kilowatt kWp Kilowatt peak kWh Kilowatt hour
MW Megawatt MWp Megawatt peak MWh Megawatt hour
GW Gigawatt GWp Gigawatt peak GWh Gigawatt hour
Target Market Analysis: Ethiopia’s Solar Energy Market VII
List of Acronyms
AMES Access to Modern Energy Services (GTZ project)
BIPV Building Integrated PV
BOS Balance of System
BTS Base Transmission Station
DSM Demand Side Management
EAREP Energy Access and Rural Electrification Programme
EBG Equatorial Business Group, Private Trading Company
EEPCo Ethiopian Electric Power Corporation
EREDPC Ethiopian Rural Energy Development and Promotion Centre
ETC Ethiopian Telecommunication Corporation
GEF Global Environment Facility
GoE Government of Ethiopia
GSM Global System for Mobile Communication
GTZ IS GTZ International Service
IDA International Development Association (World Bank Group)
IFC International Finance Corporation (World Bank Group)
IGAD Intergovernmental Authority on Development
LCH Low Cost Housing
LED Light Emitting Diode
MME Ministry of Mines and Energy
MoFED Ministry of Finance and Economic Development
NGO Non-Government Organisation
PV Photovoltaic
QSAE Quality and Standard Authority of Ethiopia
REF Rural Electrification Fund
RET Renewable Energy Technology
SCS Self Contained System
SHS Solar Home System
SSA Sub Saharan Africa
SWH Solar Water Heater
TVET Technical Vocational Education and Training
UCBP University Capacity Building Programme
UEAP Universal Electricity Access Programme
UNEP United Nations Environment Programme
VAT Value Added Tax
Target Market Analysis: Ethiopia’s Solar Energy Market VIII
Summary
The Ethiopian solar market is still at an early development stage with an estimated installed capacity
of 5 MWp. Growth during the 1990s was under 5 % but has reached 15-20 % during the last few
years, primarily driven by the telecom market that constitutes 70 % of installed capacity. Five or six
companies supply 90 % of the market and some lack a specialist focus on solar PV.
The market potential is estimated at 52 MW, the majority within the solar home systems (SHS)
market and continued expansion in telecom sector. SHS has the greatest annual growth rate of 20 %
with few suppliers and driven by the extension of low-cost housing and real estate developments. In
the longer term, the growing inverter charger backup market combined with a feed-in tariff law under
revision could constitute a stepping stone to grid-connected PV. For the foreseeable future, larger
and in particular grid connected PV systems will face stiff competition from smaller hydro power
systems, including small and micro hydro power.
Donor support, the establishment of the Renewable Energy Fund (REF) and projects such as those
backed by UNEP/GEF have brought opportunities for solar PV and micro-hydro, and should continue
to be a driving force behind commercial demand for institutional and household PV systems as well
as for solar hybrid PV and village mini-grids. The political environment already turned into positive:
th
Since 14 December 2009 the Ministry of Finance and Economic Development (MoFED) lifted the
import duty fees on PV modules and balance of system (BOS).
Target Market Analysis: Ethiopia’s Solar Energy Market 1
1 Status Quo of the Solar Energy Sector

1.1 Brief Solar Sector Overview
Ethiopia has abundant solar energy resources. The national annual average irradiance is estimated to
2 2
be 5.2 kWh/m /day with seasonal variations that range between the minimum of 4.5 kWh/m /day in
2 1
July to a maximum of 5.6 kWh/m /day in February and March. The solar resource is relatively lower in
the most populous Northern, Central and Western highlands of the country while the rift valley regions,
Western and Eastern lowlands of the country receive higher annual average irradiance well above 6
2
kWh/m /day.
The Ethiopian solar energy market is at its early stage of development. For about ten years, since the
commercial market started in early 1990s, annual sales growth was under 5 %. However, in the last
four years a significant sales growth at an average rate of 15 % to 20 % has been reported by major
PV suppliers. The market is yet in its pioneer stage where there is not a distinct role for the players in
the business. Capacity building and awareness raising projects in the past - even though they were
uncoordinated in nature - seem to have created demand for solar home systems (SHS) in rural
households and businesses. In addition to this, the establishment of the Rural Electrification Fund
(REF) under the Ministry of Mines and Energy has also been a milestone for the solar industry.
In the 1990s and early 2000, the market for solar PV was mainly a tender market for procurements of
systems for NGO supported projects. The telecom sector has always been the biggest market
constitution about 70 % of an estimated installed capacity of 5 MW, supported by the Ethiopian
Telecommunication Corporation (ETC) Universal Connectivity Programme (for which BP Solar has
historically been the major supplier). Estimations based on information obtained from major suppliers,
the annual sales for the year 2008 is over 500 kWp without systems for the telecom sector. The
annual solar PV sales seem to have doubled in the last three to four years. There are about 15 solar
equipment suppliers in Ethiopia. However, over 90 % of sales are from five or six major suppliers at
the moment. Less than half of these suppliers sell solar as a primary business. For most of them solar
is not a specialised market but an additional item in their business. Compared to other countries in the
region, the developed market in Ethiopia is at the low end with major international PV companies
(such as “Solar 23”) initiating a presence.
The market for institutional PV system is developing but very slowly. NGOs support and Rural
Electrification Fund (REF) for rural schools and health institution are creating a significant market for
solar PV systems. The demand from the tourism sector is not growing as rapidly as would be
expected. So far not more than 20 kWp systems are sold to the sector and these are mainly in
national parks and resorts in off grid areas.
The solar water heater (SWH) market was started with locally manufactured products and is currently
entirely based on imported products. Technologies available in the market range from simple flat plate
collectors to evacuated tube with heat-pipes. The market for SWH is concentrated in major cities
particularly in Addis Ababa. Demand for SWH is still low but continuously growing particularly driven
by newly developed real estate businesses for residential buildings. SWH installed to date is in the
order of 2000 units with annual sales of about 200 units.
1
Solar Energy Resources, Technical Report 3, CESEN 1986.
1.2 Major Market Segments

1.2.1 The Solar PV Market
Following rural income growth in the last few years the demand for solar PV systems in the household
and small commercial sectors is growing significantly. This demand is primarily coming from the need
for lighting, powering TV sets and charging mobile phones. The growing institutional demand is
primarily due to the catalytic role played by the rural electrification fund and support from various
NGOs as part of their newly introduced energy programmes. The Ethiopian solar PV market seems to
be in the transition from pioneer to emerging market. Existing companies and some of the new
entrants have not yet started to play defined roles as they are involved in imports, whole selling,
retailing and installation works. About half a dozen solar PV dealers are known to actively operate in
towns other than Addis Ababa, including Awassa, Dilla, Jimma and Harar. Even though the number of
dealers in other towns is still small, it is indicative of the growing trend of the solar PV business.
2
Table 1: Main Market Segments of the Existing Solar PV Markets
Solar PV technology Estimated Estimated Estimated Degree of competition

installed kWp installed financial
3
capacity in 2008 volume
Off-grid household > 1.2 MWp > 260 kW > 3 million Very low competition.
electrification & small scale (Approx. Euros (2008) Customer’s choice of
commercial (Solar Home 2000 to equipment is usually limited
System) 2008) by availability.
Number of players is
increasing but reliability in
products supply is still low.
Off-grid community systems > 500 kWp > 220 kW About 2.5 Supply of goods for
(including institutional, million Euros institutions has never been
worship places and pumping (2008) from stocks. Suppliers import
systems) goods after securing
contracts.
Large size supplies have
always been international
competitive bids.
Telecom > 3.5 MWp > 150 kW About 2 Telecom sector is a
million Euros Government monopoly. All
(2008) equipment is supplied by
international suppliers.
Off-grid household and small-scale business electrification

