Uganda`s Small-Hydro Energy Market

www.german-renewable-energy.com


Project Development Programme East Africa

Uganda`s Small-Hydro Energy Market

Target Market Analysis

www.renewables-made-in-germany.com


Target Market Analysis

Uganda’s Small-Hydro Energy Market


Authors

Robert J. van der Plas A. Kyezira

November 2009

Editor

Deutsche Gesellschaft für Technische

Zusammenarbeit (GTZ) GmbH

On behalf of the

German Federal Ministry

of Economics and Technology (BMWi)

Contact

Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH

Potsdamer Platz 10, 10785 Berlin, Germany

Fax: +49 (0)30 408 190 22 253

Email: [email protected]

Web: www.gtz.de/projektentwicklungsprogramm

Web: www.exportinitiative.bmwi.de

This Target Market Analysis is part of the Project Development Programme (PDP) East Africa. PDP East Africa is imple-

mented by the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) on behalf of the German Federal Ministry of

Economics and Technology (BMWi) under the Export Initiative Renewable Energies. More information about the PDP and

about renewable energy markets in East Africa: www.gtz.de/projektentwicklungsprogramm

This publication, including all its information, is protected by copyright. GTZ cannot be liable for any material or immaterial

damages caused directly indirectly by the use or disuse of parts. Any use that is not expressly permitted under copyright leg-

islation requires the prior consent of GTZ.

All contents were created with the utmost care and in good faith. GTZ assumes no responsibility for the accuracy, timeliness,

completeness or quality of the information provided.

Target Market Analysis: Uganda’s Micro-Hydro Energy Market I

Content

1 STATUS QUO OF THE MICRO-HYDRO POWER SECTOR ........................................... 1

1.1 Brief Micro-Hydro Power Sector Overview ...................................................................................... 1

1.2 Major Market Segments .................................................................................................................. 3

1.3 Local Capacities ............................................................................................................................... 3

2 MARKET POTENTIALS ........................................................................................................ 5

2.1 Overall Sector Outlook..................................................................................................................... 5 2.1.1 Outlook on Demand Profiles/ Market Volumes ............................................................................. 5 2.1.2 Obstacles / Constraints .................................................................................................................. 6 2.1.3 Recommendations for German RE Companies .............................................................................. 7

2.2 Undeveloped Market Opportunities ................................................................................................ 8 2.2.1 The Opportunities .......................................................................................................................... 8 2.2.2 The Potential ................................................................................................................................ 11

3 MICRO-HYDRO-SPECIFIC REGULATION AND FRAMEWORK ............................... 14

3.1 Policies and Regulations ................................................................................................................ 14

3.2 Applicable Public Sector Support and Financing Sources ............................................................... 19 3.2.1 Rural Electrification Subsidy Policy .............................................................................................. 19 3.2.2 Grants and Soft Loans .................................................................................................................. 20

3.3 Campaigns and Others ................................................................................................................... 21

4 BUSINESS PARTNERS AND COMPETITORS ............................................................... 22

4.1 Overview of Micro-Hydro Key Market Players ............................................................................... 22

4.2 Micro-Hydro Projects Overview ..................................................................................................... 23

Target Market Analysis: Uganda’s Micro-Hydro Energy Market II

List of Tables

Table 1: Licensed Small-Hydro Project Developers ........................................................................... 2

Table 3: Existing Capacity for Studies, Works and Finance (Micro-Hydro) ....................................... 4

Table 4: Estimated Rural Electricity Demand per Sector ................................................................... 5

Table 5: Important Small Hydro Sites in Uganda ............................................................................... 8

Table 6: Micro-Hydro Sites in the Mt. Elgon Region .......................................................................... 9

Table 7: Market Opportunity Target Areas ....................................................................................... 10

Table 8: National Targets in the Energy Sector ............................................................................... 14

Table 9: National Generation Targets .............................................................................................. 15

Table 10: Regional Equity ................................................................................................................ 20

Table 11: Service Providers ............................................................................................................. 22

List of Figures

Figure 1: Identified Small Hydro Sites .............................................................................................. 12

Figure 2: Relevant Institutional Framework ...................................................................................... 17

Figure 3: Tariff Information ............................................................................................................... 18

Currency

1 USD = UShs 2,230 (May 2010)

1 € = UShs 2,733 (May 2010)

Measurement

W Watt Wp Watt peak Wh Watt hour

kW Kilowatt kWp Kilowatt peak kWh Kilowatt hour

MW Megawatt MWp Megawatt peak MWh Megawatt hour

GW Gigawatt GWp Gigawatt peak GWh Gigawatt hour

Target Market Analysis: Uganda’s Micro-Hydro Energy Market

III

Acronyms

COMESA Common Market for Eastern and Southern African States

CIREP Community Initiated Rural Electrification Project

EADB East African Development Bank

EIA Environmental Impact Assessment

ERA Electricity Regulatory Authority

ERT Energy for Rural Transformation, World Bank financed project

IDP Independent Power Distributors

IPP Independent Power Producer

IREMP Indicative Rural Electrification Master Plan

KCC Kampala City Council

LIREP Locally Initiated Rural Electrification Project

MEMD Ministry of Energy and Mineral Development

MUK Makerere University

NEMA National Environment Management Authority

NGO Non-Governmental Organisation

O & M Operation and Maintenance

PPA Power Purchase Agreement

PPP Public-Private Partnership

PREEEP Promotion of Renewable Energy and Energy Efficiency Programme

PREP Priority Rural Electrification Project

PSFU Private Sector Foundation of Uganda

PV Photovoltaic

RESP Rural Electrification Strategy and Plan

REA Rural Electrification Agency

RET Renewable Energy Technology

SME Small- and Medium-sized Enterprise

UECC Uganda Energy Credit Capitalization Company

UETCL Uganda Electricity Transmission Company Ltd

UNEP United Nations Environment Programme

UNIDO United Nations Industrial Development Organisation

WRMD Water Resources Management Department

Target Market Analysis: Uganda’s Micro Hydro Energy Market 1

1 Status Quo of the Micro-Hydro Power Sector

1.1 Brief Micro-Hydro Power Sector Overview

In preparing this report, it has been assumed that micro-hydro as a renewable energy technology

would only be relevant for the generation of electricity. Therefore much of the focus of this report is in

the electricity sector. In Uganda, micro-hydro is generally defined as a generation capacity of less

than 100 kW. However, because there is no standard definition for this capacity, this document in-

cludes some larger capacities as well.

In Uganda the bulk of electricity at the present time is generated, transmitted and distributed as fol-

lows:

Although the peak demand is more than 650MW, so far only a total of 416 MW has been in-

stalled.

300 MW of this is generated from two large hydro dams located at the river Nile in Jinja, with

180 MW from Nalubaale and 120 MW from Kiira.

100 MW is generated by thermal power plants that have been put up to complement the hy-

dro capacity.

In Kassese, there is a mini-hydro generation plant producing 11 MW of electricity and another

in Kilembe that is generating 5 MW. Both of these feed into the grid.

There is a 1 MW thermal power plant that supplies the grid of West Nile.

Only 5% of the Ugandan population currently has access to electricity, most of which are in

urban areas.

There is no lack of potential sites where hydro power can be developed, whether large or small ca-

pacities. However, a comprehensive atlas of the potential resources as prepared in Rwanda has

never been made. Uganda’s Renewable Energy Policy states that large-scale-hydro power potential

along the White Nile in Uganda is estimated at 2 GW. This includes six potential major hydro power

sites: Bujagali 250 MW, Kalagala 450 MW, Karuma (Kamdini) 150 MW, Ayago North 300 MW, Ayago

South 250 MW and Murchison Falls 600 MW. In addition, the potential for small-scale-hydro power

generation is between 200 MW and 500 MW.

There has been very little systematic development of small-, micro- or mini-hydro in Uganda and the

focus has always been on the larger sites. There are over 60 small hydro sites identified for which

some pre-feasibility studies were done (See Annex 1) and it is certain that more sites exist that have

not been identified yet. GTZ has carried out a study in the Mount Elgon region on ten potential micro-

hydro sites giving key information about the potential demand and market for electricity (See Annex

2).

Below in Tables 1 and 2 are current on-going small (mini/ micro) hydro projects that have obtained a

license to operate and operational plants. All planned plants except one are above 3 MW.


Table 1: Licensed Small-Hydro Project Developers

Project developer Project and location Project brief Capacity

(MW)

Status

Kisiizi Hospital Power

Company Ltd

Kisiizi Hospital Expansion of small micro plant of

60 kW to 300 kW. Generated

electricity to be sold to the com-

munity

0.3 Near

Comple-

tion

Kilembe Mines Ltd Kilembe Mines Hydro

Power Project, Kas-

ese

Private generation company

formerly part of the Kilembe

mines feeding excess power onto

the grid.

5.0 Opera-

tional

Hydromax Ltd Buseruka HEP Pro-

ject, Hoima

Generation for distribution. Stud-

ies still on-going

9.0 On-going

China Shan Sheng

Industry International

(U) Ltd

Kikagati HEP Project,

Isingiro

Re-development of old decomis-

sioned site

10.0 On-going

Kasese Cobalt Com-

pany Ltd

Kasese Cobalt Hydro

Power Project Kas-

ese

Private generation company

formerly part of the Kilembe

mines feeding into the grid

11.0 Opera-

tional

Africa EMS Mpanga

Ltd

Mpanga HEP Project,

Kamwenge

On-going studies to feed into the

grid

18.0 On-going

West Nile Rural Elec-

trification Company

Ltd

Nyagak HEP Project,

Nebbi

Dam construction on-going

through support from the Uganda

Govt. and Industrial Promotional

Services IPS Kenya of the

AghaKhan foundation

3.4 On-going

Tronder Power Ltd Bugoye HEP Project,

Kasese

Under construction 13.0 On-going

Eco Power (U) Ltd Ishasha HEP Project,

Rukungiri

Studies on-going 6.6 On-going

Mt. Elgon Power

Company

Siti & Sipi, Kap-

chorwa

Studies completed but no project

implementation yet

3.3 Expected

to proceed

SN Power Invest AS Waki, Masindi Studies completed but no project

implementation yet

5.0 Expected

to proceed

Kuluva Arua Own use by Kuluva hospital 0.12 Opera-

tional

Kagando Kasese Own use by Kagando Hospital 0.6 Opera-

tional

Source: ERA

Some small-hydro realisations are:

Two sites were developed by the now defunct Uganda Electricity Board (the electricity utility

company that existed before deregulation of the sector): Mubuku II (up to a generation capac-

ity of 5 MW) and Kikagati (generation capacity of 1.25 MW) which has since been decommis-

sioned.


