Ethiopia's decades-old energy policy is evolving rapidly, opening doors for private sector involvement in renewable energy and clean technology. Spearheaded by the Ministry of Water & Energy, the policy targets two vital goals of meeting the growing energy demand with renewables and unlocking investment and exports.

By diversifying energy sources like solar, wind, and geothermal, the Ministry's officials aspire to increase energy production by 30pc annually and meet the rising demand for clean power. They believe their newly designed policy aligns with the country's "Green Economy" strategy to reduce its carbon footprint. The draft policy also seeks to attract foreign investments by creating opportunities for hydrogen and ammonia exports and generating foreign currency.

"It goes in line with recent transport initiatives," said Mesfin Dabi, the Ministry's lead executive of electrification and energy information.

He called for the private sector to contribute to achieving the objectives outlined in the draft, particularly in expanding the infrastructure for electric vehicles, including charging stations and power sources.

Minister of Transport & Logistics, Alemu Sime (PhD), recently enforced a ban on imports of gas-powered automobiles for personal use. However, the policy has raised concerns about Ethiopia's current electricity infrastructure capacity to handle an increase in electric vehicles. Alemu's vision for green transport extends beyond electric cars, embracing a five-year strategic plan his Ministry designed with the support of the United Nations to promote non-motorised mobility in urban centres.

Alemu said in an interview released last week that he is keen to see a culture of walking, cycling, and the use of horse-drawn carriages within cities. According to him, the policy reduces vehicle dependence, improves air quality, and creates a more pedestrian-friendly urban environment.

Mesfin observed that progress proved to be slow. He sees a recent agreement between a Dubai-based company and officials of the Ministry of Finance as a positive step but pointed to the lack of an enabling policy as the primary stumbling bloc holding back multinational companies from investing. The recent success of Australian firm Fortescue Future Industries in extracting hydrogen from the Omo and Awash river basins demonstrated the country's potential.

"There is a lot of untapped potential," said Mesfin.

It has been five years since the Parliament ratified a bill to increase energy production through Public-Private Partnership (PPP) arrangements. While a few companies have embarked on large-scale projects since then, notable progress was marked in December when the United Arab Emirates-based company, AMEA Power, signed a deal with the Ministry of Finance to construct a 300MW wind farm, representing one of the most significant private sector entries into the energy landscape.

Energy experts have long called for a revision of the policy, arguing the existing policy is struggling to meet growing demand and relies heavily on inefficient practices.

Yemaneberhan Kiros, founder of Yomener Energy Auditing & Engineering PLC, echoed these concerns. He observed that a rapid shift to electric vehicles would be incompatible with the current infrastructure limitations.

Research revealed that nearly 50pc of factory energy is wasted due to lax follow-up on past energy-saving initiatives. Yemaneberhan believes improving efficiency through regulatory overhauls can significantly reduce the strain on the power grid. Increasing tariffs to incentivise investment from large energy companies, implementing regulatory reforms to boost efficiency, and establishing legal frameworks to unlock Ethiopia's vast energy potential are some of the ideas experts urge the authorities to consider.

"Energy efficiency matches a new hydroelectric dam," Yemaneberhan told Fortune.

A recent policy change by the central bank, allowing foreign currency repatriation, offshore accounts, and profit convertibility in large-scale projects, has removed a bottleneck for foreign companies seeking to invest in the energy sector. Ethiopia boasts immense potential for renewable energy generation, with around 5,200MW of energy available, but limitations remain—existing infrastructure struggles to meet existing demand, particularly in rural areas.