Djibouti is a small country located in the Horn of Africa. Djibouti occupies a total area of 23,200 km2 and a population of 956,985 in 2017. Djibouti is strategically located near some of the world's busiest shipping lanes, controlling access to the Red Sea and Indian Ocean. More than 70% of the population lives in urban areas, with nearly 60% in the capital, Djibouti City. French, Arabic and Somali are the official languages.

The economy is dominated by the service sector - transport, communications, commerce and tourism. These sectors contribute more than 80% of Djibouti’s gross domestic product (GDP), and employ about 60% of the active population. The primary sector (agriculture and fisheries) contributes to about 3%, while the industrial and manufacturing sector accounts for 17% of GDP. Unemployment in Djibouti is high at 60%, and poverty remains pervasive with nearly 42% of the population living below the absolute poverty line. Access to electricity in 2016 was 51.8%.

Djibouti has no indigenous sources of oil, natural gas, hydropower. Most of the installed capacity of 126 MW comes from thermal power facilities.The majority of imported oil and oil products comes from Saudi Arabia. There is limited potential for biomass for energy since the country is a semi-desert.

There is significant potential for solar energy exploitation as daily insolation levels range between 5.5 and 6.5 kWh/m2 in all areas of the country.  The government intends to use this to ensure economic development. Plans are also in place to use solar energy to power desalination plant to supply the city of Djibouti. It is estimated that about 40,000 m³/ day of salt water will be treated using a hybrid Concentrated Solar Power (CSP) and Reverse Osmosis (RO) plant.

Djibouti aims to make a power sector transition, moving from 100% fossil thermal in 2010 to 100% renewable electricity sources by 2020. This would be sourced mainly from geothermal, wind and solar, as well as interconnecting with the Ethiopian grid, which is based on hydropower. The largest renewable source in the country is that of geothermal energy, with an estimated potential of 100 MW.

The government is actively developing solar projects considering the solar potential of the country. The country’s first large-scale power plant is being developed with a capacity of 30 MW in the desert region of Grand Bar. The solar station is being developed by French energy company, Engie, which signed a memorandum of understanding with state-owned Électricité de Djibouti. The 30 MW solar plant is part of the first phase of a larger project to construct a 300 MW solar complex.