Off-grid solar PV market for households and commercial establishments in Ethiopia began around mid
1990s. Initial demand was below 5 kWp per year and the business was not encouraging at all to
suppliers. For almost all suppliers solar business accounted for only less than 5 % of their annual
turnover which was mainly in response to institutional tender markets. The major demand for SHS
today comes from the cash crop growing areas such as Jimma, Sidama and to some extent Hararghe.
Typical SHS sizes are in the range of 20-30 Wp for households. Typical system sizes in the
commercial establishments are in the range of 50-80 Wp. With growing telecommunication coverage,
a micro system with a single light bulb and a mobile phone charger is in high demand in rural areas.
2
Estimated based on information from four major suppliers, REF tender document and UNEP/GEF Project,
previous studies by Megen Power, 2005.
3
Total system volume including complete system and installation costs.
This conveniently coincided with growing rural income over the past few years. However, this potential
market remains entirely unserved at the moment.
The total installed capacity for SHS in households and small commercial establishments is estimated
to be over 1 MWp. The present demand for SHS is in the order of 200 kWp per annum with an
average annual growth rate of about 20 %.
In summary, the relative growth in PV SHS and small commercial applications is attributable to the
following factors:
Awareness creation and capacity building efforts by donor-funded projects since 2000, even
though they were spontaneous in nature, have played significant role in creating demand and
establishing linkages between Addis based suppliers and rural retailers.
Improving rural income in many parts of the country due to favourable terms of trade for
agricultural products (i.e. coffee and chat growers) created demand for consumer electronics.
Telecommunication expansion into rural areas created new demand for smaller systems.
Presence of Rural Energy Fund (REF) created awareness about solar PV system as
alternative power supply systems at the level of regional energy bureaus which was further
propagated to districts and rural consumers.
Procurements of PV systems through regional energy bureaus (in Oromia and Southern
Peoples Regions) for re-sell at subsidised prices to rural households and businesses for
promotional purposes have sensitised the market.
As a result of the convergence of all the above favourable market conditions, the PV solar market is
set to grow. The market would grow to even higher levels if more innovative and flexible financing
mechanisms were put in place; fortunately as a step forward to the stimulation of the solar market, the
Ministry of Finance and Economic Development (MoFED) waived the tax duty from the importation of
solar energy equipment in December 2009.
Despite such favourable market conditions, however, PV equipment and accessories are not always
available in the local commercial market in quantities and sizes the market requires. Therefore, this is
an opportunity for German companies to forge partnerships with local companies and keep equipment
in stock in the required commercial market. In addition to maintaining the momentum, such
partnerships would lead the local market to grow into the next higher level of development.
Off-grid community systems

Off-grid community systems are primarily addressing demands from health institutions, schools,
religious institutions (i.e. churches and mosques) and community water supply systems. Demand from
health institutions and schools are dependent on external support from government programmes or
NGO initiatives.
At the moment, the driving force for institutional PV market is financial support from NGOs and
international donors. Procurement for religious institutions, however, is fully financed by members’
contributions. For instance, in 2008, REF alone internationally procured solar PV systems worth over
4
one million Euros in one bid. These systems are earmarked for installation in selected rural schools
and health facilities. Total capacity of equipment is in the range of 70-80 kWp. More recently it has
become a trend for religious institutions to install solar PV systems to power their sound systems and
musical instruments. For instance, in 2008 one single supplier sold PV systems in the range of 30
kWp for off-grid rural churches mainly in Southern parts of Ethiopia. An 80 Wp system has been a
typical size for rural religious institutions.
4
An Asian company won the bid at a price of about € 9.3 per Wp before tax. The quoted price includes
transportation, installation and after sales service.
The total installed solar PV capacity in off grid institutional systems including health institutions,
schools, and water supply systems is estimated to be around 500 kWp. However, in the last one or
two years demand is growing mainly due to REF funds and NGO support. During the last six months
alone international and local tenders worth over one million Euros were announced for the supply of
institutional PV systems.
Based on sales volume in the past two years, the market for off-grid community systems is estimated
to be over 200 kWp per year. Given the number of pipeline projects over the next one year or so,
installation of systems is expected to exceed the current annual estimate.
Telecommunication
The Ethiopian telecommunication sector is one of the fastest growing and largest PV market perhaps
in the whole of Eastern Africa. In 2005 total installed capacity stood at around 3 MWp which
constituted over 70 % of the total market share.
Currently, as part of the overall national development programme, the Ethiopian Telecommunication
Corporation (ETC) has been implementing a five-year-programme (Universal Connectivity
Programme) since 2005. Over 18,000 villages are known to exist in rural Ethiopia. The programme
5
aims to achieve 100 % telecommunication coverage (universal telecom access ) in the country by
6
connecting all rural villages so that rural dwellers will get telephone access within a radius of about 5
7
km. According to ETC, about 80 % of the target has been achieved so far. In order to connect the
remaining 20 % of the villages and service centres, ETC needs to install additional 6,000 to 8,000
wireless telephones. This would create additional demand for over 200 kWp systems (i.e. 8000 rural
telephones x 30 Wp) over the coming one year. Nevertheless, in some villages due to highly scattered
settlement patterns rural communities and local topography, people have to travel as far as 15 km to
get access to a telephone service. In order to reduce travelling distance for people living in scattered
settlements and improve overall access on per capita basis, ETC has planned to increase the number
of wireless telephone units from one to five in each rural village over a time horizon of five years.
Installation of additional telephone units would create an additional demand for about 1.8 MWp
systems. In off-grid locations ETC powers its rural base stations and wireless telephones with either
solar PV or generator sets.
It is worth noting that, unlike previous telecom installations which are in the range of 1-2 kWp, power
requirements of wireless telephone are smaller (between 20-30 Wp). It should also be noted that the
aggressive advance of the grid into the rural areas in recent years has resulted in a continuous
replacement of the existing solar PV and genset powered base transmission stations by grid electricity
throughout several rural parts of the country.
Tourism
Despite several tourist destinations, the tourism industry is at its early stages of development. The
industry has yet to fullfill basic infrastructure and services. Most of the tourist destinations in the North,
(historic route) are grid connected. With the exception of the Semen Mountain National Park (14 kWp
installed capacity) and few other eco-lodges in the South, other off-grid tourist destinations have yet to
develop camping facilities which may require alternative source of power such as solar PV. Therefore,
despite its considerable potential for the future, the PV market for the Ethiopian tourism sector has yet
to be developed.
5
“Access” is defined as having one telecom service station in each village. In addition to the minimum access to
telecom service, rural connectivity programme includes the provision of telecom service to rural administrative
offices, government organisations, cooperatives and investment schemes.
6
Total number of rural villages in the country is about 18,000.
7
Interview with Telecom Agency Planning Department
Other markets
Until 2003/04 the national power grid was fairly reliable. However, the utility is unable to keep pace
with the growing need for energy to fuel the growing economy in recent years. As a result, frequent
power shedding has become a common practice. In response to this power crisis, demand for
generator sets and - more recently - inverter battery backup systems is growing exceptionally. At the
moment inverter backup systems may not constitute a real PV market, but in the medium term, the
inverter charger backup market together with the upcoming feed-in tariff law may constitute an
opportunity for grid-connected PV.
Predominant operator models

Despite the considerable growth in solar PV sales in recent years, the local PV market is still in early
stages. Instead of specialising in one or another aspect of the PV supply chain, all local PV companies
are engaged in doing everything from import and whole sale through retail, installation and
maintenance. With growing demand for equipment and renewed interest of some international
companies to enter the market, the Ethiopian PV market is expected to develop rapidly and transform
to the next higher level which can be termed as full-fledged commercial market. With this description
of prospective market in mind, currently operating PV market players’ characteristics can be
summarised as follows:
There are about five or six major players in the industry which import PV systems and
components from various suppliers. Companies typically import systems in small
consignments because of two reasons. The first is fear of tying up capitals on equipments in
stocks due to limited market to absorb large imports. Secondly, companies themselves have
limited finance as solar constitutes a small percentage of their business.
New entrants to the market who have links or affiliation to international PV companies have
set their presence in the country waiting for major demands. Some of them import solar
equipments for retail while others are simply waiting for opportunities.
Few others import whenever they can but usually obtain systems locally for installation
businesses.
NGOs and regional governments such as Oromia and Southern Region are actively promoting
solar PV systems through procurement, financing and training PV installation in their
respective jurisdictions.
1.2.2 The Solar Water Heating Market

The market for solar water heaters started with locally manufactured products about a decade ago.
There were very few instances of installation of imported SWHs earlier mainly in government
institutions such as training centres. Currently, local manufacturing has been squeezed out of the
market for it could not compete with cheaper but higher quality imported products. Because of the real
estate boom in recent years, demand for solar water heaters has risen significantly. Unlike solar PV,
installation of SWHs was not monitored in the past, so obtaining accurate data on the number of
installations is difficult. However, based on some information from previous studies and interviews with
key players in the sector, the total installed capacity is estimated to be 5,000 units which is equivalent
2
to about 10,000 m (see Table 2 below).
Locally manufactured flat plate collectors were the most common types of SWHs until they were out-
competed by evacuated-tube-type collectors (with and without heat pipes) imported mainly from
China, Israel and Italy.
Table 2: Outline of the Sales of Solar Water Heater and the Market Structure
Solar water heater technology Estimated installed Estimated Estimated financial

