VZCZCXRO5731
RR RUEHROV
DE RUEHDS #2318/01 2711017
ZNR UUUUU ZZH
R 281017Z SEP 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 6308
INFO RUCNIAD/IGAD COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUEWMFD/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHNR/AMEMBASSY NAIROBI 4048
RUEHKO/AMEMBASSY TOKYO 0534
RUEHRL/AMEMBASSY BERLIN 0380
RUEHDR/AMEMBASSY DAR ES SALAAM 5667
RUEHKM/AMEMBASSY KAMPALA 4129
RUEHLGB/AMEMBASSY KIGALI 1612
RUEHDJ/AMEMBASSY DJIBOUTI 0169
RUEHAE/AMEMBASSY ASMARA 3809
RUEHJB/AMEMBASSY BUJUMBURA 0067
RUEHPL/AMEMBASSY PORT LOUIS 0901
RUEHAN/AMEMBASSY ANTANANARIVO 0139
RUEHKH/AMEMBASSY KHARTOUM 1213

UNCLAS SECTION 01 OF 05 ADDIS ABABA 002318 
 
SIPDIS 
 
DEPARTMENT FOR AF/E-JWIEGERT,OES/PCI-VDELAWIE,MGERDIN,OES/ST C- 
TBURNS,OES/SAT-FECHAVARRIA,EEB/IFD/OMA-JWINKL ER AND EEB/CBA- 
DWINSTEAD 
 
DEPARTMENT PASS TO U.S. PATENT AND TRADEMARK OFFICE - AMY COTTON 
USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND BARBARA GRYNIEWWICZ 
 
 
DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO 
 
DEPT OF TREASURY WASHDC FOR REBECCA KLEIN 
 
DEPT OF ENERGY FOR TSPERL 
 
E.O. 12958: NA 
TAGS: KSCA SENV ENRG ETRD PGOV ECON ET
 
SUBJECT: ETHIOPIA SEEKS ENERGY SECTOR INVESTMENT 
 
ADDIS ABAB 00002318  001.2 OF 005 
 
 
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Summary 
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¶1. (U) Charge d'Affairs (CDA) Meece met with Ethiopia's Minister 
of Mines and Energy, Mr. Alemayehu Tegenu, for a courtesy call 
on September 23, 2009.  Accompanied by DCM Mushingi and the 
Regional Environment Officer, CDA requested a briefing on the 
GoE's energy sector development priorities.  Alemayehu explained 
that geothermal and wind are the two major energy sources that 
Ethiopia plans to develop as an alternative to existing 
hydropower resources and petroleum imports. Per CDA's 
suggestion, the Minister agreed to draft a GoE policy statement 
identifying geothermal power generation as a developmental 
priority.  Alemayehu also noted he will attend the upcoming 
Corporate Council on Africa's U.S.-Africa Business Summit in 
Washington in order to promote investment opportunities in 
Ethiopia, highlighting key initiatives the government has taken 
to attract foreign investment in Ethiopia's energy market. 
 
----------------------------------- 
Ethiopia's Energy Sector: Background 
----------------------------------- 
 
¶2.   (U) Ethiopia is experiencing dire energy shortages 
currently estimated at 200MW.  During the height of the crisis, 
the GoE announced that electricity would be cut 14 hours daily 
for 12 days each month, possibly costing the country more than 
1% of its GDP.  Although Ethiopia operates on 783 MW of grid- 
based electricity, domestic peak demand has reportedly risen 24% 
beyond the national utility's supply.  To meet expanding needs, 
the GoE has traditionally relied on hydropower development. 
Currently, hydropower supplies more than 80% of the country's 
total installed capacity, with costly petroleum imports covering 
17%.  Ethiopia's massive hydropower potential, perhaps as high 
as 45,000 MW, has been the driving force behind the country's 
national energy strategies.  Were all of Ethiopia's hydro 
development plans to come online according to schedule and 
operate at full capacity, the country would generate enough 
electricity to meet its own growing demand as well as to supply 
excess for exports, securing much needed foreign currency in the 
process.  The GoE estimates 300 million Euros in annual income 
would be generated from GIBE III power exports alone. 
 
