Unlocking Somaliland’s Energy Potential: Opportunities in Renewable Energy Investment

Unlocking Somaliland’s Energy Potential: Opportunities in Renewable Energy Investment

By Eng. Sharmaarke Mustafe Ibrahim, Deputy Director of Energy, Ministry of Energy and Minerals, Republic of Somaliland.

Introduction

Somaliland stands at a pivotal moment in its development journey. With a growing economy, increasing energy demand, and abundant renewable energy resources, the country is uniquely positioned to transition toward a sustainable, reliable, and affordable energy system. This article highlights the current status of Somaliland’s energy sector, its vast renewable energy potential, ongoing reforms, and the investment opportunities available for local and international partners.

Somaliland at a Glance

The Republic of Somaliland is strategically located in the Horn of Africa, bordering the Gulf of Aden and lying close to the Bab al-Mandeb Strait, one of the world’s most critical maritime trade routes. Covering an area of approximately 176,120 square kilometers and boasting an 856-kilometer coastline, Somaliland’s geography provides not only strategic trade advantages but also strong potential for renewable energy development, particularly solar and wind.

With an estimated population of around five million people, the demand for electricity is steadily increasing, driven by urbanization, industrial growth, and improved social services.

Energy Sector Background

Following the collapse of central government institutions in 1991, electricity services in Somaliland emerged through private initiative. Individuals and entrepreneurs installed small diesel generators to meet their own needs, which gradually expanded into community mini-grids. Over time, these fragmented systems evolved into larger metro-grids through consolidation.

Today, Somaliland’s electricity sector is fully privatized, with Electricity Service Providers (ESPs) generating and distributing power across urban centers. While this model ensured service continuity in the absence of public utilities, it also resulted in high electricity tariffs and heavy reliance on imported diesel fuel.

Current Energy Sector Status

Somaliland’s total electricity demand is estimated at approximately 150 MW. About 80% of this demand is met through diesel generation, while renewable energy—primarily solar—accounts for around 20%. Electricity access stands at roughly 50.3% of the population, with significant disparities between urban and rural areas.

Despite these challenges, the Government of Somaliland is firmly committed to transforming the energy sector by promoting renewable energy, improving efficiency, and expanding access nationwide.

Renewable Energy Potential

Somaliland is endowed with some of the best renewable energy resources in the region:

• Solar Energy: High solar irradiation levels averaging 5.5 – 6.0 kWh/m²/day make Somaliland ideal for photovoltaic (PV) development at both utility and distributed scales.
• Wind Energy: Average wind speeds of 7– 9 m/s, particularly in coastal and elevated inland areas, offer strong potential for wind power projects.
• Hybrid Mini-Grids: Decentralized hybrid systems combining solar, storage, and backup generation present a viable solution for rural and underserved communities.
• Geothermal Energy: Preliminary assessments in the Sahil region, including the Gaha site, indicate surface temperatures of up to 60°C, suggesting promising geothermal prospects that warrant further exploration.

Policy, Legal, and Regulatory Framework

The Government has undertaken significant reforms to create an enabling environment for energy sector development. Key instruments include:

• National Development Plan III (2021–2026)
• Electrical Energy Act (Law No. 81/2018) and its ongoing amendments
• National Energy Policy (at finalization stage)
• Mini-grid policies and regulations
• Power Sector Master Plan
• Electricity Supply Industry (ESI
• 10-Year Electricity Sector Strategy (Ongoing)

These frameworks aim to enhance transparency, attract private investment, and guide long-term sector planning.

Priority Energy Projects

Several flagship initiatives are currently shaping Somaliland’s energy future:

• Somaliland Electricity Sector Recovery Project (SESRP): A USD 50 million World Bank–funded program focused on sector reforms, infrastructure improvement, and increased renewable integration.
• Ethiopia–Somaliland Power Interconnection Project (Pipeline Project): Implemented under the Eastern Africa Power Pool, this project will connect Somaliland to regional power markets via Wajaale, Hargeisa, and Berbera, improving supply reliability and reducing generation costs.

Investment Opportunities

Somaliland offers diverse and compelling opportunities for investors:

• Utility-scale solar and wind projects to displace expensive diesel generation
• Hybrid mini-grids and off-grid solutions for rural electrification
• Battery energy storage and smart grid technologies to enhance system stability
• Technical services, capacity building, and energy efficiency solutions

Why Invest in Somaliland?

• A largely untapped electricity market with strong demand growth
• Abundant and high-quality renewable energy resources
• Supportive government policies, including tax incentives for renewable energy investments
• Strategic location as a gateway to the Horn of Africa and regional markets
• Growing support from international development partners

Key Challenges

While opportunities are significant, challenges remain, including high fuel import costs, limited access to financing, infrastructure gaps, skills shortages, and the broader issue of limited international recognition. Addressing these challenges is a priority for the Government and its partners.

Conclusion and Call to Action

Somaliland is poised for a clean energy transition. With strong renewable resources, ongoing policy reforms, and committed leadership, the country offers a unique opportunity for investors and development partners to contribute to sustainable growth.

The Ministry of Energy and Minerals invites international and local partners to collaborate in expanding energy access, reducing electricity costs, and ensuring long-term energy security for Somaliland. Together, we can power the future of Somaliland.