Ethiopia experiences high system losses from its power grid. Given the challenges of electricity generation and distribution in Ethiopia, the government has encouraged measures to promote energy efficiency. One example is an initiative by the national power authority to distribute power saving bulbs. The Ethiopian Electric Power Corporation (EEPCO) successfully distributed 5 million compact fluorescent lights (CFLs) in Ethiopia in exchange for existing incandescent lamps. As a result, the peak demand in Ethiopia reduced by about 80MW. Energy efficiency is also critical in rural areas, where energy consumption has remained largely unchanged from traditional sources such as kerosene, wood and charcoal. Most energy efficiency efforts in the country have focused on transportation, cooking, and baking; a recent example is an investment by the Nordic Development Fund to install biomass cookstoves in community and commercial institutions.

The main barriers to energy efficiency in Ethiopia are (i) diminishing biomass supplies in rural areas, (ii) cost-effectiveness and scalability of solutions from urban to rural, and (iii) dissemination and standardization of modern energy efficiency practices and products. In line with the National Energy Policy (NEP) for Development and Harnessing Potential Energy Resources, future innovation - such as lighting, appliances (e.g. cook stoves), HVAC (heating, ventilation, air conditioning), energy efficient manufacturing, transmission and distribution, green IT, and building design - must enable Ethiopians to manage and conserve scarce renewable and non-renewable fuels. It must also ensure that the energy savings and benefits are channeled towards improving living conditions for the country’s poor. Most importantly, innovations in energy efficiency must serve to protect the environment for future generations.