The Least Cost Generation Plan
The Least Cost Generation Plan
The Least Cost Generation Plan
2016 – 2025
EXECUTIVE SUMMARY
In the update of the plan, similar to the Power Sector Investment Plan,
prepared by the Ministry of Energy and Mineral Development, the
”Econometric Demand” forecasting method was used at distribution
level to forecast Commercial, Medium Industry and Large Industry
customer category demand. A bottom up approach was used for
Domestic customer category using the end-user method. A Base Case,
Low Case and High Case scenario were developed for sensitivity
analysis.
The resultant demand forecast was 6.5%, 3.6% and 12% growth rate in
energy demand for the Base Case, Low Case and High Case scenarios
respectively. This growth rate is lower than the projection in the 2013
LCGP of 10%, 5% and 14% for Base Case, Low Case and High Case
respectively.
1
In the demand supply balance, Figure E1 shows the demand and supply
balance over the planning period. A large unutilized generation
capacity is observed for the Base, Low and High Case scenarios. The
excess capacity increased from about 120 MW in 2016, to a range of
1,200 MW and 2,300 MW in 2025, for the Low Case to the High Case
Scenario.
Figure E1: Trend of Peak Demand and Supply Balance 2015 - 2024
3,500.0
3,000.0
2,500.0
Capacity (MW)
2,000.0
1,500.0
1,000.0
500.0
-
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Operating construction
Licensed Feasibility
Import Base Case Demand (MW)
Source: ERA
2
additional generation. This can be done through reduction of network
congestion and grid extension to increase the uptake.
3
TABLE OF CONTENTS
EXECUTIVE SUMMARY .............................................................................................................................. 1
1. INTRODUCTION ................................................................................................................................. 7
1.1 Background ................................................................................................................................... 7
1.2 Objectives of the Plan ............................................................................................................ 8
1.3 Structure of the Report ........................................................................................................... 9
2.1. Update on Electricity Industry Policies and Reports ..................................................... 10
2.1.1. Energy Policy and Renewable Energy Policy ........................................................ 10
2.1.2. Rural Electrification Strategy and Plan (RESP) 2013-2022 ................................... 12
2.2. Regulatory Policies and Decisions .................................................................................... 12
2.2.1. Solar Tendering ............................................................................................................... 12
2.2.2. Implementation of the Quarterly Tariff Adjustment ............................................. 13
2.2.3. Multi Year Tariff (MYT) .................................................................................................... 14
2.2.4. Umeme Performance Targets .................................................................................... 14
2.2.5. Progress of GETFiT Implementation ........................................................................... 15
2.2.6. Implementation of the Demand Side Management Strategies ...................... 15
2.3. Macro economy .................................................................................................................... 16
2.3.1. Annual Inflation Rate .................................................................................................... 16
2.4. Exchange Rate ....................................................................................................................... 17
3. FORECAST OF ELECTRICITY DEMAND ........................................................................................ 19
3.1. Methods of Forecasting ....................................................................................................... 20
3.2. Review of PSIP Demand Forecast Methodology .......................................................... 23
3.3. Review of Data Used in the Study..................................................................................... 23
3.4. Review of Energy Forecast per Customer Category................................................... 24
3.4.1. Domestic Demand Forecast ...................................................................................... 24
3.4.2. Commercial Demand Forecast................................................................................. 25
Source: PSIP and ERA .................................................................................................................... 26
3.4.3. Medium Industry Demand Forecast ......................................................................... 26
3.4.4. Large Industry Demand Forecast .............................................................................. 27
3.4.5. Demand Forecast for Rural Grids .............................................................................. 28
3.4.6. Projected Total Exports ................................................................................................. 29
4
3.4.7. Distribution Losses ........................................................................................................... 29
3.4.8. Suppressed Demand .................................................................................................... 30
3.5. Energy Sales Forecast 2016-2025 ....................................................................................... 30
3.5.1. Data Source and Trend................................................................................................ 31
3.5.2. Diagnostic Test for Variables....................................................................................... 34
3.5.3. Daily Load Curves .......................................................................................................... 36
3.6. Regression for Elasticities ...................................................................................................... 37
3.6.1. Forecasting Domestic sales ........................................................................................ 37
3.7. Forecasting Scenarios .......................................................................................................... 38
3.7.1. Sales to Other Distribution Companies .................................................................... 43
3.8. Demand at Generation Level ............................................................................................ 44
3.8.1. Forecast for Export ......................................................................................................... 44
3.8.2. Trend of Distribution and Transmission Losses ......................................................... 45
4. PROJECTED ELECTRICITY SUPPLY 2016 – 2025 ......................................................................... 48
4.1. Introduction ............................................................................................................................. 48
4.1.1. Review of Uganda’s Potential source of Electricity ............................................. 48
4.1.2. Large Hydro ..................................................................................................................... 48
4.1.3. Small Hydro ...................................................................................................................... 49
4.1.4. Biomass/Bagasse Cogeneration ............................................................................... 49
