Linking agriculture, rural electrification in Ethiopia could unlock $4 billion for national economy, RMI
Rocky Mountain Institute (RMI) launched a new report that shows how electricity can unlock billions of dollars in new value across six agricultural processing or small business opportunities in some of Ethiopia’s most important crops, while saving money for farmers who switch to electricity from expensive alternatives such as diesel.
In collaboration with the International Food Policy Research Institute (IFPRI), the Ethiopian Ministry of Water, Irrigation and Energy (MoWIE); and Agricultural Transformation Agency (ATA), RMI’s Capturing the Productive Use Dividend: Valuing the Synergies between Rural Electrification and Smallholder Agriculture in Ethiopia report outlines the synergies between rural electrification and agricultural productivity, processing and businesses, and the value that can flow from closely linking the two. By mapping key value chains and opportunities, this report demonstrates the economic case for a national program to promote the productive uses of electricity.
''There is a huge opportunity for Ethiopia to capture an economic dividend and accelerate progress toward national development goals, capturing the benefits of electrification for rural smallholders,'' said Francis Elisha, principal at Rocky Mountain Institute.
In the midst of current widespread global economic disruptions caused by COVID-19, compounded by the mounting threat of desert locust infestations, Ethiopia faces numerous threats to national food security including disrupted trade and import channels, food price spikes, water supply risks, and delayed or compromised harvest yields. Ongoing efforts to transform the agriculture sector in Ethiopia therefore continue to be critical.
RMI’s research explores the opportunity for mutually assured success among agricultural transformation and rural electrification efforts. These solutions can be deployed in rural areas on and off grid, thereby creating millions of dollars in new revenue for the utility, helping defray the costs of rural electrification and reducing the subsidy needs for minigrids.
The report outlines value streams for different actors in the productive use space:
(a) Rural smallholders can use electricity to unlock or accelerate revenue streams from agricultural productivity and processing worth $4 billion by 2025.
(b) Making the switch to electricity saves communities another $120 million in fuel costs, while unlocking an annual revenue stream of $22 million for the utility.
(c) Providing the appliances for this market is a $380 million business opportunity for local manufacturers, importers and distributors.
''In agriculture, electricity can unleash higher farm income and productivity by enabling irrigation, cold storage and post-harvest processing and handling. Thus, it is time for Ethiopia to invest in electrifying farms, in addition to lighting residences, through electric motor pumps and storage facilities with innovative financing mechanisms such as pay-as-you-use and pay-as-you-store options,'' said Dawit Mekonnen, research fellow at the International Food Policy Research Institute (IFPRI).
Working alongside electrification efforts, a national productive use program could offer huge benefits and position Ethiopia as a leader in the sector, setting a model that other countries will no doubt follow.