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Uganda's Energy Transition Plan Digested

Date: 15/12/2023

Uganda’s Ministry of Energy and Mineral Development has published its Energy Transition Plan (ETP) prepared with support from the International Energy Agency.

The 108-page document sets out a pathway to achieving universal access to modern energy by 2030 and powering the country’s economic transformation up to 2050 in a sustainable and secure way.

It envisages Uganda achieving net zero emissions in the energy sector by 2065 and installed solar capacity reaching 45GW by 2050.

Uganda’s Energy Minster Ruth Nankabirwa Ssentamu writes in the introduction to the report: “The launch of the Energy Transition Plan is a clear signal that demonstrates Uganda’s openness for investment. We welcome companies and investors to work with us, exploring public-private partnerships and new innovative approaches to financing the country’s energy and critical minerals industries. We know the private sector needs to be assured of a consistent direction of travel, and this plan provides the clear, long-term strategic signals to answer that need.”

ETP objectives

The objectives of the ETP are to:
• Provide universal access to electricity and cleaner cooking by 2030. 
• Modernise and diversify Uganda’s energy mix and promote its efficient use across all sectors to support industrial growth, poverty reduction and socioeconomic transformation. 
• Ensure secure and affordable energy supply. 
• Mitigate energy emissions in line with Uganda’s conditional climate commitments, which imply a 20% reduction compared to baseline emissions in 2030. 
• Position Uganda as an energy hub for the East African region

The plan is based on the scenario of Uganda’s population almost doubling to 88 million in 2050, from 46 million in 2021, and the urbanisation rate increasing from about 25% today to 45% by the middle of the century.

The ETP predicts that Uganda will enjoy strong economic growth in the coming decades driven by the start of oil production in 2025 and increasing minerals output. 

Rising urbanisation rates and the development of new industries and infrastructure will spur a construction boom, leading to an acceleration in domestic cement and steel production, which will in turn fuel energy demand.

According to the document, annual steel production in Uganda will almost double by 2030, while cement production will leap by 30%.

The report states that Uganda currently produces around half a million tonnes of finished steel products per year. It notes that two coal-fed direct reduced iron (DRI) facilities - one at Iganga operated by Tembo and another in Masese operated by Abyssinia Iron and Steel - recently entered production, and more are planned. It predicts steel production to exceed 6 million tonnes in 2050, while cement production will be around 8 million tonnes, up from about 3 million tonnes today.

The contribution to the economy of light industry - comprising food production, machinery, textiles, timber, construction and mining - is expected to double by 2030, and electricity demand from the industrial sector as a whole is expected to more than double by 2050.

The ETP says that Uganda’s energy systems must be developed in lockstep with these emerging industries, while also meeting the target for universal access to electricity and clean cooking fuels by 2030.

At present, just 45% of the population of Uganda has access to electricity, and clean cooking access is just 15%. Solid biomass (firewood, charcoal and bagasse, the latter used in buildings and industry) accounts for 90% of the country’s final energy consumption.

Future generation mix

By 2050, the aim is for clean fuels including solar, geothermal, nuclear and hydropower to account for 75% of the country’s energy supply.

Electricity generation is projected to increase from 5TWh today to 200TWh by the middle of the century, driven by industrial activity, increased electricity access, population growth, rising living standards and the electrification of the economy.

Under the ETP, Uganda’s installed generation capacity will grow nearly 40-fold by 2050.

Whereas 90% of the country’s electricity is currently produced by hydropower facilities, its future energy mix will be more diversified, with photovoltaic (PV) solar accounting for 40% by 2050. 

Installed solar PV capacity will expand from about 0.06GW today to 7.5GW in 2030 and almost 45GW by the middle of the century. “In 2050, around two-thirds of the solar PV installed is distributed, most of it is grid-connected, as stand-alone systems are increasingly absorbed by the grid over the course of the ETP,” the document states.

The Uganda Rift System in the west of country offers significant opportunities for developing geothermal energy. The target is for 1.5GW of installed geothermal capacity by 2040 and 5GW in 2050, when it will account for one sixth of Uganda’s electricity supply. The long lead times for geothermal projects mean that it will not feature heavily in the energy mix until the mid-2030s, the ETP notes.

The ETP sees a small role for wind power in Uganda, largely in the northeast due to the limited resource profile. Installed hydropower capacity will double to 2.3GW in 2030 and again to 4.5GW in 2050, but the opportunity for expansion is constrained due to limited sites and concerns over the future impact of climate change on water flows.

From 2030, grid-connected batteries will come online - bringing greater operational flexibility and enhancing grid resilience - scaling up to almost 9GW in 2050 on the back of global cost reductions. This will facilitate the integration of solar and wind capacity.

The Ugandan government is keen to pursue the development of nuclear power to improve energy security and grid stability, and is planning to develop two nuclear plants, with the first 1GW facility coming online in the mid-2030s. The ETP envisages installed nuclear capacity reaching 5.9GW by 2050, providing 20% of the country’s electricity.

“While large-scale reactors are currently the dominant form of nuclear power, technological developments and rising interest in small modular rectors means that these reactors could also play a role,” the document states. 

“The country is currently in phase 2 of the International Atomic Energy Agency’s Milestone Approach, meaning that the policy decision to pursue nuclear has already been made and the preparatory work for the contracting and constructing of the nuclear power plant is being undertaken.”

