Government plans cheaper and reliable power solutions

Question: What is the current electricity supply situation?
Answer: The current electricity supply prior to the injection of 50MW from the first unit of Bujagali Hydropower Station is outlined in Table 1 (above). The supply situation is compounded by the prevailing dry spell which has affected most of the small hydropower plants. The recent records, for example, indicate that Mpanga Small Hydropower Station which has an installed capacity of 18MW is delivering only 0.3MW while Bugoye Small Hydropower Station with an installed capacity of 13MW is delivering only 3.8MW.   

What is the solution to the current power supply shortage?
The immediate solution to the current power shortage is the stepwise commissioning of the Bujagali Hydropower Station. The project developer has indicated a stepwise commissioning programme starting with 50MW on February 7, followed by another 50MW in mid-March this year. The subsequent units will be commissioned end of May, end of June and end of July this year.

The 50MW Aggreko thermal power plant will be decommissioned at the end of next month. Consequently, the second Bujagali unit will only come in to replace the Aggreko Mutundwe plant.

Once the first unit stabilises in the system, we will be seeing a decline (or elimination of day loadshedding). Any outage during day would then be attributed to technical faults in the transmission and distribution network. The peak demand will also reduce by 50MW. At the end of May this year, when the third unit is commissioned, then the peak deficit will reduce further. Elimination of the evening peak deficit will be realised at the end of July when the fifth unit is commissioned.

The other intervention is on the consumer side, whereby the users of electricity should practice energy efficiency. Consumers are encouraged to switch off electrical appliances which are not required. For instance, it is common to see security lights lit during the day. Practicing energy efficiency will not only contribute to the supply strategy but will also help individual consumers to manage their electricity bills.

What is the demand forecast in the medium and long-term?
The demand for electricity is growing at a rate of about 10% per annum. This may even get higher if it is seen that a stable supply of electricity is possible. In that regard, it is anticipated that once the Bujagali power plant is commissioned, the additional generation capacity it will add to the grid will be consumed by 2014.

It is therefore critical and urgent to quickly develop renewable energy projects (including small hydropower projects, biomass cogeneration projects, solar PV and solar thermal etc), peat and the local oil and gas thermal power project to bridge the power supply gap prior to the commissioning of the Bujagali HPP.

In the medium-term, Karuma is being packaged for development as a public project with construction works expected to start in June this year. Isimba is also being packaged for development while the full feasibility study for Ayago is commencing in April this year.

Could you enumerate the benefits that have accrued since the unbundling of UEB and eventual liberalisation of the power sector?
The objectives of the power sector reforms were to bring about efficiency, reduce the dependency of the power sector on Government subsidies and attract private capital into the sector.
To objectively analyse the impact of the reforms, one needs to recognise the power supply crisis which hit the sector in 2005 (at the commencement of the reforms) and persisted to the present time. Due to the power crisis, subsidies had to be pumped into the sector (an estimated sh1.5 trillion has been paid as subsidies).

Therefore, the efficiency and financial sustainability has not been achieved. The main achievement has been in the area of attracting private capital in both generation and distribution. For 50 years, the installed capacity was about 385 MW while over a 10-year period, 250MW Bujagali has been added, in addition to about 20MW in sugar mill cogeneration, 53MW of small hydropower, 120MW of emergency thermal power and 50MW of permanent thermal power.
The Umeme concession in distribution as well as the small concessions like Ferdsult and the cooperatives are examples of investments in the distribution network.

As the power supply crisis is put behind it is expected that the other objectives will also be met.
Finally, it should be pointed out that the power crisis is not unique to Uganda but has been an East African regional problem.

There are concerns that when the sector was liberalised, electricity prices have risen and there is a belief that this may curtail connectivity. What is your take on this subject?
The rise in power tariffs did not occur because of the liberalisation of the sector. Rather, this came about due to the introduction of emergency thermal power supply. Table 2 (next page) shows how the tariffs have progressed over the period 2001 to 2011.

It should be noted that the tariffs for the period 2001 to 2004 did not have a direct government subsidy while the tariffs from 2005 had a direct Government subsidy. Without a subsidy the end user tariffs would be in the range of sh800 per unit.

But now that the power subsidies are scrapped, isn’t it going to be expensive for consumers?
As pointed out earlier, the level of subsidy has reached unsustainable levels. The cumulative amount of subsidy paid out is sh1.5 trillion. This is sufficient money to build a power plant of Bujagali size (by 2001 costs).
In order to pay out subsidies, money is being cut from other priority Government programmes. Should we stop providing medicine in hospitals or providing scholastic materials for Universal Primary Education and Universal Secondary Education and provide power subsidies?

The grid connected consumers are about 12%. Should the strategy be to continue subsidising the lucky few instead of expanding the grid to reach other communities which are not currently served with electricity?
Independent analysts have shown that the majority of industrial and business consumers are minimally affected by the tariff adjustment. Should such consumers continue to be subsidised?

The strategy which has been adopted is to maintain the lifeline tariff ie sh100 per unit for the first 15 units. This category has about 100,000 consumers or nearly 25% of the grid connected consumers.

Consumers need to be more energy efficient so that they use what they really need and therefore manage their electricity bills. If tariffs were to remain the same in a situation where subsidies for the power sector have run out, the alternative would be for generators to shut their plants and then manufacturers would have to generate their own electricity at a cost of over sh1,000 per unit.

Is Bujagali going to solve Uganda’s electricity problems by providing more cheap power?
As pointed out Bujagali will ensure reliable supply of electricity. The tariff announced by the regulator takes into account Bujagali commissioning and the decommissioning of the 50MW Mutundwe plant at the end of March.
Some 100MW of thermal power will remain in the mix that is the 50MW Jacobsen plant (which will revert to Government) and the 20 MW Tororo plant which is being upgraded to 50 MW.

A real tariff reduction will be realised as cheaper generation options become more predominant in the supply mix and the power system losses are drastically reduced.

What has been done to promote renewable energy?
Substantial efforts have been made to promote renewable energy development. Starting with the Renewable Energy Policy of 2007, other interventions have included the development of feed-in tariffs. We are working with development partners to ensure that development of renewable energy becomes even more attractive to the private sector.

When will you phase out the expensive thermal power?The Aggreko 50MW Mutundwe plant will be decommissioned next month.

Which thermal power project will Government keep? The 50MW HFO Jacobsen thermal plant will be retained by the Government as it is under a BOOT arrangement. The Electromaxx Tororo plant has an extension for six years after which it will be decommissioned.

What advice do you give to consumers to ensure they manage electricity efficiently?
The Government has energy efficiency programmes which can be accessed by consumers  and energy audits can be carried out and advice on efficient utilisation of electricity given.

Emphasis will also be placed on prepaid metering to assist consumers manage their consumption.

What is the way forward?
The way forward is to call upon consumers and other key stakeholders to support Government policy of reducing or minimising power subsidies so that emphasis is placed on expanding access to electricity supply.
The other appeal is for the public to exercise patience as we get the Bujagali units online to eliminate loadshedding.

Consumers should also contribute to the reduction of power losses by paying their bills promptly and reporting those who steal electricity.

Finally, on the Government side, efforts are going to be made to ensure delivery of cheaper power supply solutions and ensuring reliable supply so that the country does not plunge into another power supply crisis.