Power Crisis Hits Harder in Uganda
Is there a way out of the current electricity crisis in Uganda?
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First published: October 30, 2006
Introduction (Back to top)
You might have heard of a saying that it is difficult to appreciate the value of water until the well runs dry. This saying comes to mind when looking at the pervasive effects of the electricity shortage that hit the country last year. Businesses are falling or struggling, products more expensive while many people are losing jobs because of power scarcity.
The electricity shortage resulting from reduction a in generation capacity at the two principle dams of Nalubale and Kiira on Jinja's Owen falls dam is affecting Uganda in many ways, putting many businesses and the government at the toughest test of the day.
Uganda' hydro power generation capacity has dropped by over half, from of 300 MW (Megawatts) to 120 MW as of October 2006, yet the country needs 340MW. Hydro electricity in Uganda is the main source of power, at least for the industrial sector.
Electricity load-shedding has now become the norm with 12 hour and 24-hour load-shedding the reality for industrial and domestic consumers.
The current power crisis has made thermal power a necessity. Already, much of the power being supplied on the national grid is from thermal plants, while many small and medium scale enterprises continue to run most operations on generators.
Aggreko International is operating a 50 MW thermal plant at Lugogo and is about to finalize another thermal plant in Jinja.
According to the Ministry of Energy, another 50 MW thermal plant will be installed at Mutundwe by 2007 after the World Bank's approval of the project whose deal agreement the Inspector General of Government (IGG) had said was riddled with corruption.
The government also expects to have another 50 MW thermal pant installed in Namanve. But according to experts, thermal power costs thrice as much to generate as hydropower. This is already beginning to show.
Power tariffs to continue increasing (Back to top)
After experiencing a 37% power tariff increase in June 2006, a heavy power tariff increment is expected beginning November 1st 2006 following the completion of the Jinja thermal plant, which will be generating 50 MW at full capacity.
"Continued reliance on high cost thermal generation as the economy fights inflation coupled with diesel price increment has led to the price to go up. For every thermal plant installed and connected to the national grid, there will be tariff increment to meet the costs of the plant," says Johnson Kwesigabo, ERA acting Chief Executive Officer.
The government allocated 229bn shillings in the 2006/2007 financial year budget to subsidize electricity costs. The subsidization is in form of tax waivers, mobilization fees and capacity prices. Kwesigabo says that by the end of October, 100 MW of thermal power would be generated, but it will consume 90% of the subsidies allocated for this financial year. This is generating a situation of problems in solutions that the country needs to measure the comparative cost of thermal energy on the economy.
Experts had long warned that power consumers should brace for higher electricity tariffs as the government is compelled to go for the more expensive thermal power to bridge the shortfall in generation.
Frank Ssebowa, the Executive Director of Electricity Regulatory Authority, says it would take "divine intervention" to see power costs coming down.
"When Aggreko was commissioned, the cost of oil was 45 U.S. dollars a barrel. Today it is close to 65 dollars and this hasn't been passed on to the consumer because the government is subsidizing. But for how long shall we subsidize?" Ssebowa asks.
"People should expect such changes in the tariff structure as our investors try to offset the heavy capital investment put into the electricity grid," Sebowa says.
But the many people have been asking how as a country, we found ourselves in this situation, when Uganda was generating considerable power and exporting some last year.
What caused the power crisis (Back to top)
The Electricity Regulatory Authority says the low generation capacity and the fast growth in demand (between 6% & 8% annual increase) have been responsible for the frequent day and night load-shedding currently being experienced.
The Permanent Secretary of the Ministry of Energy and Mineral Development, Fred Kabagambe says the shortfall in hydro electricity is due to reduced water levels at the two dams due to prolonged drought, delays in setting up of the 250 MW Bujagali power project that was to start in 2004 and increased demand of power.
Lack of power policy? (Back to top)
Some environmental experts insist that the power shortage in Uganda is a result of poor planning and lack of policy on power.
"In 1999, we called upon the government to put in place a power policy, which they did not. The actual reason for power shortage is not because Bujagali was not built, but, due to lack of transparency in the privatization of UEB and liberalization of the power sector," the National Association of Professional Environmentalists (NAPE) said in a recent press statement.
