The Ethiopian solar market is still at an early development stage with an estimated installed capacity of 5 MWp. Growth during the 1990s was under 5 % but has reached 15-20 % during the last few years, primarily driven by the telecom market that constitutes 70 % of installed capacity. Five or six companies supply 90 % of the market and some lack a specialist focus on solar PV.
The market potential is estimated at 52 MW, the majority within the solar home systems (SHS) market and continued expansion in telecom sector. SHS has the greatest annual growth rate of 20 % with few suppliers and driven by the extension of low-cost housing and real estate developments. In the longer term, the growing inverter charger backup market combined with a feed-in tariff law under revision could constitute a stepping stone to grid-connected PV. For the foreseeable future, larger and in particular grid connected PV systems will face stiff competition from smaller hydro power systems, including small and micro hydro power.
Donor support, the establishment of the Renewable Energy Fund (REF) and projects such as those backed by UNEP/GEF have brought opportunities for solar PV and micro-hydro, and should continue to be a driving force behind commercial demand for institutional and household PV systems as well as for solar hybrid PV and village mini-grids. The political environment already turned into positive: Since 14th December 2009 the Ministry of Finance and Economic Development (MoFED) lifted the import duty fees on PV modules and balance of system (BOS).