Maziba I (1 MW; not producing electricity anymore, but there is a KfW-funded feasibility study

going on, and KfW will also fund the rehabilitation) and Kisizi (75 kW) were developed by pri-

vate developers. Kisizi has recently been expanded to produce 300 kW.

Others are at various stages of development:

o Muzizi - 10 MW

o Paidha - 7.5 MW

o Ishasha - 4.5 MW

Two community driven micro hydro sites are being developed with assistance from GTZ at

Bwindi, Kanungu District with an expected generation capacity of 64 kW and Suam, Bukwa

District with a generation capacity of 40 kW.

In summary, the micro-hydro generation capacity in Uganda is in its early stages of development.

There are quite a few undeveloped opportunities and very few operational micro-mini hydro plants in

Uganda at the moment. GTZ supports districts, sub-counties and communities in the development of

such plants. So far the installation of two micro-hydropower schemes and one pico-hydropower pilot

scheme could be facilitated.

1.2 Major Market Segments

The market for electricity in Uganda can be divided into the rural and the urban market. Systems in

urban areas tend to feed into the national grid. Systems in rural areas can potentially feed their own

clients. A determining factor is the distance to the existing or proposed grid network. Private organisa-

tions may use their own power source but most privately built schemes do actually feed into the grid

network. Kuluva Hospital as a counterexample is close to the grid network but they require around the

clock electricity - especially in Arua District, where Kuluva Hospital is located. Load shedding is com-

mon and hence the electricity from the micro-hydro plant is used for private consumption only.

It is estimated that Uganda’s population 2009 is more than 30.0 million with 85% of Ugandans living in

rural areas.In these regions, electricity is mainly used for:

Social sectors, including water, health, education.

Economic and commercial sectors, including industries, agriculture, telecoms, mining and

others.

Domestic and informal sector, the latter including SMEs such as salons, restaurants, enter-

tainment halls, bars etc.

1.3 Local Capacities

Currently the number of qualified staff and labourer is extremely limited. Most hydropower equipment

has to be sourced from outside the country. Specialised equipment is imported. There are firms that

are able to install grids (transmission lines etc.) and there were a couple of pico-hydropower test tur-

bines manufactured but not yet for usage. The following Table 3 shows a list of expertise needed for

realising hydro projects and the extent to which this is available in Uganda for micro-hydro plants.


Table 2: Existing Capacity for Studies, Works and Finance (Micro-Hydro)

Ugandan private

firms or indi-

viduals

International

firms in Uganda

Govt institutions

and/or agencies

Hydrological study -/+ + -/+

Site survey and rough system design + + +

Demand & willingness to pay surveys -/+ + -/+

Technical plant design -/+ + -

Feasibility study -/+ -/+ -/+

Construction work + + -

Engineering work -/+ + -/+

Electrical work + + -/+

Business development advice + + -/+

Audits & book keeping advice + ++ -

Funding support to carry out studies - + +

- not available; -/+ limited; + can be found; ++ there is choice

There is some expertise with regards to accessing specific capacities in Uganda while it is true, too,

that there have been a number of disappointing results in recent projects. In the region, Uganda was

the first to deregulate the electricity sector and through a number of private sector initiatives the de-

velopment of key skills throughout the project cycle has been realised.


2 Market Potentials

2.1 Overall Sector Outlook

2.1.1 Outlook on Demand Profiles/ Market Volumes

Uganda has a booming economy and the demand for electricity is increasing; the current power gen-

eration deficit is estimated at over 200 MW. The small-hydro sector can contribute tremendously by

supplying reliable power to local customers at a price that is much lower than possible with diesel or

PV power.

Table 4 below shows the estimated rural electricity demand per sector. This can be satisfied by diesel

generators or by small-hydro when applicable. The estimated potential is at a minimum of 77.5 MW.

Table 3: Estimated Rural Electricity Demand per Sector

Sector Sub sector Category

No

. o

ff-g

rid

Es

tim

ate

d N

o.

ne

ar

sm

all

hy

dro

sit

es

Es

t. p

ow

er

req

uir

ed

(kW

)

To

tal

po

ten

tia

l

(kW

)

Social

service

Health Health centre IV 120 10 15 150

Health centre III 470 38 5 190

Health centre II 659 53 0.5 26.5

Education Tertiary 0 0 15 0

Secondary 1,160 93 15 1,395

Primary 11,836 947 1 947

Water Small town d 50 4 50 200

Small town c 150 12 25 300

Small town b 250 20 12.5 250

Small town a 350 28 7.5 210

Institutions 50 4 3 12

Individual cites 35 5 2 10

Social

economic

Commercial agric Coffee factory (wet) 4 2 250 500

Commercial dairy 10 1 200 200

Commercial farm 22 10 250 2,500

Cotton Ginnery 11 1 250 250

Fish processing plant 30 4 250 1,000

Horticulture 5 0 100 0

Irrigation 140 12 100 1,200

Tea factory 8 5 400 2,000


Small Scale agric Animal feed mixer 145 20 7.5 150

Coffee mill (dry) 62 15 7.5 112.5

Dehusker (grain/ rice) 108 20 7.5 150

Fish landing site 49 30 10 300

Fish store 80 5 7.5 37.5

Grain mill 355 50 7.5 375

Milk chiller 201 15 7.5 112.5

Oil press 18 5 10 50

Mining and Quarry-

ing

Base metals 16 10 250 2,500

Other metals 6 5 250 1,250

ICT & Telecom Small offices 554 100 0.5 50

Training centres 107 40 10 400

Base/ repeater sta-

tions

620 50 15 750

Household Domestic 4,500,000 500,000 0.1 50,000

Non-domestic

(SMEs)

1,200,000 100,000 0.1 10,000

Source: ERA

In order to support the realisation of such potentials and to meet the National Renewable Energy Pol-

icy envisioned, a government programme with a target to have installed up to 100 MW of hydro ca-

pacity by 2017 from mini- or micro-hydro plants alone was introduced. That would account for about 7

% of the total national capacity. So far the government is far from reaching that target.

2.1.2 Obstacles / Constraints

The following constraints have been identified that hamper the development of micro-hydro:

High Upfront costs for investment. It is estimated that the cost for investment in small hydro is

USD 2,500 – USD 5,000 per kW. Although this is much lower than the cost for investment in

solar PV, it does require higher initial investment levels since the capacities involved in small

hydro are normally much bigger than for PV.

Hydro site issues are usually site specific and may be seasonal. As a consequence, they

therefore have a relatively long gestation period due to studies and construction. In addition,

an Environmental Impact Assessment (EIA) has to be carried out in order to get permission

from the National Environment Management Authority (NEMA).

The legal and institutional framework is somewhat weak for micro hydro with less than 0.5

MW of generation capacity. Legally, the regulator is not mandated to provide a license and it

may therefore become challenging to negotiate key tariffs and accessing permits. Such nego-

tiations need to be carried out on a case-by-case basis.


There is a lack of appropriate financing mechanisms that can facilitate the development and

promotion of micro-hydro. However, there are two existing renewable energy projects, that

have been financed by local banks under the joint World Bank and governmental Programme

Energy for Rural Transformation (ERT) (supported by a refinance facility). Additionally,the Ki-

kagati project received a loan from the East African Development Bank (EADB). Also, under

ERT 2 there will be the Credit Support Facility which is going to address precisely the problem

of lacking availability of financial resources. While the market potential is significant with a lot

of public and national interest, the market for micro hydro use and technology is underdevel-

oped with limited levels of awareness.

There is a lack of standards and quality assurance that can effectively monitor and ensure

quality in technology and electricity generated.

Despite the many studies carried out, access to detailed information which should really be

public for use in investment is quite difficult.

2.1.3 Recommendations for German RE Companies

Investors interested in the micro-hydro technology are recommended to:

Have access to the following key documents

The Electricity Act

The Indicative Rural Electrification Master Plan (IREMP)

The Renewable Energy Policy

Existing studies to determine areas of interest

Develop local linkages that can assist in studies and follow up as an initial strategy. This could

be done through a joint venture with a local RE company that may not yet have experience

with the technology. Local capacity would be enhanced at that level and many administrative

matters can be followed up easily and quickly.

Grid connected systems may be the least cost solution in terms of system management, al-

though the applicable tariffs may render this difficult. Other interesting target markets for gen-

eration may be for own use, possibly complemented by grid connection for sale of excess en-

ergy. This could be a specific factory, industry or privately operated social institution like a

hospital.

If interested in generating for distribution with an isolated mini-grid, extensive community mo-

bilisation and development of network management systems have to be setup. Distribution in

itself requires a very strong local management.

Because of the limited local experience, an investor has to come prepared to carry out exten-

sive technology capacity building in terms of system setup, operation and management.

There are opportunities to get support for preparatory studies from the Private Sector Founda-

tion of Uganda (PSFU) under the BUDS-ERT programme. This should be utilised effectively

to reduce the initial investment costs related to studies, capacity building and forecasting.


2.2 Undeveloped Market Opportunities

2.2.1 The Opportunities

There is conflicting information about the potential of small-hydro in Uganda and studies carried out

have targeted rather the mini-hydro potential and excluded what would be considered micro, while

others looked at specific geographical areas and included more potential capacities. Table 7 shows

data from a 2006 Ministry of Energy and Mineral Development (MEMD) study that targeted small and

micro hydro sites that are considered important, i.e., good potential to develop. Table 8 shows more

recent GTZ data for the Mount Elgon region only.