8
units area installed/year volume
(Number)
2
(m ) (2008) (€/year/2008)
Urban Households 4,500 9,000 800 0.48 Million
Tourism (Hotels) and Institutions 500 1,000 200 0.12 Million
TOTAL 5,000 10,000 1,000 0.6 Million
Assessing the total potential market volume of 1000 units of SWHs per annum, this could be
considered too small a market to attract investment. However, the market is steadily growing in recent
years and such growth in the market is witnessed in the face of inexpensive grid electricity (less than
USD 0.06/kWh domestic tariff) and in the absence of enabling policy environment for renewable
energy technologies. Integrating SWHs with ongoing low cost housing and real-estate development
could provide further impetus to the SWH market. Therefore, by creating partnerships with local
businesses German companies could position themselves strategically to take advantage of the
growing market opportunities in this sector in the near future.
The predominant operator model in the SWH industry is characterised by companies engaged in
doing everything including importation, retail, installation and maintenance by them. Currently, there
are about seven companies that import and sell SWHs in large volumes.
1.3 Local Capacities

1.3.1 Solar PV
Availability of qualified solar technicians in Ethiopia is limited. Training is mainly given by companies to
their technicians. With very few exceptions such as REF, the NGO “Solar Stiftung” (Solar Energy
Foundation), and projects financed by international donors (UNEP/GEF, EU/IGAD), there has been no
properly organised, industry-wide solar PV technicians training programme in Ethiopia. Whenever
there is a training session it is sporadic, non-modular and project specific. As a result a cadre of highly
skilled technician with technical capacities to design, size and install larger and more complex PV
systems is lacking. Some of the technicians trained by projects such as EU/IGAD and UNEP/GEF in
the past are active in providing limited installation and, repair and maintenance services in some rural
towns.
Sizing and installations of larger systems are always conducted by in-house technicians of the
companies themselves. Lack of autonomous skilled technicians is so severe that local PV companies
are often compelled to use their in-house capacities to install even smaller SHS in some areas.
Including in-house technicians of local PV dealers, all of whom are based in Addis Ababa, a total of
about 50 technicians are believed to exist nationwide. About one-quarter of the total number of
technicians are supposedly autonomous and not necessarily attached to one or the other PV dealer.
Each PV dealer on the average maintains one or two technicians in-house. PV companies outsource
autonomous technicians only when necessary.
8
Equipment and installation cost
1.3.2 Solar Water Heating (SWH)

Solar Water Heating systems installed in the country are mostly simple and modular collectors with
separate water tanks. Systems with central heating that require a relatively complex installation
procedure, and hence skills, are not common in the local market. Even with simpler systems technical
capacity in terms of both quality and quantity is lacking. SWH dealers usually have one technician in-
house assisted by a plumber out-sourced. All in all, the total number of SWH technicians is estimated
to be in the order of ten to 15 nationwide.
In summary, therefore, considerable technical capacity constraints are evident in the local market in
both PV and SWH sub sectors. Conversely, such capacity limitations present themselves as ample
opportunities for German companies who wish to either sell their skills and services or develop
strategic business partnerships with local solar companies, or both.
2 Market Potentials
2.1 Overall Sector Outlook
2.1.1 Solar PV
Market Potentials
In the past, the Ethiopian PV market was dominated by bulk purchases by the telecom industry and
donor driven large projects. Until early 2000s there was a gross misconception about commercial PV
market in Ethiopia. That is, firstly, PV is too expensive and too high-tech to be used by rural
consumers, and secondly, rural Ethiopians are too poor to afford PV. Further, the official attitude
towards PV is such that PV does not have a role to play in energising development for it does not
provide adequate motive power. Such misconceptions have improved considerably over the past
several years thanks to few ice-breaking donor supported projects which helped to unleash the
market.
Demand for PV has been growing in Ethiopia over the last ten years. Some of the favourable market
conditions that have led to current PV market growth include the following:
1. Officially, access to electricity is estimated at about 22 % with actual connection rate of only
about 6 % nationwide. This leaves massive sections of off grid communities unelectrified by
the grid. Given the distributed nature of PV solar, a good portion of this market could be
served using PV technology.
2. The majority of rural Ethiopians may be too poor to afford PV. However, due to the sheer
number of rural population, even if a minute fraction of that population is served with PV, the
absolute numbers are too significant to be ignored. Smaller products (for example solar
lanterns) will considerably increase access.
3. Despite the overall low rural incomes, there are a number of cash crop growing areas that will
constitute a considerable market for solar PV.
4. The overall Ethiopian economy has been growing by over 10 % for the past several years in a
row. Similarly, export re-orientation of the government policies have resulted in a steady rising
of rural incomes during the same period. Such growth of rural incomes has resulted in growing
demand industrial goods and services including solar PV.
5. Efforts made jointly by the Ethiopian Government and international donors to build market
infrastructure for solar PV commercialisation have led to growing awareness, some technical
capacity, and creation of linkages between various players in the industry. For instance, some
ten years ago awareness about solar PV technology among rural communities in Ethiopia was
none existent. Thanks to efforts made by IGAD/EU, UNEP/GEF, REF and regional
Governments of Oromia and Southern Ethiopia, at present, over one-third of the rural
communities have either heard about, or seen, or used solar PV.
6. More recently, there are also efforts that are aimed at building upon previous gains and
accelerate the commercial PV market growth. Key players behind recent PV commercial
market development include GTZ-AMES and the NGO Solar Stiftung (Solar Energy
Foundation).
7. The penetration of telecom services into the rural arena has given an additional impetus to
rising demand for solar PV for charging mobile and wireless phones in rural off grid areas. It
will open up new niches for different types of products and services.
In summary, the convergence of the above favourable market conditions has resulted in an average
market growth rate of about 20 % per annum during the last three years. Table 3 below presents an
indicative matrix of the potential market for solar PV systems in Ethiopia.
9
Table 3: Solar PV Off-Grid Market Potential in Ethiopia
Market segments Category of system Basic Estimated Existing penetration

sizes potential financial volume
market size (million €)
All 38 MW 400 1 MW
Micro systems (< 5 4.0 MW ~43
Wp)
One light + Radio (10 4.8 MW ~50
Solar home systems Wp)
Two lights + radio 4.8 MW ~50
cassette player (20 N/A
Wp)
Four light system or 12.0 MW ~130
more (50 Wp)
Larger systems with 12.0 MW ~130
inverter (150 Wp)
Small-scale commercial 1 MW > 10 N/A
Off-grid schools 3.6 MW ~40 < 0.05 MWp
Health institutions 4.6 MW ~50 > 0.06 MWp
Community Water ~2 MW ~20 N/A
Supply
NGO power 0.1 MW ~1 N/A
Isolated grids and rural 1.5 MW ~15 N/A
mini-grids (RE)
Telecom > 2 MW >20 >3 MWp
Tourism ~0.5 MW ~5 < 0.05 MW
TOTAL 52.3 MW 500 4.2 MW
9
Multiple sources: Own estimation based on information from Lighting Africa (2008), Central Statistics Authority
2007, information from suppliers.
Some important conclusions can be drawn from potential PV market analysis presented in Table 3
above. These are:
The total potential market for solar PV in Ethiopia is estimated to be about 52 MW. Currently,
the estimated market penetration rate is about 8 % of the potential.
Over three-quarters of the total demand comes from the household sector distantly followed
by the health institutions, rural schools and the telecom industry.
Despite its diminishing role as a major PV market, the telecom sector will continue to
constitute immediate cash market. According to ETC’s short to medium term rural connectivity
plan, the estimated PV market in the telecom sector is likely to saturate over the coming five
years or so. However, this does not mean that market for the rural telecom connectivity is
entirely exhausted. With rapidly growing urbanization and improving rural incomes demand
for solar PV to power rural telecommunication in off grid locations is expected to continue
growing.
At present, community water supply and institutional PV markets (health institutions and
schools) are financed almost entirely by donors. Out of an estimated potential market of about
10 MW in community and institutional PV market, only a small fraction (about 1 %) is currently
served. Since the bulk of the market is yet to be tapped and financing is most likely to come
from donors, demand in these sectors will continue to provide much needed incentives to the
commercial PV market growth.
As there is no local experience yet, it is difficult to estimate the potential market for grid-
connected PV. Obviously, however, PV grid connection will become hugely relevant and the
long term prospect is considerable. However, as it stands now, grid-connected PV is far from
being competitive to Ethiopia’s highly hydro dominated power supply option. Perhaps this
could be the reason why the feed-in tariff law under review did not consider solar PV grid
connect as the current and short-term generation cost per kWh can simply be several times
10
higher than the competing options.
Telecom coverage is expanding rapidly into rural areas at a rate much faster than that of grid
electricity. This has created considerable demand for electricity for charging mobile phones in
off-grid areas. An estimated one million mobile phones are believed to exist in off-grid areas.
At the moment mobile phone consumers are travelling 10-20 km to access electricity for
charging their phones. Beside the inconvenience and considerable travel effort, consumers
are paying € 0.11 per charge, or approximately € 11 per capita per year. This is equivalent to
11 million Euros business annually. At the moment, this is a cash market which is entirely
unserved. This market can best be served in the following ways:
1. Centralised mobile phone charging station: this is a multi-port charging unit with a
battery (fixed or portable) capable of charging several phones simultaneously. Such
units can be bought and owned by private small businesses as an additional income
generating activity.
2. Micro PV systems that could serve off-grid market:

