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Ethiopia: Issues and Options 47411 in the Energy Sector Report No 4741-ET Ethiopia:Issues and Options 47411 in the EnergySector Public Disclosure Authorized July 1984 Public Disclosure Authorized Public Disclosure Authorized Reportof the jointUNDP/World Bank Energy Sector Assessment Program Public Disclosure Authorized This document has a restricted distribution Its contents may not be disclosed without authorization from the Government, the UNDP or the World Bank _________E E_l~~ JOINT UNDP/WORLD BANK ENERGY SECTOR ASSESSMENT PROGRAM REPORTS ALREADY ISSUED Country Date No. Indonesia November 1981 3543-IND Mauritius December 1981 3510-MAS Kenya May 1982 3800-KE Sri Lanka May 1982 3792-CE Zimbabwe June 1982 3765-ZIM Haiti June 1982 3672-HA Papua New Guinea June 1982 3882-PNG Burundi June 1982 3778-BU Rwanda June 1982 3779-RW Malawi August 1982 3903-MAL BangLadesh October 1982 3873-BD Zambia January 1983 4110-ZA Turkey February 1983 3877-TU Bol i17a Arril 1983 4213-BO Fiji June 1983 4462-FIJ Solomon Islands June 1983 4404-SOL Senegal JuLy 1983 4182-SE Sudan JuLy 1983 4511-SU Uganda July 1983 4453-UG Nigeria August 1983 4440-UNI Nepal August 1983 4474-NEP Cambia November 1983 4743-GM Peru January 1984 4677-PE Costa Rica January 1984 4655-CR Lesotho Januarv 1984 4676-LSO Seychelles January 1984 4693-SEY Morocco March 195.4 4157-MOR PGor -Ug aL April 1984 4824-PO yigOr 'ay 1984 4642-NIR FOR OFFICIAL USE ONLY Report No. 4741-ET ETHIOPIA ISSUES AND OPTIONS IN THE ENERGY SECTOR July 1984 This is one of a series of reports of the Joint UNDP/World Bank Energy Sector Assessment Program. Finance for this work has been provided, in part, by the UNDP Energy Account, and the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosed without authorization from the Government, the UNDP or the World Bank. ABSTRACT Ethiopia has one of the lowest levels of per capita energy con- sumption in the world. More than 90% of this energy is derived from bio- mass fuels and is almost entirely used in household cooking. The supply of these fuels historically has resulted in massive deforestation and soil erosion which now threatens an otherwise fertile agricultural base. Major programs of aforestation covering 5% of Ethiopia's landscape are required to prevent complete deforestation, to redress the imbalance between supply and demand for woodfuels for cooking, and to restore and protect the capacity for sustained agriculture in the populous highland regions. Ethiopia has very substantial hydropower resources and some small reserves of natural gas, both of which could make an important con- tribution to future economic development. The demand for petroleum pro- ducts has grown in recent years to the point where their cost has become a major burden on the balance of payments. This report presents a stra- tegy for greatly augmenting the supply of household fuels through refor- estation, through the production of new biomass fuels, and through cook- ing fuel demand management. Measures are recommended which will help define the most economic means of exploiting hydropower and natural gas, and which will lead to a better understanding of the economic potential of other prospective energy resources. In addition, measures are out- Lined to enhance the efficient use of expensive electricity and imported petroleum. The energy sector investment needed between now and 1993 is estimated to be US$1.7 billion. Recommendations also are made on energy pricing and on strengthening institutional and manpower capabilities to implement the required investment program. I ABBREVIATIONS AND ACRONYMS Abbreviations bbl barrel bd basic density Btl British Thermal Unit ft cubic feet GDP gross domestic product GWh gigawatt hour ha hectare kg kilogram kVA kilovolt ampere kW kilowatt kWh kilowatt hour LPG Liquified petroleum gas mai mean annual increment mc, mcwb moisture content, moisture content wet basis m3 cubic meter M,m thousand MM million MVA megavolt ampere MW megawatt MWh megawatt hour OD oven dry sv solid volume tonne metric tonne toe tonnes of oil equivalent tpa, tpy tonnes per annum, per year Acronyms EELPA Ethiopia Electric Light and Power Authority ERESA Eritrea Region Electric Supply Authority ENEC Ethiopian National Energy Committee EPC Ethiopian Petroleum Corporation ERR Economic Rate of Return FAWCDA Forestry and Wildlife Community Development Authority FCMC Fuelwood and Charcoal Marketing Corporation FRR Financial Rate of Return MME Ministry of Mines and Energy MOA Ministry of Agriculture PA Peasant Association SWCD Soil and Water Conservation Department WFP World Food Program This report is based on the findings of an energy assessment mission to Ethiopia in May-June, 1983. The mission assignments were H. Wackman, Mission Leader; K. Newcombe, Deputy