4.1.5. Wind ................................................................................................................................... 49
4.1.6. Geothermal ..................................................................................................................... 50
4.1.7. Natural gas Plants .......................................................................................................... 50
4.1.8. Thermals ............................................................................................................................ 51
4.1.9. Nuclear Energy ............................................................................................................... 51
4.1.10. Solar Photovoltaic (PV) ............................................................................................ 51
4.2. Current Sources of Electricity.............................................................................................. 52
4.2.1. Eskom Uganda Ltd (380 MW) ..................................................................................... 52
4.2.2. Bujagali Energy Limited (250 MW) ............................................................................. 52
4.2.3. Africa EMS Mpanga Ltd (18 MW) .............................................................................. 52
4.2.4. Tronder Power Ltd – Bugoye (13MW) ....................................................................... 53
4.2.5. Kasese Cobalt Company Ltd -KCCL (10.5MW)..................................................... 53
5
4.2.6. Tibet Hima Ltd – THL (5MW) ......................................................................................... 53
4.2.7. Eco Power-Ishasha (6.5 MW) ...................................................................................... 53
4.2.8. Kakira Sugar Works (32 MW) ....................................................................................... 54
4.2.9. Kinyara Sugar Works Ltd ............................................................................................... 54
4.2.10. Hydromax Ltd - Buseruka (9MW) ........................................................................... 54
4.2.11. Electro-Maxx Ltd - Tororo (50 MW) ........................................................................ 55
4.2.12. Jacobsen Uganda Power Plant Ltd - Namanve (50MW)............................... 55
4.3. Committed and Candidate Projects ............................................................................... 56
Source: ERA ......................................................................................................................................... 58
5. DEMAND AND SUPPLY BALANCE ............................................................................................... 59
5.1. Introduction ............................................................................................................................. 59
5.2. Demand and Supply balance ........................................................................................... 60
6. WAY FORWARD .............................................................................................................................. 62
6.1. Increase Domestic Demand .............................................................................................. 62
6.2. Export Opportunities ............................................................................................................. 63
6.3. Review the Renewable Energy Policy ............................................................................. 63
6.4. Rescheduling of Generation Plants .................................................................................. 64
6.5. Rural Electrification ................................................................................................................ 64
7. REQUIRED INVESTMENT TO UNLOCK DEMAND ....................................................................... 64
7.1.1. New Connections .......................................................................................................... 64
7.1.2. 33/11KV and MV Feeder Growth Investment ........................................................ 65
7.1.3. Investments to Reduce Poor Power Quality .......................................................... 66
7.1.4. Total demand Growth Investment at Distribution ................................................ 66
7.2. Investment in Transmission ................................................................................................... 67
7.3. Exports Opportunities for Uganda ..................................................................................... 68
7.4. Rural Electrification ................................................................................................................ 70
Annex 1: INPUT DATA ............................................................................................................................ 72
Annex 2: .................................................................................................................................................... 78
Annex 3: REGRESSION RESULTS ........................................................................................................... 81
Annex 4: DETAILS OF COMMITTED AND CANDIDATE GENERATION PROJECTS .................... 82
ANNEX 5: ADDITIONAL INDUSTRIAL DEMAND ................................................................................. 87
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1. INTRODUCTION
1.1 Background
Most of the time, the reality does not conform to the plan due to a variety
of factors that affect the strict implementation of plans. As such, the
“Electricity Generation Plan” is a living document that is continuously
revised to ensure that it is realistic and guides generation capacity
development.
In Uganda, there has been concerted effort to develop and update the
electricity related plans. In 2010, Government of Uganda (GoU)
developed and published a comprehensive “Power Sector Investment
Plan” covering up to 2035. Since then, other studies have been
conducted like “Grid Development Plan”, by Uganda Electricity
Transmission Company Limited (UETCL), Regional Power System Master
7
Plan and Grid Code Study by JICA, a study on Integrating Nuclear Power
in Generation Capacity Plan by MEMD among others.
The purpose of the “Least Cost Generation Plan” (LCGP) was to derive
forward looking least cost electricity supply options that can satisfy the
projected demand over a given time. The Authority intended to
continuously update this plan every year in order to reflect any changes
since the last LCGP was produced.
The overall objective of this Plan is to update the current 5-year (2013-
2018) LCGP to a ten-year (2016 – 2025) Plan. The specific objectives are
to:
8
(PSIP) demand forecast models against the actual outturn and
adapt and apply the models in forecasting demand in this report;
9
Section 6 presents the demand-supply balance.
10
Manage energy-related environmental impacts In addition to the
2007 Renewable Energy Policy, developed by the Ministry of
Energy.
The main objective of this policy was to increase the use of modern
renewable energy so that its proportionate use increases from the then
3.8% to 61% of the total energy consumption by the year 2016. The key
objectives in this policy include:
11
2.1.2. Rural Electrification Strategy and Plan (RESP) 2013-2022
In July 2013, the Cabinet of Uganda approved the new RESP 2013 - 2022.
The overall objective of this plan was and is still, “To position the
electrification development program on a path that will progressively
advance towards achievement of universal electrification by the year
2040, consistent with the existing policy of the Government, while
ensuring the displacement of kerosene lighting in all rural Ugandan
homes by 2030”.
