Rural electrification to unlock $4 billion in Ethiopia’s economy

A new report released by Rocky Mountain Institute states that linking agriculture and rural electrification in Ethiopia could help the country unlock up to $4 billion in its economy.

Linking the two sectors can help Ethiopia to address threats posed to its economy by food insecurity from locust infestations, water scarcity and cases of COVID-19.

The economic benefits will be experienced across six agricultural processing or small business sectors at the same time helping farmers to save money by switching away from expensive sources of energy such as diesel.

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The report Capturing the Productive Use Dividend: Valuing the Synergies between Rural Electrification and Smallholder Agriculture in Ethiopia has been compiled in partnership with the International Food Policy Research Institute (IFPRI); the Ethiopian Ministry of Water, Irrigation and Energy (MoWIE); and the Agricultural Transformation Agency (ATA).

“There is a huge opportunity for Ethiopia to capture an economic dividend and accelerate progress toward national development goals, capturing the benefits of electrification for rural smallholders,” said Francis Elisha, principal at Rocky Mountain Institute.

By deploying on and off grid mingrids, Ethiopia can help its utilities to generate new revenue streams and save money by defraying the costs of rural electrification and reducing the subsidy needs for minigrids.

The report outlines value streams for different actors in the productive use space:

  • Rural smallholders can use electricity to unlock or accelerate revenue streams from agricultural productivity and processing worth $4 billion by 2025.
  • Making the switch to electricity saves communities another $120 million in fuel costs, while unlocking an annual revenue stream of $22 million for the utility.
  • Providing the appliances for this market is a $380 million business opportunity for local manufacturers, importers and distributors.

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“In agriculture, electricity can unleash higher farm income and productivity by enabling irrigation, cold storage and post-harvest processing and handling. Thus, it is time for Ethiopia to invest in electrifying farms, in addition to lighting residences, through electric motor pumps and storage facilities with innovative financing mechanisms such as pay-as-you-use and pay-as-you-store options,” said Dawit Mekonnen, research fellow at the International Food Policy Research Institute (IFPRI).

The report is available here