Uganda has a burgeoning renewable energy sector: with just over 900MW of power-generation capacity, 18% is made up of small renewables consisting of small hydro projects, biomass co-generation at sugar manufacturing plants and some new solar plants. This share will grow considerably, as 157MW of feed-in-tariff supported projects are expected to be commissioned by 2018.
The bulk of the country’s generation comes from large hydro plants owned by the state-run Uganda Electricity Generation Company (UEGCL) and Bujagali Energy Limited, an independent power producer (IPP). Under its 2007 Renewable Energy Policy, Uganda has a target to increase its renewables capacity, including large hydro, to 1,420MW by 2017 – in 2016 it stood at 635MW. The country will miss this target in 2017, but is expected to reach 1,418MW of installed hydropower capacity in 2018 (approximately 76% of expected total in country). Under its Nationally Determined Contribution, Uganda aims to have installed 3,400MW of generating capacity from renewable sources, a target it will likely meet.
Uganda is one of the few sub-Saharan countries to have liberalized its energy market; generation, transmission and supply were unbundled in 2001. Distribution is dominated by Umeme, which in 2015 supplied 98% of Uganda’s electricity consumption. The near-monopoly is a publicly traded company with a 20-year concession for distribution and retail in Kampala and several other territories. Uganda Electricity Transmission Company (UETCL) and UEGCL are both state owned and have a mandate to support government policy objectives. IPPs account for 60% of generation capacity, a share which is set to grow in the near term as a number of smaller renewables projects are developed. However, UEGCL expects to almost triple its capacity with 783MW due to come online in 2018 between the Karuma and Isimba hydropower projects. Another 1,2GW of new capacity in large hydro plants is currently planned for 2023.
Renewable project developers have been offered a feed-in tariff since 2007, but this has had limited success in encouraging capacity build. As a result, in 2013 the government and development partners launched a programme to fast-track 20-25 small-scale renewable projects with a target capacity of 150MW. The scheme, known as GET FiT, originally focused on small hydro, bagasse (sugarcane waste) and other biomass. In 2014 solar PV was included in the list of eligible technologies. To encourage participation, developers benefited from a top-up on the existing feed-in tariff and standardisation of power purchase agreements and the development process. By the end of 2015, 17 GET FiT projects had been approved for 20MW of biomass, 117MW of small hydro and 20MW of solar PV, with the first solar project commissioned in 2017, and others to follow in 2018. Now under its third phase, GET FiT will offer support for up to 295MW of hydro, bagasse and wind projects. However challenges remain to bring these projects online, as grid capacity is constrained and connections to the grid suffer of delays. Despite international donors agreeing to fund additional transmission and distribution capacity, projects have been slow to get off the ground. Generally, prospects for further small-scale renewables development appear limited, as with the commissioning of the 600MW Karuma hydropower project in 2018 the country faces a period of over-capacity (already around 200MW higher than peak power demand).
Credit-enhancement and support instruments are available to the private sector for both on- and off-grid projects via the government owned – and internationally financed – Uganda Energy Credit Capitalisation Company (UECCC). Support includes technical assistance for early stage grid-scale project development and working capital for pay-as-you-go off-grid solar providers.
Uganda has one of the lowest electrification rates in Africa, remaining at 18.2% in 2016. Under the Strategy and Plan covering 2013-22, the Rural Electrification Agency aims to connect over 1.4m customers to the main grid. The Agency plans to increase today’s 7% rural electrification rate to 26% by 2022, with the ultimate goal of universal access by 2035. It is also in the process of building micro-grids to connect an additional 144,000 off-grid customers via solar PV, micro-hydro and biomass generation financed by private developers or local communities.
The solar PV market in Uganda has steadily grown over the last 15 years with new players, including foreign investors, entering the market. The lack of grid access in rural areas and the growth of telecoms, which facilitates mobile payment and monitoring systems, are structural factor that have benefited off-grid solar development. Policy measures such as tax exemptions for equipment for solar and wind generation and subsidies for end-users have also supported expansion of the sector. However, many players complain that these mechanisms are poorly implemented, often creating additional challenges. Biofuels production has been lacklustre to date. However a biofuels blending bill has been introduced by the government and is expected to pass into law in 2017. This should support development of production capacity on top of an 18mLpa bioethanol plant that was commissioned in September 2016.
Uganda was placed 17th on Climatescope 2017, down from seventh in 2016. Its score of 1.47 ranked it fifth among the 19 African nations assessed, having taken second place last year, behind only South Africa. The land-locked East African nation saw dramatic declines on both Clean Energy Investment and Climate Financing Parameter II as well as Greenhouse Gas Management Activities Parameter IV.
In contrast, the country gained nine places on Enabling Framework Parameter I to take 10th overall. This reflected the presence of supportive clean energy policies, including feed-in tariffs, and the ongoing unbundling and privatisation of its power sector structure. Installed renewable capacity grew 16% in 2016 to 172MW (mostly small hydro and biomass plants), yet the output from these assets declined by a small margin.
On Parameter II, the country plummeted 21 places to 30th as the volume of funds flowing into the sector slumped by 73% to $76m (from $284m the previous year). Other factors dragging the score lower included the country’s high average cost of debt (22.6%) and lack of local investment. Uganda also dropped out of the top 10 on Low-Carbon Business & Clean Energy Value Chains Parameter III, sliding five places to 13th. The country’s relatively small renewable equipment manufacturing base weakened the score, but the presence of a wide range of service providers offset this somewhat.
On Parameter IV the country suffered a steep decline, tumbling 34 places to 47th from 13th a year earlier. The country was one of the first to submit its Nationally Determined Contribution but it has limited regulations in place to control emissions in its domestic policy framework.