The plan targets to achieve 26% rural electrification rate (i.e. consumers
who will be utilizing electricity in their homes, businesses or institutions) by
2022 from the current 7%. This is planned to be achieved using long-
range service territory plans and financial forecasts for the service
territories under logical, sequential allocation of investment and
capacity-building resources. This will be met by electricity service
expansion of up to 1.28 million on grid new service connections and
140,000 additional installations of Solar PV Systems and Mini-Grid
Distribution Service Connections for off-grids making a total of 1.42 million
connections1. If this plan is achieved, then demand for energy should
be projected to increase in similar measures for our study. The
implementation of this plan will contribute to the demand for electricity
in the next 10 years and must therefore be considered in this LCGP.
1
Refer to the Rural Electrification Strategy and plan 2013-2022
12
opportunity to all developers as well as manage the capacity
requirement at the time of day when they cannot generate.
500
Tariff (Ushs/kWh)
450
400
350
300
Jan,14 Apr,14 Jul,14 Oct,14 Jan,15 Apr,15 Jul,15 Oct,15 Jan,16 Apr,16 Jul,16 Oct,16
Weighted Average Tariff
411.1 407.8 408.5 409.2 419.2 427.8 432.2 507 491.7 484.6 472.4 470.2
Ush/kWh
Source: ERA
13
2.2.3. Multi Year Tariff (MYT)
Table 1:
Loss Targets Set for UETCL
Parameter 2014 2015 2016
Power loss (%) 4.7 4.4 4.0
These targets have been included in the tariff determination for UETCL
since 2014. The process of setting another set of performance targets for
UETCL starting from 2017 is underway.
Table 2:
Umeme Performance Targets
PARAMETER SYMBOL TARIFF YEAR
2013 2014 2015 2016 2017 2018
DOMC(Total) USD*1000 44,093 44,553 46,186 47,678 49,300 51,100
Uncollected
TUCF 2.70% 2.50% 2.30% 2.10% 1.80% 1.50%
Debt Factors
14
PARAMETER SYMBOL TARIFF YEAR
Actual
ALF 24.3% 21.3% 19.5%
Losses
Source: ERA
a. In the 2014/15 Annual Tariff Review, the Peak Time of Use Weighting
factor was increased from 110% to 130%. This was intended to shift
consumption especially for time of use customers like
manufacturers from consuming energy at peak time to other time
periods like shoulder and off-peak periods. The effects of the
consumer response so far to the shift in time of use factor was
2
Read : http://www.getfit-uganda.org/
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analyzed and it showed that there was a possible shift
consumption from peak to shoulder and off-Peak time periods.
II. Exchange rate and international prices of heavy fuel oil (HFO)
which is used in some thermal power generation plants in Uganda.
The inflation rate measures the movement in the general price level of
good and services over the past twelve months. While determining
electricity costs for various licensed companies, there is an allowance for
a proportion of costs to be adjusted for movement in the variable cost
of the company. This adjustment filters through to the final consumer
tariff. It is therefore important to keep track of inflation in the country.
Figure 2 shows the trend of inflation over the past three years. For the past
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three years, core annual inflation has increased by an average of 5%.
The lowest annualized increase in inflation (1.6%) was recorded in
September 2014, while the highest annualized increase in inflation (8.5%)
was in December 2015. Over the forecasting period, we expect the
general price level to increase by an average of 5% per annum in line
with the past trend.
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Mar-14
Jan-16
Mar-16
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
May-14
Jul-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
May-16
Jul-16
Sep-16
Sep-14
Nov-14
rate over the past three years. The figure indicates that over the past
three years, Uganda’s shilling has generally depreciated against the US
17
dollar by an average of 12% per annum. The most significant
depreciation was noted in May 2015 to September 2015.
3,800
3,600
3,400
Exchange rate (UGS/US$)
3,200
3,000
2,800
2,600
2,400
2,200
2,000
Mar-16
Jan-13
Mar-13
May-13
Nov-13
Jan-15
Mar-15
May-15
Jul-15
Jul-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Sep-15
Nov-15
Jan-16
May-16
Jul-16
Sep-16
Sep-13
There are two major power generation plants that use Heavy Fuel Oil in
Uganda and contribute up to 11 % of the total installed generation
capacity. Changes in international fuel prices have significant impact
on the electricity production costs of these plants and end-user tariffs in
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general. Over the past five years, the international price of oil has been
on a declining trend from about US$100 per barrel in 2011 to US$42 per
barrel in 2015 as indicated in Figure 4.
100
Crude Oil Price USD/BBl
80
60
40
20
Jul-15
Jul-13
Sep-13
Jul-14
Sep-14
Sep-15
Mar-13
Mar-14
Mar-15
Mar-16
Jan-13
Jan-14
Jan-15
Jan-16
May-13
May-14
May-15
Nov-13
Nov-14
Nov-15
Source: World Bank
According to the US Federal Energy Agency, in the next five years, the
international price of oil is likely to remain within the range of US$50 - 80
per barrel. This is information we have taken into consideration in the
update of the LCGP.
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demand outstrips supply. Achievement of a balanced forecast requires
application of a credible methodology, a correct planning approach,
accurate information and appropriate assumptions.
i. Trend Method
This method assumes that demand mainly moves with time and thus the
demand is predicted purely as a function of time, rather than being
influenced by any other factors apart from itself. Given the limitation of
the time element, it may not be conclusive to assume that the demand
for electricity is only time bound.
20
equipment and consumption by the respective sectors in the economy
and the difficulty of making futuristic end-use demand or usage patterns.
