BY ABEBE WOLDE GIORGIS
Ethiopia is one of the energy starved countries in the world which is the major indicator of the nation’s underdevelopment. To change the economic landscape of the country from agriculture which is the main stay of the economy despite rain fed and subsistence yet. Hence, to make industry play the leading role in the economy, exploring and exploiting the water resource to generate hydro power is a key factor.
Recently, the Ethiopian Economic Association conducted its 18th international annual conference. On the occasion, Dr. Tewodros Negash, an economist and private consultant, presented a study paper on the economic value of GERD to the Nile riparian countries after its completion.
As to him, Ethiopia is endowed with abundant water resources and enormous hydropower potential. Its theoretical hydropower capacity places it second next to only the Democratic Republic of Congo in Africa and its technically and economically viable potential.
However, only a tiny fraction of this potential has been utilized so far. Though the country has recently raised its hydroelectricity generation capacity to 35 percent access to energy remains severely constrained with 65 percent of the population (60 million people) lacking access to electricity.
Ethiopia is endowed with a huge potential of renewable energy resources, including 45,000 MW of hydropower, 5.5 kW/m2/day of solar power, 10,000 MW of geothermal power, and wind power estimated to be 10,000 MW. Despite this potential and increased energy generation capacity, Ethiopia still has the second largest energy access deficit in Sub-Saharan Africa after Nigeria and the third in the world, he explained.
As to Tewodros, the completion of the Grand Ethiopia Renaissance Dam stimulates the economy as a result of generating power. The energy constraint facing the country is exacerbated by increasing demand driven by the rapid economic growth. Over the past decade, this was on average 10.7 percent per year and in the next decade the economy is projected to grow on the average at the rate of 10.2 percent annually due to the expansion of the most energy – intensive manufacturing sector which is projected to grow by 20.6 percent annually.
Sustaining the economic growth and meeting the growing demand for electricity requires further development of the country’s energy sector. The GERD constitutes the centerpiece of the country’s plan to boost its hydroelectric generation capacity. The GERD, being built on the Nile River has a design capacity to generate over 6,000 MW annually.
Tewodros further said that, the dam which is under construction is the most important source of water supply to downstream countries Sudan and Egypt. The GERD project has therefore been a source of concern for these downstream countries. Ethiopia argues that the GERD will offer several benefits to downstream countries, including hydropower supply at a comparably cheaper price, flood control, water saving through reduced evaporation loss from the reservoirs of downstream dams and trapping silt.
In order to create trust and consensus on sharing the dam’s benefits, the Eastern Nile countries agreed on the establishment of an International Panel of Experts, tasked with assessing the impact of the dam on downstream countries. The experts report indicates, among others that, the dam could potentially offer significant benefits to all the three Eastern Nile riparian countries.
The study results reveal that the GERD operation stimulates real GDP in the Eastern Nile basin. The basin-wide gain in real GDP due to the dam operation is 8.07 billion USD. Ethiopia earns 6.79 billon USD of the total basin-wide gain in real GDP, while Sudan and Egypt earn 1.11 billion USD and 0.17 billion USD gain in real GDP, respectively. Thus, all the Eastern Nile countries are expected to benefit from GERD operation.
Yet, the distribution of the benefits is highly skewed with Ethiopian amassing 84 percent of the GDP gain followed remotely by Sudan that gains 14 percent of the benefit. Egypt earns a mere 2 percent of the basin – wide gain in GDP. This reveals that the GERD involves no potential economic costs on both Egypt and Sudan. Thus, the net economy-wide effect is positive for all countries including Egypt, reflecting a win-win outcome. This underscores the fact that the benefits of the GERD should be seen in the wide spectrum. Further negotiations are imperative to resolve the disagreements of the Eastern Nile countries over the filling strategy of the GERD and avoid potential conflict between the countries. For future negotiations to succeed, the countries need to show interest for the forthcoming 10-year perspective plan of the economic significance of the GERD.
The economic impacts of dams have been assessed using partial and general equilibrium modeling approaches. Several studies analyzed the economic effects of infrastructure development in the Blue Nile River in Ethiopia using partial equilibrium models. However, Computable General Equilibrium models are best-suited to analyze the direct as well as indirect impacts of dams, Tewodros said.
Adding, he said that inter-linkages between economic sectors to analyze economy-wide effects that could occur as a consequence of policy interventions such as big dams.
To analyze the transboundary economic significance of the GERD operation, it is vital to assess the economic cost of delaying the operation of the dam and extending the filling period of the dam. Delaying the filling of water in to the dam costs Ethiopia billions of Birr annually which in turn delays the benefit the lower riparian countries need to access. Hence, the demand from Egypt and Sudan for the delay of filling the water in the reservoir is unacceptable, unscientific and not beneficial.
The GERD will boost Ethiopia’s energy generation capacity substantially which brings significant increase in the country’s hydropower production by 142.7 percent. The construction of the GERD will also increase Ethiopia’s capital stock by about 6.3 percent. Sudan is expected to benefit from the GERD operation in many respects. The dam is expected to trap much of the silt from the Blue Nile River that would otherwise fill up Sudan’s dams and will increase the existing power generated at Rosaries, Sennar and Merowe hydropower plants by about 35.5 percent from 8.5 percent per year.
The Ethiopian Herald August 7/2021
