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Hopes of lower tariffs by 2012 as design work on Karuma begins

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The Bujagali Hydropower project is running ahead of schedule and is expected to begin producing electricity next year. Photo/MORGAN MBABAZI

The Bujagali Hydropower project is running ahead of schedule and is expected to begin producing electricity next year. Photo/MORGAN MBABAZI 

By ESTHER NAKKAZI

Posted  Saturday, February 21  2009 at  09:45
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Uganda next month embarks on design studies for a massive 750MW hydropower station on Karuma Falls that holds the promise of clawing down consumer tariffs as early as 2012.

“A lot of preparatory work has already been put in. The money is there and the procurement process is on,” a highly placed government official told The EastAfrican, confirming that a political decision had also been taken that the station should have a minimum capacity of 700MW.

The unique aspect of the project is that it is to be fully financed from internal resources. Now officials say enough money has accumulated in the Energy Fund to start work on the $1 billion Karuma Falls power juggernaut.

The procurement process for the technical design, financial viability and other aspects is expected to commence in early March, with funds to be sourced from the accumulated ring-fenced monies in the Energy Fund.

The government has been stashing away ever larger sums of money in the Fund, which was started three years ago to give the country an independent capacity to meet challenges in the energy sector in the long run through the development of large hydropower generation facilities.

President Yoweri Museveni, who has variously blamed the misguided views of the World Bank and environmental activists for the powes woes that brought Uganda to its knees in 2006, set up the Fund to end dependence on donors for critical energy infrastructure.

Junior Minister for Energy Simon D’Ujanga told The EastAfrican that work on the dam will start next month with feasibility studies and within three years, electricity generation should have started. However, the project is expected to have a development cycle of five years.

So far, 10 international consultants including one Ugandan firm have expressed interest in participating in the dam’s feasibility studies.

If the Karuma dam proceeds on track, it will boost Uganda’s installed generation capacity to 1,380MW from the present 380MW. After stumbling for more than a decade, Uganda commissioned the Aga Khan Fund for Economic Development-sponsored Bujagali Hydropower Project, itself expected to add 250MW to the grid when complete. The project is running ahead of schedule and is expected to begin producing electricity next year.

Demand for electric power was last estimated to be growing at 8 per cent per annum, which translates into 30MW per annum. Average peak demand was 399MW in 2008 while off-peak demand was running at 205MW.

Johnson Kwesigabo, company secretary at the Uganda Electricity Regulatory Authority, said demand for power is growing in tandem with the development in the country.

Though he was not specific on projected growth numbers, he said current rates were being constrained by the high tariffs associated with thermal generation, which now accounts for more than 50 per cent of supply. He said the entry of Karuma and its downward pressure on electricity prices was likely to see demand surge.

“The government is doing well to finance Karuma; demand will be much higher because the tariff will be cheaper,” said Mr Kwesigabo.

The proposed design envisages an underground power station, although experts are already warning that it will encounter huge technical challenges in ensuring it does not affect surface flows because wildlife is dependant on the water.

When it was first conceived in the mid 1990s, Karuma was designed to produce 250Mw at a bill of $400 million, but the new design envisages a 200 per cent expansion of the original.

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