The 2013 LCGP followed the PSIP forecast output for the same year
period 2013 to 2018 and only corrected for an observed upward bias in
the forecast. This adjustment was mainly related to the over estimation
of rural customer connections and suppressed demand that was
attributed to poor security and quality of supply as well as strained
network operating conditions. The under lying error was therefore
estimated and applied to the proportional method to smoothen out the
error bias on the total sales estimates by the PSIP.
21
Figure 5: Comparison of LCGP Forecast against Actual Energy demand
1,600
1,400
1,200
PEAK DEMAND (MW)
1,000
800
600
400
200
-
2013 2014 2015 2016 2017 2018
LCGP 2013 Actual Demand PSIP Intergration of Nuclear
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3.2. Review of PSIP Demand Forecast Methodology
Secondary data for energy sales and electricity tariffs was captured from
electricity distribution billing records from 1991 to 2007. This was captured
from reports made by Umeme Limited, from 2005 to 2007, UEDCL from
2000 to 2004 and UEB from 1991 to 1999 respectively. The Gross Domestic
Product (GDP) and Population data was acquired from the Uganda
Bureau of Statistics.
The data used was reviewed to assess its consistence with the sources
referred to and it was found to be correctly reported. In addition to the
data used in the PSIP which stretched from 1991 to 2007, more recent
data from 2008 to 2015 is reported and was considered in this report to
establish the level of variation. A discussion of the respective variables
23
that is Energy Sales, Electricity Price and GDP is presented in the following
sections.
While deriving the regression, the authors of the PSIP study observed
that there was a negative relationship between income per capita and
domestic average consumption per connection. This relationship was
considered to be inappropriate and therefore the regression was recast
by regressing each aggressor against energy sales separately.
25
A comparison of the PSIP forecast with the actuals (2008 – 2015) was
conducted. The results shown in Table 4 indicate a variance of about 8%
for the last 3 years. We however note a variation between the actuals
and forecasted Commercial GDP forecast. This would have contributed
to the overall variation reported in the forecast.
The PSIP regression used Umeme Medium Industry energy sales data
(1991 – 2007) on industrial GDP and the electricity tariffs for Medium
industry. The PSIP results were reported to be inconsistent with economic
theory. The results showed that an increase in electricity prices led to an
increase in energy sales as shown in equation (v).
26
compared with actuals (2008 – 2015) of Umeme Medium Industry
consumers and found that the PSIP grossly underestimated the actual
demand as shown in Table 5.
We validated the robustness of the PSIP forecast, for the period 2008 –
2015 against actual Large Industry demand data. Over the same period,
the results are presented in Table 6 and indicate that PSIP forecast is on
average 17% lower than the actual out turn.
27
2010 589 711 -17%
2011 648 859 -25%
2012 717 909 -21%
2013 790 981 -19%
2014 870 1,060 -18%
2015 958 1177 -22.9%
Average -18%
Source: PSIP and UETCL
The PSIP projected that the total number of customers would increase
from 10,000; 5,000; 15,000 for Base Case, Low Case and High Case
28
respectively in 2008 to 250,000; 456,668 and 618,290 in 2012. This forecast
was based on the 2002-2012 Rural Electrification Plan. However, this
number of connections was not achieved. The non-achievement of
customer growth targets was addressed in the RESP 2013-2022.
The PSIP had anticipated that in the Base Case scenario, exports to
Tanzania would increase from 10 MW in 2008 to 16 MW in 2012, increasing
by 3% per year. On the other hand export to Kenya would remain stable
at around 6 MW. Considering the actual outcome from 2008 to 2015,
export to Tanzania has remained at around 12 MW while export to Kenya
has generally not exceeded 3 MW, which is within the Tie line between
Uganda and Kenya for Grid stability.
The PSIP assumed that the total electricity commercial losses would be
2%, while the technical losses would be 14.4% by 2020. However,
following the review of Umeme Limited’s performance targets, the loss
targets were revised such that the overall distribution losses are
expected to be 14.7% by 2018. In addition, the plan did not take into
account the projected transmission loss trajectory. It is therefore
important to take stock of the loss expectation in this LCGP. Figure 6 shows
the loss trajectory achieved by Umeme.
25%
20%
15%
2012 2013 2014 2015
29
Source: Umeme
In this LCGP 2016-2025, the same forecasting methodology from the PSIP
was retained given the robustness and its good theoretical foundation.
30
The econometric regression method was used for Large Industry,
Medium Industry and Commercial. However, given the challenges of the
observed reverse relationship for the domestic customer sales with
Income per capita reported in the PSIP report, the forecast for this
category was based on a bottom-up estimation method depending on
the projected connections and average consumption starting right from
the household.
a) Energy Sales
All the data that was used is shown in annex 1 of this report for reference
purposes. As shown in figure 7, the trend of energy sales to all customer
categories has increased from 1991 to 2015. In particular, as was
reported in the PSIP, energy consumption by the large industry customers
is observed to be increasing at a higher rate compared to the rest of the
customers.
