SMALL INDEPENDENT SMALL INDEPENDENT POWER PRODUCERSPOWER PRODUCERS

IN UGANDAIN UGANDA

BYBY

BARBARA ASIIMWE KASULEBARBARA ASIIMWE KASULE

REAREA

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BACKGROUNDBACKGROUND In 1997, the Government of Uganda In 1997, the Government of Uganda

through the Ministry of Natural through the Ministry of Natural Resources then, drew up a Strategic Resources then, drew up a Strategic Plan for the power sector in Uganda. Plan for the power sector in Uganda.

The objective was to strengthen and The objective was to strengthen and enlarge the power sector, so that it is enlarge the power sector, so that it is able to provide adequate and reliable able to provide adequate and reliable energy in order to ensure sustainable energy in order to ensure sustainable social and economic development. social and economic development.

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BACKGROUND (Contd)BACKGROUND (Contd) This plan resulted into the enactment This plan resulted into the enactment

of the Electricity Act of 1999.of the Electricity Act of 1999. The Act ushered in changes like the The Act ushered in changes like the

unbundling of Uganda Electricity Board unbundling of Uganda Electricity Board (the Government owned parastatal (the Government owned parastatal that had a monopoly in electricity that had a monopoly in electricity operations), liberalization of the power operations), liberalization of the power sector and the introduction of sector and the introduction of competition in the sector, a regulatory competition in the sector, a regulatory framework for players in the sector framework for players in the sector and rural electrification.and rural electrification.

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SMALL IPPS SMALL IPPS As part of the Renewable Energy Policy As part of the Renewable Energy Policy framework, the Government promotes the framework, the Government promotes the development of small electricity generation development of small electricity generation projects. projects. Renewable Energy SourcesRenewable Energy SourcesCo-generationCo-generation - Bagasse - Bagasse Kakira Sugar Works Kakira Sugar Works (1985) Ltd – Generates (1985) Ltd – Generates 20MW, sells 12MW to the main grid (UETCL) and 20MW, sells 12MW to the main grid (UETCL) and consumes 8MW internally.consumes 8MW internally.Kinyara Sugar Kinyara Sugar – Generates 2 to 4MW consumes – Generates 2 to 4MW consumes some and sells to UETCL.some and sells to UETCL.

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SMALL IPPS (Contd)SMALL IPPS (Contd)Mini hydrosMini hydros Kilembe Mines Kilembe Mines Ltd – Generates 3 to 5MW Ltd – Generates 3 to 5MW

depending on the hydrology and sells to the main depending on the hydrology and sells to the main grid.grid.

Kasese Cobalt Limited Kasese Cobalt Limited – Generates 10.5MW – Generates 10.5MW (Mostly for own use and sell 2MW surplus to the (Mostly for own use and sell 2MW surplus to the main grid).main grid).

Tronde Power (Bugoye)Tronde Power (Bugoye) – Has a capacity of 13MW. – Has a capacity of 13MW. Is currently producing 6 – 10 MW depending on Is currently producing 6 – 10 MW depending on the hydrology and sells to the main grid..the hydrology and sells to the main grid..

..Kisiizi Hospital Kisiizi Hospital – Generates 374KW, uses some – Generates 374KW, uses some and distributes and sells surplus in neighboring and distributes and sells surplus in neighboring environs. environs.

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SMALL IPPS (Contd)SMALL IPPS (Contd)Non-Renewable Energy SourcesNon-Renewable Energy Sources

ThermalThermal Electromax (Heavy Fuel Oil plant) Electromax (Heavy Fuel Oil plant) – capacity 17.5MW – capacity 17.5MW

but is currently producing 8MW cause of technical but is currently producing 8MW cause of technical problems. It is connected to the main grid and sells problems. It is connected to the main grid and sells power to UETCL.power to UETCL.

WENRECO (Heavy Fuel Oil plant) WENRECO (Heavy Fuel Oil plant) – Not connected to – Not connected to the main grid. It generates 1.5MW and distributes to the main grid. It generates 1.5MW and distributes to consumers in West Nile.consumers in West Nile.

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SMALL IPPS (Contd)SMALL IPPS (Contd)Mini –hydros in the PipelineMini –hydros in the Pipeline Mpanga Mpanga – Capacity of 18MW , has signed a PPA – Capacity of 18MW , has signed a PPA

with UETCL. Commissioning scheduled July 2010.with UETCL. Commissioning scheduled July 2010. IshashaIshasha – Capacity of 6.5MW, has signed a PPA – Capacity of 6.5MW, has signed a PPA

with UETCL. Commissioning scheduled Aug 2010. with UETCL. Commissioning scheduled Aug 2010. Early production in April 2010 of 3 to 4 MW.Early production in April 2010 of 3 to 4 MW.

Buseruka, Hoima Buseruka, Hoima – Capacity of 9MW, connected – Capacity of 9MW, connected to the main grid and under construction.to the main grid and under construction.