Micro PV systems for mobile phone charging only
Integrated micro PV charging-lighting systems with 3-5 Wp. The integration of
mobile phone charger with lighting feature using LEDs will make the whole
system more attractive to off grid consumers.
10
Feed-in tariff law, Second draft, Ethiopian Electric Agency, Ministry of Mines and Energy, October 2009.
Obstacles / constraints
Currently, the global economic downturn has caused some economic difficulties including
shortage of foreign exchange to import solar PV equipments. As a result, currently local
companies are either out of stock or under stocked. This problem is expected to be only
temporal.
Another issue that will continue to pose challenges to solar PV market is the rapidly advancing
grid without clear and enforceable master plan. The grid, however, is not necessarily a threat
to potential PV market. It could even be considered as new opportunity for integrated grid
connected PV.
Still another constraint in the sector is capacity limitation both at the level of
dealers/companies and autonomous technicians. Major constraints at the level of PV
companies include: in adequate working capital, managerial skills, lack of specialisation,
limited network both upstream and downstream. Constraints on part of technicians include
lack of organisation, lack of technical skills for sizing and designing larger systems, and
inadequate skills for installation of smaller systems.
High upfront cost of solar PV systems in the face of absence or inadequate innovative
financing mechanisms.
More recently, the acute shortage of foreign currency has become a serious constraint for
supply and stocking of PV equipment and accessories in adequate quantities.
Lack of appreciation among policy makers of the role of PV as a complementary strategy in
both on-grid and off-grid electrification.
Solar PV: Recommendations for German enterprises
First of all, German enterprises should forge partnerships with capable local PV
companies to position themselves strategically for the growing solar PV market in Ethiopia
and the region as a whole. Such partnerships would help German companies to tap into
large scale international competitive bidding for telecom industry and donor supported
institutional PV market. Initially, such partnerships would require some investment in
building technical and managerial capacities of local partners.
Technical capacities and skills for designing, sizing and installing larger systems hardly
exist locally. Therefore, in addition to supplying PV equipment and accessories, such
constraints constitute an opportunity for German enterprises to market their expertise and
services.
While tapping into existing commercial as well as institutional solar PV market, German
companies should be vigilant and be ready to take advantage of much larger PV market
such as isolated mini grids and integrated grid connected PV which are likely to unfold in
due course.
Currently, despite a rapid expansion of mobile phone into the rural market, the market is
unable to provide innovative mobile phone charging technologies. German enterprises
could fill in this niche market. To facilitate reaching out to off-grid micro PV market, it
makes sense for German companies to forge partnership with mobile phone
manufacturers, telecom operators and local PV dealers.
2.1.2 Solar Water Heating (SWH)

Market for SWH has been growing rapidly in recent years. Given a very low penetration rate at present
coupled with booming real-estate development in major cities and towns, demand for SWHs is set to
rise increasingly for some time to come. Real-estates developers and owners of private residential
housing constitute high-end market with readily available cash to purchase SWHs. For this market
segment is important the quality of equipment and the reliability of service.
On the average, two electric water heaters are installed in almost every newly built residential house.
In addition to the government financed low cost housing (condominium), dozens of real-estate
developers are engaged in constructions of residential houses in the capital as well as other major
towns. Currently, construction of tens of thousands of housing units (close to 100,000 at present) is
either completed or underway throughout the country. Therefore, even if a fraction of existing electric
water heaters is replaced by SWHs over the next several years the market would remain attractive
enough for private investment. For instance, if one assumes that only one-quarter (25,000 units) of
existing electric water heaters in the domestic sector were to be replaced by SWHs, the potential
market would be five times more than total installed capacity to-date, which stands at about 5,000
units.
An estimated 80 % of total installed capacity of SWHs is within Addis Ababa. It is estimated that the
residential housing SWH market takes the lion’s share of 90 % while the surplus goes to hotels and
tourism. Conservatively, an estimated 2000 hotels and pensions with an average number of 20 rooms
each fitted with electric geysers exist throughout all towns in the country. Given the attractive financial
incentives that SWHs would bring to the businesses, it is assumed that 100 % of them would replace
their electric geysers with SWHs. This would translate into an estimated market potential of 40,000
units of domestic size SWHs. Putting domestic and hotel potential markets for SWHs together, the
total aggregate potential market for SWHs would become about 65,000 units. Assuming a
concurrence factor of 40 % for households and 80 % for hotels on the morning hour peak demand, the
contribution of SWH to serve the peak demand is estimated to reach 50 MW.
Existing growth and estimated market potential for SWHs is in the absence of conducive policy
environment for the technology. In fact, relatively low existing electricity tariff (0.06 €/kWh), is a
considerable challenge for a wide spread market uptake. Therefore, if favourable policy environment
were created - including upward electricity tariff revision – then the total potential market would be
much higher.
Owing to delays in completion of construction of several large hydro power projects, there is an
estimated 200 MW power shortage at the moment. In response to prevailing power shortage, EEPCo,
the national power utility, has embarked upon demand side management (DSM) interventions other
than load shedding.
Solar Water Heating: Recommendations for German enterprises

German enterprises need to establish partnerships and alliances with local SWH suppliers
to tap in existing real-estate market.
German enterprises, jointly with their local partners should use existing GTZ (AMES-E)
infrastructure and contacts to:
o Lobby policy makers to formulate policies that are favourable to Renewable
Energy.
o Influence real-estate developers to integrate SWH in their design and construction
of buildings.
German companies in partnership with existing GTZ infrastructure could play a catalytic
role in unleashing this potential market through implementing pilot projects on some of the
ongoing GTZ International Service programmes such as Low Cost Housing (LCH) and
University Capacity Building Programme (UCBP).
2.2 Undeveloped Solar Market Opportunities
Undeveloped market opportunities considered in this section will focus primarily on solar hybrid PV in
the tourism, telecom sectors and village mini-grids.
2.2.1 Solar Hybrid PV Systems

The primary purpose of hybrid power applications is to enhance system reliability and rationalise
energy utilization and investment outlay in an optimal manner. For example, an off-grid telecom centre
could use solar PV-genset hybrid in which PV could support the base load while the genset could be
used for the peak load only.
Despite value addition, enhanced reliability and cost-effectiveness of energy solutions that such hybrid
systems could provide to off-grid consumers, potential markets for such systems remain largely
undeveloped in Ethiopia.
Solar hybrid PV and tourism

Ethiopia has several tourist destinations. According to official statistics, in 2007, Ethiopia has earned a
total of about 100 million Euros from 400,000 tourists that had arrived in Ethiopia. Despite the gloomy
outlook in the global economy at present, senior officials in the tourism sector expect that the number
of tourists will reach half a million in the current year and the number will hit the mark of one million per
annum in the coming few years (www.hotelresortinsider.com). With an estimated one million
international tourists expected to arrive each year, tourism is set to grow rapidly in Ethiopia. However,
as far as solar hybrid PV in the tourism market is concerned, there are a few important points to bear
in mind. These are:
The tourism industry as a whole is not fully developed and well diversified
The majority of the destinations, particularly those in the Northern “historic” route are grid-
connected
Lodges and tourist camping facilities, which would be ideal places for solar hybrid PV
electrification, are uncommon or only coming up in recent years.
Therefore, despite growth in number of tourists in recent years, the market for solar hybrid PV in the
tourism sector is not yet developed.
Solar hybrid PV and telecommunication