Table 4: Important Small Hydro Sites in Uganda

Item Site name District Est. gen.

potential (MW)

1 Nkusi at Pachwa Hoima 0.06

2 Manafwa Mbale 0.15

3 Sezibwa falls Mukono 0.25

4 Kisizi * Rukungiri 0.3

5 Tokwe Bundibugyo 0.42

6 Rwizi Mbarara 0.49

7 Rwigo Bundibugyo 0.67

8 Nyahuka Bundibugyo 0.7

9 Siti Kapchorwa 1.04

10 Olewa Arua 1.5

11 Nyamabuye Kisoro 2.2

12 Mvepi Arua 2.3

13 Kakaka Kabarole 3

14 Waki Masindi 3

15 Kikagati * Mbarara 3.5

16 Ishasha Kanungu 4.33

17 Sipi Kapchorwa 5.4

18 Chambula Bushenyi 8.3

19 Nengo Bridge Rukungiri 8.5

20 Muzizi Kabarole 10

21 Nkusi Escapement Hoima 11

22 Bugoye Kasese 12.7

23 Mpanga Escapment Kamwenge 14

24 Buseruka * Hoima 15.6

25 Nsongezi Mbarara 22

* : are being developed (Source: ERA, MEMD


Table 5: Micro-Hydro Sites in the Mt. Elgon Region

Site Location Estimated electrical

power potential

(kW)

Potential application

Upper Ngeng Kween Kapchorwa 55 – 100

Households, Social

Institutions, Social

economic services and

export to Kenya.

Sono/ Lwakhakha Bubolo, Manafwa 55 – 100

Bukwa Kongasis, Bukwa 85 - 100

Lower Ririma Bubolo, Manafwa 85 – 100

Binyiny, Tabok Kween Kapchorwa 75

Upper Muyembe Bulambuli, Sironko 75

Kaproron, Kere River Kween Kapchorwa 120

Siti Kween Kapchorwa 120

Buluganya Bulambuli, Sironko 50

Bukalasi Manjiya, Bududa 64

Source: GTZ Study on the Potential of Micro-hydro Power in the Mount Elgon Region, Uganda

Generally, the micro-hydro market in Uganda is highly underdeveloped. Some of the immediate op-

portunities include:

1. Independent power producers (IPP) or independent power distributors (IPD) - becoming

independent power producers (IPP) or independent power distributors (IPD). This is a market

for those interested to generate their own electricity, for their own use or for a specific client,

and thereby often replace diesel generated electricity. IPDs can either be represented as indi-

vidual entrepreneurs or communities. Officially it is possible to achieve government support in

the form of subsidies through the Rural Electrification Agency (REA), but effectively this sup-

port is rare and/or much paperwork and bureaucracy make it a time consuming process. IPPs

and IPDs can be entirely different entities; IPPs can generate electricity simply to have it fed

(fully or partially) into the transmission grid and earn from a Feed-in-Tariff. In this case, the

IPPs would have to enter into a Power Purchase Agreement with Uganda Electricity Trans-

mission Company Limited (UETCL). On the other hand IPDs would sell electricity as their

main business lines to their own clients without the involvement of the UETCL. Some of the

Ugandan sugar mills have become IPP or IPDs.

2. Social Institutions - very many social institutions need electricity for their own use. These

are usually hospitals. In cases where the generated capacity is more than what they con-

sume, these may sell some into the community and thereby become IPD as well. They there-

fore present a market for generation and would further be a technology market rather than an

electricity market. The competition comes from PV systems as often the load from these insti-

tutions is only small.

3. The government - The government’s 10-year-target for generated capacity by 2017 is 1.5

GW from various sources. Only 5 % of the Ugandan population currently has access to elec-

tricity and these are in addition mainly located in urban areas, leaving rural areas totally

voided of electricity. The government electricity access programmes target to have 625,000

new household connections in 20171, up from 250,000 in 2007.

1 This will be 8 % electrification rate when figuring in a total population of 38 m in 2017.


4. Donors. It has been a policy since 1999 in Uganda that generation and distribution of electric-

ity would be privately led. This has proved a challenge because of the limited number of de-

velopers willing and capable of investing in developing hydro power projects. Willing market

players still face the problem of lacking capacities to design and install hydropower projects.

By importing capable members, the cost of investment would rise dramatically.As a result this

aspect of the market is usually support through donor financing. Some donor agencies are in-

terested in improving the level of access or are ready to partly fund any initiative that will im-

prove access to electricity in the rural areas. GTZ has taken an initiative in training locals

alongside the installation of two pilot micro-hydro schemes.

5. The export market is another huge area of interest that can as well be supported by the

Government of Uganda. Uganda has a network connection with Kenya in the Mount Elgon

region. Through the Nile Basin Initiative (NBI)/ Nile Equatorial Lakes Subsidiary Action Pro-

gram (NELSAP), a cooperation between Uganda, Burundi, DR Congo, Kenya, and Rwanda,

the construction of two additional interconnection lines between Kenya and Uganda on the

one hand and Uganda and Rwanda on the other hand are being planned. Work on ground is

expected to start at the end of 2010 or beginning of 2011. In the West of Uganda, the market

potential for export of electricity also includes Eastern Congo which hardly has electricity. Ac-

cordingly, Uganda and DR Congo are planning to extend the Uganda electricity network to

Beni and Bunia in DR Congo through a transmission line Nkenda – Beni - Bunia.

Table 6: Market Opportunity Target Areas

Market segment Target

IPPs Distributors of Electricity into isolated grids and for general electricity supply and

UETCL through a Power Purchase Agreements.

IPDs Communities for general electricity use for Households and SMEs and Institutional

Social institutions Own use for a hospital, school and sell to surrounding communities

Government IPDs; UETCL

Donors IPPs; IPDs and Communities


2.2.2 The Potential

Theoretical potential

While the government policy aims at making Uganda a service based economy, there is no doubt that

Uganda is highly endowed with natural resources and a good natural climate for agriculture. This is

likely to provide many opportunities for investors. Uganda is a leading agricultural based economy

with the bulk of the business depending on unprocessed agricultural produce. The addition of value at

any level would fetch much desired foreign hard cash, and often this requires access to electricity.

Uganda is the biggest producer of Robusta Coffee in Africa and only produces a limited quantity of

Arabica. Most of this is exported with very little value added. The Mount Elgon area is known for its

production of high quality Arabica and it also has a very high hydro potential which if developed would

suffice in the coffee production. A number of factories that were de-husking coffee were forced to

close because of the high energy cost from captive generators.

Uganda also has a very active tea sector in the South Western and Western parts of Uganda. In the

Rwenzori region, there is a large potential for micro-hydro where the bulk of tea is produced. Uganda

is one of the participating countries in the United Nations Environment Programme (UNEP) funded

Greening-The-Tea Project (see Annex 5).

Geographical potential

More than 50 mini-hydro power sites with a total potential of about 210 MW have been identified

through different studies (see Figure 1). Annex 1 lists sites that potentially can be developed into elec-

tricity generation sites or may at least be worthwhile to revisit and undertake a full site assessment as

the significance of data about geographical potential is limited as long as further studies (technical

and economical) have not been carried out to determine the actual potential at each site. Potential is

linked to economic factors because different geographical sites have different economic levels. For

example, there is special support in terms of subsidies that is dependent on the geographical area

(see section 3.2). Also, to develop any specific site, there has to be both public and community con-

sultation. There are sites that the government reserves for natural and tourism purposes that may not

be developed and there is also the possibility of pico-hydro and PV systems, which are perfect for

small institutions or for small private companies in need of power. Such systems would work as run of

the river systems and do not require comprehensive civil works.


Figure 1: Identified Small Hydro Sites


Technical potential

The geographical potential is further reduced due to technical limitations as conversion efficiencies

can be low. For micro-hydro it does not make much sense to express the potential in terms of overall

capacity as the specific capacity that eventually will be developed depends on the exact design of the

system. There is a theoretical potential for 67 sites with a capacity between 300 kW and 20 MW; the

technical potential could be larger or smaller, depending on the level of accuracy applied during the

pre-investment studies. It is clear that the Government of Uganda is targeting the much larger mini

hydro sites rather than micro-hydro sites (see Annex 2).

Economic potential

The economic potential is partly linked to the geographical potential and is usually somewhat smaller.

Some areas may have the resource but have limitations in terms of demand. However, many such

micro hydro investments will attract subsidies that will mitigate initial investment costs. Further to that,

for certain periods of time, tax holidays can be negotiated to make it easier for an investor to build the

market first.

Market potential

The market potential is the total amount of renewable energy that can be implemented in the market,

taking into account the demand for energy, the competing technologies, the costs and subsidies of

renewable energy sources, and the barriers. The market potential could in theory be larger than the

economic potential, but usually the market potential is lower because of all kinds of barriers. Generally

where the hydro resource exists, it is preferred over other technologies as it is often much cheaper.

Current studies show that all identified sites would have a ready electricity consumption market.

There are several support mechanisms in place. First of all, there are programmes to finance devel-

opment of hydro sites through the government and through donors.

The World Bank led Energy for Rural Transformation (ERT) project is key to support development of

the energy sector in Uganda; micro-hydro could be included. Through the BUDS-ERT the cost for

studies can be shared and subsidies for distribution systems can be accessed from the Rural Electrif i-

cation Agency (REA). In some cases there have been finance activities for MV lines. The mandate,

however is mainly rural electrification.

GTZ is running the Promotion of Renewable Energy and Energy Efficiency Programme (PREEEP)

that is designed to assist private investment in rural electrification through technical and financial as-

sistance.


3 Micro-Hydro-Specific Regulation and Framework

3.1 Policies and Regulations

The national targets for power generation, rural and urban electrification, modern energy services,

biofuels, waste to energy and energy efficiency (April 2007) are summarised in the Table 5 below.

These provide the best estimates as to the potential developments of the specific energy subsectors.

Table 7: National Targets in the Energy Sector

Policy action Base Cumulative targets

2007 2012 2017

Power generation

Mini/ Micro hydro power plants

(MW Installed)

17 50-70 85-100

Rural/ urban electrification

Electrified households through PREPs2, LIREPs3 and

CIREPs4

250,000 375,000 625,000

Biofuels

(Ethanol, Bio-diesel) (m3/a) 0 720,000 2,160,000

Modern energy services for households

Improved woodstoves 170,000 500,000 4,000,000

Improved charcoal stoves 30,000 100,000 250,000

Institutional stoves 450 1,500 5,000

Baking ovens 60 250 1,000

Kilns (lime, charcoal, brick) 10 30 100

Household biogas 500 30,000 100,000

Solar home system (kWp) 200 400 700

Fruit driers 3 1,000 2,000

Source: RE Policy

2 Priority Rural Electrification Project

3 Locally Initiated Rural Electrification Project

4 Community Initiated Rural Electrification Project


Table 8: National Generation Targets

Programmes Baseline Cumulative targets

Power generation 2007 2012 2017

Hydro power plants (large) (MW installed) 380 830 1200

Hydro power plants (mini and micro) (MW

installed)

17 70 100

Co-generation (MW installed) 15 35 60

Geothermal (MW installed) 0 25 45

Municipal waste (MW installed) 0 15 30

Total installed (MW) 1435

Source: RE Policy

Under the current government strategy of rural electrification, small hydro power has been recognised

as a key technology in improving the level of access to electricity in the rural areas of Uganda.

