Access to a reliable water supply remains a significant issue in many Ethiopian rural communities, particularly in off‐grid areas where existing water sources are typically unreliable and labor‐intensive. This work describes the solar‐powered irrigation and drinking water supply Living Lab, installed in Dengeshita kebele, Dangla Woreda, Ethiopia. The system is irrigating 15 ha of land and supplying drinking water for about 800 households. PVsyst software was utilized to assess the performance of the system. The amount of water delivered, energy efficiency, and operational reliability of the system were evaluated at standard weather data. The result showed that, with an outstanding total efficiency of 72.3%, the system effectively satisfied 97.5% of the projected yearly water demand for irrigation and drinking. Using the locally approved water tariff of €0.25/m
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, the system proved profitable, with a net present value (NPV) of €138,559.45, a return on investment (ROI) of 247.9%, and an internal rate of return (IRR) of 27.71%. The system is technically robust, achieving 97% operational reliability. Furthermore, it demonstrates economic sustainability, with a payback period of 4.0 years under current conditions, extending to 8.5 years in a scenario without subsidy support. Furthermore, the findings demonstrated the viability and effectiveness of photovoltaic (PV)‐powered water pumping devices as a long‐term solution for rural water access. The Living Lab demonstrates the potential of decentralized, sustainable water solutions to address rural water challenges by providing a reliable, affordable, and clean alternative to conventional supply methods. Its successful implementation highlights a scalable and replicable model for enhancing water access and resilience in off‐grid communities.