Rwanda has one of the smallest energy sectors among sub-Saharan African countries – but one with a lot of activity and innovation. The government is pressing towards two ambitious targets by June 2018: to increase total power capacity to 563MW and access to electricity to 70%, while reducing carbon intensity of the power mix by 10%.
To meet its 2018 installed capacity target, Rwanda will need to add more than 300MW to the 208MW installed as of May 2017. The country will struggle to meet this target in the original time frame. Installations in line with its own ‘likely demand’ prediction of 444MW are more realistic, but still ambitious.
The country has an oversupply of on-grid generation, as well as a backlog of contracted projects. As a result, new Independent Power Producers (IPP) will not be able to secure permitting in the country until the roughly 200MW of pipeline projects with existing PPAs are moved further into development. Currently 27% of the country’s 30% electricity access is met with on-grid generation, with plans for 48% by June 2017.
The government has introduced several tools that have made on-grid development very attractive for the private sector. Utility reform, tenders, unsolicited proposals and favorable tax regimes, as well as substantial backing from international donors, have all drawn a myriad of private-sector players into Rwanda since 2007, and 47 power purchase agreements (PPA) have been signed to date. Additionally, Rwanda has signed a 30MW PPA with Kenya, but the transmission infrastructure has not been built yet.
Rwanda’s power mix is based heavily on hydro, at over 50% as of December 2016, but other technologies are represented.
Gigawatt Global’s 8MW photovoltaic plant in the Eastern Province is the largest solar project in the country. It, along with several other small solar projects, makes up just 3% of the country’s on-grid generation.
Diesel generation and the newly commissioned Gishoma peat-to-power project round out the generation mix, along with the innovative Kivu Watt methane gas power plant. This ground breaking project recovers methane in Lake Kivu to supply up to 100 MW of gas capacity once fully completed, reducing the risks linked to a sudden release of the trapped methane in the environment. Phase II of Kivu Watt is in the early stages of development.
The new electric utility, the Rwanda Electricity Group (REG), is a private company established in 2014, wholly owned by the government. Operations are carried out by two subsidiaries – the Energy Development Corporation Limited (EDCL) and the Energy Utility Corporation Limited (EUCL). EDCL supports new capacity and transmission development – by itself and with independent power producers (IPP) – while EUCL is a more traditional utility, operating transmission and distribution networks and selling the power.
IPPs must go through the Rwanda Development Board (RDB) to start the process of developing new projects, before negotiating a PPA with EDCL and signing with EUCL. Developers had previously been able to sign 20-25 year “take-or-pay” PPAs, which has them compensated for full output of their project, even if it isn’t delivering to the grid, and as a result Rwanda has higher electricity tariffs than its neighboring East African countries. All future IPPs must now participate in a competitive tender process, which is monitored by the Rwanda Utility Regulatory Authority (RURA). The country had a feed-in tariff program that was historically used to support small hydro and micro-hydro projects, with plans to extend to solar and bioenergy in the future, but it has expired.
On grid, new connections are heavily supported by the government electrification program. Connections cost an average of $750 each, with 80% paid by the Ministry of Infrastructure (MININFRA), 10% by the utility and 10% by the customer, in most cases supported by a low-cost loan from the utility and repaid via a charge on electricity bills spread over 5 years. This cost remains too high for a majority of households, however, and the government is looking into the possibility of further subsidizing connection costs.
Rwanda has been one of the most welcoming countries for the off-grid sector, with 22% of the 70% energy access target to be achieved through off-grid solutions (at 3% as of May 2017). RURA released the off-grid simplified licensing regulation in the summer of 2015. Mini-grid (>1 MW) and distributed generation projects (>5 MW) can now apply for operational licenses for between 5 and 25 years of operation, awarding them the right to sell electricity at tariffs set by themselves. RURA verifies that the tariffs do not exceed a reasonable rate of return. The processing time for license application may not exceed 60 days according to the regulation.
VAT exemptions have been extended to cover renewable energy generation and associated products including DC appliances such as TVs and refrigerators in 2015. Finally, a number of donors have recently committed to support off grid electrification in the country, including the European Union, which signed a 200 million euro financing agreement with MININFRA in May 2016, and the World Bank, which signed a $50 million agreement in July 2017 to support Rwanda’s Scaling Up Renewable Energy Program (SREP).
As of May 2017, just under 330,000 off-grid solar products, including lanterns and multi-light kits, have been sold and deployed in Rwanda. In order to meet electrification targets, MININFRA has floated the idea of rolling out a competitive tender to provide fully subsidized multi-light kits to the poorest households in Rwanda, which many donors and off-grid companies fear will decrease demand among wealthier households expecting similar subsidies.
MININFRA has identified three target areas within energy to improve by 2030, outlined in its Intended National Determined Contributions (INDC) report. On the generation side, the Ministry wants to increase the share of renewables in Rwanda’s energy mix, and install up to 100 solar PV mini-grids for rural communities, totaling 9.4MW. Separately it wants to roll-out an energy efficiency department, tasked with reducing grid losses from the current 22% to 7.8% by 2030, and providing households with 35,000 high-efficiency biogas digesters to reduce reliance on biomass for cooking.