A Renewable Energy Policy was launched in 2007 to make modern renewable energy a substantial

part of the national energy consumption. The Goal of the Renewable Energy Policy is to increase the

use of modern renewable energy from the current 4 % to 61 % of the total energy consumption by the

year 2017. The overall responsibility for this policy lies with the Ministry of Energy and Mineral Devel-

opment (MEMD) to specifically focus on the promotion of RE and RETs under the Department of Re-

newable Energy was created.

The Rural Electrification Strategy and Plan (RESP) provides the framework within which the electri-

fication process occurs. It focuses amongst others on rural electrification. The primary objective of the

RESP is to reduce inequalities in access to electricity and the associated opportunities for increased

social welfare, education, health and income generating opportunities. Under the RESP small-scale

power generation, especially utilising clean and indigenous renewable energy sources is considered

to play a key role in supporting expansion of electrification in Uganda. A standardised transactional

framework necessary to facilitate commercially based development of small scale power generation is

described in the RESP. The main bodies concerned are the Electricity Regulatory Authority (ERA)

and the Rural Electrification Agency (REA).


The Energy for Rural Transformation (ERT) project (World Bank) aims to develop Uganda’s rural

energy sector so that it makes a due contribution to bringing about rural transformation. A key compo-

nent of the ERT is the development of an Indicative Rural Electrification Master Plan (IREMP). The

IREMP deals with conceptual designs only and is supposed to avoid a too detailed planning. The

master planning process is the sequence of activities to address the demand for electricity. It com-

prises identifying appropriate technologies and designs to be applied to rural electrification, identifying

potential rural electrification areas and projects, selecting and applying appropriate technologies to

these projects and prioritizing amongst the various projects. The IREMP recognises that there are a

number of small and medium scale generation technologies that can be used as network support, for

mini-grids, or in stand-alone applications. These include small (mini, micro & pico) hydro, wind and

diesel generation, and photovoltaic. The costs of generation technologies in Uganda appear to be at

the high end of developing country averages. Based on the least-cost analysis and a grid-prioritised

approach, it is clear that the general order of technology preference for remote energy supply for lar-

ger settlements is:

Grid extension options, as part of the grid-prioritised approach

Hydro mini-grid

Diesel mini-grid

Stand-alone small hydro

Stand-alone diesel (large users)

Stand-alone PV (small users)

Stand-alone petrol generator (small users)

The Electricity Act is however the most important document in relation to the micro-hydro technology

and how it best applies. It is through the Electricity Act that the Electricity Regulatory Authority (ERA)

is established and its functions are provided for (see Annex 3). Further details of the Renewable En-

ergy Policy institutional framework are highlighted in Annex 4.


Figure 2: Relevant Institutional Framework

Institutional Framework

Several institutions involved in the development of renewable energy projects for power generation

are highlighted here under:

The Ministry of Energy and Mineral Development (MEMD) is the lead agency in the energy sector.

The Ministry is responsible for policy formulation, promotion, coordination, monitoring and evaluation.

MEMD is also responsible for initiating legislation in the energy sector.

Rural Electrification Agency (REA) is responsible for developing and promoting rural electrification

and rural electrification projects. Rural Electrification Board (REB), as the governing body for REA,

controls subsidies for rural electrification and renewable energy projects, and therefore decides on

priorities and allocation of funds.

Uganda Electricity Transmission Company Ltd. (UETCL) is the bulk supplier and single buyer of

power for the national grid in Uganda. It is the purchaser of all independently generated power in the

country. UETCL is also responsible for publishing standardised tariffs for renewable energy genera-

tion up to 20 MW capacity based on the avoided cost principle.

National Environment Management Authority (NEMA) awards environmental clearances, following

review and approval of Environmental Audits, Environmental Impact Assessment (EIA) statements

and Resettlement Action Plans (RAP).

Water Resources Management Department (WRMD) is the authority that awards surface water

permits and construction permits to Developers. Additionally, WRMD provides technical advice to the

Developer in the early stages of the EIA and initial project development phase.

Private Sector Companies (potential investors) who apply for various permits and licenses from the

Electricity Regulatory Authority as per the Electricity Act 1999 Cap 145. These carry out necessary

feasibility studies and implement the various projects. Procedures for investments are highlighted in

Section 5.

The Electricity Regulatory Authority (ERA) is responsible for receiving and processing applications

and issuing permits and licenses for generation, transmission, distribution or sale of electricity, and

prescribing conditions and terms of licenses, including prices. In addition, the ERA is empowered to

make and enforce directions to ensure compliance with licenses issued under the Electricity Act.

The ERA is also charged with establishing a tariff structure and investigating tariff charges, whether or

not a specific complaint has been made for a tariff adjustment, approves charges and terms and con-

ditions of electricity services provided by transmission and distribution companies, among other roles

as laid out in the Electricity Act.

Source: ERA

The electricity sector has very well documented regulations and guidline documents for the following

aspects: generation of electricity for own use, generation and sale, transmission, and bulk supply of

electricity, system operator, distribution, retail supply/sale, export and import of electricity.

All the activities above would require an operational license from ERA. However, under the electricity

act, a license for generating electricity would only be required if the capacity anticipated for generation

is over 0.5 MW. This is good news for micro-hydro plant operators as this would imply that a license is


not required. In addition, a permit would have to be applied for as an initial step to allow for studies

and proper planning without undue interference by local authorities. Basically, this would give the

investor exclusivity at any site or area of choice, but since only one license is given per site, some

companies reserve a site and sit on it for a few years, renewing their license when necessary5.

For anyone interested in investing in hydro for feeding into the grid, it is important to understand tariffs

and how compensation is arranged. The Uganda Electricity Transmission Company Ltd (UETCL) acts

as a single buyer of electricity supplied to the transmission network in Uganda and the sole exporter

and importer of power. The UETCL sells power to any distribution company (buyer) that is connected

to the transmission network at a Bulk Supply Tariff. The Bulk Supply Tariff reflects the costs of power

acquisition and transmission costs.

Figure 3: Tariff Information

Until recently Uganda had feed in tariffs in place only for hydro and bagasse. Due to limited uptake by

project developers, the Renewable Energy Feed-In Tariff (REFIT) was reviewed in 2010 and a new tariff

scheme was developed based on updated levelised costs of production. Now a guaranteed purchase

price for a fixed duration of 20 years and a stepped tariff for different priority technologies are established

(see table below).

Technology Tariff (US$/ kWh) Cumulative Capacity Limits (in MW)

2011 2012 2013 2014

Hydro (9<>=20 MW) 0.073 45 90 135 180

Hydro (1<>=9MW) Linear tariff 15 30 60 90

Hydro (500 kW<>=1 MW) 0.109 1 1.5 2 5

Bagasse 0.081 20 50 75 100

Biomass 0.103 10 20 30 50

Biogas 0.115 10 20 30 50

Landfill gas 0.089 10 20 30 50

Geothermal 0.077 10 30 50 75

Solar PV 0.362 2 3 5 7.5

Wind 0.124 50 75 100 150

Renewable energy projects above the Maximum Installed Project Capacity can be developed through the negotiation of tariffs and PPAs, on a case by case basis, with either the System Operator or individual buyers. More detailed information about the tariff scheme, licensing conditions, procedures, and evaluation criteria for license applications can be found on the ERA website.

6

5 To apply, according to Section 29 of the Electricity Act, a USD 2,000 processing fees and USD 2,000 for a permit are paid. On

completion of a study, the following fees are paid: (a) USD 2,000 again for processing for a license

(b) Depends on capacity intended for generation: Below 0.5 MW: USD 1000; 0.5 – 2 MW: USD 2000; and above 2MW USD

10,000; ERA states that these fees are recovered and built into the tariff. However, the gestation period is quite long for a good

and thorough study and as an example serves Hydromax which has only gotten a generation license after three years of stu-

dies and bureaucratic processes. 6 http://www.era.or.ug/Pdf/Approved_Uganda%20REFIT%20Guidelines%20V4%20(2).pdf


3.2 Applicable Public Sector Support and Financing Sources

3.2.1 Rural Electrification Subsidy Policy

The Rural Electrification Agency’s Subsidy Policy (REA) published in March 2007 aims to present the

subsidy criteria that will guide the awarding of subsidies for rural electrification in Uganda. The specific

objectives of the Subsidy Policy are to:

Establish detailed guidelines that will ensure that REA uses transparent criteria in its dealings

with subsidy applications.

Ensure that applicants and the public know-how to proceed with projects.

Enable the correct use of the guidelines which should, in turn, ensure reasonable and equita-

ble treatment of applicants for RE subsidies.

The types of rural electrification projects supported by REA/REB comprise grid extension with electric-

ity supplied from the main electricity generation plants in the country, and mini-grids around isolated

generation plants and stand-alone systems. Project Sponsors are either private parties, communi-

ties/cooperatives, the government, or individuals, sometimes in combination with different parties.

REA can also initiate projects by tendering out packages. The classification of projects that can re-

ceive subsidies is as follows:

The local distribution part of grid-connected generation projects

Mini-grid distribution system around an isolated generation plant

Grid-connected distribution extension with no own generation

Small stand-alone systems with one or few consumers (PV, small diesel or pico-hydro)

Projects eligible for subsidies should be in the rural electrification area of the country, i.e. outside the

main urban triangle (Kampala, Entebbe, Jinja), but within this area there may be interfaces with the

UETCL-owned distribution network that is operated by UMEME.

Technical criteria also need to be satisfied: the projects should be technically sound and satisfactory

demand studies have been carried out. The design should match the projected load in the case of

distribution extension projects, and the grid code should be observed.

A Locally Initiated Rural Electrification Project (LIREP) can be initiated by a small private investor

without access to finance on international capital markets, whereas a Community Initiated Rural

Electrification Project (CIREP) can be initiated by a local community. In both cases, the costs of the

development of the project are met jointly by the investor/community and the REF. Projects may be

either grid extensions or mini-grid electrification and can be within or outside a distribution concession

footprint. Communities are also able to form cooperatives to be concessionaires.