31
Figure 7: Trend of Energy Sales per customer Category
1,400
1,200
1,000
Energy Sales (GWh)
800
600
400
200
-
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2004*
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Figure8: Trend of GDP by Sector
30,000.0
25,000.0
20,000.0
15,000.0
10,000.0
5,000.0
2008
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2009
2010
2011
2012
2013
2014
Agriculture GDP Services GDP Commercial GDP Industrial GDP
Source: UBOS
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2007 2008 2009 2010 2011 2012 2013 2014
GDP Growth rate 8.4% 8.7% 7.2% 5.2% 3.4% 5.3% 4.8% 5.1%
Growth in GWh Sales % 17.4% 10.5% 10.8% 8.0% 3.5% 9.9% 6.9% 5.6%
33
c) Trend of Electricity Prices/Tariff
250
200
150
100
50
0
1995
1998
1991
1992
1993
1994
1996
1997
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Best practice in econometrics requires that time series data used for
forecasting is stationery and that a long run relationship exists among the
4
http://era.or.ug/index.php/2013-12-14-14-58-04/guidelines
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variables. It is observed that the PSIP methodology did not reflect this
important step.
Annex 2 shows the results from the Augmented Dickey Fuller test for
stationarity. The table shows that before differencing, all the variables
became non stationary given that the absolute values of the test
statistics are less than the critical values. However, it is illustrated that
after the first difference, all the variables are stationary. We can
therefore conclude that the electricity sales, electricity prices and GDP
are integrated of order one thus I (1) and thus have a long run
relationship.
To test for the existence of cointegration the “Engle and Granger 1987”
method was used. Regression of energy sales against GDP and tariff
were conducted for the respective consumer categories and an ADF
test for stationarity of the residuals was conducted.
The First cointegration test with Electricity Sales, tariff and GDP showed
no existence of cointegration in all customer categories as shown in
Annex 2. However, regressions without tariffs showed that cointegration
actually exists between GDP and electricity sales in all the respective
customer categories under review.
5
Engle and Granger, 1987, Cointegration and Error Correction: Representation, Estimation and Testing,
Econometrica, 55 251-276.
35
This therefore confirms the existence of a long run relationship between
electricity sales and income. The problem with electricity tariff is likely to
be due to the fact that tariffs were not changing in nominal terms for a
long time which could have had marginal effects on the consumer.
None the less, given that the Authority implemented the quarterly tariff
adjustment mechanism, we expect that going forward, tariffs will
impact on the energy sales. From the foregoing, we therefore
maintained both tariff and GDP as the variable that influence sales.
550 Dec-14
500
Max Demand (MW)
Mar-15
450
400 Jun-15
350 Jul-15
300
Sep-15
250
200 Oct-15
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour of the Day
Source: UETCL
36
3.6. Regression for Elasticities
In order to forecast the sales, a regression of the log of the variables was
conducted for the respective customer categories as shown in the Annex
1 and summarized in the equations below. The results for the respective
energy sales all show that the models were correctly specified with a
significant F statistic. The sign on the independent variables is positive for
GDP which implies that energy sales are positively influenced by income.
The table shows that while the total domestic customers have steadily
increased, the average consumption per household has gradually
reduced. This is due to the increase in rural customers whose
37
consumption is lower than the existing urban and peri-urban customers.
This trend is expected to continue in the future as more rural connections
are made.
In order to capture the sensitivity of the forecast and prepare for different
outcomes, we considered a number of scenarios as discussed in the
following section. This LCGP maintained three main scenarios, the Base
case, High case and Low case.
This case assumed the business as usual scenario in the economy and
thus adopted the average GDP growth rate as projected by the second
National Development Plan (NDP II) 62015-2020.The National Planning
Authority while developing the NDPII 2015/16 to 2019/20 estimated that
the GDP growth rate will be as indicated in Table 9.
6
npa.ug/wp-content/uploads/NDPII-Final.pdf
38
Table 9: Forecast of GDP Growth Rate
For the Base Case forecasting scenario, the same growth rate was
adopted for the period 2015 to 2019. While the 2019/20 growth rate was
maintained from 2020 to 2025.
However, we note that the growth rates were reported in Financial Year
terms while energy sales were reported in Calendar Years. In order to
convert the rates from Financial Year to Calendar Year, a two year
moving average was used for each year. Table 10 shows the GDP growth
rate that was used for the period 2015 to 2025.
Using the forecast of the GDP growth rate, the forecasted real GDP from
2015 to 2025 is shown in table 11.
Industry
7,388 7,820 8,301 8,844 9,441 10,083 10,769 11,501 12,283 13,119
Services
15,524 16,432 17,442 18,585 19,839 21,188 22,629 24,168 25,811 27,566
Source: Team’s computations
39
In order to project the domestic demand up to 2025, we assumed total
new connection of 140,000 from 2016 up to 2025 as submitted by
Umeme. In addition, we assumed that the consumption per household
would annually reduce by 8%. Using the above assumption, the
projected Domestic energy sales are as shown in Table 12.
