Peat Energy Company has finally sealed a one-year contract worth Rwf1 billion to supply peat to power plant at Gishoma.
The Gishoma peat energy plant project will cost the Rwanda taxpayer at least Rwf24 billion.
The signing of the interim agreement ends the two years of negotiations between government and PEC.
The deal paves the way for use of locally mined peat to power industries as opposed to thermal plants fuel.
According to Energy Water and Sanitation Authority (EWSA), at least Rwf41 billion is spent on fuel used for running thermal power plants in the country annually.
Experts say addition of 15MW generated from peat could save Rwandan taxpayer Rwf13 billion annually.
However the government is unlikely to shut down the thermal power plants at Gikondo-Aggreko, Mukungwa-Aggreko and Jabana I and Jabana II as they produce almost 50 per cent of the energy needed in the country.
The thermal power plants have an installed generation capacity currently is 47.8MW. Currently the total power generation capacity stands at 115MW.
“We have already delivered 10,000 tonnes of peat and in August, and the remaining 10,000 tonnes will be supplied,” said Pierre Kalinganire, chief executive officer of PEC. The stock delivered is enough to sustain the plant during the test run period.
Under the interim agreement, PEC is to supply 20,000 tonnes of peat to EWSA. Each tonne, according to EWSA director-general Ntare Karitanyi, costs about Rwf480,000. He also allayed fear that the peat, which PEC will supply does not meet specifications.
“The agreement was entered after tests confirmed that the peat to be supplied meets the moisture content specifications,” said Mr Karitanyi.
There are fears that EWSA may be forced to transport peat from 300km away, which could add to the cost of power generation and definitely. Rwandan government also signed an agreement with an Indian firm Punj Lloyd Ltd, worth $371 million to invest in a 100MW peat power project.
Punj Lloyd will construct, finance, maintain and operate a peat power plant in North Akanyaru located in Bugesera District in Eastern Province.
PEC mines and harvests peat in concessions at Gishoma, Mashya, Gihitasi and Rwabusoro after piloting project business.
“We hired African Alliance to look for a strategic investors. The idea is to produce power from peat. Unfortunately we have not yet sourced the strategic partner,” said Mr Kalinganire.
The government plants to generate 563MW from hydro, peat, methane gas and solar by 2018 and also import cheaper power from the East African region through the ongoing interconnection projects with Uganda, Kenya, Democratic Republic of Congo and Burundi.
A third firm Hakim Mining and Trade company from Turkey is also investing $284 million in an energy project.
A peat master plan indicates that Rwanda’s peat capacity stands at 155 million tonnes of dry peat spread over 50,000 hectares.
In Rwabusoro marshland, there are peat reserves with potential to generate 450 MW of electricity in a period of 25 years.