Ethiopian Telecommunications Corporation (ETC) is the monopoly telecom operator in the country.
With only about 15 % of the population living in electrified areas, the rate of electrification is very low in
Ethiopia. Besides, the pace of electricity grid expansion has almost always been slow compared to
rural telecom connectivity. With rapidly growing mobile phone markets that began to expand into the
rural areas in recent years, the gap grew even bigger. For example, since mid 2004, ETC has
embarked upon a series of major investment projects aimed at improving the coverage and quality of
the mobile network. Introduction and subsequent expansion of wireless and mobile phones into the
vast off-grid rural market in recent years required more innovative and cost-effective energy solutions
than the traditional, often unsustainable, diesel gensets.
For instance, the GSM and GPRS mobile networks with fibre optic backbone supplied by Nokia
Siemens Networks required the construction of some 300 new base transmission stations (BTS) in the
Northern and Central parts of the country alone. According ETC, half of these stations are located in
“hard-to-access rural areas” where there is no grid electricity to provide power. In response to this
challenge, ETC approached Nokia Siemens to come up with a sustainable alternative to diesel
generators. Nokia Siemens Networks built more than 50 solar-powered BTSs where solar PV,
including battery banks, is being used to power the stations as well as the transmission node sites for
11
the fibre optic backbone network. Therefore, all or most of the remaining 100 BTSs constitute
undeveloped market for PV hybrid.
Although the grid is advancing rapidly and hundreds of small towns and villages are getting connected
every year at present, an estimated 200 to 300, diesel powered BTSs might still exist in Ethiopia.
12
Potentially, all of these stations could be powered using solar PV, or PV-diesel hybrid. Replacing the
power supply systems for the BTSs alone with solar PV would require 1.5-2 MWp systems.
Solar hybrid PV and village mini-grid

There are about 18,000 rural villages and 2000 towns in Ethiopia. The Ethiopian Electric Power
Corporation (EEPCO), under its Universal Electricity Access Programme (UEAP), plans to electrify
some 7,500 more towns and rural villages between 2005 and 2010. As of 2004, there were about 700
electrified towns in Ethiopia.
13
Table 4: Number of Customers and Electrified Towns until 2006
Fiscal year 2002 2003 2004 2005 2006
Total number of customers directly connected 654,885 698,360 797697 947697 1,126,464
Number of customers directly connected per 29,389 43,475 99,337 150,000 178,767
year
Electrified towns per year 23 66 74 32 227
Number of electrified towns 492 558 632 664 891
Given the faster pace of rural electrification in the past two years, the number of electrified towns and
villages might have currently reached 3000. Even then, this leaves nearly 5,000 towns and villages to
be electrified yet in the next years. Therefore, we can safely assume that there are over 10,000 rural
11
Ethiopian Telecommunications Network Powered by Renewable Energy Solutions: A Success Story,
www.nokiasiemensnetworks.com.
12
However, officials within ETC are skeptical about this because, according to them, the majority of off-grid V-
Sats and BTSs, which used to be powered by solar PV and gensets are now being replaced by grid electricity;
and this leaves no or very little room for PV hybrid application in the sector.
13
The World Bank: Electricity Access (Rural) Grid And Off-Grid Expansion Project – Phase II, May 25, 2007
villages that will remain un-electrified for foreseeable future. Even if we assume a fraction of those
villages (say 5 %) as potential market for solar hybrid PV, it constitutes a considerable market for PV.
Table 5: Summary of Estimated Undeveloped Market Potential for Solar Hybrid PV Systems
Time frame Financial volume

Sector Number KWp
(years) (million Euro)
Tourism 50 250 5 2.69
Telecom 100 150 5 1.61
Village mini-grid 500 5000 10 53.75
Total 5400 58.05
EEPCo, under its so called self-contained system (SCS), operates several mini-grids providing
electricity to dozens of rural towns. An estimated 30 to 40 small towns are currently being served by
SCS mini-grids. The SCS has a total installed capacity of about 22 MW of which only about 6 MW is
mini and small hydro and the balance diesel genset. Similarly, there are hundreds of small informal
businesses and private individuals who generate and sell electricity using gensets. Informal electricity
suppliers generate an estimated 100 MW of which some 30 % are located off-grid. Therefore, while
the bulk of thousands (5,000+) of unelectrified rural towns constitutes undeveloped market, urban
settlements with diesel-based mini-grids could be considered as immediate potential market for hybrid
PV systems.
2.2.2 Grid Connected PV Systems

So far there has not been any experience in the area of grid-connected PV. However, with rapidly
advancing technology globally coupled with abundant solar resource and feed-in tariff law under
review in Ethiopia, the technical potential for grid-connected PV is enormous. Nonetheless, unless it is
considered on strategic and prestige grounds, grid-connected PV is far from being competitive in the
short to medium term in Ethiopia.
3 Solar-Specific Regulation and Framework

The Government of Ethiopia (GoE) has adopted a twin-track strategy of rural electrification. The
central focus of the strategy is accelerating grid expansion to rural towns on the one hand, while using
gensets and mini-grids to bring electricity to off-grid consumers on the other. To realise this strategy of
grid-based rural electrification, a programme known as “Universal Electricity Access Programme”
(UEAP) was established under EEPCo in 2005. The UEAP, a ten year rural electrification programme
of the GoE that aims to connect over 7000 towns and villages during its life span, envisages improving
electricity access from 15 % to about 50 % over a five year horizon. The programme also aims at
raising per capita electricity consumption from the level of 24 KWh per year in 2007 to 128 KWh by
2015. The UEAP has successfully connected hundreds of small towns and villages each year over the
last three to four years.
As ambitious as it is, EEPCo’s grid-based rural electrification (implemented through UEAP) alone
might not be able to meet the energy needs of the country any time soon. This is because, firstly,
2
Ethiopia is a vast country with an estimated land area of 1.1 million km ; and secondly, the rate of
electrification is one of the lowest (6 % direct connection) even compared with Sub Sahara Africa
(SSA) standards. Challenged by those inconvenient realities mentioned above, the GoE has
recognised the need for more innovative energy solutions and flexible technologies to complement its
overall national rural electrification programme. In line with this, the GoE has established the
necessary institutional and financing frameworks to facilitate and accelerate off-grid rural
electrification. The establishment of rural electrification fund (REF) under the Ethiopian Rural Energy
Development and Promotion Centre (EREDPC) has opened up new opportunities for Renewable
Energy Technologies (RETs) particularly solar PV and mini and micro hydro power development in the
country.
Cognizant of the inherent limitations of grid-based rural electrification, the GoE, has set up the Rural
Electrification Fund (REF) to electrify off-grid rural areas. The two most important components of the
REF initiatives are promotion and support to mini-grids and solar PV for institutions such as health and
education. The mini-grid component with its initial budget of about 29 million Euros was designed to
finance about 180- 200 projects of isolated grids, with majority of renewable energy projects, i.e., mini
and micro hydro, and solar PV. It was targeted at providing electricity services to 150,000 customers,
representing a population of 750,000 inhabitants. The institutional PV component, which had a budget
of about 1.9 million Euros, was designed to support installation 1000 institutional PV systems in
selected clinics and schools. Details of cost estimates and funding sources are presented in Table 6
below. The REF is still active and running, despite its very slow process in financing RE projects.
Table 6: Cost Estimates and Funding Sources for Off-Grid Electrification (in Million €)
Estimated IDA (to Customers and

Component
total costs GoE) developers
Develop about 180-200 Mini-Grids serving 150,000 new
29 26.4 2.6
customers (Mini hydro, PV, Diesel)
Install 1,000 small PV systems for social services 1.9 1.9 --
Provide low cost lighting to 150,000 customers 5.4 1.2 4.1
3.1 Policies and Regulations

3.1.1 General Policies and Regulations
The Rural Development Strategy, November 2001
The Rural Development Strategy recognises development of physical infrastructure, among which
energy is recognised to be an essential rural infrastructure. The strategy explicitly addresses the issue
of rural electrification and proposes rural electrification implementation by both the public and private
sector. Solar energy is specifically addressed in the strategy as potential alternatives for rural
electrification. The strategy pointed out that the participation of non-government sector would be
crucial in the application of solar energy in rural areas.
The Amended Investment Proclamation (No. 116/1998)

In an attempt to attract foreign direct investment in key economic sectors, Ethiopia has revised its
investment codes several times. The revised investment proclamation, in addition to several incentive
schemes including tax relief, has lowered investment capital requirement from about 0.7 million Euros
to 70,000 Euros. In fact, the code slashes back this sealing to nearly one-half (43,000 Euros) if foreign
private investors forge partnerships with local businesses.
The National Energy Policy, 1994

The general policy direction was towards a least-cost, indigenous resource based and environmentally
sustainable development for the energy sector. The policy sees energy security only from cost and
reliance on indigenous resources points of view. It seems to disregard achievement of energy security
through increased diversity of generation options. The policy has given less emphasis towards the
application of solar energy technologies to rural development and livelihood improvement.
The Rural Electrification Strategy, 2002

