Ethiopia Secures $2m for Renewable Energy Mini-Grids

Ethiopia is set to receive a $2 million reimbursable grant from the African Development Bank Group's Sustainable Energy Fund for Africa (SEFA) to develop two renewable energy mini-grids designed to expand rural electricity access while supporting agricultural production.

The financing, approved on 17 July, will support the Lelicho and Murche mini-grid projects under the Distributed Renewable Energy and Agriculture Modalities (DREAM) programme. The projects are being developed by RVE.SOL ETH Energy Generation Solutions PLC and will receive financing covering up to half of their capital expenditure.

The funding is part of an $8 million programme financing package for DREAM approved by the AfDB in May 2024, with the initiative developed in partnership with the Ethiopian government, the Global Energy Alliance for People and Planet (GEAPP) and other stakeholders.

The project is significant because it links rural electrification directly to agricultural development rather than treating electricity access as a standalone infrastructure goal. By combining renewable power with irrigation and other productive activities, the model aims to create reliable demand for electricity while helping rural communities increase agricultural output and incomes.

The approach could also improve the commercial viability of mini-grids in underserved areas. Mini-grids are small-scale electricity networks that generate and distribute power locally, often using renewable sources such as solar, and can provide electricity to communities that are not adequately served by the national grid.

Under DREAM, the projects will use an "ABC" model built around anchor loads, business demand and community connections. The approach is intended to combine predictable electricity consumption from major users with demand from businesses and households, creating a stronger revenue base for private-sector investment.

The two mini-grids are expected to demonstrate whether this integrated model can attract private capital into rural energy markets where conventional electricity projects may struggle to achieve sufficient returns.

Energy and agriculture drive rural development

Ethiopia's Minister of Water and Energy, Habtamu Itefa Geleta, said the programme recognised the close relationship between access to water, energy and food.

"Through DREAM, Ethiopia is pioneering an integrated approach that combines renewable energy access with irrigation and agricultural productivity," he said.

The African Development Bank's Director for Renewable Energy and Energy Efficiency, Daniel Schroth, said the initiative showed how concessional funding and partnerships could help unlock private investment in underserved markets.

The programme, he added, could provide a model for linking electricity access with employment, livelihoods and climate resilience.

GEAPP Vice President for Africa, Carol Koech, also described the initiative as an integrated approach to rural development, arguing that renewable energy could have a greater economic impact when combined with irrigation, market access and financing.

The AfDB's support comes as African countries continue to face the challenge of expanding electricity access while attracting enough private investment to finance rural infrastructure.

Ethiopia's DREAM programme seeks to address both challenges by creating productive demand for renewable electricity, potentially making mini-grid projects more financially sustainable and easier to replicate in other rural markets.

If the Lelicho and Murche projects demonstrate commercial viability, the model could offer a pathway for expanding decentralised renewable energy in Ethiopia and potentially across other African countries where electricity access, agricultural productivity and climate resilience remain closely linked.