Making a case for increased solar energy financing

Mar 14, 2019

Uganda has a comparative advantage in solar energy because of her closeness to the equator; that ensures constant supply of sunshine

By Dan Denis Agaba

Worldwide, many countries have invested huge amount of resources towards the construction of hydroelectric power projects at the expense of solar energy. Currently, Africa boasts of 140 major ongoing hydropower projects to connect citizens to electricity.

The biggest hydropower dams are the Ethiopian Grand Renaissance Dam (6000 MW) and the Grand Inga Dam (39000MW) in DRC. Hydro power projects require high capital investments and offer fewer benefits to citizens in terms of access and affordability.

For instance, Ethiopia and DRC would require US$ 4.7 bn and US$80bn respectively for two hydro projects, yet despite the huge hydro potential these countries have on the Blue Nile and Congo River, electricity access is still low at 27.2% and 13.5% respectively.

Uganda has also constructed two major dams of Karuma and Isimba dams at an astronomical cost of US$1.4b and US$567.7m. These projects with their likely environmental impacts on water, air pollution landscape degradation and displacing people, connect few people on the national grid, yet if similar resources was allocated to solar energy, the benefits would be higher, connect more people with numerous multiplier effects especially in  sparsely populated rural regions, with no major environmental effects.

Solar energy also has been found to be the cleanest forms of energy, according to the International Energy Agency. Despite all this, there is less attention given to solar other than piecemeal interventions in this viable untapped resource.

To begin with, Uganda has a comparative advantage in solar energy because of her closeness to the equator; that ensures the constant supply of sunshine. It is estimated that, Uganda has a renewable energy potential of 5300MW that remains untapped.

The renewable energy policy (2013), further estimates that the country has a 200MW potential of solar electricity that remains unexploited. Most of the solar energy projects have been relegated to private sector players that lack the required capital and appropriate fiscal regime to revolutionalise solar energy.

For instance, Xsabo group recently launched five solar projects that will generate 150MW at a cost of 200m dollars. When compared to the cost Kwh of hydroelectricity, solar is a cheaper option.

It is expected that the cost kWh of hydro will be 5 US cents and 11 US cents from Karuma and Isimba when completed .when you juxtapose the unit of solar from Tororo and Soroti solar plants at 0.11 cents, it makes both economic and rational sense that solar is more much cheaper and affordable than the latter.

For a country that aspires to reduce greenhouse emissions, solar power should be aggressively priotised.It was reported that Soroti solar plant alone will cut Uganda's carbon emissions by 264,355 tons per year while Tororo will save 7200 tons of CO2 per year. Solar power has no harmful radiation like hydroelectricity.

Why should Uganda put much emphasis in hydro yet most of the population cannot even afford to consume 940MW that is produced. It is reported that 13MW of electricity remain unutilized due to latent demand. 

Considering Uganda's rural-based population, does it make sense to extend the grid when only a few people will consume the product? What is the socio-economic and financial feasibility of such investment for a country that acknowledges affordable energy as a key driver of economic growth?

To begin with, solar, has no monthly bills, does not emit emissions that destroy the environment and studies have shown that, it's the best form of energy to use in scarce populations, which is applicable to Uganda.

The government usually borrows to finance hydro dams and less priority has been put on solar energy. How many people in rural areas would have been supplied with solar power if shs 100 billion borrowed to finance Kikagati mini hydro dam was reallocated to this cause? What can sh600b do if this compensation money by Karuma dam claimants was channeled to a solar investment? Although there is a free connections policy, many poor people cannot afford the current power tariffs both at household and institutional level.

Most of the hydropower projects are delayed by land compensation, resettling project affected persons and litigations arising from land conflicts and undervaluation. These can be minimized and eliminated in solar driven funded projects.

The government should therefore operationalise the functions of the national energy committee, district energy offices and local council energy committees that were envisaged in the Renewable Energy Policy 2013 to enable local community participation in energy initiatives.

It is this policy implementation malfeasance contributing to 90% use of biomass for energy needs. Formulating a robust solar energy policy would provide the legal, legislative and fiscal framework and scale up access to clean and affordable electricity and achieve universal sustainable energy for all.

The writer is an Economist and Associate Consultant, Africa Institute for Energy Governance (AFIEGO)

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