AfDB Backs Ethiopia's Rural Mini-Grid Programme With $2 Million Grant

DREAM introduces a different approach to rural electrification by combining renewable energy mini-grids with agricultural activities that generate stable electricity demand.

The African Development Bank (AfDB) has approved a $2 million reimbursable grant to help develop two renewable energy mini-grids in Ethiopia, supporting a new approach that combines clean electricity with agricultural growth in rural communities.

The funding, provided through the Sustainable Energy Fund for Africa (SEFA), will support the Lelicho and Murche mini-grid projects, which are being developed by RVE.SOL ETH Energy Generation Solutions PLC. Approved by the Bank's Board of Directors on 17 July, the grant forms part of an $8 million financing package for the Distributed Renewable Energy and Agriculture Modalities (DREAM) programme, which received approval in May 2024.

The grant will cover up to 50 percent of the capital costs for the two mini-grid projects.

A new model links energy with farming

DREAM introduces a different approach to rural electrification by combining renewable energy mini-grids with agricultural activities that generate stable electricity demand. The programme was developed jointly by the Government of Ethiopia, the African Development Bank, the Global Energy Alliance for People and Planet (GEAPP) and other partners. Its ABC model focuses on Anchor loads, Business demand and Community connections, creating a stronger financial foundation for rural energy projects. By linking electricity supply with irrigation, farming and local businesses, the programme improves project viability while attracting greater private-sector investment.

The initiative also addresses the close relationship between water, energy and food production, helping communities improve agricultural productivity while expanding access to reliable electricity.

Partnership targets long-term rural growth

Ethiopia's Minister of Water and Energy, Habtamu Itefa Geleta, said the programme represents an integrated approach that combines renewable energy with irrigation and agriculture to support sustainable development. He said the partnership with the African Development Bank and other organisations will help turn the DREAM programme into a practical solution for rural communities.

African Development Bank Director for Renewable Energy and Energy Efficiency Daniel Schroth described the programme as an example of how concessional finance and innovative partnerships can encourage private investment in underserved markets. He said the model supports energy access while also creating jobs, strengthening livelihoods and improving climate resilience.

Model could expand across Africa

The Global Energy Alliance for People and Planet believes the programme could become a blueprint for rural development across the continent. GEAPP Vice President for Africa Carol Koech said combining renewable energy with irrigation, market access and financial support creates stronger economic opportunities for rural communities while making infrastructure projects more financially sustainable.

By demonstrating how energy access can drive agricultural production and local economic activity at the same time, the African Development Bank expects the DREAM programme to provide a scalable model that other African countries can adapt to expand clean energy access and strengthen rural economies.