"The Power Purchase Agreement (PPA) which was kept hidden from the public between the government and ESKOM, allowed ESKOM to operate the hydro electric plant at Nalubaale and Kiira in which ESKOM is paid for power generated and not power consumed. This became an incentive for the Company to produce as much power as possible without regard to the water flow, water levels and the need for power," NAPE says in a statement signed by Frank Muramuzi.
According to the group, the result was that in 2004 and 2005, a lot of power was generated by running all the turbines at full blast allowing more water to flow from the dam than the engineering designs required, and consequently draining the dam and the lake. ESKOM has however, denied the allegation, saying that the reduced water levels are a result of natural reduction in water levels in Lake Victoria.
Lake Victoria's decreasing water levels
"You may recall sometime back in 2005, the Ministry of Energy declared that there would be no more load-shedding and for about six (6) months there was almost no load-shedding. During this time the dam was being drained to produce power to maximise profits on power generation," NAPE insists.
They also dismiss the government position that the power shortage is due to drought.
Environmental causes and concerns (Back to top)
NAPE however admits that environmental degradation is the major factor that contributes to the reduction of the waters flowing into Lake Victoria. The indiscriminate cutting down of forests and other vegetation reduces rainfall, and it also contributes to soil erosion, which in turn causes siltation in rivers and wetlands. Siltation reduces the amount of water that finally reaches Lake Victoria and also causes flooding, with all its resultant effects on health, agriculture and the human habitat. Rivers and wetlands are therefore drying due to siltation and not because of the decreased rainfall," NAPE says.
Apart from the concern on the effect power shortage is having on shriveling the economy, there are rising environmental concerns as many people take to tree cutting to get charcoal to solve their and other consumers' energy needs.
Environmentalist John Ken Lukyamuzi, says that Uganda is headed for severe environmental disaster of depending on generators, which apart form noise pollution emit dangerous gasses on daily basis, from almost every part of the city, if not the country.
President Yoweri Museveni has vowed not to listen to environmental groups and foreigners who he blames for the power crisis Uganda is facing. Museveni says if the Bujagali power plant was in place, Uganda would not have faced the current electricity crisis.
Earlier attempts to construct a power plant at Bujagali faltered in 2004 after strong international pressure from the opposition and especially environmentalists. The Bujagali power project was marred with allegations of corruption and environmental degradation.
Some people have blamed the government for privatizing the Uganda Electricity Board (UEB), and separating it into three separate companies, all somehow run by one company ESKOM under a power concession agreement with the government.
UEB was divested into the Uganda Electricity Generation Company, the Uganda Electricity Transmission Company and the Uganda Electricity Distribution Company (now UMEME). You can then understand why some people cannot take the blame of power shortage off UMEME.
Worries over prolonged crisis, effect on investment (Back to top)
Despite President Museveni's repeated assurances to the nation that his government can fix the power shortage problem. Only 19% of Ugandans sampled in a survey by Daily Monitor believe the electricity situation will improve in a short time.
Even the Presidential Investors Roundtable (PIRT) put in place by President Yoweri Museveni to identify obstacles to investment named power shortage as the leading obstacle to investment.
Investors have for long been complaining of frequent power load-shedding which limit their industries from operating at an optimum level. Uganda Manufacturers Association Chairman, Abid Alam says that alternative sources of power like diesel generators are expensive and push up production costs, thus making their products unaffordable by many Ugandans.
Severe effect on economy
(Back to top)
The power shortage and resultant load-shedding is causing multiplier effect of problems to traders and consumers, in the end creating an economy of woes for traders and consumers. Just ask any Ugandan. People are complaining of increases in prices since the power shortage shot in. Traders are complaining about the high factory prices of products. Manufacturers on the other hand are complaining of increased costs of production due to power shortage. The result is an uncomfortable business environment that is negatively affecting the country's economy, which has been one of the most promising economies in Africa in terms of economic growth figures.
The Bank of Uganda announced in August 2006 that the power shortage is already having an adverse effect on the economy as the government has failed to meet its projected Growth Domestic Product growth rate of 6% in the 2005/2006 financial year, only managing close to 5% growth rate.
"The lack of reliable and available power supply and/or the need to run expensive back-up generation has impacted on industrial production," the Ministry of Energy and Mineral Development admits in an expert paper presented to the World Bank in October 2006.