Regional equity

The Subsidy Policy further provides for the concept of regional equity, i.e. the support of projects to

obtain a more even distribution of electrification geographically. Areas which are more remote, poorer

and/or experience security problems, are targeted to receive a premium over-and-above the normal

subsidy. The regional premium is composed as shown in Table 11 below.


Table 9: Regional Equity

Zone Zone adjust-

ment

Remoteness

(>60 km from

grid)

Poverty and

low popula-

tion density

Security

(Civil/ unrest/

insurgency)

Maximum

adjustment

Centre +0.0% +2.5% +0.0% +0.0% +2.5%

East & West +2.5% +2.5% +5.0% +2.5% +12.5%

North East and North +10.0% +5.0% +5.0% +5.0% +25.0%

West Nile +5.0% +2.5% +2.5% +2.5% +12.5%

Source: ERA

3.2.2 Grants and Soft Loans

Through cost share grants, the Private Sector Foundation of Uganda (PSFU) through BUDS-ERT can

support the execution of preliminary, feasibility and other studies for micro hydro projects, the design

of business plans in order to determine cost units and set appropriate tariffs, and the development of

local capacities.

Further to that, E+Co, a venture capitalisation firm active in Uganda, is known to have interest in sup-

porting start-ups in this area of business through loans or equity. They are already supporting a feasi-

bility study for a 2 MW hydro project.

GTZ through the PREEEP programme can support hydro power projects with a rural electrification

component by providing technical and financial assistance through public private partnerships (PPP).

GTZ and PREEEP staff on site can give information about local opportunities and means of coopera-

tion for PPPs, contact:

Lucius Mayer-Tasch, GTZ-PREEEP, [email protected]

Peter Schragl, GTZ-PREEEP, [email protected]

Besides PPPs, GTZ is involved in the Private Sector Participation (PSP) in Mini Hydropower initiative, a cooperation of GTZ, the Uganda Energy Credit Capitalization Company (UECC), the Private Sector Foundation of Uganda (PSFU) and REA. The partners provide technical and financial support to pri-vate developers of mini-hydropower projects for rural electrification with a capacity of up to 1 MW. Support offered includes:

Technical advice throughout the process - from site identification to operation (GTZ).

Transaction advice, i.e. advice on business plan development and facilitation of financing ar-

rangements (UECCC).

Grants for feasibility studies on a cost-sharing basis. 100% grants for demand studies

(PSFU).

Attractive interest and loan terms from local banks supported by a partial risk guarantee

(UECCC-GTZ Credit Enhancement Facility).

Up to 25% conditional (performance based) grant for hydropower plant (UECCC-GTZ Credit

Enhancement Facility).

Grants for distribution grid (REA).

Relevant contacts for PSP in Mini Hydro Uganda are PREEEP staff and Specioza Ndagire from

UECCC ([email protected]).


Finally, the possibility of using carbon finance exists through the Small-scale Programme of Activities

in East Africa covering Renewable Energies (SPEAR) which was initiated by the Uganda Carbon

Bureau With support of GTZ/CIM and KfW. The Uganda Carbon Bureau was registered in April 2006,

and is a full-service carbon finance company. SPEAR will act as the UN-registered support centre for

renewable energy technology projects of less than 30MW each in Kenya, Uganda, Tanzania,

Rwanda, Burundi, and Sudan. It will be the Coordinating/Managing Entity (CME) of a Programme of

Activities (PoA) under the UN's Clean Development Mechanism (CDM) rules with small and medium

scale hydro power projects being the programme’s initial focus.

Further information can be found on the bureau’s website: http://www.ugandacarbon.org/index.php.

3.3 Campaigns and Others

There are no known programmes promoting financing of small or larger hydro projects at this time.

However, cost-shared funding support is available for studies from PSFU under the BUDS-ERT pro-

ject. This funding covers 50% of all costs related to:

Carrying out preliminary, feasibility and other studies

Design of business plans in order to determine cost units and set appropriate tariffs

Development and/or improvement of technology

Greening-the-Tea-Industry in East Africa has a programme that intends to develop 6 micro hydro sites

for use by tea industries for members of the East Africa Tea Trade Association, of which one in

Uganda (2 MW) . Details about this programme are highlighted in Annex 5.


4 Business Partners and Competitors

Note: the business of micro-hydro can be broken down into project developers, construction compa-

nies, installation companies, equipment suppliers, and consultants. There are many construction

firms, ranging from small to large, but not one has a particular advantage in relation to designing or

constructing micro-hydro. There are very few individual consultants specialised in micro-hydro. There

are also several installation firms, but not one specialises in micro-hydro although a few have been

identified with some more experience than other firms.

4.1 Overview of Micro-Hydro Key Market Players

The known project developers are listed in Table 12 below.

Table 10: Service Providers

Type Full name Address/contact details Specialisation

Construction

companies

Krishna Construction

Company

Kampala, Uganda

Tel.: (+256) (0) 414 252977

Civil contractors

Turnkey Construction

Company

Kampala, Uganda

Tel.: (+256) (0) 414 270812

Civil contractors

Roko Construction Co. Ltd Kampala, Uganda

Tel.: (+256) (0) 414 567305

Civil contractors

Allied Enterprises and

Construction

Kampala, Uganda

Tel.: (+256) (0) 414 235508

Civil contractors

Civicon Ltd Kampala, Uganda

Tel.: (+256) (0)414 252491

Civil contractors

Concorp International Ltd Kampala, Uganda

Tel.: (+256) (0) 414 250414

Civil contractors

Dott Services Ltd Kampala, Uganda

Tel.: (+256) (0) 414 566027

Civil contractors

Spencon Services Ltd Kampala, Uganda

Tel.: (+256) (0) 414 566163

Civil contractors

Ferdsult Engineering 17/19 Diamond Trust Blding

Tel.: (+256) (0) 414 342198

Electrical contractors,

also experience

operation of distribution

networks

Intermix Electrical

Contractors

8, Burton Street, Eng.

Tel.: (+256) (0) 414 232067

Electrical contractors

Pluto Investments Ltd

Plot 2, Jinja Highway Mukono Kam-

pala, Uganda, Eng. Paul Yawe

Tel.: (+256) (0) 414 290600

Civil & water

engineering contractors


Samka Sam Kajojo Construction company

VS Hydro Plot 2 Summit View Road Naguru Hill P.O. Box 3655 Kampala, Uganda Attention: Mr. Cletus Serwanga Tel.: +256 772 566 487

Construction company,

engineering contractors

Consulting

companies

Vida Corp

M73 Old Kireka Rd Mbuya ,

Eng. Gonza Kagwa

Tel.: (+256) (0) 312 283080

Mob.: (+256) (0) 712 161610

Civil & water

engineering with experi-

ence in dam construc-

tion

Ssempebwa and Partners

05 Emka House, Bombo Rd,

Eng. Nathan Ssempebwa

Tel.: (+256) (0) 414 251117

Mob.: (+256) (0) 772 412280

Electrical engineering

M & E Associates

Suzzie House, Ggaba Rd,

Eng. Sentongo

Tel.: (+256) (0) 414 501893

Civil engineering

Multi Konsults

29 Clement Hill Road,

Eng. A.M.S. Katahoire

Tel.: (+256) (0) 414 341321

Electrical & mechanical

engineering

Newplan Crusader House,

3 Portal Avenue

Box 7544,

Kampala, Uganda

Tel: +256 414 340 243/4/5

Fax: +256 414 257 861

Consulting

4.2 Micro-Hydro Projects Overview

More than 50 mini hydro power sites with a combined potential of 210 MW have so far been identified

through various studies in Uganda. Currently, small hydro accounts for only 18 MW of the electricity

generated in the country. Not much attention has been accorded to small sites that have a generation

potential between 10 kW and 1 MW. A study in the Mt Elgon region by GTZ did target this range of

generation capacity. In Annex 2 is a summary of the findings of that study that carried out prefeasibil-

ity studies of 10 sites ranging from 50 -120 kW and estimated investment costs ranging from 3500 -

5800 Euro per kW.

There are some micro-hydro sites that have been operational for a while. These have especially been

used to power hospitals.

The United Nations Industrial Development Organisation (UNIDO) has also supported a number of

small micro-hydro projects and it is funding Tanaka Company from Japan to develop five small pro-

jects each of 0.1 MW.


Annex 1: Documented Hydro Sites in Uganda

Table 1: Documented Hydro Sites in Uganda (Source: MEMD)

No. Name District Status Installed

(MW)

Potential

(MW)

1, Maziba Kabale Out of Operation 1.00 1.00

2, Kuluva Moyo Feeding Kuluva Hospital 0.12 1.00

3, Kagando Kasese Feeding Kagando Hospital 0.06 1.00

4, Kisiizi Rukungiri Upgraded from 60kW and Opera-

tional soon to distribute electricity

around the community

0.30 0.30

5, Mobuku I Kasese Operated by Kilembe mines and

feeds excess power to the grid

5.40 5.40

6, Mobuku III Kasese Operated by Kasese Cobalt

company and feeds into the grid

10.50 10.50

7, Muzizi Kabarole Still undeveloped but extensive

studies carried out

- 20.00

8, Warugo Bushenyi Pre-feasibility study carried out by

UNIDO

- 3.50

9, Rwizi Mbarara Pre-feasibility study carried out - 0.50

10, Kakaka Kabarole Still undeveloped but extensive

studies carried out by Eco Power

- 7.20

11, Nshungyezi Mbarara Still undeveloped but extensive

studies carried out by Electricity

Distribution Managmnt (Namibia)

