Overview
As the government prioritized increasing Uganda’s power production, foreign investment in the sector has increased. The Electricity Regulatory Authority (ERA) estimates that as of December 2022, installed electricity capacity in Uganda was 1,402 megawatts (MW) with demand at 843 MW, leaving a surplus of 559 MW. Uganda’s largest hydropower project, the 600 MW Karuma Hydro Power Dam is slated to come fully come online by the end of 2023, after over four years of delays. The addition of the Karuma Hydro Power Dam is projected to boost Uganda’s total capacity by 44% and leave potentially over 1000 MW of excess power generation capacity. However, analysts believe a large, suppressed demand exists, particularly among industrial consumers, due to Uganda’s unreliable transmission and distribution systems. Despite these energy projects, Uganda has one of the lowest electrification rates in Africa, primarily due to an overreliance on biomass sources in the energy mix, constrained electricity transmission and distribution infrastructure, limited access to off-grid solutions, limited productive use of energy, and uncoordinated intra- and inter-sectoral planning. In urban areas, 57.2% of Ugandans have access to electricity; however, access drops to 10% in rural areas, and it is only 22.1% nationwide. As of December 2022, Uganda had approximately 3,385 km of transmission lines, which the government aims to increase to 4,354 km by 2025. As investment in transmission is still insufficient, some existing generation capacity cannot be distributed. Additional investment is also needed to enable export of electricity to other countries in the region. The ERA regulates licensing, generation, transmission, and distribution. Uganda’s power tariffs are set on a quarterly basis, and the average tariff to consumers is $0.19/kWh ($0.09/kWh for large industrial users), with the first 15 units of power subsidized. Umeme Co. Ltd. is the largest energy distributor in Uganda, distributing 93% of all electricity in the country. Umeme’s concession runs out in 2025, and the government of Uganda has expressed that it will not renew the concession. USAID’s Power Africa has been providing transaction advisory services to generation projects to reach financial close or commercial operations but is now focused on increasing access to electricity and improving the enabling environment for private sector investment in electricity generation and access. Through Power Africa support, over 1.5 million new connections have been added, with the bulk being off-grid solutions that benefit rural communities. Much of Power Africa’s support targets innovation in product development, last mile market entry and development, and the promotion of productive use of energy.
Opportunities
On the generation side, investment opportunities remain in small hydropower projects, especially those that help balance the distribution network and can support ancillary services, especially storage. In the transmission sector, the government plans to build 13,000 km of new transmission lines over the next 20 years, along with associated substations, switching stations, and transformer capacity, with a total estimated cost of approximately $4.8 billion. With support from Power Africa and other development partners, the government is seeking to attract private investment in the construction and maintenance of high voltage transmission lines. On the distribution side, the government is seeking private sector investment to develop mini-grids for over 650 target communities, which were mapped and identified with Power Africa support. The government is planning for at least two additional large hydro power stations along the Nile River. According to the ERA, there are another 19 undeveloped small hydro station sites around the country.
Resources
Uganda Electricity Regulatory Authority
Uganda Electricity Transmission Company Ltd
Umeme (Power Utility Company)
Uganda Ministry of Energy and Mineral Development
Directorate of Geological Survey and Mines of Uganda
Renewable Energy Investment Guide