Ethiopia’s energy sector faces critical challenges to meeting steadily increasing energy demand given limited infrastructure, heavy reliance on hydroelectric power and underdevelopment of alternative energy resources. The purpose of this paper was to identify optimal least cost investment decisions for integrated energy source diversification. The authors seek to contribute to the relevant literature by paying particular attention to the role of public policy for promoting renewable energy investment and to better understand future energy security implications of various sources of uncertainty.
The authors created a dynamic linear programming model using General Algebraic Modelling System software to explore the national energy security implications of uncertainties associated with increasing technological advances and efficiency, and climate change scenarios.
To cope with the impacts of drought expected from future climate change on hydroelectric power production, Ethiopia would need to invest in the development of alternative energy resources. Such investment would not only enhance the sustainability and reliability of energy production but also increase costs. Greater rates of technological and efficiency innovations, however, were found to improve electricity diversification and reduce production costs and shadow prices or resource scarcity, and are thus key for enhancing energy security and reducing the risks posed by drought.
The dynamic linear programming model by the authors represents a flexible sector modelling tool for exploring the sustainability and efficiency of energy resource development pathways and evaluating the effects of different sources of uncertainty on the energy sector.