40
Table 13: Base Case Projected Energy Sales by Umeme
Large Industry Commercial Medium Domestic Total
(GWh) (GWh) Industry (GWh) (GWh) Umeme
Sales (GWh)
2016 1107.4 325.4 413.4 752.2 2598.5
2017 1201.8 349.8 436.1 801.6 2789.3
2018 1310.9 377.8 461.5 838.3 2988.5
2019 1433.6 408.9 489.3 864.0 3195.8
2020 1568.9 442.8 518.9 918.5 3449.1
2021 1716.8 479.5 550.3 967.3 3713.9
2022 1878.7 519.2 583.7 1010.7 3992.3
2023 2055.9 562.3 619.0 1049.1 4286.3
2024 2249.8 608.9 656.5 1082.7 4598.1
2025 2462.0 659.4 696.3 1112.1 4929.8
Source: Computations
5,000
4,500
Domestic
4,000 (GWh)
Demand (GWh)
3,500
3,000 Medium
Industry (GWh)
2,500
2,000
Commercial
1,500 (GWh)
1,000
500 Large Industry
- (GWh)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
41
b. High Case Forecast Scenario
As a result of the assumption for the High Case scenario, the resultant
demand by Umeme is shown in Table 14. The average growth rate in
demand is 11%, with demand expected to grow from 2,843GWh in 2016
to 7,076GWh in 2025. The main driver of demand still remains industrial
demand with more than half of the growth in the total demand.
42
c. Low Case Forecast Scenario
The Low case scenario assumed that the demand would drop under
lower expectations of the level of economic activity at about 3.4% GDP
growth rate on average from 2016 to 2025. The consideration of the 3.4%
GDP growth rate was because it is the lowest growth rate registered for
the past 10 years which happened in 2011. The consumption per house
hold connection would reduce by 10% per year, while the average new
connections would be 70,000. This would translate into total sales as
shown in Table 15 at an average growth rate of 4%.
Umeme represent more than 97% of energy purchases for Uganda’s ESI.
However a number of other small distribution companies were set up
with the support of REA. Among the other distribution companies are,
43
Pader Abim Community Multipupose Electric Cooperative Society
Limited (PACMECS), Bundibugyo Energy Co-Operative Society (BECS),
Kilembe Investment Limited (KIL). Table 16 provides some highlights of the
performance of these companies. Since most of the REA activities are
supporting rural electrification, we have assumed a 20% growth in
energy purchases to all the mini- distribution companies from 2016 to
2025.
44
Table 17: Energy Exports
2007 2008 2009 2010 2011 2012 2013 2014 2015
Export
(MWh) 65 66 82 76 88 99 105 167 121
Source: UETCL Annual Report
For this report, we assumed that any significant export would be made
at the earliest in 2018. This assumption is mainly based on fact that
Uganda does not have any new contract in the pipeline to export
power. We assumed that the same exports will be as those in 2015 until
2017. Export will then increase by 20% in 2018 and another 20% increase
in 2020.
During the Review of Umeme’s License in 2012, ERA set the loss reduction
target trajectory that will have distribution losses at 14.7% by 2018. In
UETCL’s Multiyear Tariff Review 2014 - 2016, the transmission loss trajectory
was also set from 3.8 % in 2014 to 3.3 % in 2016. For this forecast, we have
assumed distribution loses to be 11 %, while transmission loses will be at
2.3 % by 2025 as shown in Figure 13.
45
Figure 13: Distribution and Transmission Loss Trajectory
30.0%
25.0%
20.0%
%ge Energy Loss
15.0%
10.0%
5.0%
0.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: ERA
Table 18:
Projected Demand at Generation Level
Year Total Peak Total Peak Total Peak
Generation Demand Generation Demand Generation Demand
(GWh) (MW) (GWh) (MW) (GWh) (MW)
46
3,974 646 4,971 809 3,456 546
2018
4,203 684 5,520 899 3,549 561
2019
4,548 742 6,239 1018 3,738 593
2020
4,875 796 7,001 1144 3,899 619
2021
5,223 855 7,859 1286 4,071 647
2022
5,610 918 8,846 1448 4,266 678
2023
6,043 989 9,990 1635 4,489 714
2024
6,517 1067 11,299 1849 4,736 753
2025
Source: ERA
2,000
1,800
1,600
1,400
Peak Demand (MW)
1,200
1,000
800
600
400
200
-
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: ERA
47
4. PROJECTED ELECTRICITY SUPPLY 2016 – 2025
4.1. Introduction
Since the development of the last LCGP in 2013, some projects either
commissioned, upgraded their generation or started construction.
Kasese Cobalt Company Limited (KCCL), increased their dispatch to the
national grid from around 1 MW to an average of 5 MW. This followed
the company’s indication that it had exhausted the cobalt which was
consuming most of the power and therefore all the energy would be
exported to the national grid.
In the review of the various sources of energy that would satisfy the
projected demand, different technologies were considered to supply
the projected demand from 2016 to 2025 as discussed below.
There are three existing large Hydro Projects; Kiira (180 MW) and
Nalubale (200 MW), managed by Eskom Uganda Limited and Bujagali
48
HPP (250 MW), located on the Nile River. All the future large hydro
projects are also located on the Nile River. The committed projects
include; Karuma (600 MW), Isimba (183MW), Ayago (840 MW) and
Agago-Achwa (83 MW). In addition, the other candidate plants include;
Oriang 392 MW and Kiba 600 MW.
