Log in
Free: The Observer Mobile App - Exclusive Content and Services

Uganda’s solar attracts investors amid cost fears

A number of investors are lining up at the offices of the Electricity Regulatory Authority seeking licenses to carry out solar power projects. Fears that this is an expensive venture have not dampened their appetite, writes JEFF MBANGA.

As far as Uganda’s innovations go, the launch of the Kayoola bus has thrust the country into continental limelight, with the makers of the vehicle, Kiira Motors Corporation, saying their product is the first in Africa.

While much of the attention might be focussed on the prospect of Uganda becoming a mass producer of buses, it is the innovation that the vehicle is partly powered by solar that could get the pulse of the energy industry racing.

Solar power is not new in Uganda; a number of households with no access to the electricity grid have resorted to installing solar panels on top of their houses for lighting.

Now, there is a new energy trend sweeping across Uganda – solar photovoltaic (PV) projects that have attracted numerous investors into the country, and huge paycheques from European financial institutions.

The spread of solar power projects has strongly emerged after the Electricity Regulatory Authority (ERA) decided to include solar power as part of Uganda’s energy mix in order to promote different forms of renewable energies.

The latest deal surrounding solar power came recently when FMO, the development finance arm of the Dutch government, agreed to lend up to $5.35 million to Access Solar Power Limited to build a 10MW solar power project in Soroti, 290km east of the capital Kampala.

The 1.6MW Bukuzindu hybrid solar and thermal power station in Kalangala district

In a confidential letter dated January 20, 2016, a copy of which The Observer has seen, E.L.M Eurlings, the director of Energy at FMO, and J.J. de Vries Robbé, the manager of legal affairs at FMO, noted that they were satisfied with the conditions of the agreement the two parties signed in late November 2015, which had Deloitte Uganda as the security agent.

The solar project is part of GETFiT program, an initiative between the government of Uganda, the European Union and KfW, to promote renewable energies on a small scale of five to 20MW. Up to 18 projects have received approval from the ERA to embark on power projects. At least five of these projects are in the construction stage, while another five are closing financing.

RURAL ELECTRIFICATION

Uganda is looking keenly at promoting the use of solar as it seeks to deepen rural electrification. While much of the attention has been placed on the huge hydropower projects that Uganda is undertaking, so much activity appears to be happening in the solar power segment.

However, ERA appears to be overwhelmed by the number of requests for licenses to undertake solar power projects. Just over a year ago, ERA issued a regulatory notice, where it noted: “There is need to remain alert to the cost of power from this [solar] resource, as well as the technical capability of the national electricity grid to absorb this power without affecting the quality of electricity supply.” Solar power costs more than many other sources of energy.

ERA further explained that “From a technical perspective, solar photovoltaic generation is associated with frequent power swings owing to its intermittent nature. This, therefore, calls for accurate determination of the extent to which the national electricity grid can accommodate power from solar without adversely affecting the quality of power supply.”

Nevertheless, the private sector has not been dampened by ERA’s fears, while the government itself is not showing signs of slowing down on tapping into solar power.

For example, Uganda is also looking at installing at least 20,000 solar systems in eight districts in the next financial year, plus also put up solar-powered pumps in areas facing water shortages.

The private sector is also chipping in to attract more investment. For example, Tororo PV Power Company Limited has already applied for a licence to construct, generate and sell electricity from its proposed 50MW solar power plant in Tororo district.

Emerging Power Limited plans to build a 15MW solar power project in Mayuge district at a cost of nearly $30 million. MSS Xsabo Power Limited intends to generate 20MW of electricity from a solar power plant in Gomba.

Simba Telecom Ltd, owned by city businessman Patrick Bitature, has partnered Building Energy SpA to put up a 10MW solar power project in Tororo district.
G-teck, a local firm that deals in energy solutions, is organising what it calls the Africa Solar Power summit, slated for late October in Kampala. The summit is expected to attract most solar service providers around the region and also international investors.

The Rural Electrification Agency, under the ministry of Energy and Mineral Development, is mulling over different proposals by companies to boost off-grid solar power production.

The agency has received a proposal from Kirchner Solar Ltd to supply power to 30 villages with about 150 households and businesses using a 22kW PV hybrid mini-grid. Remergy Energy Solutions plans to supply electricity to three villages in Kasese district – 370km west of the capital Kampala - using PV mini-grids.

Still in Kasese, the Joint Energy and Environment Project Uganda installed a solar micro grid, where at least 100 households have been connected to power. Absolute Energy Ltd plans to set up a 230kW PV mini-grid at Kitobo Island on Lake Victoria to supply more than 400 households and businesses.

The value of Uganda’s solar power industry is not clear.

LARGEST PROJECT

Access Power’s solar project in Soroti will be the largest in Uganda after it is completed. Reda El Chaar, a representative of Access Power, whose main shareholders are France’s EREN Renewable Energy S.A and Dubai-based Access Consultants DMCC, has already written to its contractors Electrónica y Electricidad of Spain to move ahead and start construction. The construction of the solar project is expected to take six months.

According to ERA, the average tariff for the Soroti solar PV project over the 20-year operation will be $16.37 cents per kWh.  However, Uganda’s electricity consumers will contribute only $11 cents per kWh through the tariff throughout the term of the project, while GET FiT will cover the rest.

jeff@observer.ug

Comments are now closed for this entry

Bunga Bet