In Ethiopia, strong dependency on hydropower presents risks to energy security issues due to the vulnerability of the country to recurrent and prolonged droughts. The problem is also linked to trade-off in drinking, industrial and agricultural water needs; the impact of silt and sedimentation on lakes and reservoirs; and disputes over water resources. The Ethiopian railway industry is at the core of all these energy issues, for example the new preference for the supply of energy for traction purposes has been given to hydropower. However, power cuts continue, leading to uncertainty. In addition, separate railway repair units are also starving for their energy demands. This clearly has negative effect on the overall performance of the railway industry. Furthermore, as energy requirements rise, railways will have to fight for the scarce energy with other priority sectors. Therefore, energy is the last big issue to be overcome by industry in the coming decades. In this regard, regenerative energy could be one of the promising energy source to maximize energy efficiency of the railway. Consequently, this paper has assessed and examined the main factors that influence regenerative braking energy recovery as well as evaluated regenerative energy potential of Addis Ababa light rail transit. To this end, a mathematical model, consisting of a series of empirical formulas have been developed and detail analysis has been performed. To verify the empirical formulas and mathematical models a comprehensive simulation model of Addis Ababa light rail transit system using Mathlab/Simulink has been developed. Consequently, the simulation results confirmed the consistency of the proposed mathematical model. Finally, based on different scenarios; this paper concluded that, it is possible to save up to 32% of the electrical energy for the light rail transit network in Addis Ababa (AALRT).