The race to have more solar power projects in Uganda is on after the launch of first such energy to be connected on the national grid, writes JEFF MBANGA.
The government’s rural electrification scheme has not yet pulled hydro-electricity to Okorom trading centre in Ngora district, but the area residents have learnt to make do with the next best alternative.
In the evenings, parts of the trading centre is lit using solar electricity units that some residents have purchased, due to their growing accessibility. Some homes whose owners can afford the units are also well lit. In addition, the solar panels help residents charge their mobile phones.
Unlike the past when the cost of installing a solar system and the wiring system ran into millions of shillings, today locals can purchase a “self-contained unit” (comprising a solar plate, a battery, a phone charging facility and three light bulbs) for as low as Shs 250,000.
The growth of solar energy from such small settings has evolved into the big stage with the Soroti project being the first to connect units on the national grid. The launch of the 10MW solar power plant in Soroti on Monday, the biggest in East Africa, is expected to spur more investments in this particular renewable energy segment, especially now that the costs of equipment are said to be falling.
Fears that solar energy needed higher tariffs for investors to recoup the money they intended to spend on power projects have been dispelled, especially now that the prices of solar equipment have dropped by a half over the last five years.
Godfrey Turyahikayo, the executive director of Rural Electrification Agency, explained that China, one of the largest producers of solar equipment, has influenced the movement of prices.
“There are quite a number of things that have developed with regards to solar. One is that the costs have actually drastically reduced over the last five years.
The cost of solar has gone to about a half over that period. The cost of production of panels in China has reduced; so, the market is flooded. Also, the efficient gains that have been achieved through scientific research have shown solar is less expensive. So, there has been a number of innovations that have made solar cheaper.
“Right now, we are actually looking at incorporating it into our system. If you look at the small hydro power projects, the unit cost of energy is about 12 US cents. But solar is also between 12 US cents and 15 US cents, right now, although that is without batteries,” he said.
MORE INVESTMENTS
Plans are already underway to construct bigger solar projects as more Ugandans, especially those living in the rural areas, switch to using solar. For example, Tororo PV Power Company Limited has already applied for a licence to construct, generate and sell electricity from its proposed 50MW solar power plant in Tororo district.
MSS Xsabo Power Limited intends to generate 20MW of electricity from a solar power plant in Gomba, although the company ran into trouble with the regulators over its other planned 20MW wind power project in Tororo. Emerging Power Limited plans to build a 15MW solar power project in Mayuge district at a cost of nearly $30 million.
On a lower scale, more homes and public spaces are switching to solar. This financial year, Uganda has set for itself a target of installing at least 20,000 solar systems in eight districts, plus also putting up solar-powered pumps in areas facing water shortages. Maintenance of solar equipment in more than 500 schools is already being undertaken under the Energy for Rural Transformation program.
The Joint Energy and Environment Project Uganda installed a solar micro grid, where at least 100 households have been connected to power. Absolute Energy Ltd plans to set up a solar 230kW PV mini-grid at Kitobo island on Lake Victoria to supply more than 400 households and businesses.
The increase in the interest in solar power, and other cleaner energies, has brightened Uganda’s international stature. For example, according to the 2014 Climate Scope report, an initiative by Bloomberg, Uganda was ranked 10th out of the 55 countries in the world ranked for attracting clean energy investments, and third in Africa. The report noted that Uganda’s non-large hydro clean energy sector attracted $307m between 2006 and 2013.
GOVT STRATEGY
As part of its strategy to attract more investments for strictly solar energy, Uganda, in January 2015, changed tact when it stopped using the feed-in tariff – an inbuilt tariff that the investor and private firm negotiate on – to competitive bidding for on-grid projects.
Before, investors demanded for a particular feed-in tariff that the Electricity Regulatory Authority had capped at 11 US Cents per kWh for grid connected solar PV energy. But now, with the change to competitive bidding, the tariff can go even lower.
“Continuous technological advancements have resulted into cheaper and more efficient solar photovoltaic technology worldwide. Benefits from these improvements can only be realized through effective management of the cost of production of electricity from this resource. Competitive procurement of such capacity is one of the most effective means of guaranteeing reasonable and fair pricing of solar power, as well as harnessing the benefits of such modular technologies, including system loss reduction and voltage stability,” the Electricity Regulatory Authority noted in 2014.
Still, government is calling for caution.
“From a technical perspective, solar photovoltaic generation is associated with frequent power swings owing to its intermittent nature. This, therefore, calls for accurate determination of the extent to which the national electricity grid can accommodate power from solar without adversely affecting the quality of power supply,” ERA noted in 2015.
Investors say that government might need to consider tax incentives for more investments in solar on-grid projects. Kristian Schmidt, the head of delegation for the European Union in Uganda, while at the ground-breaking launch of the Soroti project in March this year, said: “For grid-connected solar projects, for instance, the applicable tax treatment and standard contractual agreements already agreed could be improved to keep Uganda’s reputation as a stable, reliable and attractive environment for private sector investment.”
Government used to offer tax incentives for solar equipment for off-grid projects but scrapped that when the prices for equipment started declining. Nevertheless, a number of financial institutions, such as Centenary bank and Post bank, are increasing their lending to those who need solar power.
jeff@observer.ug