Ethiopia is called the water tower of Africa due to its combination of mountainous areas with a comparatively large share of water resources in Africa. Only a fraction of this potential has been harnessed so far, 1% at the beginning of the 21st century. In order to become the powerhouse of Africa, Ethiopia is actively exploiting its water resources by building dams, reservoirs, irrigation and diversion canals and hydropower stations. The benefits of the dams are not only limited to hydropower. Many dams are multi-purpose dams that are also designed to provide water for irrigation, drinking water and flood control. However, hydropower is expected to be the main benefit of the dams.
List of dams and reservoirs
List with an emphasis on construction-related informations.
Weighing the benefits and costs of large dams is far from easy. The following sections describe the impacts of the dams in more detail as objectively as possible, in order to provide a basis for such an assessment by the reader. They have to be compared with the planned use, see above.
Issues
The construction of large dams entails many tangible and intangible costs. The financial cost itself is already substantial. Resettlement adds to the social costs of the dams. Sedimentation from unchecked erosion in the upper watershed of rivers reduces the lifespan of reservoirs. Environmental costs are imposed on communities living downstream of the dams in Ethiopia. And neighboring countries, in particularly Egypt, see their historical water rights affected and threaten to take action against the dams. The almost exclusive reliance on hydropower makes electricity generation vulnerable to droughts, which may be exacerbated by climate change. Earthquakes can also endanger the dams and associated tunnels. There were a total of 16 recorded earthquakes of magnitude 6.5 and higher in Ethiopia's seismic active areas in the 20th century. Last but not least, the dams are built in an environment of poor governance: Most contracts have been awarded without competitive bidding, raising the suspicion of corruption. The above concerns have hampered access to financing from international financial institutions, slowing down the dam building program.
Financial costs
The financial costs of large dams in Ethiopia that have been completed after 2009 and were scheduled to be completed until 2014 is estimated at about US$11 billion, or about one third of Ethiopia's annual GDP. This does not include the cost to build transmission lines and to expand the distribution grid.
Given very low electricity tariffs in Ethiopia, the dams are not likely to generate a large financial rate of return, except if generation is subsidized by the government which itself is cash-strapped. Since many dams will be financed through loans, the heavy investment program – to the extent it is not being financed directly by the government outside the balance sheet of the national power utility EEPCo – could jeopardize the financial health of EEPCo. If the utility should become bankrupt, loan guarantees from the Ethiopian government would be called, thus imposing a potentially high financial cost on the government in addition to the investment subsidies from the government for the construction of the dams. Furthermore, the Central Bank of Ethiopia has issued bonds to finance the construction of the Grand Ethiopian Renaissance Dam, the largest of all dams in Ethiopia. These subsidies have a high opportunity cost, since the scarce government funds are not available for other investments in education, health, agriculture or forestry.
Delays and technical challenges
Large dam projects are prone to delays. The dams built in Ethiopia are no exception to the rule and all have been delayed by at least one year. A complex geology has been one of the reasons for the delays, leading to landslides and tunnel collapses. The Gibe II dam has been affected by such problems even after its completion, when a tunnel collapsed and put the hydropower plant out of service for several months. The grand Ethiopian renaissance dam was delayed as well, because of upgrading the power from 5250 watt to 6000 watt, budget problems and dispute with government of Egypt.