Financial and Economic Analysis of Small Hydropower in Ethiopia
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Date
2014-08
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Addis Ababa University
Abstract
Ethiopia has a vast amount of hydropower potential despite the fact that its people are not yet
benefited as required, especially those in the remote scattered rural villages. The people in
these areas have a great tendency of using traditional energy production methods, which
result in deforestation, environmental degradation, health problems, and so many other
unpleasant life styles. Small hydropower plants can solve the above mentioned problems. But
their installation has not come into reality as required. Even though they are installed at some
places, they stop functioning before their service period. There may be many reasons behind
the above problems. One of the problems which results in slow growth of small hydropower
construction has been discussed in this study, which is the unclear financial and economic
analysis that results in financial and economic infeasibility. Before the installation of any
Engineering structure, it is crucial to analyze the financial and economic analysis of the
installed project. Financial analysis is usually undertaken in order to evaluate the cost and
benefit brought about by the project to a person or business, while the economic analysis is
undertaken in order to assess the overall impact of the project on the economic welfare of the
residents of a specific region. This paper discusses the financial and economic status of small
hydro powers in Ethiopia. Four small hydro power projects which are found in different
regions of Ethiopia have been analyzed in order to assess their financial feasibility and
economic efficiency. The analyses have been carried out first at existing conditions which
showed infeasibility. Then different possible ways and new approaches have been searched
and discussed in order to check whether they bring financial and economic feasibility. By the
different alternative approaches the projects have got appreciable results in financial viability
and economic efficiency. Therefore, the approaches can be applied to both the case study
sites and other small hydro power sites.
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Ethiopia has a vast amount of hydropower