The small hydro projects in Uganda are generally developed on the basis
of the run of the river technology stationed on the small rivers in the
country. The GETFiT Program has given a boost to the development of
small renewable energy projects with small hydro project developers
taking the majority. As it was indicated earlier, more than 8 GETFiT
Program approved projects are expected to be commissioned within
the next two (2) years. In addition, more private developers have
expressed interest and are apparently conducting feasibility studies for
their projects as will be discussed in detail later.
4.1.5. Wind
4.1.6. Geothermal
Using natural gas, one method of generating electricity is to burn the gas
in a boiler to produce steam, which is then used by a steam turbine to
generate electricity. A more common approach is to burn the gas in a
combustion turbine to generate electricity.
7
Read: The Joint Sector Review Report 2013/14 by the Ministry of Energy
50
MEMD has indicated that there will be some natural gas that will be
harvested in the Albertine region in the process of drilling the oil. We
therefore considered natural gas as one of the resources in the plan.
4.1.8. Thermals
The national grid currently has two 50 MW plants that use imported
Heavy Fuel Oil, that is Electro max Tororo and Jacobsen Namanve,
which are operating under a merit order dispatch regime. GoU has
indicated that some fuel from the Albertine region will be committed to
generation of electricity. The quantum of fuel to be provided and time it
will be available for use is not yet confirmed. However, the indicative
capacity to begin with is around 50 MW which can later on be
expanded accordingly.
This plant was commissioned in 2011, as a run of the river. It has not
experienced any major technical challenge since its commissioning. The
52
average generation capacity for the plant in the past five years is 9.5
MW. We have thus assumed the same in this plan.
In 2013, KCCL indicated that it had exhausted cobalt from it mines which
were consuming part of the energy that was being generated. As a
result, the company increased its energy supply to the National Grid in
the second half of 2014. The plant generated on average 64.58 GWh in
2014 and 2015 compared to 17.55 GWh earlier when the cobalt plant
was still active. We have therefore assumed an average generation
capacity of 7.2 MW to the National Grid.
The floods in the Kasese region continue to pose a threat to the normal
operations of this plant. None the less, we project that THL will generate
an average of 2.5 MW.
53
4.2.8. Kakira Sugar Works (32 MW)
54
4.2.11. Electro-Maxx Ltd - Tororo (50 MW)
The plant expanded its capacity in 2013 from 18 MW to 50 MW. Since the
commissioning of Bujagali, the plant has been operating minimally as an
emergency and peaking plant. In order to ensure that the plant is
available on call, a minimum dispatch of 7 MW is maintained. We have
assumed the same dispatch and any addition dispatch to be called on
merit order going forward when all cheaper options have been
exhausted. Electro-Maxx’s license expires in 2017. We have assumed that
the plant will not be in mix after 2018.
9.5
Hydro Africa EMS Mpanga 18
4
Hydromax Buseruka 9
3.3
Eco Power Ishasha 6.5
55
Technology Name of Plant Installed Average
Capacity Available
Capacity
2.5
Kilembe Mines Limited 5
7.2
Kasese Cobalt Company Ltd 10.5
8.6
Tronder Power Bugoye 13
25
Kakira Sugar Limited 32
2.4
Mayuge Sugar 3
Bagasse
Cogeneration 5.5
Sugar & Allied Kaliro 6.9
1.5
Kinyara Sugar Works 7.5
45
Jacobsen-Namanve 50
Thermal
45
Electro-Maxx-Tororo 50
Source: ERA
Twenty five (25) Hydropower Projects are currently under feasibility study,
of which, 22 projects can be classified as small Hydropower Projects. The
small hydropower projects post a combined installed capacity of
547.871 MW.
56
Table 20: Committed and Candidate projects
Installed Capacity Estimated
No. Project Name
(MW) Commission Date
1 Siti 1 HPP 5 2017
2 Access Solar 10 2016(Commissioned)
3 Isimba HPP 183 2018
4 Rwimi HPP 5.5 2017
5 Lubilia HPP 5 2018
6 Muvumba HPP 6.5 2017
7 Waki Hydro HPP 4.8 2018
8 Nkusi HPP 9.6 2017
9 Nyamwamba HPP 9 2017
10 Tororo North Solar 10 2017
11 Ms Xsabo Solar 20 2018
12 Mahoma HPP 3.2 2018
13 SCOUL 26 2018
14 Sindila HPP 4.8 2018
15 Nengo Bridge HPP 6.7 2019
17 Agago-Achwa HPP 83 2018
18 Kyambura HPP 7.6 2018
19 Nyamagasani 2 HPP 5 2018
20 Nyamagasani 1HPP 15 2018
21 Bukinda HPP 6.5 2018
22 Ndugutu HPP 4.8 2018
23 Siti 2 HPP 17 2018
25 Kinyara 25 2018
26 Albatros Thermal Power 50 2021
27 Kakaka HPP 5 2020
28 Nyagak III HPP 4 2019
29 Sironko HPP 12 2019
Lake Albert Natural
30 50 2021
Gas Project
57
Installed Capacity Estimated
No. Project Name
(MW) Commission Date
31 Kabeywa HPP 12 2019
32 Kabale Peat 33 2021
33 Karuma HPP 600 2019
34 Muzizi HPP 45 2020
35 Muyembe-Sirimityo HPP 7 2019
Nyabuhuka-Mujunju
36 3 2019
HPP
37 Keere Small HPP 6 2020
38 Ngoromwo HPP 6.2 2020
39 Senok Wind Project 20 2020
40 Kikagati HPP Project 16 2018
41 Oriang HPP 392 2024
Source: ERA
Cost Outlook
58
In addition to the oil prices, a number of assumptions were considered
for costs of generation projects. Table 21 shows the respective estimates
mainly focusing on Capital cost of a plant, Operation and maintenance,
Plant Factor and Time of construction of a plant.
