Can Ethiopia Afford the Grand Renaissance Dam?

Lori Pottinger

Grand Ethiopia Renaissance Dam
Grand Ethiopia Renaissance Dam

A new report by an Ethiopian with experience in energy planning reveals that the new Grand Ethiopian Renaissance Dam (also known as the Grand Millennium Dam), now planned for the Nile, could be an overpriced, underperforming boondoggle (if it ever gets built). The report notes that the US$4.7 billion dam will be very inefficient in terms of producing electricity, and therefore a poor investment for a country with high poverty, low access to electricity and recurring hydropower-killing droughts.

The dam’s “load factor” will be just 33%. That’s low compared to the global output for hydropower dams (which average around 50%). The author of the report, Mehari Beyene, notes, “A much lower height and lower capacity dam would be more efficient, more cost-effective, and would come with fewer social and environmental impacts.”

Because international donors have shied away from supporting this project,

which is already worsening tensions with Egypt, the government is exhorting Ethiopian citizens to donate a month’s salary to pay for this dam, which would be one of Africa’s costliest. Beyene states, “Ethiopians are being pushed and politicized to buy dam bonds that are supposed to cover the project's construction costs … As an Ethiopian, I say the least the government can do is provide us with the required information and answer all open questions before asking us to shoulder such a massive investment.” 

And massive it is: the dam's cost is almost as high as Ethiopia’s entire national budget. As The Economist writes:

How will Ethiopia pay? … Some engineers think the cost will exceed $4.8 billion. Ethiopians are being urged to subscribe to a bond issue on patriotic grounds. But it is unlikely to generate more than a fraction of the required amount. Neither the World Bank nor private investors are willing to put up the cash, since Ethiopia has failed to create partnerships with power companies in neighbouring countries to which it could sell electricity. The Nile’s geology may be favourable for dam building, but the flow of money is not.

Meanwhile, Ethiopia is in the midst of a difficult and prolonged drought. The Ethiopian government continues to build dam after dam, with little thought as to how climate change (and recurring drought) will affect these projects' bottom lines. With each new large dam, the government promises an end to the ongoing national electricity crisis. It's not proving to be a very effective strategy.

Like other mega-dams the world over, evidence is beginning to mount that the Grand Ethiopian Renaissance Dam will be more trouble than it's worth.