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Commentary: Harnessing the power of GERD for economic, social progress in Somalia and Somaliland

Grand Ethiopian Renaissance Dam, August 2022 (Photo: Office of the Prime Minister-Ethiopia/Facebook)

By Ali Regah @aregah

Introduction

The construction of the Ethiopia Renaissance Dam has been a topic of controversy in the Horn of Africa region, with concerns raised about its potential impact on downstream countries such as Egypt and Sudan. However, there are also opportunities for neighboring countries such as Somalia and Somaliland to benefit from the dam’s electricity generation capacity. This article will explore the potential economic and social benefits of access to cheap electricity from Ethiopia for Somalia and Somaliland, as well as the challenges that must be overcome in order to realize these benefits.

Electric Access and Cost in Somalia and Somaliland

Somalia and Somaliland are both countries with limited access to electricity. According to the World Bank, only 15% of Somalia’s population has access to grid electricity, while in Somaliland the figure is around 30%. The lack of reliable electricity hinders economic development and limits access to essential services such as healthcare, education, and their countries potential for industrialization.

The cost of electricity in Somalia and Somaliland is currently very high, with some estimates putting it at $1 per kilowatt hour. In contrast, the cost of electricity in Ethiopia is much lower, at around $0.06 per kilowatt hour. This is due in part to the country’s investment in hydroelectric power generation, including the Ethiopia Renaissance Dam. Access to cheap electricity from Ethiopia could bring significant economic benefits to Somalia and Somaliland, including increased industrialization and job creation.

Economic and social benefits of access to cheap electricity

Access to cheap electricity from Ethiopia could have a transformative effect on Somalia and Somaliland’s economies. Investment in infrastructure, such as manufacturing plants and transportation networks, could help jumpstart economic growth and create jobs. Cheap electricity could also lower the cost of doing business in these countries, making them more attractive to investors. In addition to the economic benefits, cheap electricity could also improve access to essential services such as healthcare and education. Hospitals and clinics could operate more effectively with reliable electricity, and schools and universities could provide students with access to technology and other resources.

Challenges and Solutions

There are several challenges that must be overcome in order to realize the benefits of accessing cheap electricity in Ethiopia. One of the main challenges is the lack of infrastructure in Somalia and Somaliland, including transmission lines and distribution networks. Investment will be needed in these areas in order to connect the countries to the Ethiopian grid. Another challenge is the political instability and insecurity in Somalia and parts of Somaliland, which could deter investors. Furthermore, many private companies have invested in electric service provision in both countries. They should be included in all discussions, giving priority to the advantage of the country in using cheaper costs, reducing dependency on diesel powered services, and attracting investors to benefit from the cheap labor and strategies of the locations to export their products beyond Somalia and Somaliland. A public partnership discussed below might be an ideal solution to consider in the effort to realize their partnership.

To overcome these challenges, there will need to be a coordinated effort between the governments of Somalia, Somaliland, and Ethiopia, as well as private investors and international organizations. The construction of transmission lines and distribution networks will require significant investment, but the potential economic benefits make it a worthwhile endeavor.

Why should Somalia and Somaliland support Ethiopia’s Renaissance Dam Project?

Access to cheap electricity from the Ethiopia Renaissance Dam could bring significant benefits to both Somalia and Somaliland, which should encourage their support for the project. Here are some additional points to consider:

  • Regional Stability: The Renaissance Dam has the potential to be a catalyst for regional stability and cooperation. By providing access to electricity for multiple countries, the dam could promote economic growth and reduce tensions in the region.
  • Energy Security: Access to cheap, renewable energy from Ethiopia could increase energy security for Somalia and Somaliland. Dependence on imported, fossil-fuel-based energy sources carries the risk of price volatility and supply disruptions, which could be mitigated by access to hydropower from Ethiopia.
  • Climate Change: As climate change continues to accelerate, access to renewable energy sources such as hydropower will become increasingly important. Supporting the Renaissance Dam project aligns with the global push towards decarbonization and mitigating the effects of climate change.
  • Job Creation: As mentioned earlier, increased electricity access could lead to increased industrialization and job creation in Somalia and Somaliland. This would be a welcome development for economies that have struggled with unemployment and low growth rates.
  • Economic Integration: The Renaissance Dam project could open up opportunities for economic integration between Ethiopia, Somalia, and Somaliland. As businesses benefit from cheap electricity and transportation links improve, trade and investment could accelerate between the countries.

Public Private Partnership in Electricity Supply:

Public-private partnerships (PPPs) offer a unique opportunity to leverage the strengths of both the public and private sectors in the development of electricity infrastructure and supply. PPPs can bring together the financial resources and technical capabilities of private companies with the institutional capacity and regulatory oversight of governments.

One example of a successful PPP in electric supply is the partnership between Kenya Power and Lighting Company (KPLC) and the Gulf Energy Corporation (GEC). KPLC, the state-owned electricity utility in Kenya, partnered with GEC to construct and operate an 80 MW power plant in Nairobi. The power plant helped to expand electricity access in the country and improve reliability of supply, while also creating jobs and generating economic growth.

There are several benefits to PPPs in electric supply, including:

  • Increased Investment: PPPs can attract new sources of private investment, enabling more rapid and efficient development of electricity infrastructure and supply.
  • Better Risk Management: Through PPPs, risks associated with electricity projects can be allocated to the party best suited to manage them, whether the public or private sector.
  • Improved Efficiency: The expertise and innovation of the private sector can help to improve the efficiency and effectiveness of electricity projects, allowing for the delivery of better services at lower cost.
  • Increased Accountability: PPPs can help to improve transparency and accountability in the electricity sector, by introducing private sector disciplines and performance metrics.
  • Job Creation and Economic Growth: The development of electricity infrastructure and supply through PPPs can lead to the creation of jobs and the stimulation of economic growth, particularly in rural and underdeveloped areas.

By considering this option, the existing companies in electric services in Somaliland and Somalia can benefit from it, while the existing infrastructure will be maintained to ensure the availability of alternative power sources that can be used during emergencies.

Conclusion

In summary, the benefits of accessing hydropower-generated electricity from Ethiopia are numerous and would likely bring economic, social, and environmental benefits to both Somalia and Somaliland. By supporting the Renaissance Dam project, they would also be supporting regional stability, energy security, job creation, economic integration, and climate change mitigation efforts.

Access to cheap electricity from Ethiopia could be a game-changer for Somalia and Somaliland, bringing significant economic and social benefits to both countries. However, there are significant challenges that must be addressed in order to make this a reality. With the right investments in infrastructure and a commitment to political stability, the potential benefits of the Ethiopia Renaissance Dam could be realized for the greater good of the region.

Editor’s Note: Ali Regah is a WASH Coordinator, Somaliland/Somalia at Oxfam Novib. He can be reached at aregah@gmail.com

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