The main objectives of the strategy are to improve access to better social services (communication,
water health and education), reduce negative environmental impacts, and promote private sector
participation in increasing access to electricity in off-grid areas. The strategy proposed three basic
rural electrification approaches: grid extension by the public utility (EEPCO), private sector led off-grid
electrification, and promotion of new energy sources. Solar PV based electrification is recommended
for isolated and dispersed electricity requirements.
Rural Electrification Fund (REF) Establishment Proclamation (Proclamation no. 317/2003)

The fund is established to promote private sector participation through the provision of accessible
finance and technical assistance. It is financed by international donors and financial organisation such
as GEF and the World Bank with some contribution from the GoE. The REF proclamation states that
priority will be given to electrification through renewable energy sources.
Feed-in Tariff Proclamation

A draft feed-in tariff law is under preparation by the electricity regulatory agency (Ethiopian Electricity
Agency). Presence of feed-in tariff with an attractive price per unit of power generated would be an
incentive to encourage grid based solar power projects.
Quality and standards

Solar energy equipment is currently imported from various sources in different qualities. Unregulated
importation of PV equipment and accessories from uncertified suppliers has been a challenge to solar
companies that provide standard products and services as they hardly compete with cheaper but
inferior quality products. This is more vivid in the SHS and small commercial systems market where
awareness is low and cost reduction as opposed to product quality is usually accorded high priority.
The Quality and Standard Authority of Ethiopia (QSAE) does not have codes of standards to solar
equipment and installation of systems. More recently, however, with appearance of finance and
support organisations (i.e. REF, NGOs, etc) in the solar PV industry, quality and standard of products
has become an issue. However, on the other hand, building the capacities of PV technicians’ both in
quality and quantity is highly required and it has to go together with the effort of setting codes of
standard for products and practices in the industry. To this effect, GTZ AMES-E and Solar Stiftung
(Solar Energy Foundation) have taken initiatives to establish solar competence centres in the country
Solar Stiftung (Solar Energy Foundation) has already established a training facility in Amhara Region
of Ethiopia. GTZ AMES-E on the other hand signed a Memorandum of Understanding (MoU) with
Selam Technical Vocational Training Centre for establishment of a training facility in Addis Ababa.
3.1.2 Technology-Specific Considerations

Off-grid solar PV
In its various sectoral and national economic policies, the GoE recognises the role renewable energy
particularly solar PV could play in providing electricity to off-grid rural towns and villages. In fact, solar
PV is one of the key rural electrification strategies through which the government intends to improve
electricity access to off-grid consumers. In line with this, the GoE showed its commitment to the
promotion and widespread adoption of RETs through the establishment of institutions and financing
mechanism (REF) for off-grid rural electrification.
Grid connected solar PV

The feed-in tariff law is under discussion at the present, but grid connected PV is not considered yet.
Among the reasons for disregarding grid connected PV in the draft feed-in tariff law could be due to
relative abundance of far less expensive options.
Solar water heaters (SWH)

Despite the conscious promotion of the use of natural and renewable resources, the Ethiopian energy
policy and various strategies do not explicitly mention SWH (except for large scale process heating).
Recommendations for German enterprises

Tax revoking and introduction of appropriate feed-in tariff could prompt large-scale solar
power plant and Building Integrated PV (BIPV) systems. German companies may need to
work with their Government to lobby the Government of Ethiopia for placement of effective
policy implementation strategy to support the industry.
Companies need to closely follow up the progress to such changes and monitor how the
market would respond.
German companies should work with the German bilateral technical support programmes to
influence Ministry of Education to incorporate technical solar energy system installation skills
in the curriculum of Technical Vocational Education and Training (TVET) programmes.
German companies need to forge partnership with local PV companies to follow up local and
international tenders for the supply of PV systems and components, and also to source out
installation works.
3.2 Applicable Public Sector Support /

Financing Mechanisms and Sources
Rural Electrification Fund (REF)

Currently, the REF provides concessional loans for the development of off-grid electrification projects
– 85 % loan with an interest rate of 7.5 % for diesel projects, and 95 % loan with zero interest rate for
renewable energy projects. Learning from the experience and lessons of the off-grid component under
Energy Access and Rural Electrification Programme (EAREP-II) (financing heavily biased in favor of
diesel generators), REF provides co-financing grants for renewable energy off-grid projects.
Renewable energy technologies that receive support under this programme include solar PV, mini and
micro hydro, and biomass cogeneration. The co-financing grant will provide 20-30 % capital subsidy of
the investment costs to project developers on a reimbursement basis. In addition to the co-financing
grant, the REF will continue to provide 60-70 % concessional loans to project developers, who will
contribute 10 % of equity investment.
Under Energy Access Project-I, the majority of approved and co-financed projects were diesel
generators. As diesel gensets not only unsustainable but also not favoured by government policies
(increased foreign exchange burden from oil imports), EAREP-II gives priority to Renewable Energy
projects when and wherever resource availability allows. In addition to co-financing, the REF also
assists Renewable Energy project developers in evaluating least-cost options such as solar, biomass
technologies and diesel/wind hybrid systems in areas without hydro resources.
In the last couple of years, the REF has disbursed about two million Euros for procurement and
installation of solar PV systems for rural schools (100), health facilities (200), and households (about
600). The REF floats one or two tenders annually for the supply and installation of PV system.
GTZ AMES-E
GTZ under its six-year-programme “Access to Modern Energy Services – Ethiopia” (AMES-E)
promotes solar PV system through capacity building and installation of pilot institutional solar PV
systems. GTZ has already procured solar PV modules and equipments to be installed in 50 rural
health centers in 2009. The total system size is about 75 kWp. In the coming three years, before the
completion of the project, GTZ will install solar PV systems in 50 more rural health clinics and about
30 rural schools. Moreover, in partnership with the Ministry of Mines and Energy and Selam Technical
Vocational Centre, GTZ will set up a solar PV training centre, the centre to be set up will have all the
necessary equipment needed for conducting standardized training.
Plan Ethiopia
Plan Ethiopia is the local representative of the NGO Plan International. It is involved in various
community development activities in various sectors such as health, education, water development.
As part of its social service improvement activities, Plan Ethiopia recently adopted integration of solar
PV systems into rural health facilities, schools and community water supply system. In the coming two
years it will require supply of solar PV systems of size over 90 kWp.
Others
There are several local regional governments in Ethiopia, particularly health bureaus and energy
agencies, set aside budgets for procurement of solar PV systems. For instance, Amhara Regional
Health Bureau, with support obtained from Austrian Development Cooperation, needs a supply of
solar PV systems and vaccine fridges for rural health facilities to be installed in 2009.
Lighting Africa
Lighting Africa is a World Bank/IFC funded project currently under implementation in several African
countries including Ethiopia. Currently, the project is in preparation to conduct nationwide market
assessment for solar PV lighting opportunities.
4 Business Partners and Competitors

4.1 Overview of Solar Key Market Players
With growing demand for solar PV and SWH, the number of suppliers has also grown over the past
years. At present, there are about 15 solar PV companies at different capacities and levels of
involvement in the business. However, over 80 % of the annual solar PV sales are constituted by
about five companies. The others are opportunistic traders who sometimes import few systems
otherwise purchase from the major suppliers. Including all players in the PV market, their number has
grown by about 50 % in the last three years. Table 8 below shows the list of major solar PV dealers in
Ethiopia.
New companies are also getting into the SWH market. At present there are about ten SWH dealers in
the country. Solar water heater market is mainly the urban households market. Imported products are
of smaller sizes suitable for households. Systems with pumps and central hot water distribution for
hotels and institutions are not adapted in the country. Hotels and institutions use several smaller
modular units each having their own hot water tank. In addition to the PV dealers outlined in Table 8,
the following companies are involved in the SWH market:
Table 7: Companies Involved in the SWH Market
Full name Activities Contact details
Equatorial Business A multi million business company. SWH EBG Head Office
Group (EBG) account for less than 5 % of the total Debre Zeit Road
business. It takes the biggest share of P.O.Box 8964
total sales in the country. Products are Addis Ababa Ethiopia
mainly of heat-pipe technology.
Tel : (+251) (0) 11-4400103/4407492
Tel : (+251) (0) 11-4424955(PABX)
Fax : (+251) (0) 11-4422148
Email ebg@ethionet.et
Internet: www.ebg-ethiopia.com
NBA-Solar Energy & A new entrant to the SWH business NBA-Solar Energy & Security Centre PLC
Security Centre PLC specialising in SWH. Yelebe Molla Abebe
P.O.BOX 24859/1
Addis Ababa Ethiopia
Tel. : (+251) (0) 6460420/6477070

