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    The Drive towards Development of Hydropower Dominated Energy Source and Its Socio-Economic and Environmental Implications in Ethiopia

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    Ethiopia is currently driving towards development of hydropower dominated energy source in order to meet the energy demand of its economic sectors. However, the domination of this modern source of energy is expected to be realized if it can substitute the currently dominant modern source of energy, i.e. imported fossil fuel. Besides, hydropower generation is said to have adverse socio-economic and environmental impacts. In cognizant of this, this term paper was prepared: to explore the pros and cons of hydropower generation and to investigate substitutability of this source of energy with fossil fuel. The paper was prepared using extensive review of literatures as well as quantitative regression analysis using time series data having 39 years of observation (from 1971 – 2009). Result of the review of literatures reveals that multiple benefits can be derived from hydropower generation; which may also accompany with various socio-economic and environmental risks. On the other hand, the quantitative regression analysis shows that, even if there is negative association between hydropower generation and the proportion of energy derived from imported fossil fuel, increase in hydropower generation overtime could not significantly reduce the proportion of energy derived from the fossil fuel, yet, due to the country’s huge demand for energy. Hence, it is recommended that huge expansion of hydropower generation is required for hydropower to be the dominant energy source, provided that hydropower can fit to the energy demand of most of the sectors. Moreover, sustainability of development of the economy relying on hydropower dominated energy source is expected to be realized only if the possible risks and costs are appropriately managed. Keywords: Hydropower generation, benefits, risks, fossil fuel, substitutabilit