Tuesday, February 22, 2022

LISTEN TO PROPHETS OF DOOM ON UGANDA POWER SITUATION

Podcast here

In 1996 I  made my first trip to South Africa. We got there in the dead of the night, but you wouldn’t know it. The highway from the airport was so well lit you could drive without your headlamps on.

At the time Uganda was beginning major loadshedding. We would have power on in 12 hour alternating intervals – power would be on in the day today, off at night, tomorrow off in the day and on at night.

I asked our South African hosts whether they ever had loadshedding and they went, “What is that?”

Today they are the ones suffering massive power outages and we go crazy when it goes off for 30 minutes. They failed those years ago to plan for the growth of their economy and the subsequent jump in demand that would swallow their surplus supply.

As it is now we have a installed generation capacity of about 1,252 MW against a peak demand of 750 MW. This surplus will bumped up even further when Karuma’s 600 MW comes on line later this year.

"While we may be forgiven for taking a break from trying to build new power dams given the bloodiness of the fights that it took to build Isimba and Karuma dams, industry experts estimate that by 2027 if we don’t start building new power generation units now, we will be back to the loadshedding years of yesterday and who knows it may be South Africa’s time to ask again, “What is that?”...

Also given that on average it takes about seven years to commission a power project in this country, we are behind schedule to beat the 2027 deadline.

Government keeps moaning that it has got bad deals in the generation and distribution concessions it signed with private providers, but everybody who was around knows we were in a desperate situation at the time with little to no bargaining power. To do nothing now means in a few years we will be signing other “bad” deals because a crisis will be upon us.

For starters there has to be more integrated planning. The left hand needs to know what the right hand is doing. Recently it was reported that a 40MW hydro power dam at Achwa is ready for commissioning there are no transmission lines in place to evacuate the power. As a result government is paying a few billions a month to the owners for power we are not consuming because the promoters of project cannot be blamed for government inefficiencies.

It seems the logical thing to do, when you start building a dam you have to ensure there is demand down the line, that you have the distribution network to feed this demand and you have the infrastructure to get the power from the dam to the distributor. To that all the players up and down the line have to be in the know of what is happening. In Uganda clearly not.

It was the same complaint with Karuma where the dam construction was ahead of the process of getting transmission lines to them. Is it possible that the multi-year development of the billion dollar 600 MW Karuma dam was kept secret from Uganda Electricity Transmission Company Ltd (UETCL)?

It was heartening to see that Uganda Electricity Generation company Ltd (UEGCL) showed a healthy profit last year – all of sh92b. This has been helped by the takeover of Isimba dam which suggests we are developing in house capacity to develop our own power projects.

This is important, because in our desire to lower power costs for industrialists, who generates our power is a big determinant.

"A recent industry showed that while government power plants – Kiira and Nalubale produce about half the power we consume they account for less than 20 percent of the tariff that we pay. Common sense would dictate that government should be looking to shifting development of power plants more and more towards UEGCL as a way to shift the tariff further down...

Private investors should be encouraged but within a broader strategy of pushing tariffs down, that recognizes this fact.

It comes as surprise then that the other day Electricity Regulatory Authority (ERA) put out an announcement that China International Water & Electric Corp, the contractors of Isimba are undertaking a feasibility of building a 392MW dam at Oriang in northern Uganda.

To begin with there is too much conflict of interest in the proposed contractor carrying out a feasibility study on the dam they want to build. What if the site has a capacity of 700MW but the contractor can only finance a 392 MW dam, will he tell the truth and forgo the project? Highly unlikely.

At the bare minimum feasibility studies like these should be done by government before the put out bids for development of these projects.

This should be UEGCL’s work. UEGCL is not only to collect fees from independent producers, but eventually to develop projects just like KENGEN in Kenya does, all within an industry strategic plan.

The energy ministry as the overseer of the sector needs to pull up its socks. Just because we now have private players in the sector, does not mean the ministry should abrogate its responsibility as the overall planner of the sector.

 


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