Fax. : (+251) (0) 6477070
Cell. : (+251) (0) 1919381
Sat Mechanical One of the earliest businesses in SWH.
Workshop Company started with local manufacturing
but currently all products are imported.
GPG Energy & Pioneer in local manufacturing of SWH. It Addis Ababa Ethiopia
Security forged partnership with an Israeli based Tel. (+251) (0) 11 416 0575
company. Set up an assembling unit for Fax: (+251) (0) 11 416 0576
flat-plate collectors importing components
from Israel. It was market leader some
five years before.
Vonall.com is specialised on solar systems for hot Addis Ababa, Ethiopia
water solutions. In addition, the company Tel. (+251) (0) 11 551 1659
is considering to move into solar PV. Fax(+251) (0) 11 551 1647
Table 8: List of Relevant Importing Companies in the Solar PV Market
2008 Importing Company description & Company strategy Major PV product PV business Equipment Contact details
company distributors sector sources
200 kWp Direct Solar Privately owned Ethiopian 100 % PV work. Aggressive marketing to Modules and controllers SHS, commercial, Mulugeta Girma
Energy company based in Addis donors. Supplies PV systems to all are mostly imported from solar pump, and Mob: (+251) (0) 911207830
Ababa. Total number of markets - households, commercial, NGO suppliers in Europe and institutional Email: directso@ethionet.et
employees less than five and government projects. Pioneer in Dubai. systems market
development of commercial sales Batteries: mainly from
outside Addis Ababa. China.
Imports equipment from
changing suppliers.
150 kWp Everbright Private Ethiopian solar PV Over 90 % PV work. Targets home Modules and balance of SHS and small Imports Tesfaye Legese
company. More than ten systems and small commercial system systems including commercial products Tel: (+251) (0) 911619474
employees markets. controllers, batteries and systems market mostly from
Has retailing shops in some rural towns. light bulbs China
40 kWp Lydetco P.L.C Private Limited Ethiopian Solar PV constitutes less than 20 % of All modules and system Institutional, PV products Dereje Walelign
Company. Number of business turnover. Company strategy is components from major PV telecom mainly from Tel: (+251) (0) 911207283 or
employees more than ten to respond to tenders also wholesales multinational PV company Europe 114 663189
and retails. in Europe Email: lydet@ethionet.et
20 kWp BETA Private Ethiopian Company. PV constitutes between 10-15 % of the Modules: Opportunistic, Household, small Mostly from Kassa W.Senbet
Electrical Total number of employees business. Electrical spares and BOS: India, Europe. commercial and India Mob: (+251) (0) 911242766
Engineering (both permanent and short engineers with operations in off-grid institutional Email: route@ethionet.et
P.L.C. term) is more than 50. areas. Strategic partnership with systems market
Those involved in solar are international finance organisation.
less than ten in number
5 kWp Ethio-Ducth Company established in 100 % PV company. It aims for large Product list includes Institutional system China and Adane W. Michael
Business P.L.C partnership with Ethiopian scale donor supported institutional modules, BOS markets Europe Tel: (+ 251) (0) 113200021
and Netherlands company systems. Email: adane@solar-man.net
(Gira Mundo/ Solar Man). Wholesales and retails equipment -
Employees less than five including home systems and small
commercial systems market.
Davis & A subsidiary of Davis Specialised in pumps and PV systems. Supplies pumps and PV Urael Bole Tele Road
Shirtliff Shirtliff Kenya Focus on institutional and wholesale systems market. Wholesale P.O. Box 170540
market. to distributers. Addis Ababa / Ethiopia
Tel: (+251) (0) 11 51 59
341/44
Fax: (+251) (0) 11 51 59 351
Email: d&s@et.dayliff.com
Solar 23 A subsidiary of Solar 23 Institutional systems market, wholesale Nabil Ishak

Germany (About a year to distributers. Nefas Silk Lafto Sub City
since opened business in Kebele 06 - House No. 182
Ethiopia). P.O. Box 22572/1000
Employees less than ten Addis Ababa / Ethiopia
Tel: (+251) (0) 118 500 024
Mob: (+251) (0) 911 714 668
Email:
nabil.ishak@solar23.com
Table 9: List of Consultants, NGOs and Non-Governmental Projects in the Solar PV Market
Procurements
Plans in
(types of
Full name Role in sector Activities Volume kWp or € immediate Contact details
equipment/
future
services)
GTZ - AMES Promoter Installation of pilot institutional systems to rural Solar PV systems Over 75 kWp (about 1 to 3 years Joachim Gaube, or
health facilities and schools. Plans to set up a solar € 700,000 for clinics Samson Tolosa
training facility in Addis Ababa. plus between 15-30 (+251) (0) 911 429640/ 911211284
kWp for schools Email: joachim.gaube@gtz.de;
(over € 200,000) samson.tolessa@gtz.de
Solar Stiftung (Solar Promoter Promotes SHS through installation of PV systems at Samson Tsegaye
Energy Foundation) subsidised price, Tel: (+251) (0) 116 181462,
Installed over a 1000 small solar PV powered LED Mob: (+251) (0) 911 228710
system in more than 1000 homes in a rural village, Email: sccaddis@yahoo.com
Works closely with local regional governments in
Ethiopia to install SHS at subsidised price,
Established a solar PV training facility in Amhara
Regional State.
Plan Ethiopia/ Plan NGO-involved in Development of community water supply system, Institutional systems Over 90 kWp (above In few months Asnake W. Michael
International community construction of rural health facilities and schools, for rural schools, 800,000 Euros) time Email:
development child sponsorship programme. health facilities and asnake.woldemichael@plan-
activities community water international.org
supply systems
Megen Power Ltd Consultant Energy, environment, development Melessaw Shanko

Mob: (+ 251) (0) 911203096
Email: mgp@ethionet.et
Partners Consulting and Consultant Business development, energy Mekonen Kassa
Information Services Mob: (+ 251) (0) 911 203097
Email:
mekonnenkasa@yahoo.com
ERG Consultant Renewable energy, environment, development Hilawe Lakew

Mob: (+ 251) (0) 114 670802
Email: erg@ethionet.et
SolaTech Consultant Energy Tesfaye Bayou
Mob: (+251) (0) 911 226556
Email: solatec@ethionet.et
B-Cad Management Consultant Specialised in business development, training.
Consultants
Table 10: Government and Public Sector Projects
Procurements
Plans in
(types of
Full name Role in sector Activities Volume kWp or € Immediate Contact Details
equipment/
Future
services)
Rural Electrification Promotion and Assists developers on rural electrification projects, SHS for 300 homes 7 kWp system Tender already Amare Hadgo
Fund financing rural Disburse loans. in Somali regional (about 70 thousand floated Tel: (+251) (0) 116 558 654
electrification state Euros) Email: eesrc@ethionet.et
projects
Ethiopian Electric Electricity Issues operational licenses for power generation, Getahun Moges
Agency regulation distribution and sales, regulates electricity tariff.
Amhara Region Ensures provision Solar PV systems Over 7 kWp (over 70 In few months Wudu Ayalew
Bureau of Health of health services for rural health thousand Euros) Tel: (+251) (0) 582 201 722
facilities
Ethiopian Engineering Procurement of solar PV modules for telecom Solar PV modules >2 MW PV module from 1 to 5 years Tayework
Telecommunication support for ETC's infrastructure. (worth over 20 Tel:(+251) (0) 115 529 687 or
Corporation (ETC) rural telephony million Euros) 115 527579
programme
4.2 Overview of Major and/or Most Emblematic Solar PV Projects
Several ongoing projects are stimulating the solar PV market in Ethiopia. As it has been mentioned in
section 2.1, institutional demand for solar PV is driven mainly by donors’ support. Such demands are
incentives for businesses with a trickle-down effect on developing the commercial market. In this
regard, solar PV support-programmes by UNEP/GEF, REF, GTZ AMES-E and Solar Stiftung (Solar
Energy Foundation) are worth mentioning.
Table 11: Major PV Projects
Projects Location Size Project participants Success

factors/stories
UNEP/GEF Jimma, South West East African Donors, government, Building commercial
Ethiopia regional project consumers, local PV PV market
in five countries companies, infrastructure
consultants through technical
training, raising
awareness, creating
linkages and
installing subsidised
demo PV systems.
REF National ~ USD 40 million GEF, World Bank, Removing market
Ministry of Mines and barriers through
Energy promotion, “flexible”
financing to RETs.
GTZ AMES-E Oromia, Amhara, Ministry of Mines and Institutional and
Southern Ethiopia Energy, Universities, technical capacity
Rural Technology building for RETs.
Promotion Centres, Piloting RETs for
regional energy institutional and
bureaus, local PV community
companies, electrification.
international PV
companies
Solar Stiftung (Solar Oromia and Amhara Removing barriers
Energy Foundation) through awareness
raising, technical
training to local PV
technicians, and
installation of demo
SHS.
Important Projects
The Rural Electrification Fund (REF) - One of primary purposes for the establishment of REF is to
stimulate the solar PV market through provision of financing mechanism in the form of soft loans.
Since its formation, REF has disbursed over two million Euros for direct purchase of solar PV
equipment and local technical capacity building activities. Out of the total finance made available in the
PV sector through REF, about half goes to installation of PV systems in rural health facilities and
schools. REF encourages rural communities to organise in unions/cooperatives in order to become
eligible to access REF loans. REF financed the following institutional and SHS installation:
REF-financed institutional systems:

