Ethiopia’s renewable energy sources are such a valuable resource that smallholder farmers in particular can benefit from, and the nation as a whole in many ways regarding social, economic, and environmental issues, having a good and workable policy as a country is a necessity. With this as a starting point, it is intended to review the current status of renewable energy resources, policies, and institutional arrangements with existing opportunities. It is found that there are abundant renewable energy sources including hydropower, wind, geothermal, biogas, solar, and agricultural wastes. Moreover, technical and practical skills of the utilization of professionals, donor-run projects not sustainable, less focus on negative externalities to project plantation’s nearby communities, low supply of material for inputs in implementation, not timely policy revising as per world dynamics. The country’s reliance on imported fuel does not help in reducing its carbon footprint. Technical and practical utilization of these resources at the smallholder level is low. Therefore, it is recommended that policymakers are advised to take into account the timely revision of policies, capacity building in training for professionals and farmers, timely completion of projects, strengthening action-oriented subsidizing of resource-poor farmers when necessary, and strengthening the institutions that support renewable energy resources.