- 20.00

12, Nyamabuye Kisoro Still undeveloped but extensive

studies carried out by Norplan for

USES the developer

- 2.20

13, Siti Kapchorwa Still undeveloped but extensive

studies carried out by Mt. Elgon

Power Company Ltd

- 3.30

14, Sipi Kapchorwa Still undeveloped but extensive

studies carried out by Mt. Elgon

Power Company Ltd

- 2.50

15, Anyau, Olewa Arua Still undeveloped but extensive

studies carried out and WENERECO

has exclusive rights

- 1.50

16, Haisesero Kabale Undeveloped and only prefeasibility

studies

- 1.00

17, Kitumba Kabale Undeveloped and only prefeasibility

studies

- 0.20


18, Mpanga Kabarole Undeveloped and only prefeasibility

studies

- 0.40

19, Nyakibale Rukungiri Undeveloped and only prefeasibility

studies

- 0.10

20, Leya Moyo Undeveloped and only prefeasibility

studies

- 0.12

21, Amua Moyo Undeveloped and only prefeasibility

studies

- 0.18

22, Mvepi Arua Undeveloped and only prefeasibility

studies

- 2.40

23, Ela Arua Undeveloped and only prefeasibility

studies

- 1.50

24, Agoi Arua Undeveloped and only prefeasibility

studies

- 0.35

25, Ngusse Kibaale Undeveloped and only prefeasibility

studies

- 0.40

26, Kikagati Mbarara Decommissioned 1MW plant being

replaced with 20MW plant under

construction by China Shang Sheng

Industrial Company

- 20.00

27, Sezibwa Mukono 0.50

28, Tokwe Bundibugyo Un-development with on-going stud-

ies by Uganda Energy for rural De-

velopment

0.10

29, Mgiita Bundibugyo Undeveloped and only prefeasibility

studies

0.15

30, Maria Adua Arua Undeveloped and only prefeasibility

studies

0.10

31, Ishasha Rukungiri Un-development after extensive


6.50

32, Buseruka Hoima Still undeveloped but extensive

studies carried out by Hydromax for

development

- 10.00

33, Nengo Bridge Kanungu Un-development after extensive

studies carried out by SN Power

Invest AS

- 7.50

34, Bugoye Kasese Un-development after extensive


Invest AS

- 11.00

35, Mobuku II Kasese Un-development after extensive


Invest AS

- 13.00

36, Kyambura Bushenyi Under development after extensive


- 0.60


37, Muyembe Siri-

nutyo

Sironko Un-developed. studies carried out by

Elgon power. Permit expired

- 2.60

38, Ririma Kapchorwa Un-developed. studies carried out by

Elgon power. Permit expired

- 1.20

39, Mahoma Kamwenge Un-development with on-going stud-

ies by Uganda Energy for rural De-

velopment

- 1.00

40, Mitano Kanungu Undeveloped and only prefeasibility

studies

- 2.50

41, Rwempungu Bushenyi Undeveloped and only prefeasibility

studies

- 2.30

42, Cresta Ibanda Undeveloped and only prefeasibility

studies

- 2.00

43, Rwenzori Kasese Undeveloped and only prefeasibility

studies

- 3.00

44, Mpanga Escarp-

ment

Kamwenge Undeveloped and only prefeasibility

studies

- 14.00

45, Rwigo Bundibugyo Undeveloped and only prefeasibility

studies

- -

46, Nyahuka Bundibugyo Undeveloped and only prefeasibility

studies

- 0.70

47, Nkussi

Escarpment

Hoima Undeveloped and only prefeasibility

studies

- 11.00

48, Nkussi at Pachwa Hoima Undeveloped and only prefeasibility

studies

- 0.38

49, Waki Hoima Still undeveloped but extensive

studies carried out by Norplan for

SN Power Invest AS

- 5.00

50, Sonso Masindi Undeveloped and only prefeasibility

studies

- 1.40

51, Waisoke Masindi Undeveloped and only prefeasibility

studies

- 1.70

52, Izizi Masindi Undeveloped and only prefeasibility

studies

- 1.60

53, Esia Adjumani Undeveloped and only prefeasibility

studies but licensed out to Adjumani

Rural Elect. Co.

- 1.00

54, Kochi Koboko Undeveloped and only prefeasibility

studies

- 0.91

55, Nyarwodo I Nebbi Undeveloped and only prefeasibility

studies

- -

56, Nyagak I Nebbi Under construction with License held

by WENRECO

- 3.50

57, Nyagak II Nebbi Undeveloped and only prefeasibility

studies

- 3.00


58, Ora Arua Undeveloped and only prefeasibility

studies

- 0.90

59, Manafwa Manafwa Undeveloped and only prefeasibility

studies

- 0.75

60, Simu Sironko Undeveloped and only prefeasibility

Studies

- 2.60


Annex 2: Summary of Study in Mount Elgon Region

Carried out by GTZ GTZ undertook the following Study on the Potential of Micro-hydro Power in the Mount Elgon Region

which looked at the potential for developing small hydrosites in the Mount Elgon Region in Uganda.

The Executive Summary of the report as well as a few tables are reproduced here. For more informa-

tion, please contact the GTZ office in Uganda.

Executive Summary

1. The aim of the assignment is to identify potential micro hydropower sites for off-grid electricity sup-

ply in remote rural areas around the Mt. Elgon National Park, comprising the districts Bukwo, Kap-

chorwa, Sironko, Mbale, Bududa and Manafa,

2. During this first step of the assignment more than 20 potential mini hydropower (MHP) sites were

identified initially on desk-level. Subsequently the identified potential was verified by conducting brief

site reconnaissance of most of the identified locations. Ten sites were identified as the most promising

by applying a customised site screening and evaluation matrix. The evaluation of the sites was based

on technical, socio-economic, socio-cultural and environmental aspects. The findings of this first part

of the assignment were summarised in an inception and screening report submitted in December

2008.

3. Surveys and more detailed site assessments were conducted during the following months. Findings

were summarised and analysed, initial designs, cost estimates and economic analyses were prepared

on the basis of a customised format. Ten prefeasibility studies will be submitted together with this

main report.

4. Numerous meetings with local authorities, planners and potential stakeholders and beneficiaries

were held in Kampala and in the respective districts. Generally the initiative was received and sup-

ported very positively.

Conclusions and Recommendations

5. The pre-feasibility studies prepared prove the technical and economic viability of the proposed pro-

jects. A large number of these sites is characterised by relatively high heads and low flows, which are

available in most cases almost throughout the year but with restrictions on the coverage of the peak

load during one to two months during the lean season.

6. The socio-economic situations found in the villages were rather diverse. In most cases the under-

standing for the proposed projects was low in view to technical and management implications and to

the potential benefits of such projects to the community. In some cases the understanding blurred by

possible short-term benefits such as employment during construction and selling of construction mate-

rials.

7. In regards to the existing institutional structures on village level substantial input and training is

required along with the physical implementation of the projects. As an option it might also be consid-

ered to implement a centralised institution, which provides long term support in management and

technical issues.

8. Large emphasises of many people met during the consultations, mainly in Local Government Insti-

tutions, was also put on the large potential for development of on-grid small hydropower (SHP) sites

(1 to 20 MW). The overall SHP-potential in the region is commonly estimated to be in the range of 40

to 80 MW.

9. The following further steps might be recommended based on the findings of this study:


Options for financing of the detailed planning and implementation of the schemes should be

investigated in detail.

It is recommended to proceed with the proposed sites to feasibility-level.

It is highly recommended to start mobilisation and training measures in the respective com-

munities as early as possible, ideally in parallel with the preparation of the feasibility studies. The region around Mt. Elgon features substantial potential for the development of micro, mini-and

small hydropower plants. Under this report exclusively sites were identified which may serve the pur-

pose of rural electrification beyond the areas yet connected to the national grid. A large number of

potential sites which might be interconnected to the national grid would also be available but was

excluded from this study by definition.

Sites supplying to isolated micro grids were found in all assessed districts. However, mainly due to the

exclusion of areas already electrified, the highest density of such sites was found in Kapchorwa Dis-

trict, north of Mt. Elgon. Technically all analysed sites are feasible, whereby the required specific in-

vestment (cost per installed capacity) is commonly ranging between 3 000 and 4 000 EUR per kW-

installed.

Most sites are characterised by relatively high heads (up to over 100m) but relatively small flows. It

was aimed for schemes, which are capable of supplying the required peak demand throughout the

year, whereby in most cases the flow is not sufficient to supply the required peak demand during one

to two months in the lean season, resulting in possible options:

- load shedding for up to three hours in the evening during one to two months per year (usually an

inconvenient but viable measure)

- reduction of the number of households connected (this will imply higher specific investment costs

and a reduced total number of beneficiaries)

- at some sites it is possible to constrict enlarged forebays, which would allow to store water during

off-peak times to be used during the peak hours in the evening. At the sites where this is possible this

might be a suitable compromise, whereby the cost-benefit analysis should be prepared in the detailed

feasibility studies (from a purely economic point of view this measure is mostly not viable, as it comes

at relatively high costs compared to the limited unserved demand)

The socio-economic situations found in the villages visited were rather diverse; so was the general

understanding and reception of the proposed projects. To the largest extent the areas are inhabited

by families living in a subsistence economy, based on agriculture and rising of livestock. Management

skills as well as the technical understanding were usually low. A high demand for work with the com-

munities was identified on the institutional level, on management, operation and maintenance, possi-

ble productive use of electricity etc.


Annex 3: Functions of the Electricity Regulatory

Authority (ERA)

The ERA has the following functions:

To issue licenses for

The generation, transmission, distribution or sales of electricity

The ownership or operation of transmission systems;

To receive and process applications for licenses;

To prescribe conditions and terms of licenses issued under this Act;

To modify licenses issued under this Act;

To make and enforce directions to ensure compliance with licenses issued under this Act;

To establish a tariff structure and to investigate tariff charges, whether or not a specific com-

pliant has been made for a tariff adjustment;

To approve rates of charges and terms and conditions of electricity services provided by

transmission and distribution companies;

To review the organisation of generation, transmission and distribution companies or other le-

gal entities engaged in the generation, transmission and distribution of electricity to the extent

that that organisation affects or is likely to affect the operation of the electricity sector and the

efficient supply of electricity;

To develop and enforce performance standards for the generation, transmission and distribu-

tion of electricity;

To encourage the development of uniform electricity industry standards and codes of conduct;

To establish a uniform system of accounts for licensees;

To advise the Minister regarding the need for electricity sector projects;

To prepare industry reports and to gather information from generation, transmission and dis-

tribution companies;

To prescribe and collect licence fees;

To provide for the procedure for investment programmes by transmission and distribution

companies;

To approve standards for the quality of electricity supply services provided;

To approve codes of conduct in respect of the operation of transmission and distribution sys-

tems;

To acquire information and carry out investigations relating to any of its functions; and

To perform any other function that is incidental or consequential to its functions under this

section, or as may be conferred on it by any other law.