Mission Leader; J. Besant-Jones, power system planning; C. Killoran, power engineering; A. Oduolowu, petroleum exploration and supply; T. Nayar, refinery engineering; J. Boroumand, energy balances and projections; T. Wood (cons), stove efficiency ana- lyses; F. Werner (cons), forestry planning; P. Duiker (ILO cons), manpower planning; T. Bierschenk (ILO cons), manpower planning; B. Robinson (cons), energy conservation engineering; E. Peries, Administrative Assistance. Ken Newcombe was the principal author of the report and Linda Sullivan was the principal typist. The contribution of the ILO to evaluation of man- power training and development issues is gratefully acknowledged. CURRENCYAND FUEL EQUIVALENTS Currency US$1.00 = B2.07 1B = US$0.48 CONVERSION FACTORS 1 MJ = 948 Btu = 239 kcal = 0.278 kWh 1 kWh = 3.6 MJ 1 ft3 natural gas = 1,000 Btu = 1.055 MJ l MMCF natural gas = 1 billion Btu = 24.7 toe Major Fuels 1/ toe 2/ M3 MJ/liter per metric tonne per metric tonne Petroleum Products Aviation Gasoline 33.1 1.11 1.43 Gasoline 34.3 1.10 1.37 Kerosene/Jet Fuel 36.7 1.10 1.28 Diesel 37.8 1.07 1.20 Fuel Oil 40.1 1.01 1.08 L. P. Gas 25.4 1.04 1.77 Woodfuels MJ! kg Fuelwood (air dried) 14.3 0.335 1.50 3/ Charcoal 29.0 0.679 Fuelwood (oven dry) 20.0 0.468 Basic Density of Wood 3 (unless otherwise stated) 500 kg/m Electricity kWh per TOE Thermal-equivalent (supply) 3,206 (at 27% efficiency) 1/ Conversion factors are approximations only. 2! One tonne of oil equivalent (toe) = 10.2 million kcal = 42.74 thousand megajoules 3/ Solid Volume (SV). Table of Contents Page MAIN FINDINGS AND RECOMMENDATIONS....................... i-xvii I. ENERGY AND THE ECONOMY OF ETHIOPIA ...................... 1 The Pattern of Energy Consumption ..................... 3 Future Energy Demand.................................. 7 II. HOUSEHOLD ENERGY ........................................ 10 Introduction.......................................... 10 Preview of the Analysis and Main Findings............. 17 Short-term Supply Options, 1983-92.................... 19 Short-term Demand Options, 1983-92.................... 24 Short-term Strategies ................................. 28 Summary and Conclusions on Options for the Southern Region ..................................... 29 Potential Impact of Short Term Measures ............... 33 Medium- to Long-term Strategies (1992-2012)........... 34 - Peri-urban plantations ............................ 34 - Existing Addis Ababa Plantations .................. 36 - New Plantations Design and Management ............. 36 - The Need for Peri-Urban Forestry .................. 36 - Achievable Peri-urban Plantation Program .......... 37 Costs of Achievable Forestry Program .................. 40 Economics of Rural Forestry........................... 42 Implementation of the Achievable Forestry Program..... 44 Consequences of Failure to Act on Rural Afforestation ................................. 45 III. ELECTRICITY .. 47 Institutional Arrangements . 47 The Power System .. 47 Features of Present Demand . 51 Electricity Demand Forecasts . 54 Mission's Demand Forecast .. 59 Medium-term Supply Options .. 60 Demand Management Options .. 62 Long-term Supply Options .. 63 Export Options .. 64 Natural Gas .. 66 Future Supply and Demand Management Options for ERESA . 68 Financing Power Sector Investment . 71 IV. PETROLEUM ............................................... 74 Pattern of Supply ..................................... 74 Alternative Supply Options ............................ 75 Product Transportation ................................ 77 Petroleum Exploration and Production Prospects........ 79 Production of Ogoden Gas ............................ 80 Petroleum Conservation and Substitution............... 81 Page V. OTHER ENERGY SOURCES ........................... 86 Crop Residues.86 State Farm Crop Residue Resources.86 Coffee Residues ..................................... 90 Bagasse.91 The Market for Crop Residues.94 Ethanol .94 Solar Water Heating .95 Other Energy Forms .96 Coal-Lignite .96 Geothermal .96 Biomass Gas Sources.97 VI. ENERGY PRICIN .98 Woodfuels.98 Petroleum Pricing ....................................... 100 Electricity Pricing ..................................... 103 Tariffs ............................................... 103 Economic Costs................... 103 Financial Requirements ........................ 105 Implementation Strategy ........................ 106 Summary ........................ 108 VII. INVESTMENT, MANPOWER, AND INSTITUTIONAL REQUIREMENTS.... Ill Energy Sector Investment.............................. 111 History and Plans .. Il 1.................. Future Investment................ 112 Manpower Issues ................ 115 Institutional Arrangements for Energy Planning and
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