In recent years Djibouti and Ethiopia have aligned bilateral cooperation efforts to grow their economies. Despite having a significantly smaller land area and lack of sizeable natural resources, Djibouti has used its access to trading routes on the Indian Ocean and the entrance to the Red Sea to become a trans-shipment nexus for its landlocked neighbour. Ethiopia’s hydroelectric dams have been key to such efforts to position Djibouti as a critical link in maritime trade.
Djibouti receives electricity from Ethiopia through a 283-km interconnection link completed in 2011. This transmission line connecting Djibouti City with Dire Dawa in Ethiopia has been essential for both countries’ development. As of late 2022 Ethiopian-produced electricity accounted for 60-80% of Djibouti’s annual electricity consumption. Between 2011 and 2020 annual electricity transfers from Ethiopia rose from 155 GWh to 532 GWh, according to the African Development Bank (AfDB). The integration of generation capacities between the two countries has also been beneficial for Ethiopia, allowing the country to earn $24m-35m per year in foreign exchange.
Djibouti’s electrification rates and household consumption levels have grown, underscoring the need to expand transmission capacity. The bulk of power demand has been driven by a gradual uptick in industrial and port activity, and the commissioning of the electrified railway line used to transport freight between Djibouti’s ports and Ethiopia. The Ministry of Energy and Natural Resources estimated that the country’s daily electricity needs will jump to 1000 MW by 2030, up from 120 MW as of December 2022.
Increasing Capacity
Rising demand for electricity led the authorities to plan for a second transmission line in 2018, expected to cost $137.8m. Most of the financing was secured in mid-2021 through two loans from the AfDB totalling $83.6m. The funds will be split between Ethiopia and Djibouti, with the former receiving a $69.7m loan and the latter $13.9m. Additional financing is set to come from the World Bank, which committed $55m to the project. Construction work began in October 2022.
The project will require the construction of 292 km of high-voltage, 230-KV transmission lines linking Semera in eastern Ethiopia to Nagad, south of Djibouti City. It will also involve the extension of existing electricity substations and the construction of new facilities. Furthermore, the energy authorities will have to revisit the existing power-purchase agreement to accommodate the expected increase in electricity sales because of growing demand. The second transmission line is estimated to provide access to an additional 30% of electricity. Annual electricity flows average 532 GWh as of late 2022 but are set to reach 696 GWh once the project is operational.
Cost Savings
Operating a second electricity transmission line from Ethiopia, rather than building new thermal power plants in Djibouti to satisfy shortterm electricity needs, has several advantages. It will reduce greenhouse gas emissions and keep electricity prices lower. According to World Bank estimates, thermal generation in Djibouti can cost up to $0.26 per KWh, while hydroelectricity from Ethiopia costs $0.065 per KWh. The government hopes that the second line, along with ongoing electrification efforts, will improve access to power. The use of biomass fuels in households for cooking and heating would also decline, further reducing pollution.
A second transmission line would supply Djibouti with much-needed electricity as the country works to develop additional energy sources and enhance regional integration. In the future, the authorities aim to fulfil all electricity needs with power generated from renewable sources. Although solar, wind and geothermal electricity generation are being developed as viable energy options, Djibouti will likely rely on Ethiopian electricity exports as an integral part of its energy mix for years to come.
Read More from OBG