Annex 4: Institutional Framework of the Renewable

Energy Policy

The overall responsibility for this policy lies with the Ministry of Energy and Mineral Development

(MEMD).

It is the responsibility of the Ministry to oversee coordination and effective implementation of activities

under this policy by various stakeholders.

Within the Ministry, a Renewable Energy Department was created to specifically focus on the promo-

tion of RE and RETs. The MEMD is required to work with municipal authorities and industries that

generate lots of waste in developing the potential.

The functions of the RE Department at the MEMD are:

To identify new sources of energy to be developed in Uganda

To collect and process the information concerning renewable energy resources

To carry out pre-feasibility and pre-investment studies of the various sources and sites

To mobilise technical assistance and funding for the development of the sources

To develop and review renewable energy policies

To promote and develop appropriate renewable energy technologies

To provide technical support to local governments and other stakeholders

To supervise projects in renewable energy

To adopt standards and codes of practice for renewable energy technologies

To facilitate the transfer of renewable energy technology

Further to that, since renewable energy and energy efficiency are being implemented in a holistic and

integrated manner, it became necessary to strengthen the energy efficiency and conservation func-

tions of the Ministry, by the creating an Energy Efficiency and Conservation Department.

The main functions of this new department are:

To regularly collect, analyse and interpret data on the status of energy efficiency and conser-

vation throughout the country

To develop strategies and programmes to improve energy efficiency and conservation

To implement and monitor programmes that intend to improve energy efficiency and conser-

vation

To recommend and develop standards that can be used to improve energy efficiency and

conservation

To coordinate and conduct research on the measures to improve energy efficiency and con-

servation

To provide advice and technical guidance to energy users on the best practices of energy ef-

ficiency and conservation


To provide technical advice to other government departments, local governments, the private

sector and other stakeholders on energy efficiency and conservation

To disseminate information on energy efficiency and conservation to the public and translate

this into local languages.

Furthermore, the RE Policy calls for the establishment of a National Energy Committee which is nec-

essary to provide strategic policy guidance to the sector. The other main actors include:

The Electricity Regulatory Authority (ERA), which sets the tariffs and issues licenses for

studies, generation and distribution, according to the Electricity Act 1999.

The Rural Electrification Agency (REA) is the secretariat of the Rural Electrification

Board (REB), which manages the Rural Electrification Fund (REF). The REF provides sub-

sidies to support rural electrification projects.

The Uganda Electricity Transmission Company (UETCL) is the System Operator and

owns the transmission mains of above 33KV on behalf of the government.

The Uganda Electricity Distribution Company (UEDCL) is the owner of the electricity dis-

tribution network, which is being managed by UMEME, the concessionaire. Investments by

government will belong to UEDCL.

The Uganda Electricity Generation Company (UEGCL) is the owner the Kiira and

Nalubaale Power stations at Owen Falls, which have now been concessioned to Eskom

Globeq to manage them.

The Uganda National Bureau of Standards (UNBS) is responsible for developing and moni-

toring standards for renewable energy technologies in addition to biofuel technology.

The National Environment Management Agency (NEMA) is responsible for regulating the

impact of renewable investments on the environment, through instruments like Environment

Impact Assessment (EIA).

The Directorate of Water Development (DWD) is responsible for issuing permits for water

extraction for hydropower schemes.

The Private Sector Foundation (PSFU) is a body that brings together private companies will

assist in project development.

The Uganda Investment Authority (UIA) provides both foreign and local investors with li-

censes for investment.

Uganda Manufacturers Association (UMA) is a body that brings together key users of re-

newable energy and potential manufacturers of the equipment.

Uganda National Renewable Energy Agency (UNREA) brings together companies, NGOs

and CBOs that are implementing renewable energy projects.

The Uganda Small Scale Industries Association (USSIA) will also participate through its

members.

The Media Houses, which include the radio, print and TV will also participate in the sensitisa-

tion campaigns.

Other government ministries involved in the provision of renewable energy technologies for

social services. These are the Ministry of Health, Ministry of Finance, Planning and Economic

Development, Ministry of Education and Sports, Ministry of Water and Environment, National


Forestry Authority, Ministry of Agriculture, Animal Industries and Fisheries, Ministry of Local

Government, the district and local governments and the municipalities.

Special financial mechanisms have been instituted to facilitate rural electrification and renewable en-

ergy investments. This includes the Credit Support Facility (CSF) known as the Uganda Energy Capi-

talisation Trust that has been instituted to provide partial guarantees for private sector borrowing from

the local financial markets to develop projects.

Participating Financial Institutions (PFIs) will include Commercial Banks, Development Banks and

Microfinance Institutions (MFIs).


Annex 5: UNEP Greening-the-Tea-Project Using Small

Hydro Plants

Introduction:

The objective of the proposed small hydro programme is to reduce the electrical energy in the tea

processing industries in countries covered by the East African Tea Trade Association (EATTA, Ethio-

pia, Burundi, Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda, Zambia, and Zimbabwe),

while increasing power supply reliability and reducing greenhouse gas emissions through the removal

of barriers. Specifically, the project aims to establish six small hydro demonstration projects in at least

four of the EATTA member countries, preferably with an attached rural electrification component, and

prepare a number of additional pre-feasibility studies. Both studies and actual installations shall serve

as training grounds for the entire tea sector in the region. In addition, a special financing window shall

be designed that will provide incentives for individual tea processing plants to move into “green power

generation”.

Project summary:

Many Eastern and Southern African countries produce tea in bulk for export, generating crucial for-

eign earnings. The basic processing of tea leaves undertaken at the tea factories requires significant

amounts of electrical energy. Currently, in most factories the electrical energy is sourced from unreli-

able national grids or inefficient and highly polluting and greenhouse gas emitting diesel gensets.

Since the tea areas are often remote areas, voltage on the grid may drop causing damage to equip-

ment and preventing the use of some voltage sensitive equipment like compact fluorescent lights.

Drought prone countries which include most Eastern and Southern African countries have had

drought induced power rationing in recent years. Most of these countries have inefficient transmission

and distribution systems, high demand and low generation capacities resulting in frequent load shed-

ding. All tea factories have generator sets that are on average in operation for up to 5 % of (factory

operation) time. Consequently, the fuel budgets of tea factories are dependent on increasing interna-

tional oil prices with negative implications on the competitiveness of the tea produce in the world mar-

ket.

It appears that in most areas where tea is grown, the rainfall and hilly terrain guarantee that there will

be a hydro potential somewhere near the tea processing plant. In some cases, this potential has been

harnessed, but in many cases, the tea manufacturers rely on the grid and some diesel gensets for

back up purposes.

The umbrella organisation in the tea sector in the region is the East African Tea Trade Association

(EATTA). EATTA is the proponent of the proposal, as well as the initiator and facilitator of the pro-

ject. Through its network, it shall be instrumental in liaison with national tea agencies and individual

tea factories, support overall data collection, and provide support to consultative workshops and train-

ing sessions in various countries.

Through a number of (pre-) feasibility studies, six pilot small-hydro projects are to be developed, pref-

erably with a rural electrification component, piggy-backed to the small-hydro project development. All

stages of such a project development (pre-feasibility, feasibility including detailed design, tendering,

actual construction and commissioning, operation and maintenance) will form a solid training ground

for tea sector engineers as well as civil engineers from national consulting/engineering firms. Hands-

on training should build sufficient technical capacity that will enable the realisation of future small-

hydro systems tapping local expertise. Socio-economic impacts and environmental assessments

would be included at feasibility and completion stages.


In addition, the project aims to accelerate the shift from grid and diesel gensets to hydro through the

creation of special financing window for tea manufacturers with conducive terms and conditions of-

fered to all EATTA member countries, in order to provide a long lasting incentive for such a shift.

This initiative aims to improve both energy supply security and lower tea production costs by reducing

dependency on fossil fuels, consumed by generator sets, and shifting from grid power to hydropower

generated in close proximity to the tea factories. The project will have the global environmental benefit

of reducing Greenhouse Gas (GHG) emissions and contribute to poverty alleviation through employ-

ment and local productive uses.

The specific objectives are to: facilitate generation of electricity from decentralised hydro power; im-

prove the reliability and quality of energy service to the tea factories and hence lower factory produc-

tion costs; and provide access of electricity to households and public and community facilities within

close proximity to the tea factories. The benefit to the utilities will be grid reinforcement and reduce

any fossil fuel generated electricity in the main grid. The concept is to blend a commercial activity (tea

processing) and its energy requirements with the social and developmental dimension of rural electri-

fication in a sustainable manner.

Objectives:

A specific project-oriented financing scheme that encourages small-hydro development in

East Africa is created.

Small-hydro projects for tea processing industry in EATTA countries developed and imple-

mented.

Technical capabilities concerning design, operation and maintenance of small-hydro electrical

power systems enhanced within the tea sector and civil engineering sector of each participat-

ing country.

Quality standards for small hydro design, installation and maintenance and operation have

been set for all EATTA countries.

Awareness on potential for (small) hydro as technically viable, economically feasible and envi-

ronmentally friendly alternative to current (conventional) practices has been raised.

A regulatory framework for power generation and distribution of (small-hydro) power has been

established in all participating EATTA countries (water rights, generation and distribution li-

censes and tariffs).

Households, commercial and social establishments in un-electrified communities near tea

processing plants have been connected to the plants’ small hydropower supply.

Regional increase in local manufacturing of small-hydro system components.

One or more models for electric service provision to tea factories (and communities- if rele-

vant) are established.

Communities aware of the value of well preserved watershed catchment areas upstream.

Specific outputs:

Six small-hydro demonstration projects established in at least three EATTA member coun-

tries; preferably with an attached rural-electrification component.

Partnership between EATTA and UNEP has been established (MoU).


Up to five additional pre-feasibility studies for promising small-hydro sites prepared.

Project financing mechanism established (dedicated financing window for project develop-

ment including incentives).

EATTA project facilitation skills enhanced and project implementation committee operational.


Annex 6: Executive Summary –

The Rural Electrification Strategic Plan

The Electricity Act, 1999, provides that the Minister responsible for electricity shall prepare a sus-

tainable and co-ordinated Rural Electrification Strategy and Plan for Uganda for the approval of Cabi-

net, and once in each year to submit to Parliament a report on progress and achievement of the Plan.

