The Gibe III dam, which reaches 243 metres in height, is the third-largest dam in Africa and the biggest in a series built along the Omo River.
When it comes fully online, the Gibe III is expected to produce 1,870 megawatts of power, enough to sell energy abroad including to neighbouring Kenya.
But environmentalists and rights groups warn the project will dramatically decrease water levels downstream all the way to Kenya's Lake Turkana, which derives 80 per cent of its resources from the river.
UNESCO has previously condemned the project and Human Rights Watch has accused the Ethiopian government of pushing people from the Omo Valley to free up land for state sugar cane plantations.
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Gibe III, located about 350 kilometres southwest of Addis Ababa, took nine years to build and cost 1.5 billion euros (USD 1.6 billion), with 60 per cent of financing coming from the Chinese export credit agency China Exim Bank.
With no natural gas or oil reserves of its own, Ethiopia is banking on renewable energy to help foster energy independence and economic growth.
Its Grand Renaissance Dam on the Blue Nile, which is slated to be Africa's largest-ever dam, is expected to produce 6,000 megawatts -- tantamount to six nuclear reactors -- when it is completed in 2017.
The Blue and the White Nile rivers converge in Khartoum and from there run north into Egypt as the Nile.