Alam says while thermal (generator) power is an option that can be looked forward to, it is making costs of production for most industries high, which in turn leads to increases in prices of products, thereby negatively affecting the sales and business of the manufacturers and traders.
"There is an inevitable outcome of increasing prices. Yet when we increase prices, people will not buy. People are not buying because they don't have money. The whole economy is being affected by the power shortage," he says.
Prices of most consumable products have already more than doubled. For example a candle which used to buy at Shs 100 now is now sold at Shs 200, sugar which was at Shs1,700 at the beginning of the year is now sold at Shs 2,800, telecommunication companies have increased airtime call rates as have several other goods and service providers.
The manufacturers are expressing concern that as a result of the power crisis and increase in cost of production and the resultant increase in prices, Uganda's products, which are produced expensively, can no longer compete favorably on the international market.
The power shortage is thus affecting the country's export sector and killing any hope for manufacturers to keep in business in relation to their regional counterparts.
The falling water levels are also bad news for thriving fishing, floriculture, tourism and lake tourism industries, as well as a threat to the livelihoods of the 30 million people who directly live off the lake in Kenya, Uganda and Tanzania. It could also cause disputes with the countries like Egypt and Sudan, which get water from the Nile.
Solutions to the power crisis (Back to top)
The fact is that the power crisis is with us and solutions have to be found. President Museveni says the government has imported two diesel generators, one for 100 megawatts (MW) and another for 50 MW as short term measures to ameliorate the negative effects of power shortage. He noted that though diesel electricity is expensive, the government is going to subsidize the electricity.
The president says in the long run, the government is going to build power plants at Bujagali and Karuma falls simultaneously within three years time to solve the power shortage. He said Bujagali will produce 250 MW and Karuma 200 MW.
The Executive Director of Uganda Investment Authority, Maggie Kigozi says that the World Bank is helping Uganda to mobilize funds for the construction of two power dams.
Museveni says that Kakira, Lugazi and Kinyara sugar factories are going to generate electricity using bagasse (the residues of sugar cane), which are expected to produce a total of 30 megawatts. The President says the government is also looking for a solution the form mini power stations, including Nshungyezi (in Isingiro) - 9 megawatts; Bugoye (in Kasese)- 10 megawatts; Buseruka (in Hoima) - 10 megawatts; Waki (in Hoima) - 5.5 megawatts; Ishasha (in Kanungu) - 5.5 megawatts and Nyamabuye - 3 megawatts. Nengo (in Rukungiri) 10 megawatts.
Finding alternatives (Back to top)
Museveni also says the government is going to promote the use of solar energy for lighting, water heating and water pumping.
"Anybody installing a solar power system for the above reasons will get a subsidy of 45 percent," Museveni said, adding that apart from the initial costs which are subsidized, those who use solar energy will never pay the electricity bill for 25 years other than occasional repairs and battery renewal.
"When it comes to cooking and refrigeration, it is better to use gas and kerosene if hydro-electricity is not available," Museveni advises.
The Chairman of the Uganda Private Sector Foundation, James Mulwana says traders in the country should stop criticizing the government over the power shortage and instead provide solutions to the current power crisis in the country. Mulwana says that businessmen should take opportunities of the power shortage and provide cheaper alternatives to help the government out of the current power crisis.
Power access still very low (Back to top)
But even if the power crisis was solved, it is highly doubted that Uganda can generate enough power to supply adequately for energy needs in all parts of the country. Today, only 5% of Ugandans access electricity on the national grid. This is despite the fact that access to electricity has been a prime campaign demand for many regions during presidential elections.
The government embarked on a rural electrification programme to ensure the majority of Ugandans are able to access electricity for home and industrial use, but with even the urban areas not having half of the power needed, rural electrification is set to be in incubation for a long time. Some Ugandans are even seeking for divine intervention for the country to get out of the power crisis in order to meet the energy needs of the country.
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First published: October 30, 2006
Gerald Rulekere is a Journalist and member of Ultimate Media Consult. He has written and published extensively on business and gender issues and been writing for Ultimate Media Consult (U) Ltd for the last two years. A professional and graduate journalist, Rulekere is always looking for an opportunity to better his writing especially for international media.