Lower Primary Schools: 100 schools each with 200 Wp institutional PV systems is
underway in various parts of the country.
Health Posts: 200 health posts with each with 360 Wp is underway in various parts of
the country.
REF-financed solar home systems:
Yirgachefe SHS: Installation of SHS in 300 households with a total capacity of 6 kWp
is completed in Yirgachefe.
Nazereth SHS: Installation of SHS in 100 households with a total capacity of 7 kWp is
completed in Nazreth area.
Somali region SHS: Installation of SHS in 100 households with a total capacity of
about 10 kWp is underway in Somali regional state.
GTZ AMES-E is implementing a six years programme with the financial support obtained from the
Dutch Government under “Energising Development Programme”. Under this programme, GTZ
promotes solar PV systems and micro-hydro power as pilot projects intended to remove barriers for
PV commercial market development. GTZ AMES-E is currently working on the installation of the
following institutional PV systems:
First-round installations: Installation of a total of 57.6 kWp (1.44 kWp x 40 institutions) in 40
health institutions is currently completed in various parts of the country.
Second-round installations: Installation of a total of 72 kWp (1.44 kWp x 50 institutions) in 50
health institutions is underway.
Community Service and Schools: Another round of institutional PV installations for community
services and rural schools is being envisaged by AMES to be completed over the coming
years.
Besides, GTZ AMES has signed a Memorandum of Understanding with Ethiopian Rural Energy
Development and Promotion Centre and Selam Technical Vocational Centre for establishment of a
solar PV training centre. The training facility is expected to start functioning over the coming three
years.
Solar Stiftung (Solar Energy Foundation) is a German NGO that works on promotion of solar PV
technologies and technical capacity building. Over the last few years, Solar Stiftung installed solar
home system in more than 3,000 households in various parts of the country. The following are PV
SHS projects under Solar Stiftung:
Rema-Dire SHS project: Installation of a total of 2,000 SHS in Rema and Dire Villages in
Amahara region.
SHS in various regions: A total of 1,000 SHS were installed in Oromia, Southern Ethiopia,
Amhara and Tigray regions.
Solar Stiftung (Solar Energy Foundation) envisages installing 49,000 SHS in various parts of
the country over the coming two years. Besides, the NGO has established a solar competence
centre in Amhara regional state. This centre is expected to increase the availability of capable
solar technicians in the country over the coming few years.
These and various other efforts by governmental organisations, NGOs and private firms are expected
to set the solar PV industry to grow in an accelerated rate over the coming years.
Additional local solar market developments include:

The REF released in May 2009 a fourth round tender for procurement of an estimated 7 kWp
PV systems for households in Somali Region of Ethiopia.
There is a renewed interest on renewables among policy makers and high level officials as
indicated by a series of forums led by Ministers and Vice Ministers were organised by the
Ministry of Mines and Energy since mid 2008. The following are the key issues that the high
level renewable energy discussion forum is attempting to address currently feed-in tariff law
and establishment of Solar Energy Society.
NGOs are showing keen interest in integrating RETs in their development programmes. A
case in point is, Plan Ethiopia, an NGO, which has committed to install more than 70 kWp
solar PV systems to provide electricity to rural villagers in some of its community development
projects.
New entrants to the solar market: Two companies, one international and one local have
14
recently opened offices in Addis Ababa and joined the solar market.
Current Market News: due to the prevailing power shortage, demand for charger/inverter
backup systems is growing significantly in recent months. Inexpensive Chinese LED lights
have started to appear in the market. Many PV dealers have reported either no or very low
stock due to shortages of foreign exchanges to import PV equipment.
14
Solar 23 Pvt. Ltd Co. a local company but affiliated with Solar 23 Germany, and Davis & Shirtliff, a subsidiary of
Davis & Shirtliff Kenya.
References
Ethiopian Electric Agency (EEA): http://ethioelectricagency.org/ (July 2010).
Ethiopian Telecommunication Corporation (ETC): http://www.ethionet.et/ (July 2010).
Ethiopian Telecommunications Network Powered by Renewable Energy Solutions: A Success
Story, www.nokiasiemensnetworks.com (July 2010).
Feed-in tariff law, Second draft, Ethiopian Electric Agency, Ministry of Mines and Energy,
October 2009.
Ministry of Mines and Energy: www.mome.gov.et (July 2010).
Rural Electrification Fund (REF): http://ethiopiaref.energyprojects.net/ (July 2010).
Solar Energy Resources, Technical Report 3, CESEN 1986.
The World Bank: Electricity Access (Rural) Grid And Off-Grid Expansion Project – Phase II,
May 25, 2007.
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or campaigners or electoral assistants during an election for the purposes of campaigning. In
particular, it is forbidden to distribute this publication at campaign events or at information stands
run by political parties or to insert, overprint, or affix partisan information or advertising. It is also
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Ethiopia’s Solar Energy Market

Deutsche Gesellschaft für Technische

German Federal Ministry

Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH

1 STATUS QUO OF THE SOLAR ENERGY SECTOR............................................................. 1

1.1 Brief Solar Sector Overview ............................................................................................................... 1

1.2 Major Market Segments .................................................................................................................... 2

1.3 Local Capacities ................................................................................................................................. 6

2 MARKET POTENTIALS .......................................................................................................... 7

2.1 Overall Sector Outlook....................................................................................................................... 7

2.2 Undeveloped Solar Market Opportunities ........................................................................................12

3 SOLAR-SPECIFIC REGULATION AND FRAMEWORK .................................................. 14

3.1 Policies and Regulations ...................................................................................................................15

4 BUSINESS PARTNERS AND COMPETITORS .................................................................. 18

4.1 Overview of Solar Key Market Players ..............................................................................................18

4.2 Overview of Major and/or Most Emblematic Solar PV Projects ........................................................23

1 USD = ETB 13.50 (May 2010)

W Watt Wp Watt peak Wh Watt hour

1 Status Quo of the Solar Energy Sector

1.2 Major Market Segments

Solar PV technology Estimated Estimated Estimated Degree of competition

Off-grid household and small-scale business electrification

Off-grid community systems

Predominant operator models

1.2.2 The Solar Water Heating Market

Solar water heater technology Estimated installed Estimated Estimated financial

1.3 Local Capacities

1.3.2 Solar Water Heating (SWH)

Market segments Category of system Basic Estimated Existing penetration

2. Micro PV systems that could serve off-grid market:

Solar PV: Recommendations for German enterprises

2.1.2 Solar Water Heating (SWH)

Solar Water Heating: Recommendations for German enterprises

2.2 Undeveloped Solar Market Opportunities

2.2.1 Solar Hybrid PV Systems

Solar hybrid PV and tourism

Solar hybrid PV and telecommunication

Solar hybrid PV and village mini-grid

Time frame Financial volume

2.2.2 Grid Connected PV Systems

3 Solar-Specific Regulation and Framework

Estimated IDA (to Customers and

3.1 Policies and Regulations

The Amended Investment Proclamation (No. 116/1998)

The National Energy Policy, 1994

The Rural Electrification Strategy, 2002

Rural Electrification Fund (REF) Establishment Proclamation (Proclamation no. 317/2003)

Feed-in Tariff Proclamation

Quality and standards

3.1.2 Technology-Specific Considerations

Grid connected solar PV

Solar water heaters (SWH)

Recommendations for German enterprises

3.2 Applicable Public Sector Support /

Rural Electrification Fund (REF)

4 Business Partners and Competitors

Table 7: Companies Involved in the SWH Market

Full name Activities Contact details