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Will Isimba and Karuma bring down the price of electricity in Uganda?
According to the National development plan (II), Uganda should be producing 2500 megawatts of electricity by 2020 if it is to reach middle-income status, and 41738 megawatts by 2040.

On the 8th of November 2011, Aggreko International Uganda Limited, a renter of high powered diesel generators whose CEO Rupert Soames once claimed that they are the team you call when you need emergency power and they will deliver up to 40 Megawatt of electricity in 5 weeks, shut down Its thermal power plant and forced the country into crisis Mode.

The company blamed the shut down on diesel shortages in Uganda, and according to the Dow Jones publication, the shutdown left the country with a deficit of 200 Mw during peak hours.

Shocked by Aggreko’s action, UMEME's then outage project manager Florence Nsubuga told the media the shutdown had reduced electricity supply to the national grid, leaving UMEME with no option but to ration power.

That was the time Uganda had some of the worst load shedding with average electricity supply lasting 8 hours.

Luckily, Bujagali hydropower dam’s 250 megawatts came on board and increased Uganda’s installed electricity capacity to 862 megawatts, with 100 mega coming from the 2 thermal power generators that stuck it out Jacobsen and Electromaxx.

From that experience, and the fact Uganda had spent over 1.5 trillion shillings subsidizing the cost of electricity, the last seven years have been dominated by a national conversation on the cost of electricity and new hydropower infrastructure.

According to the National development plan (II), Uganda should be producing 2500 megawatts of electricity by 2020 if it is to reach middle-income status, and 41738 megawatts by 2040.

When the two dams under construction Karuma (600 Megawatts) and Isimba (180 megawatts) come on board, Uganda will have installed capacity of 1683 megawatts, meaning Uganda will have to embark on more power projects in the next 3 years if it is to meet its Nation development plan target.

When I asked David Isingoma the chief strategy and Business development officer at the Uganda electricity generation company (UEGCL), why Uganda which has an electricity surplus of almost 200 megawatts, has not seen the price of electricity go down, and whether the new dams would have any effect.

Isingoma said that the cost of electricity would only come down if there was an increase in demand so that power producers benefit from economies of scale ‘’Electricity is not like other products, the cost of production, the generation cost, is something which does not come down with an increase in capacity, it would come down if all that electricity was being consumed’’ Isingoma says.

He further says that Uganda is producing electricity, but the market is constrained, he says that it is a small market that is shouldering the cost of production. ‘’The problem is that we have suppressed demand, it is the demand which is there, but we are not reaching out to those people, we need to unlock demand’’ He says.

 

According to Isingoma, the issue of the price of electricity goes beyond the capacity and is about the economy too. He notes that the industries that would be shouldering most of the electricity are operating at 50% capacity, because of low demand.

‘’When people produce products and they are not being purchased, they cut back on production, and the electricity they use’’ He says.

Mr Isingoma says that it is hoped that the new dams will help bring the cost of electricity from the current 12 us cents per kilowatt-hour that is paid to Bujagali energy limited, to about 5 US cents for Isimba and Karuma.

 

Who is going to consume Uganda’s surplus electricity?

In 2012, the government of Uganda cancelled the subsidy on power that had always been out to power companies to keep power tariffs artificially low since 2005, this forced tariffs up by over 42%, and allowed market forces to finally operate in the heavily regulated sector.

The government of Uganda had spent 623 million dollars on subsidies by the time it was cancelled.

The Energy Minister Irene Muloni said the money that they used to spend on subsidies will be used to invest in the sector.

"The money freed from the subsidies will be used to finance the implementation of the other critical government programmes for example construction of the 600MW Karuma hydropower project," Muloni told the Media.

The various investments have seen Uganda get to the level where its projected electricity capacity will reach 1683 megawatts.

In a presentation to Journalists at the African centre for media excellence, Mr Harrison Mutikanga the chief executive officer of the Uganda electricity distribution company revealed the key projects that would ensure that there is enough consumption to match with the increasing levels of production.

He listed the upcoming standard gauge railway which he says would consume more than 300 megawatts, the phosphate factory in Tororo which he says would consume 200 megawatts, he added the upcoming industrial parks, regional power exports and rural electrification among others.

However there are still questions on whether these projects will actually see the price of electricity for consumers drop, and help Uganda’s economy grow faster and before these projects come on board, and unless deliberate effort is made to unlock the suppressed demand, the surplus power will remain a burden to consumers and taxpayers.

 

By Collins Hinamundi

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