The present document constitutes the first Rural Electrification Strategy and Plan covering the period

2001 to 2010 and prepared by the Ministry of Energy and Mineral Development in consultation with

the Ministry of Finance, Planning and Economic Development, the Ministry of Local Government and

other stakeholders in the private and public sector.

Rural electrification forms an integral part of the government’s wider rural transformation and

poverty eradication agenda. The government’s Poverty Eradication Action Plan (1998-2000) has the

aim to raise incomes of the poor through provision of infrastructure, credit, etc., and to improve quality

of life. Increased electricity access facilitates greater income generating opportunities and allows the

provision of better public services, especially health care. But, it is only one condition for rural devel-

opment. Other government programmes on infrastructure such as transport and communication

means, water and programmes on health services and education are equally important for rural trans-

formation. The RE strategy seeks to maximise the economic, social and environmental benefits of

rural electrification subsidies through a close co-ordination of the electrification programme with other

government activities in the rural areas. Special instruments, procedures and sub programmes will be

developed for making crosssector co-ordination an integral part of rural electrification projects.

The primary objective of the RE Strategy is to reduce inequalities in access to electricity and the as-

sociated opportunities for increased social welfare, education, health and income generating opportu-

nities. Electricity is currently available to about 2 % of rural households:

UEB has 170,000 customers, of which 80,000 live outside the urban Kampala-Jinja-Entebbe triangle.

UEB has been adding new connections at a rate of roughly 8,500 a year mainly in urban and peri-

urban areas, whilst the number of households is growing at 100,000 every year, more than half of

which are in rural areas. This illustrates the scale of the electrification challenge and the need for a

fundamental change of policy and approach.

The government’s Rural Electrification Strategy aims to achieve for the year 2010 a rural electrifica-

tion rate of 10%, meaning that 480,000 rural consumers, a net increase of 400,000 over the year

2000 figure are to be serviced. It is estimated that 15 % of the increasein serviced households will

come from higher connections to the existing grid outside the urban triangle, 40 % from extension of

the interconnected grid, 25% from isolated grids and 20% from photovoltaic solar systems.

The rural electricity coverage rate, - the percentage of rural households living in the service areas of

low voltage distribution grids – to be achieved in the year 2010 is 30 %. More than 1.2 million rural

households will be living in electrified areas.

Under the government’s new policy approach development is demand-driven. Any capable

sponsor: private companies, NGOs, local authorities and communities will all be able to initiate electri-

fication projects. The fundamental element of the new approach is that it will be progressively de-

mand-driven; government will determine policy, promote investments, set targets and provide guid-

ance to investors. For areas which are not yet attractive for the private sector, government will pro-

mote public-private partnership to electrify them in a realistic time.

A Rural Electrification Master Plan will be prepared by the Rural Electrification Agency (REA) in co-

operation with the system operator. It will provide information on investment opportunities and poten-

tial demand. The plan will be updated every fifth year. Priority regional distribution projects identified in


the plan may be subject to feasibility studies financed by the Rural Electrification Agency (REA) lead-

ing to tendering and bidding for their licenses. When the first indicative plan has been prepared, the

present Rural Electrification Strategy and Plan will be updated with specific details. The de monopoli-

sation of the power sector leads to the replacement of the current system of standard national tariffs

with tariffs reflecting the investor’s cost of supply. Since decentralized initiatives have to be commer-

cially viable, tariff revenue must cover the costs to the service provider, allowing private capital to

make a return and finance the investment. As a result, consumers in different parts of the country will

pay different tariffs. Providing rural investors and consumers with equal terms, the principle of cost-

reflective tariffs will be applied also in the case of a private investor taking over all of UEB’s distribu-

tion systems that are connected to the national grid as one distribution and supply license. This prin-

ciple implies that new connections outside the post UEB concession would face tariffs likely to be

different from the initial concession area.

The Rural Electrification Fund that will be established in accordance with the Electricity Act is the in-

strument for achieving equitable regional distribution access to electricity.

The rural economy is the backbone of the national economy in terms of employment, value added and

foreign exchange earnings. It will grow if the rural infrastructure, of which reliable and affordable elec-

tricity supply is an indispensable part, continues to be improved. The development of this infrastruc-

ture faces important economic barriers. The up-front investment in grid extension projects is huge,

whereas initial demand is relatively low; and the cost of diesel operation is inflated by the high tax of

diesel fuel and company margins. In order to make rural electrification projects commercially viable

and tariffs affordable for an important number of rural communities, the Fund will utilise subsidies to

buy down investment costs, risks and information barriers to public or private initiatives. The objective

of the Fund will be to get maximum access per invested subsidy amount subject to the satisfaction of

regional equity requirements.

Investments by the post-UEB concession holder in his rural electrification areas will qualify for support

from the Fund on equal footing with project proposals from other sponsors.

Funding for the REF shall, as stated in the Electricity Act, come from money appropriated by Parlia-

ment, any surplus made from the operations of the Electricity Regulatory Authority, a levy on trans-

mission bulk purchases of electricity from generation stations to be determined by the Minister with

the approval of Cabinet, and from loans and grants. To achieve the target of connecting 400,000

households by 2010, the government estimates that a total investment of USD 375 million and REF

funding of USD 125 million will be required over a ten year period. The levy on transmission bulk pur-

chases of electricity is the only remaining cross-subsidy from grid connected to non-grid connected

consumers; it will be set at the level of 5 %. Especially during the initial years, the major share of fund-

ing will have to come from donors if credible expansion results are to be achieved.

Institutional details of the Fund. A Board composed of Permanent Secretaries of the Ministries of

Energy and Mineral Development; Finance, Planning and Economic Development; local government,

a representative of the donors, a representative of the private sector, a representative of civil society,

a representative of the banking sector and a professional with expertise in regulatory matters will

oversee the management of the Fund. Grant applications will be assessed by the Rural Electrification

Agency against objective eligibility criteria and then passed on to the Board for approval. A Trust

Agent will then handle the disbursement of funds to the applicants.

Small-scale power generation, especially utilising clean and indigenous renewable energy sources,

can play a key role in supporting expansion of electrification in Uganda. To facilitate commercially

based development of such systems, a standardised transactional framework will be implemented

including power contracts, pricing terms and regulation. The target is to have at least 70 MW of re-

newable energy capacity other than large-scale hydro power developed by the year 2010. The gov-

ernment will make maximum use of the opportunity for attracting grant support from financing tools

related to the Kyoto-Protocol.


Solar PV systems are the least cost technology for providing electricity to small, scattered communi-

ties. The strategy of the government is to assist the development of a national solar PV market. Sub-

sidies will be given for institutional systems (e.g. water pumping, health, education) to strengthen the

quality of local social services; and for solar home PV systems market development.

Financing, constructing and managing an electricity service requires technical knowledge, an appro-

priate credit scheme and business skills that rural communities and potential private operators lack. In

order to overcome these barriers and stimulate more electrification projects, the RE Strategy includes

a strong and long-term capacity building and intensive awareness raising and promotion.

The regulation of RE projects will be the responsibility of the Electricity Regulatory Authority (ERA).

Regulation of small grids will be “light-handed” to avoid the regulatory process to become an adminis-

trative barrier for private sector involvement. The RE Strategy requires the ERA to develop specific

rules for the RE projects including: relaxed licensing requirements, tariff levels, appropriate safety and

service level standards and regulations for facilitating grid extensions. Regulatory responsibilities for

small electricity systems may be delegated to local authorities, where sufficient capability exists at this

level, in accordance with the Electricity Act.

Links with power sector strategy. The RE Strategy builds on and extends the thinking on rural elec-

trification set out in the Power Sector Restructuring and Privatisation Strategy (PSRPS) of June 1999.

It provides the rural complement to the privatisation of UEB, which, otherwise, would have benefited

mainly urban consumers.


References

Electricity Act 1999, The Uganda Gazette No. 56 Vol. XCII, Kampala 1st November 1999.

Rural Electrification Strategy and Plan Covering the Period 2001 to 2010, Ministry of Energy and

Mineral Development, Government of Uganda, Kampala, February 2001.

Establishment and Management of the Rural Electrification Fund, 2001, The Uganda Gazette No.

56 Vol. XCIV, Kampala 11th December 2001.

The Energy Policy for Uganda, Ministry of Energy and Mineral Development, Government of

Uganda, Kampala, September 2002.

Uganda Energy Balance, Ministry of Energy and Mineral Development, Government of Uganda,

Kampala, 2004.

Poverty Eradication Action Plan 2004/5 – 2007/8, Ministry of Finance, Planning and Economic

Development, Kampala, December 2004.

2005 Annual Report, Ministry of Energy and Mineral Development, Kampala, 2006.

2006 Statistical Abstract, Uganda Bureau of Statistics, Kampala, December 2006.

2002 Uganda Population and Housing Census. Analytical Report, Abridged Version, Uganda

Bureau of Statistics, Kampala, June 2006.

2005/06 Uganda Household Survey, Uganda Bureau of Statistics, Kampala, December 2006.

ERT Health Component – Final Baseline Report and Capacity Building Plan, Ministry of Health,

Kampala, 2006.

Background to the Budget, Ministry of Finance, Planning and Economic Development, Kampala,

June 2007.

ERT Quarterly Report, June – September 2007, Ministry of Energy and Mineral Development,

Kampala, October 2007.

Millennium Development Goals. Uganda’s Progress Report 2007, UNDP, Kampala, October

2007.

The Renewable Energy Policy for Uganda, Ministry of Energy and Mineral Development, Gov-

ernment of Uganda, Kampala, November 2007.

Small Hydropower Development in Uganda, ERA, October 2007.

Study on the Potential of Micro-hydro Power, in the Mount Elgon Region, Uganda, Final Report,

GTZ, May 2008.

This publication is available free of charge as part of the public relations work of the Federal Ministry

of Economics and Technology, and may not be sold. It may not be used by political parties or cam-

paigners or electoral assistants during an election for the purposes of campaigning. In particular, it is

forbidden to distribute this publication at campaign events or at information stands run by political

parties or to insert, overprint, or affix partisan information or advertising. It is also forbidden to pass it

on to third parties for the purposes of electoral campaigning. lrrespective of when, in what way, and in

what quantity this publication reached the recipient, it may not be used even when an election is not

approaching in a way that might be understood as suggesting a bias in the federal government in

favour of individual political groupings.

Uganda`s Small-Hydro Energy Market

Documents

Transcript of Uganda`s Small-Hydro Energy Market