However, the ETP also offers a no-nuclear scenario in case these plans do not come to fruition. In this event, solar increases to 50% of total generation by 2050 and geothermal, bioenergy and wind make up the remainder of the generation gap left by nuclear.
 
Transmission system

According the ETP, 25 million people in Uganda - 55% of the population - have no access to electricity. Those with access are mostly concentrated in Kampala and the central region where the grid infrastructure is most developed. 

“Currently, around 1.4 GW of electrical capacity is available but cannot be fully used as it is unable to reach the final consumers due to a lack of proper transmission and distribution infrastructure,” the report reads.

The inclusion of take-or-pay clauses in purchase power agreements (PPAs) with generators means the government has found itself needing to pay for deemed energy even when it cannot be used. This adds to the country’s already high residential tariff rates. 

Uganda has some of the highest electricity prices in the East African region. It has a no subsidy policy, charging customers cost-reflective tariffs. The government has since ceased signing such take-or-pay agreements.

The ETP describes grid infrastructure as a bottleneck in Uganda’s energy system. Investment in expanding generation capacity (which has increased from 290MW in 2000 to nearly 1.4GW at the start of 2023), has not been co-ordinated with spending on transmission and distribution infrastructure. Lack of transmission infrastructure and connection queues have led to delays in bringing renewable energy projects online. 

It can take six to 10 years from planning to completion to develop high-voltage grid infrastructure in Uganda, compared with between one and five years for new renewables capacity, the report says.

“Timelines for distribution projects are typically much shorter, ranging from a few months to a couple of years depending on the project scale, which enabled the country’s distribution network to expand by nearly 40% in the past five years.”

Lack of grid reliability means diesel generators are widely deployed. “This is not due to a shortage of generation capacity, but rather a lack of investment in grid infrastructure, low visibility at the grid edge, and challenges with generator dispatch matching demand,” the ETP states.

In 2020, the average customer experienced over 60 hours of unplanned outages and almost 50 non-momentary interruptions. Peak demand in 2021 was 785MW.

To achieve the goal of universal access by 2030, the ETP states that 5.5% of the population needs to gain access each year to “at least a basic level of energy services via a grid, mini-grid or solar home system connection.”

It says that off-grid solar PV systems and mini-grids offer faster deployment and easier scalability for remote communities. It envisages mini-grids and solar home systems (SHSs) will provide first access to one third of the unserved population and calls for robust and transparent policies and regulations to encourage developers and distributors. The report adds that “pilot projects and pre-feasibility studies, led by government and international partners, are vital to demonstrate the viability of investments in areas where, due to lower incomes and limited payment capacities, returns on investment might appear challenging.”

Investment requirements

The ETP calls for US$325 billion of investment in Uganda’s energy sector over the next three decades. It states that annual investment needs to reach around US$8 billion by the second half of this decade, with US$7.2 billion of this going to clean energy or access related investments. Solar will account for 30% of the total investment in clean energy.

Between 2026 and 2030, investment of US$2.8 billion is needed in power generation.

Total investment in nuclear energy is estimated at US$6 billion from 2030 to 2040, with a further US$18 billion in the following decade.

Some US$2.1 billion a year is required for extending, refurbishing and upgrading transmission and distribution grids. Around 40% of this will be high-voltage grid expansion and enhancements. After 2030, an increasing share of distribution system upgrades go to building out electric vehicle charging networks. By 2050, more than two-thirds of passenger cars in Uganda will be electric, driven by the implementation of age limits on second-hand vehicle sales.

Battery storage investments will remain small this decade, mostly concentrated in off-grid systems, however, in the early 2030s, spending steadily climbs to around US$300 million a year.

The ETP also addresses spending in the oil sector: investment in the second half of this decade will be concentrated on the construction of the 60,000 barrel-a-day Hoima refinery. Uganda is due to begin commercial oil production in 2025 from the Lake Albert basin, and the refinery project is currently under tender.

Between 2026 and 2030, the plan foresees total annual investments of US$1 billion for oil and gas supply, refining and processing. The report notes, “This falls substantially after the Hoima oil refinery is completed.”

The government has previously articulated ambitions of establishing Uganda as a regional energy hub. This would be achieved through the faster deployment of nuclear power generation to enable increased exports of 100TWh to neighbouring countries. This would require double the investment in power generation capacity envisaged in the ETP in order to reach 52GW of installed capacity by 2040. 

In 2021, Uganda exported 395GWh of electricity to Kenya, Tanzania, Democratic Republic of Congo and South Sudan, some 8% of its power generation. The country has existing or planned interconnections with all of its neighbours in the East African Power Pool.

The ETP notes that development finance institutions have accounted for around 80% of power financing in Uganda over the past 10 years, with the private sector providing just 10% of capital and the remainder coming from state-owned enterprises. Concessional funding will be needed to mobilise private finance, alongside greater involvement from domestic institutions, including pension funds to execute achieve the aims of the ETP. Diversifying funding sources will be critical to scale investment.

More plans to come

The document ends with the caveat: “The Energy Transition Plan, while based on robust energy modelling, is not designed to be an implementation strategy. Accordingly, Uganda has called for the creation of an Integrated Energy Resource Master Plan.”

In September, the Uganda Ministry of Energy launched its Energy Policy For Uganda 2023 which aimed to achieve universal access by 2040 and 52.5GW of installed generation capacity through US$250 billion of investment. 

The ministry also recently published an energy review document compiled by the International Energy Agency.

Source: Construct Africa

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