Paper short abstract:

This paper examines two intersecting dynamics in Ethiopia’s electricity sector: the transition from the state’s dismissal of the private sector as ‘parasitic rent seekers’ to opening up to the private sector; and the attempt to diversify the energy mix to reduce hydropower dependence.

Paper long abstract:

This paper examines the political economy processes shaping two intersecting dynamics within Ethiopia’s electricity sector: the transition from the state’s dismissal of the private sector as ‘parasitic rent seekers’ to recent initiatives to open up space for private sector generation; and attempts to diversify the energy mix to reduce hydropower dependence. The paper focuses on the factors underpinning path dependence in the energy mix and the balance of public vs private provision, as well as processes leading to political rupture that enable such energy transitions. The analysis utilises a process tracing methodology to reconstruct the policymaking process, drawing on more than 100 key informant interviews with key politicians, government officials, consultants and donors. The paper finds that the main driver was the triggering of several IMF debt thresholds in 2015-16. Debt reclassification necessitated a turn to the private sector to continue expansion of generation capacity, while private sector involvement has necessitated a turn to renewables. The impact of debt reclassification has, though, been reinforced by donors pressing the government for long advocated reforms and the political transition within the ruling party from 2018. This transition removed many of the old guard who were ideologically resistant to private sector involvement, replacing them with a new cadre of advisors more amenable to a market-based strategy. Yet, this transition is far from complete, with many officials in the electricity sector, still committed to state investment in hydropower and sceptical of the benefits of private investment or renewable technology.