Djibouti, Ethiopia to launch second electricity link to boost trade

Djibouti and Ethiopia have secured funds to build a second electricity transmission line after the two neighbors enjoyed the returns from the first project that linked their power grids.

The first project has enabled Djibouti to import Ethiopia's hydropower-processed, renewable and cheap electricity.

After, the two countries agreed to further develop the project, the African Development Bank (AfDB) has now approved two grant loans worth $83.6 million which enables Ethiopia and Djibouti to proceed with the construction of their second power transmission line which will eventually boost their energy trade.

 According to a statement the bank issued last week, the Board of Directors of the African Development Bank Group approved the funds in a bid to boost cross-border trade in electricity between Ethiopia and Djibouti.

The grants also intend to deepen economic integration in the Horn of Africa's region.

The funds comprise a $ 69.65 million grant to Ethiopia and a second grant of $ 13.93 million to Djibouti and were sourced from the African Development Fund, the African Development Bank’s concessional financing window.

The Nation has learnt that the latest loans which are granted based on a long-term loan framework, will be used for the second Ethio-Djibouti power transmission line project.

The Ethiopia-Djibouti Second Power Interconnection project, according to the bank, will entail the construction of nearly 300 km of interconnector line, 170 km of transmission lines, and new construction or renovation of substations in the two countries.

“The first interconnection line is reaching its power transfer capacity limit due to several developments in both countries, such as the industrial development in the eastern part of Ethiopia, the railway line from Djibouti to Ethiopia (powered by electricity), and the port expansion in  Djibouti "said Mr. Batchi Baldeh, the Bank's Director of Power Systems Development.

"The two countries have thus decided to develop the second power interconnection line to maintain energy security and reliability for Djibouti" he added.

Completion of the second phase of the joint power line interconnector will boost Ethiopia’s revenue from power exports to Djibouti.

On the other hand, it enables Djibouti to import more reliable and affordable clean electricity, with costs less than US $ 10 per kilowatt hour.

According to the Bank, the second project is expected to build on benefits achieved over the last ten years, including a 65% increase in customer connections in Djibouti and a sharp reduction in the use of thermal generation plants from 100% to around 16%.

Other expected benefits in Djibouti include a more conducive environment for businesses and job creation for youth, as well as lower greenhouse gas emissions.

Currently, electricity imported from Ethiopia accounts about 70% of Djibouti's entire power demands.

The bank was able to provide this second round of loan support acknowledging to the successful completion and fruitful outcomes achieved from the first phase of the power line project.

In 2004 the African Bank financed the first power interconnection project between the two countries.

The project is aligned with the Bank’s East African Regional Integration Strategy Paper, which seeks to promote regional infrastructure for economic transformation.

Abebe Gizachew, an economic expert says the first and second power line projects are part of Djibouti’s long-term development strategies set under the country’s vision 2035 ’launched in 2014.

"By establishing new power interconnections with Ethiopia, Djibouti plans to achieve goal of 100 percent  renewable energy supply by 2035" said Abebe.

"Though the goal looks so ambitious, the government plan however intends to make sure the entire Djiboutian population including rural areas get access to electricity by then"

Currently, some 50percent of Djibouti's little over one million population does not have access to electricity.

While, being the main power supplier to Djibouti, 60% of Ethiopia's over 110 million population however does not have access to electricity, according to recent government figures.

According to Abebe, completion of the second power line will enable Djibouti to import an additional 60 MW per day into its national grid.

Most of this electricity will be injected to Djibouti from Ethiopia's Grand Renaissance Dam which is currently 81 percent completed.

During the past 20 years, Djibouti has been aggressively working to boost its share of renewable energy within its electricity production.

In fact, some economic analysts say that the tiny Africa nation has been in an energy race to meet its ambitious goal of becoming the first African country that is entirely reliant on green energy.

Since Ethiopia started exporting electricity to Djibouti, the horn of Africa's nation has earned about $ 275 million in revenue.

Last year, Ethiopia earned $66.4 million from electric energy exports to Sudan and Djibouti.

Out of the total revenue, $ 29.3 million has been gained from Sudan while the remaining $ 37.1 million from Djibouti.

According to the state power and electricity utility, Ethiopia is working to create integration through electricity with additional African countries including with Tanzania, South Sudan and Somaliland.

A few months ago, Addis Ababa said that the power transmission line that links nation’s power grid with Kenya is near completion and it will be operational soon.

Kenya has an initial agreement with Ethiopia to import up to 400 Megawatts of electricity.