Energy sector reform in Eritrea: initiatives and implications

The Government of Eritrea gave priority status to the energy sector immediately after the country's independence in May 1991, as manifested by the rapid improvement in electricity and oil supplies. Electricity generation capacity has increased from a total of 30 MW in 1991 to over 130 MW at present. The lengths of transmission and distribution lines have similarly increased from 150 km to 400 km and from 800 to 1300 km respectively. However, as in most Sub-Saharan Africa, this public utility is characterised by inefficient managerial, technical and financial performances, an inability to mobilize the funds needed for expansion, low repair and maintenance capacity, inappropriate tariff rates, and inadequate revenue collection mechanisms. This has led the government to take appropriate reform measures in recent years, including the restructuring of the Eritrea Electric Corporation (EEC) to operate on commercial principles, setting tariffs based on real costs and reasonable profits, effective collection of revenues, the minimization of wastage and loss in the delivery of energy services, facilitating the private sector participation, and ring-fencing the interests of the poor by setting up a Rural Electrification Fund. A Regulatory body has been established to enforce these reform measures. Recognising the role of modern energy in poverty reduction and achieving the Millennium Development Goals (MDGs), the Government with the support of its development partners is expanding energy services to rural areas in an innovative manner. The Government's commitment to diversify energy sources is exemplified by its agreement with the Global Environment Facility (GEF) to share the costs of an on-going pilot wind energy project. It has also established an Energy Research and Training Centre to promote the application of renewable energies and improved biomass stoves throughout Eritrea.