Uganda adds 183MW to national grid, but will consumers gain?

Thursday March 21 2019

Isimba hydropower plant

The Isimba hydropower plant was commissioned on March 21, 2019. PHOTO | UEGCL 

By JULIUS BARIGABA
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As Isimba Hydropower Station — one of Uganda’s mega infrastructure projects — starts to generate and feed electricity into the grid, attention turns to its impact on the cost of power, its distribution and consumption.

The dam is expected to reduce the cost of power from the current $0,08 per kwh, to $0.05 per kwh, making it the cheapest in East Africa.

Although delivered seven months behind schedule, the $567.7-million project is expected to deliver the third lowest unit cost in Uganda, after Owen Falls Dam (Nalubaale and Kiira power stations) and Kilembe Mines.

The contract period for the construction of Isimba was supposed to be 40 months, but the Uganda Electricity Generation Company Ltd (UEGCL) said the project was delayed by a series of design and engineering hitches at the site and adverse weather.

With its commissioning on Thursday, the 183MW Isimba hydropower dam pushes Uganda’s power generation capacity to 1,167MW, way above the country’s peak demand of about 600MW.

Industrial, commercial and domestic consumers cite high electricity rates as the biggest cost of production. But at the wholesale price of $0.04 per unit, the cost of power from Isimba is expected to translate into lower end-user tariffs that should bring in more users.

But the Electricity Regulatory Authority (ERA) suggested that there could be other factors keeping the costs high.

“The coming onboard of cheaper generation by Uganda Electricity Generation Company Ltd shall reduce the weighted average cost of generation [and] eventually have a negative knock-on effect on the end-user tariffs. However, [because] of the impact of exogenous factors, let’s first do the numbers. You will certainly know,” ERA said in a tweet Thursday.

In the mid-2000s, Uganda suffered a drought, resulting in a power generation crisis that resulted in high end-user tariffs as the country resorted to costly emergency thermal power generation.

But even when thermal plants were decommissioned as the 250MW Bujagali hydropower dam came on line in 2012, end-user tariffs remained at $0.11. After debt refinancing for the plant last year, tariffs fell to $0.083 to $0.09 per kWh.

Currently, less than four per cent of Uganda’s 40 million population have access to electricity.

The additional power from Isimba could eliminate the slow growth of electricity consumption, currently standing at just 1.35 million users, according to data from ERA.

Chief executive of UEGCL Harrison Mutikanga said, “This economy hinges on electricity. Without it, we cannot have economic development.

“This project will power factories, homes, schools and the planned standard gauge railway.”

The Private Sector Foundation of Uganda says that the way to grow consumer numbers and reduce the tariff is by having more investors setting up shop and consuming the generated electricity.

The excess electricity that is generated without being consumed keeps the plant’s operation costs and debt servicing obligations high.

And more from Karuma

By the end of the year, UEGCL says, the country’s biggest hydropower project Karuma will come on line, feeding another 600MW into the grid.

UEGCL is the implementing agency that oversees project development including hydropower stations and renewable energy projects.

Isimba, contracted to China International Water and Electronic Corporation, is UEGCL’s first major hydropower project to be delivered, despite the design and engineering hitches that saw the agency fire consultant Indian firm Energy Infratech Pvt over lax supervision of the works.

Located about 50km downstream of the source of the Nile, Isimba hydropower plant has a power station installed with four vertical Kaplan turbine generator units, with a capacity of 45.75MW each.

The electricity transmission utility says power from Isimba is evacuated by the 132kv switchyard and transmission line from the plant to Bujagali, where it connects to the main grid to be distributed.

Out of the $567.7 million spent on Isimba, 85 percent is a concessional loan from the China Exim Bank to be repaid over 20 years; the 15 percent was funded by the government of Uganda.

After switching on the 183MW plant at Nampanyi village in Busana sub-county in Ntenjeru North county, President Yoweri Museveni commended China for extending the concessional loan.

“It is an era of big projects,” he said. “The government was not able to undertake all development programmes at the same time due to resource constraints,” the president added.

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