NyagakNyagak – Not connected to the main grid. Is to – Not connected to the main grid. Is to generate 3.5MW and distributes to consumers in generate 3.5MW and distributes to consumers in West Nile.West Nile.

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PPA ARRANGEMENTSPPA ARRANGEMENTS

Under the Electricity Act there is the single Under the Electricity Act there is the single buyer model.buyer model.

UETCL is designated as the bulk supplier of UETCL is designated as the bulk supplier of power and has a license to perform this power and has a license to perform this functions. It transmits and sells electricity in functions. It transmits and sells electricity in bulk to distribution and sales companies.bulk to distribution and sales companies.

All the IPPs that are connected to the main grid All the IPPs that are connected to the main grid sell electricity to UETCL sell electricity to UETCL

The IPPs that are not interconnected to the The IPPs that are not interconnected to the main grid are licensed by the Regulator to main grid are licensed by the Regulator to generate, distribute and sale electricity.generate, distribute and sale electricity.

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INCENTIVES OFFERED BY INCENTIVES OFFERED BY THE GOVERNMENTTHE GOVERNMENT

A subsidy was initially extended to small A subsidy was initially extended to small IPPs to buy down the cost of generation. So IPPs to buy down the cost of generation. So the feed in tariff was low. The situation was the feed in tariff was low. The situation was such that the feed in tariff and PPA were such that the feed in tariff and PPA were negotiated on a case by case basis.negotiated on a case by case basis.

This increased the transaction time, costs This increased the transaction time, costs and resulted into low investor turn out. In and resulted into low investor turn out. In some instances investors abandoned at the some instances investors abandoned at the negotiation stage. negotiation stage.

INCENTIVES OFFERED BY THE INCENTIVES OFFERED BY THE GOVERNMENT (Contd)GOVERNMENT (Contd)

The subsidy was replaced by published The subsidy was replaced by published standardized feed in tariffs that give a certain standardized feed in tariffs that give a certain Internal Rate of Return of about 15%. (Internal Rate of Return of about 15%. (Go to Table for Go to Table for

Standardized TariffsStandardized Tariffs) )

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Published feed-in-tariffsPublished feed-in-tariffs Uganda Electricity Transmission Company Uganda Electricity Transmission Company

LtdLtdin consultation with the Electricity Regulatory in consultation with the Electricity Regulatory

AuthorityAuthorityfor capacities under 20 MW for capacities under 20 MW

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Time of UseYear 1

to 6

Year 7 to 20

Simple Weighted Average

Year 1 to 6 (Bagasse)

Year 7 to 20

(Bagasse)

Weighted Average

Peak (1800-2400hrs) (US Cents/KWh

12.00 9.00 9.00 12.00 8.00 9.60

Shoulder (0600-1800hrs) (US Cents/KWh)

6.40 5.40 5.70 6.00 4.50 5.10

Off-Peak (0000-0600hrs) (US Cents/KWh)

4.00 1.50 2.25 4.10 4.00 4.04

Average Tariffs 7.20 5.33 5.89 7.03 5.25 5.96

INCENTIVES OFFERED BY THE INCENTIVES OFFERED BY THE GOVERNMENT (Contd)GOVERNMENT (Contd)

With the removal of the subsidy the tariff is With the removal of the subsidy the tariff is higher but the business environment has become higher but the business environment has become more predictable and actually investments have more predictable and actually investments have increased. Most of the above IPP’s have been increased. Most of the above IPP’s have been done after the event of subsidy.done after the event of subsidy.

A standard PPA for all IPPs to have uniformity.A standard PPA for all IPPs to have uniformity.

An interconnector to evacuate electricity from the An interconnector to evacuate electricity from the generation source is constructed by the generation source is constructed by the Government.Government.

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HOW IPPs ARE INITIATEDHOW IPPs ARE INITIATEDAccording to the Electricity Act there are two ways:According to the Electricity Act there are two ways:

1) 1) An investor notifies the Regulator in writing An investor notifies the Regulator in writing about projectabout project. . Notice contains aspects like Notice contains aspects like description of project, technical and industrial competence of investor plus description of project, technical and industrial competence of investor plus

financial and legal status. The Regulator invites public to give comments financial and legal status. The Regulator invites public to give comments about notice. After receipt of comments a permit can be issued by about notice. After receipt of comments a permit can be issued by Regulator for investorRegulator for investor to conduct studies. After studies an investor can to conduct studies. After studies an investor can proceed to apply for a generation license from Regulator. proceed to apply for a generation license from Regulator.

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HOW IPPs ARE INITIATED HOW IPPs ARE INITIATED (Contd)(Contd)

2) 2) Through solicitation. Through solicitation. A project is A project is packaged and advertised through a packaged and advertised through a

fair, fair, open and competitive process by the open and competitive process by the Regulator.Regulator.

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THANK YOUTHANK YOU