Uganda Electricity Regulator Discusses Industry position

Tuesday, April 6 2010

About 97 per cent of Uganda’s population does not have access to electricity. Load shedding remains rampant countrywide and prospects for a lasting solutions are not in the horizons as Benon Herbert Oluka reports.
Electricity consumers will continue to pay for expensive thermal power for the unforeseeable future, according to a study.

The finding is based on delays experienced in the development of more than half of 28 mini hydro power, biomass and solar power projects licensed by the Electricity Regulation Authority between 2007 and 2009.
The projects are expected to produce a total of 700 megawatts of electricity, nearly two times the current peak demand countrywide.

However, mini projects with the potential to produce a combined total of 230 MW – nearly the same capacity expected to be generated at the Bujagali Hydropower Project after its anticipated completion next year – are running behind schedule, according to the ERA study that was released in January.

The study, titled: Status of Electricity Projects under Development, reveals that three of the developers had not carried out feasibility studies or other initial activities by the time their one year permits expired. Another five are yet to fulfill all requirements for acquisition of permits and cannot, therefore, start any work. For others, the delays have been occasioned by a series of setbacks, including increasing development costs, delays in sourcing sufficient funding and difficulties in connecting to the national grid.

The Counsel/Secretary of ERA, Mr Johnson Kwesigabo, said the delays are likely to affect long term national planning and lead to the continued use of tax payers’ money by the government to subsidise the production of the more expensive thermal electricity. Mr Kwesigabo said the government currently spends about Shs92 billion per annum to subsidise electricity prices.

Impact of the delays
“The delay will impact on us because we shall continue to use expensive power,” said Mr Kwesigabo. “About 150 megawatts of the current power is thermal. We want that to be removed. We want to replace expensive thermal starting with Aggreko and then eventually other thermal plants.”

Over the years, Uganda has suffered from power shortages exacerbated in recent times by significant reductions of water levels on Lake Victoria. Attempts to alleviate the situation with thermal power have only led to increased tariffs for both domestic and commercial/industrial use.

Aggreko produces 50 MW of thermal electricity in Jinja District, which Mr Kwesigabo said the government plans to phase out as soon as there is a cheaper and cleaner source of electricity. This will be followed by the 50 MW plant in Mutundwe, which will be shut down once the three-year period that the World Bank is financing it ends. However, the one plant at Namanve will be maintained for use during peak hours.

Mr Kwesigabo said only four of the mini hydro power projects are expected to be ready within the next two years. They include Buseruka project in Hoima District, which is being developed by Hydromax Ltd to produce 9 MW, the Mpanga project in Kamwenge District - that is being developed by Africa EMS Mpanga Ltd to produce 18 MW - and the Ishasha project in Rukungiri District that is being developed by Eco Power to produce 7 MW.

The other is the thermal plant at Kaiso Tonya, in which Tullow Oil and Jacobsen Elektro have partnered to produce 52 MW. Mr Kwesigabo said the feasibility study is complete and it will be commissioned next year.
While Africa EMS Mpanga plant will be completed this July, Mr Kwesigabo said the company will take at least another six months before they can supply the power to the national grid due to problems with the construction of their transmission lines.

“The transmission line was bided (sic) out but the process got problems so they are re-bidding it out. The line is likely to delay because from the time they give out the contract, it takes about six months to construct the line. So the dam is going to be ready but the line will not,” he explained.

According to Mr Kwesigabo, the West Nile Rural Electrification Company, which is developing a 3.4 MW plant at Nyagak in Nebbi District, has resolved the problems that had derailed it and could be ready early next year. The ERA report says the hydro power companies whose permits expired and did not apply for extension include: Ziba Ltd (8.3 MW at Kyambura hydro electricity project (HEP) and Bushenyi District.

Expulsion on contracts
“We have not been happy with the progress so we have not renewed their permit. There is potential but Ziba is not going to manage. By the time their permit expired, they had not really done much work with the studies,” said Mr Kwesigabo.

The other is the Norwegian company Tronder Energie AS (5 MW at Waki HEP, Masindi District), who abandoned the project “owing to other commitments.” Hydromax Ltd, who are about to complete the 9 MW Buseruka project in Hoima District, have now applied for a permit to develop Waki.

In an ironic twist, Tronder Energie bought the interest of the 10 MW Kikagati project at the Uganda-Tanzania border from China Shan Sheng International (U) Ltd. The Chinese firm reportedly failed to resolve cross-border issues with the Tanzanian government. According to Mr Kwesigabo, Tronder Energie wants to increase the capacity of the project and have applied to review its designs. The biomass/waste project developer, whose permit expired, is Sesam Energetics 1 Ltd (33 MW in Kampala). Mr Kwesigabo explained that they intended to generate electricity from garbage in the city but had to shelve the idea following runs in with officials of Kampala City Council.

“They wanted to work on garbage from the city but for some reason City Council does not want them to touch their garbage. They have been having a problem with people who want to use garbage,” he said.

Solar power companies
Among the solar power developers, Energy Systems Africa applied to set up a generation plant at Namugoga on Entebbe Road to produce 50 MW but are facing a major stumbling in the form of the tariffs that they propose to charge.

“They can generate power at 15 cents,” explained Mr Kwesigabo. “Now if they don’t get a subsidy that will be a high tariff. We can’t afford that price. They are still negotiating with the government to give them some subsidy. The hydro power plants we licence, their long term tariff are around 7 cents so that of Energy Systems is twice as much. Solar technology is expensive although it is still cheaper and cleaner than thermal.”

Nearing completion
Three other solar developers are yet to complete their applications. They are Stewards Net Uganda Inc. Ltd (50 MW solar-PV plant in Kampala), Micro Power Group (0.24MW solar-PV in Mbale, Arua and Lira), and East African Energy Technology Development Network (60kW and 150kW at River Dirigana in Sironko District).

By Benon Herbert Oluka - Daily Monitor