Private sector players ask for affordable electricity to power industries
Kampala, Uganda | JULIUS BUSINGE | On March 21, President Yoweri Museveni commissioned the Isimba Hydropower Dam, adding 183MW to the national grid. But the private sector, who consume most of the electricity accounting for 20% of their production costs, have reservations.
“…for private sector though access and cost remain a challenge,” Gideon Badagawa, the executive director at the Private Sector Foundation Uganda told The Independent by telephone.
He said the electricity costs will come down if in addition to the refinancing of Bujagali Hydropower Dam, the country works to improve demand through attracting most value adding investors especially in the manufacturing sector.
He hopes the government will address this soon. He said it is time for the Rural Electrification Agency (REA) to up its game under the ERT III project so that most of the Ugandans can have access to electricity and eventually drive the cost south.
Currently, Uganda’s electricity access stands at about 20%, according to Uganda Bureau of Statistics, leaving the rest of the population relying on biomass and kerosene for lighting and cooking.
Badagawa, however, also said the private sector needs to invest more in energy efficient technologies to lower the electricity costs.
The private sector views appeared to be directed towards the government officials including President Museveni, who in their remarks never spoke on how the additional electricity will drive the cost downwards.
The additional electricity supply puts the country’s installed electricity generation to about 1000MW amidst the current demand of approximately 600MW.
A government official , who preferred anonymity to speak freely, told The Independent that the launch of Isimba dam will not in the short term drive down the cost of electricity currently averaging at around 8-9 US cents per kWh because government buys expensive power from other generators way above 8 US cents per kWh.
However, the official said that with the coming onboard of new power plants and anticipated increase in demand especially from commercial consumers will gradually drive down the cost to the desirable figure of 4-5US cents per kWh in the long term.
Eng. Harrison Mutikanga, the chief executive officer of Uganda Electricity Generation Company Limited (UEGCL), the official overseer of the project, described the commissioning of the dam as a ‘major milestone’ that is in line with government’s promise of generating 17, 000MW of electricity by 2028.
With the country’s average annual GDP growth forecast to exceed 6% and electricity demand growing at 9% per annum, Mutikanga said the inauguration of Isimba has come at the right time to power and drive the country’s industrialisation.
“The increased power generation capacity enhances the country’s energy security and reliability of supply that is a key driver for Uganda’s social economic transformation,” he said.
Available data indicates that UEGCL will sell electricity generated at Isimba to Uganda Electricity Transmission Company Limited at US$ Cents 4.16 per kWh. The annual projected revenue from the plant is over US$41.6million (approx.Shs150bn).
Mutikanga said that this revenue is adequate to cover operation and maintenance costs, depreciation, debt servicing, and a reasonable return vital for financial sustainability of UEGCL.
President Museveni, who did not speak much about the dam, said the launch of Isimba is a blessing to Uganda as it would ensure there is more power to supply to areas that are currently off the national grid.
He also said that the power station would in many ways support key government interventions in the areas of security, education, infrastructure, health, information and communication technology and manufacturing.
He urged the people to start up ventures that would use power from Isimba dam to improve their wealth, create jobs and support social transformation.
Irene Muloni, the minister of energy and mineral development said that the 4.16 US cents cost of electricity from Isimba will apply for the first 15 years of its operation, but will further reduce to 1.1 US Cents for the following 23 years – equivalent to the cost of Nalubaale-Kiira dam.
About Isimba dam
The power station is located 4km upstream of Isimba Falls on the River Nile, Approx. 50KM downstream of the source of the Nile.
The run-of-river plant station is about 21km from Kayunga town as the nearest town and about 65km from Jinja town.
Construction of the dam started in 2013 with a commencement date of April 16, 2015 and project duration of 40 months. It was constructed by China International Water and Electric Corporation (CWE).
It experienced some delays because of land compensation conflicts and procurement related challenges.
The project was jointly financed by the government of Uganda (15%) and the Exim Bank of China (85%) that extended a soft loan.
It is the third largest hydropower plant in the country, increasing power generation from the current 984MW to 1, 167MW. The plant has increased electricity generation by 30%, generating an average of 1.062bn kWh per year at a load factor of 70%.