5 February 2010 – Due to rising investment in the energy sector and fast-growing demand, Uganda expects electricity generation to grow by 8.6 percent in 2010, mostly through hydropower.
East Africa’s third largest economy boasts one of the region’s fastest economic growth rates, and the flow of foreign investment has accelerated following the discovery of commercial oil deposits in the west of the country around Lake Albert.
The state-run Electricity Regulatory Authority (ERA) said three mini-hydro power stations are due to come online this year, injecting an additional 33 megawatts (MW) into the grid and pushing the national electricity output at peak up to 413 MW, from 380.3 MW currently.
According to Johnson Kwesigabo, ERA’s Acting Executive Director, all the extra power that they’ll bring to the grid this year is from hydro, which is far cheaper and this will strengthen their overall sector objective of lowering power tariffs to the most minimum level possible.
Uganda’s energy sector has been plagued by frequent supply outages, and has been constrained by weak and ageing generation infrastructure, little investment and imprudent planning.
The country endured its worst electricity crisis in 2006, when generation capacity plummeted to less than half caused by a prolonged drought that eroded water levels in Lake Victoria and cut output from its main hydropower facilities at Jinja, on the Nile.
In response, the government procured diesel-powered thermal plants that instantly sent tariffs soaring. Kwesigabo said Uganda’s power supply capacity grew by about 8 percent in 2009, which had allowed the authorities to announce a 10 percent reduction in tariffs in December. According to Kwesigabo, their national power output increased last year while the distribution costs remained constant, which positively impacted the cost per unit of power produced. This allowed them to reduce end-user tariffs starting January this year and they expect this trend to sustain over the next few years.
Uganda is thought to have the most expensive power in the region. Industry consumes 55 percent of all the power produced, while domestic consumers take the rest.
Although high tariffs have pushed up production costs and undermined manufacturers, Kwesigabo said they had also become a powerful incentive for investors in the power sector, making its growth rate race ahead of that of the economy. Uganda’s GDP has averaged 6 percent over the last few years.
Its largest hydropower project, the 250 MW Bujagali dam, will have its first 50 MW unit come online in 2011. Once finished, it is expected to go along way towards plugging the country’s power deficit, which is estimated at more than 300 MW.
The Karuma falls hydropower project, with 700 MW, was also scheduled to come online this year, but was delayed after a European contractor pulled out at a cost of $1 billion.