¶3.  (U) Frequent droughts, dam siltation from severely degraded 
watersheds, malfunctioning dam equipment, and slow construction 
on new dam sites, however, as well as environmental and social 
impact concerns associated with the Gibe III dam construction, 
are all factors serving to seriously undermine the country's 
hydro-based power supply. Although reports indicate that the 
Ethiopia Electric Power Company (EEPCo) plans to install two 
diesel generators of 60 MW each, expensive oil imports do not 
represent a long-term viable alternative, particularly given 
Ethiopia's meager foreign currency reserves.  As a consequence, 
 
ADDIS ABAB 00002318  002.2 OF 005 
 
 
and facing growing popular frustration with the continued 
blackouts and power rationing, the GoE appears to be recognizing 
the need to diversify their national energy portfolio to include 
wind, geothermal, solar, and biofuel alternatives. 
 
----------------- 
Hydropower Update 
----------------- 
 
¶4.  (U) During CDA's meeting with Ethiopia's Minister of Mines 
and Energy (MoME), Alemayehu Tegenu, Alemayehu asserted that 
ongoing dam construction throughout Ethiopia has been meeting 
his expectations and that he looks forward to U.S. participation 
at the mid-October Tekeze dam inauguration.  Although Alemayehu 
noted that rain shortages will preclude Tekeze from operating at 
full capacity for the foreseeable future, he refrained from 
addressing the myriad of hydropower's shortfalls; from 
insufficient rains, to dam siltation from severely degraded 
watersheds and malfunctioning dam equipment, nor did he mention 
the significant environmental and social controversies 
associated with the Tekeze and Gibe III dams.  Alemayehu's 
prevailing message on hydropower was that, having only tapped 
into 2-3% of a 45,000MW hydropower potential, hydropower is - 
and will remain - Ethiopia's first priority. 
 
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RENEWABLES 
---------- 
 
¶5.  (U) Per CDA's request, Alemayehu provided a rank-ordered 
list of the GoE alternative energy priorities. Following 
hydropower, the Minister listed wind, geothermal, solar, 
biofuel, gas-power generation, and coal in order of priority. 
With an estimated 10,000 MW potential, Alemayehu claimed that 
Ethiopia is actively and aggressively seeking foreign investment 
in the wind sector. Alemayehu referred to a site in Tigray 
currently under construction, two recently signed investments 
with Chinese companies, and numerous other identified sites 
still open to investors.  Regarding geothermal, the Minister 
cited a figure of 5,000 MW of untapped potential.  Ethiopia 
currently is generating 7 MW of grid-connected electricity at 
Ethiopia's Aluto Langano geothermal plant (thanks to the efforts 
of an American company that completed the plant's refurbishment 
this summer), with plans for a Japanese-based 30 MW expansion to 
commence shortly.  Like the wind sector, additional sites have 
been identified for geothermal development.  Addressing solar 
potential, Alemayehu noted that there are numerous private 
companies and NGOs providing off-grid solar energy options to 
rural communities. In terms of biofuel, he highlighted that 
Ethiopia is already using an ethanol biofuel blend on the 
domestic market.  On gas-power generation, the Minister noted 
untapped potential in the Ogden region, with project proposals 
under development.  Alemayehu concluded his list of energy 
alternatives by mentioning Ethiopia's coal reserves. 
 
ADDIS ABAB 00002318  003.2 OF 005 
 
 
Recognizing that this is not a renewable energy source, he 
claimed that Ethiopia is rich in coal deposits, which he said 
Ethiopia has the right to develop given its current carbon 
neutral status. 
 
------------------------------------ 
ETHIOPIA IS SERIOUS ABOUT INVESTMENT 
------------------------------------ 
 
¶6.  (U) Minister Alemayehu confirmed that he will attend the 
Corporate Council on Africa's U.S.-Africa Business Summit in 
Washington beginning September 28.  With a tight schedule of 
only three days on the ground, his top priority will be to 
promote Ethiopia's energy opportunities to American investors. 
In particular, he hopes that the U.S. will expand its 
engineering and consultancy presence.  More importantly, 
according to Alemayehu, he also seeks direct U.S. involvement in 
the Ethiopia's power generation sector.  Explaining that with a 
second draft version of a feed-in tariff bill slotted for 
approval once Ethiopia's Parliament reconvenes in October, 
ensuing power purchase agreements will enable the creation of 
self-contained foreign-run systems.  CDA noted General 
Electric's interest in the final feed-in tariff legislation, 
saying that an acceptable framework could pave the way for GE 
investment in Ethiopia's emerging biofuel sector.  CDA also 
noted emerging interest in possible USG engagement in Ethiopia's 
geothermal sector, saying that USTDA and others seek 
reassurances from the GoE that it views geothermal development 
as a priority. To this end, the Minister agreed to draft a 
policy statement identifying geothermal power generation as a 
developmental priority. Alemayehu also cited concrete, tangible 
examples to highlight Ethiopia's serious commitment toward the 
geothermal sector. He noted that the GoE and UNIDO co-hosted the 
High Level Decision Makers conference in Addis in February 2009 
to highlight key initiatives governments must take to attract 
geothermal foreign investment.  Moreover, Japan has signed an 
MoU with the GoE to begin expanding Ethiopia's only geothermal 
plant.  Additional sites in the Tendaho region and elsewhere 
have been identified for development after substantial research, 
and Germany's geological society has agreed to refurbish and 
maintain Ethiopia's two drilling rigs. 
 
