WATER POLITICS

The promises are immense. Last September, after 14 years of construction, Ethiopia inaugurated its Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile.

Standing 175m tall and spanning two kilometres in width, Africa’s largest hydroelectric project – costing some $4bn – has doubled the country’s capacity to 5,150MW.

Surpassing the total power output of Kenya (3,200MW) on its own, the structure stands as a “beacon for Africa’s future”, according to the Ethiopian prime minister, Abiy Ahmed.

This energy is coveted by Ethiopia’s neighbours.

William Ruto, the Kenyan president, whose country already imports Ethiopian electricity, has expressed readiness to sign a new deal to “absorb a portion of the reserve power” from the new dam.

The South Sudanese president, Salva Kiir, present at the inauguration, indicated his wish to sign an agreement with Addis Ababa for the purchase of energy.

Even Sudan, despite its opposition to the project, imported several gigawatt-hours between 2024 and 2025.

“Ethiopia wants to rely on an abundant electricity supply to make itself indispensable to its neighbours, and thus increase its bargaining power,” says Tsegay Tekleselassie, an economist at Wellesley College in the US.

The arrival of GERD particularly reinforces the dependence of Kenya and Djibouti on Ethiopian electricity.

A new diplomatic weight

Electricity imports for the former – 83% of which are Ethiopian – surged by more than a quarter year-on-year in June 2025.

Addis Ababa has been engaged with Nairobi since late 2022 in a 25-year Power Purchase Agreement (PPA) at a notably competitive rate of $0.065 per kWh.

Meanwhile, Djibouti, where more than half of the consumption is sourced from Ethiopia, also launched the construction of a second transmission line connecting it to its neighbour in early November.

Becoming the region’s primary energy provider increases Ethiopia’s diplomatic clout.

“The current government’s ambitions to secure access to the Red Sea are well known. The electricity generated by its dam may allow it to secure Djibouti’s silence regarding its ambitions in Eritrea, for example,” explains Medhane Tadesse, a visiting professor at King’s College London.

Addis Ababa is also counting on energy exports to replenish its coffers.

Its external debt was branded “unsustainable” by the IMF and the World Bank in September, despite a restructuring carried out in March.

The goal is also to wipe out a portion of the debt held by its state-owned utility, Ethiopian Electric Power (EEP), estimated at nearly 290m birr ($5.3m) in mid-2023.

The electricity generated by the new infrastructure benefits mostly SMEs and households

In parallel, the nation aims to extend power access to a greater share of its population.

The dam, now ramping up operations, already provided a third of the country’s electrical output between 2024 and 2025, according to the EEP.

The minister for water and energy, Habtamu Ifeta, is targeting an electricity access rate of 90% of the population by 2030, compared with roughly half today.

Regional frictions

However, there is still some way to go to fulfil all these pledges. Ethiopia is far from flooding the region with electricity.

Despite bringing more than half of the GERD’s turbines online over the past three years, exports painfully reached just 7% of production between 2024 and 2025.

While connections already exist with Kenya, Djibouti and Sudan, those to South Sudan remain to be built.

“It is still early to view the GERD as a ‘game changer’,” says Tsegay.

“The prime minister mentioned economic returns of $1bn a year at the inauguration: the dam will certainly generate additional revenue, but that figure seems exaggerated,” adds Leïla Oulkebous, a doctor of geography at Bordeaux Montaigne University.

That said, the GERD has already shifted the balance of power on Africa’s greatest river.

To turn its turbines, the infrastructure holds a reservoir with a capacity of 74bn cubic metres – almost equivalent to the Nile’s annual flow.

The hydroelectric plant largely surpasses the power of Egypt’s Aswan High Dam (2,100MW), hitherto the master of the river.

“Egypt is no longer the sole power controlling the Nile: it is now in a co-hegemony with Ethiopia,” adds Oulkebous.

While Cairo – whose economy depends on the Nile for 96% of its water needs – had threatened to bomb the infrastructure during its construction, and Sudan failed to attend the inauguration, the ramping up of the GERD raises the risk of heightened tensions between the river’s two giants.

The prime minister mentioned economic returns of $1bn a year at the inauguration: the dam will certainly generate additional revenue, but that figure seems exaggerated

In Sudan, where lands are fed by Nile waters now less rich in sediment due to the dam, agricultural yields are diminishing, forcing farmers to resort heavily to fertilisers and pesticides.

“It is good news for the agro-chemical industry, but for the local traditional peasantry, it is a genuine upheaval,” says Oulkebous.

Renewables to the rescue

Domestically, the obstacles to be overcome are equally numerous.

The mammoth dam has sprung up in the midst of an undersized electrical grid, and the GERD alone will not suffice to meet needs.

A project costing $3.3bn and two-thirds complete since construction began in 2016.

The Koysha dam on the Omo River is set to become the country’s second largest, with a capacity of 2,200MW.

For the time being, around 40% of Ethiopian towns and villages are still not connected, and a quarter of production is lost during transmission – four times the global average.

In early August, the World Bank approved a programme worth $400m to connect six million people to the national grid.

The final Achilles heel: Ethiopian electricity comes almost exclusively from hydroelectric plants.

In a dry year, these infrastructures receive 20% to 25% less water than normal, according to the EEP.

To mitigate the risk of strain on its grid, Ethiopia is betting on solar and wind.

The Emirati firm AMEA Power signed a power purchase agreement in April 2024 to implement a 300MW wind farm project for a total investment of $620m.

The site is slated to become the largest in the Horn of Africa.

Simultaneously, the government launched a call for tenders in April to develop two new solar photovoltaic projects – GAD II and Weranso – with capacities of 125MW and 100MW, respectively.

Wind and solar currently account for less than 6% of the country’s installed electrical capacity.

The rise of cryptomining

“The GERD was financed almost exclusively by Ethiopians due to international pressure applied by Egypt [which opposed the dam’s construction].

“But that country does not seem to manifest opposition to new infrastructure: financing by foreign actors should therefore be much simpler,” says Tsegay.

Ethiopia wants to rely on an abundant electricity supply to make itself indispensable to its neighbours, and thus increase its bargaining power

As for the promise of making the GERD the engine of the country’s industrial rise, that remains to be realised.

“Since coming online, the dam has served primarily to fuel a rentier economy rather than create value,” says Medhane.

“The electricity generated by the new infrastructure benefits mostly SMEs and households,” says Tsegay, explaining that “the country’s large industrial firms, in sugar or textiles, for example, already have their own electrical substations”.

One activity that has undeniably profited from the GERD is cryptocurrency mining.

Legalised in 2022, and currently operated mainly by Chinese companies, it absorbed a quarter of Ethiopian electricity production between 2024 and 2025 alone.

Although the country suspended the issuance of new permits in August, the farms already installed continue their boom.