Access to modern and sustainable energy services is a real challenge for countries where the majority of rural population is living in austere poverty. The importance of sustainable energy access is recognized in many developing countries, and there is growing international development assistance in the sector. However the achievements are still meager particularly in Sub Saharan African countries. Most countries often fail to prioritize sustainable energy services at the local level as a means to achieve economic growth at the national level as well as the Millennium Development Goals. This study is focused on Ethiopia and investigates the existing challenges and future prospects of mainstreaming sustainable energy access into the development planning process of the country, and the implications this may have for international donor agencies, national policy makers, private actors and local energy planners. The paper analyzes the institutional framework, sector policy and financial mechanisms in the country. It also discusses operational modalities of state and non-state actors in the process, and extracts policy recommendations.