Ethiopia has an energy generating capacity of up to 60GW. This energy can be generated from different Renewable Energy Sources (RES). The country is still experiencing an energy crisis as a result of insufficient existing power systems in terms of reliability and flexibility, high investment costs, financial constraints, population dispersion in rural areas, high electricity demand in urban areas, government energy production and distribution policies, and so on. The existing supply system in the country has the following components: Hydropower (87%), Wind (7%), and Biomass (6%). In the future, based on current trends, the cost of RES components may further decrease and the efficiency would improve due to new emerging technologies in power electronics. The main challenge of renewable energy power systems is the stability problem with frequency and voltage, due to intermittent properties of resources such as solar and wind. In this paper, different RES are discussed in detail along with the challenges involved. The resources selected for discussion are based on their availability in a country. The power contribution is likewise solely hydropower-based and needs to give attention to other resources to increase the system reliability and efficiency.