Ethiopia hopes to produce 130 millions liters of ethanol to serve 5 percent of the country's energy needs and sell hydroelectric power to neighboring countries.
Alemayehu Tegenu, the minister of energy and mines, told VOA that in the face of the nation's fast-growing rate of energy consumption, alternative bio-fuel projects such as ethanol can curb the growing price of oil and save hard-earned foreign currency.
"Ethanol is a feasible product. First, we produce it at home from residual molasses, which is a by-product of sugar. We are also looking into plants that are drought resistant and can be used to produce bio-fuel."
However, critics say that alternative energy sources such as ethanol production have contributed to the rising global cost of food and pose a threat to food security in developing nations, especially those struggling with food security and recurring droughts.
Alemayehu said those who wrote Ethiopia's energy policy believe these projects need to go hand in hand with food production and can be executed without interfering with food productivity.
"We are using land that is not useful for either for farming or grazing. We have abundant idle land that can be used to plant drought-resistant plants like Jatropha. Our target is not using farmland."
New dams are part of the energy solution, Alemayehu says. Kenya's prime minister, Raila Odinga, recently said that his country is planning on importing hydroelectric power from its neighbor Ethiopia. Ethiopia ranks second behind the Democratic Republic of Congo with a potential of 45,000 megawatts of electric power.
Only a small fraction of the Ethiopia's hydroelectic power potential has been realized. For the past several months Ethiopia's capital suffered from two-day power rationing that plunged many businesses and households into darkness. Alemayehu was optimistic that in the midst of these shortages, Ethiopia is capable of exporting electric power.
"We have five hydroelectric projects undergoing construction. To name the projects, we have Tekeze in the north with expected 300-megawatt production potential, Tana Beles with 460 megawatts, Amartineshe with 100 megawatts and Gilgel Ghibe II with 400 megawatts. The biggest of them all, Gilgel Ghibe III, with a production potential of 1870 megawatts, will more than provide the energy needs of Ethiopia. That means we can export power to our neighbors."