---------------------------- 
U.S. INVESTMENT ON THE RISE? 
---------------------------- 
 
¶7.  (U)  USAID Washington is funding Merga Tassew, Ethiopia's 
geothermal expert at the Electric Power Company (EEPCo), to 
attend the Annual Geothermal Resources Council (GRC) meeting in 
Reno, Nevada, October 3-9, 2009.  Merga will present a paper at 
the conference and will also speak at a joint Department of 
Energy-Department of State international luncheon organized on 
the margins of the conference. These speaking engagements will 
provide Merga with opportunities to develop new partnerships 
 
ADDIS ABAB 00002318  004.2 OF 005 
 
 
with U.S. companies and further promote U.S. investment in 
Ethiopia's geothermal sector. 
 
¶8.  (U) The American company, Geothermal Development Associates 
(GDA), recently completed the refurbishment of the Aluto Langano 
geothermal plant in Ethiopia.  The rehabilitation project took 
over two years, and is now nearly fully operational at 
approximately 7 MW.  Although Ethiopia expended $17 million of 
its own money to build the Aluto Langano plant, it was never 
fully operational and fell into disrepair within three years 
after completion due to limited local expertise.  Now that the 
geothermal plant is running again, there is no reason to believe 
that the plant will not again decline unless they receive 
adequate training.  REO is working with relevant USG agencies to 
identify funding for a desperately needed training workshop. 
 
¶9.  (U) The African Rift Geothermal (ARGeo) fund is on the verge 
of implementation after over five years under development.  It 
is an $18 million region-wide, multi-country facility designed 
to add low-cost power generation within six countries of the 
Rift Valley (Djibouti, Eritrea, Ethiopia, Kenya, Tanzania and 
Uganda). Support is provided by the Global Environment Facility 
(GEF), the World Bank, and UNEP.  GEF is currently reaching out 
to potential donors for additional co-financing.  While the U.S. 
continues to support the ARGeo fund and its efforts to promote 
geothermal development throughout the region, we currently do 
not supply specific project co-financing dollars to ARGeo. 
Instead, we have provided in-kind support throughout the 
development of ARGeo, such as USG funding for the initial 
conference from which ARGeo was crafted. Currently, the basis of 
the U.S. funding to ARGeo comes from the USG annual contribution 
to GEF - about 20%.  According to the U.S. Department of Energy, 
however, it is the hope of the USG that additional supporting 
activities will materialize as the ARGeo process unfolds. 
GEF plans to arrange a pledging session as soon as the first 
ARGeo project begins, but has made it clear to REO that the door 
for contributions at this time is wide open. 
 
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COMMENT 
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¶10.  (U) Since the construction of the Aluto Langano geothermal 
plant in Ethiopia, the GoE has continuously stated a desire to 
further develop its geothermal resources, requesting support and 
assistance in this regard.  Yet because their actions have been 
inconsistent and have not always supported the rhetoric, the 
nascent industry has subsequently faltered.  The environment, 
however, appears to be changing in a positive direction.  Given 
the hydropower sector's failure to perform as anticipated, 
resulting in a sustained energy crisis, the GoE is waking up to 
the reality that it must diversify its energy portfolio or 
continue to face severe power shortages and frequent blackouts. 
Indications on the ground point to a willingness to tap into 
 
ADDIS ABAB 00002318  005.2 OF 005 
 
 
renewable energy options such as wind, geothermal, solar, and 
biofuels.  Transforming the business climate into one conducive 
to attracting foreign investment in the Ethiopia's evolving 
renewable energy sector, however, is clearly a work in progress; 
but one that offers opportunities for innovative and possibly 
lucrative U.S. investment. 
 
#MEECE 
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