Business

Why Uganda Now Needs Investment in the Transmission and Distribution Networks

Uganda’s installed power generation is 1,268.9 megawatts (MW), while peak demand is 723.8 MW.

Put differently, 545.1 MW remains unused or to use the Electricity industry jargon, is deemed energy/idle capacity.

One plausible explanation for the surplus 545.1 MW is that the transmission and distribution networks do not extend far beyond urban areas, therefore the proportion of Ugandans accessing and consuming power is low.

Idle capacity comes at a cost to the consumers and the government through retail tariffs and subsidies respectively.

A June 2019 Ministry of Finance Briefing Paper noted the government paid Shs30 billion in idle capacity charges in the 2018/19 financial year alone.

Deemed energy also impacts on energy sales since power that should have been consumed, as happened with Buseruka hydroelectric plant, remains unused.

To address the challenge of idle capacity and to make power accessible to prospective consumers, the government and private players must extend the transmission and distribution grids to unserved areas.

As of October 2020, the power transmission line stood at 3,223 kilometres (km) long, which though an increase from 730km in 2000, rationalises the need to expand it if all Ugandans are to be connected to the grid in the period stipulated in the National Development Plan III.

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The transmission lines go hand in hand with transmission substations and transformers.

By the first quarter of 2020, the Uganda Electricity Transmission Company Limited (UETCL) had 21 substations and 49 transformers of varying capacity.

UETCL plans to increase the transmission grid’s route length to 5,721km in the medium term.

Similarly, it intends to increase the number of substations and transformers to 50 and 104 respectively.

The total power distribution grid was 50,216 kilometres long as of Q2 2020. Umeme Limited has over the years increased the number of distribution transformers from 6,000 to 13, 000 and constructed over 10 substations.

Like the transmission company, distribution utilities such as Umeme Limited and the Uganda Electricity Distribution Company Limited intend to expand the grids in their respective service territories.

On its part, ERA has introduced an energy rebate policy through which commercial and industrial consumers who construct low voltage lines connecting their premises to the grid are later reimbursed through offsets against their bills.

As to how much money will be needed to expand and revamp the grids, an inter-ministerial committee in 2015 noted that between the year 2018 and 2025, Uganda would need to invest $3.2 billion in the power transmission and distribution networks.

The committee said the government would require $995 million for rural electrification.

These monies, it said, could be raised through debt financing, with the government looking for the loans to finance investment in the transmission network.

The private sector, the committee suggested, would fund investment in the distribution grid.

Deployment of private money means there will be a return on investment, which would then be recouped through the retail tariffs.

But this can be cancelled out by the benefits of the economies of scale that would accrue from the connection of many consumers to the grid.

Through the free Electricity Connection Policy, the government intends to connect 300,000 premises to the grid annually.

The programme started in 2018 will run until 2027 and should increase the proportion of Ugandans accessing electricity to 60 per cent over that span.

Reliable power supply will considerably contribute to the productive use of electricity and further Uganda’s industrialisation goals.

Furthermore, investing in the transmission backbone will enable Uganda to export some of its surplus power.

Already, UETCL is exporting power to Kenya, Tanzania, Rwanda, and parts of the Democratic Republic of Congo.

The inflows from power exports have risen from $18.46 million in Calendar Year (CY) 2000 to $44.57 million as of CY 2019, according to the Bank of Uganda.

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