Fate of Karuma hydro-power project remains uncertain

By Ibrahim Kasita

Focus has shifted to fast tracking the development of small renewable energy projects as a short-to-medium term measure to avert the imminent return to 48-hour load-shedding.

This follows the stalemate in the contract procurement process of the proposed 600megawatts (MW) Karuma hydropower project, which is seen as the least cost option energy project for Uganda.

Fearing that power demand could outstrip supply, authorities with the support of donor partners have come up with the GET FiT programme geared toward fast-tracking a portfolio of up to 15 small-scale renewable energy generation projects with a total installed capacity of about 125MW promoted by the private sector.

The GET FiT is a private investment facilitator programme jointly developed by Uganda, KfW, Electricity Regulatory Authority (ERA) and the Deutsche Bank Group. The programme is supported by Norway, the UK, Germany and the World Bank.

“The programme is expected to add about 125MW of installed capacity to the Ugandan electricity grid within the next 3-5 years,” said Julius Wander, the ERA principal spokesperson.

The main objective of the GET FiT programme is to assist East African nations in pursuing a climate resilient low-carbon development path resulting in growth, poverty reduction and climate change mitigation.

This will help to add much-needed clean generation capacity, help to strengthen regional grids and result in emissions reductions of 11 million tonnes of Carbone dioxide.

“The first Request for Proposal launched in April has attracted big interest among renewable energy developers. The first projects will be selected as early as July 2013,” Wandera stressed.

The implementation of the GET FiT programme in Uganda should help enhance the overall enabling environment for private investment in renewable energy through improvements in the Renewable Energy Feed-In Tariff system and its application.

It will also help stabilise power sector finances by adding least-cost generation capacity, enable the Government to pursue its electrification targets, improve the availability of long-term commercial finance for small-scale renewable energy generation projects in Uganda and help decentralise and diversify Uganda’s energy mix, which will enhance security of supply.

The Norwegian government has already committed close to $25m to support private sector investment in Uganda’s renewable energy resources for over five years.

ERA has approved the Draft Power Purchase agreement for the electricity purchase and sale to the Uganda Electricity Transmission Company by the Renewable Eenrgy generation projects qualifying for the GET FiT programme.

GET FiT is designed to leverage more private capital into renewable energy generation projects by addressing three key hurdles for private investments in the sector.

The hurdles include low feed-in tariffs for renewable energy, high perceived off-taker risks and lack of availability of long-term commercial finance at acceptable terms and conditions.

This will be accomplished through the innovative combination of the FiT Premium Payment Mechanism, a guarantee facility to secure against off-taker and political risks, as well as a Private Financing Mechanism that will offer debt and equity at competitive rates.

The programme will be officially launched on May 31 at the Serena Kampala Conference Centre.