Governance of renewable energy procurement via private suppliers: The Ethiopian experience

This paper addresses the challenges of governing energy procurement from a mix of non-hydropower renewable energy sources supplied by independent producers. Building on political economy analysis and five case studies of independent producer projects from Ethiopia, it seeks to understand the root causes of the protracted delays and limited extent of procurement by independent producers. Unlike previous research, this paper found little resistance by the incumbent (in this case a heavily hydropower dependent state-owned enterprise) to transition to non-hydropower sources, nor to private sector supply. However, competing interests and tensions among key stakeholders over procurement processes prevailed. The key contestations lie in managing long term contracts, risk, uncertainty and in developing the institutional and human capacity to transition. Procurement via private suppliers will inevitably require a competent governance arrangement cognizant of the suitability of energy sector structure to transition. In the Ethiopian case, the bundling of power generation, transmission, and off-taker roles hampers competition. In the face of risk-averse multinational independent producers, the paper argues for a green industrial policy aimed at developing a vibrant domestic private renewables sector contributing to universal access to sustainable and affordable electricity.