5.1. Introduction
59
5.2. Demand and Supply balance
On the other hand, considering the High Case scenarios, the total
demand will grow from 649 MW to 1,849 MW. This will lead to a lower un-
utilized supply starting from 44 MW in 2016 including thermal capacity to
1,284 MW in 2025.
In the same vein, considering a low case scenario will have unutilized
generation increasing from 176 MW to 2,380 MW by 2025. As discussed
60
above, considering all the scenarios, it is evident that if all planned
generation projects are commissioned as assumed in the study, then
Uganda will face a challenge of excess generation capacity if no
mitigation measures are undertaken in time. There is thus an urgent need
for Uganda to explore avenues of increasing the uptake for electricity
generated in order to align demand with supply.
61
Figure 14: Demand Supply Balance
3,500.0
3,000.0
2,500.0
Capacity (MW)
2,000.0
1,500.0
1,000.0
500.0
-
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Operating construction
Licensed Feasibility
Import Base Case Demand (MW)
6. WAY FORWARD
62
prospective industrial demand as was reported by Umeme in
preparation for the plan.
In line with the Uganda Investment Authority’s plan for industrial parks,
there is need to support the development of the infrastructure in the
Industrial parks in the country. In particular, there is need to fast track the
infrastructure required for Namanve Industrial Park. There are two forms
of investment required; investment to improve the quality of supply and
then increasing the capacity. The required investment in the industrial
parks is discussed in detail in the next section.
Preliminary inquiries have indicated that Kenya and Tanzania may have
excess capacity in the next 2 to 3 years. However, export opportunities
can be sought in Rwanda, Burundi, DR Congo and South Sudan.
According to the UETCL Grid Development Plan (2014 -2030), the export
potential stands at 390 MW.
63
renewable energy projects, it may be ideal to revisit the guaranteed
generation provision in the policy. This is mainly due to the excess
capacity projected.
For projects that are in the initial stage, it is important that these projects
are rescheduled to slightly later dates to allow for the exhaustion of the
already committed projects that are already under construction.
The connections were costed based on the “Last Mile Cost Principle”.
Normally new connection costs are based simply on the cost to install
the meter and service cable. This omits the required low voltage and
64
distribution transformer costs to support the customer base growth. This
approach is not sustainable as it results in under-investment in the low
voltage networks leading to poor voltage regulation, long low voltage
lines, high technical losses and poor reliability. The last mile costs of a
connection were considered to ensure that the customer growth does
not result in low voltage networks moving out of technical compliance.
Last mile connection costs: infill no pole $140, infill one pole $500,
and green field $1,500
The power quality has now become a topical issue within industrial
customers. The causes of poor power quality range from natural effects
such as lighting, system effects such as faults, switching operations and
customer effects switching in and out of major loads, like furnaces, large
motors etc. The symptoms of the power quality problems are:
When all the above are taken into consideration, the required
investments at distribution level to match the transmission investments
are estimated to be USD 120 million per annum for the Umeme Network
or USD 1.2 billion for the next 10 years.
66
7.2. Investment in Transmission
67
In order to support this development, a loan of US$84,979,000 was
acquired from the China EXIM Bank for the development of the
transmission infrastructure. In addition to this loan Government of
Uganda contributed up to 24 million towards counterpart funding.
i) Kenya
The current interconnection line to Kenya was contracted for the main
purpose of system stability. As such, it only works on the tie line
agreement of exchange of power mainly for stability of either systems at
any time. The maximum capacity of this line is 40MW.
68
As a result of the planned wheeling over Uganda’s network, a wheeling
agreement was as well signed between Uganda, Kenya and Tanzania.
ii) Tanzania
69
committed to the development of this line. Similarly the possibility to
export power to DRCongo will be delayed due to delays in the
construction of the transmission line to DRCongo.
The rural electrification strategic plan was developed with the intention
of increasing the number of customers by up to 130,000 per year. If the
plan is fully implemented with all the funding requirement fully accessed,
an additional 6 MW of demand is expected to be realized. It may be
noted that the increase in demand is lower than the main grid demand,
due to the consumption of the rural households.
This additional demand if fully realized will help to reduce the expected
excess generation capacity in LCGP.
70
Table 1: Summary of implication of additional information on Demand
Before intervention
Source: ERA
71
Annex 1: INPUT DATA
Table 1.1: Real Electricity Tariff per Category in Shs/kWh
72
Medium Large Street
Year Domestic Commercial Industries Industrial Lighting
2015
Source: UEB and ERA
73
Uganda’s Real Gross Domestic Product in billions
Table1.2:
Year (s) Total GDP Industrial GDP Services GDP GDP per Capita
74
Year (s) Total GDP Industrial GDP Services GDP GDP per Capita
75
Table1.3: Energy Sales across Each Customer Categories in GWh
Domestic commercial Medium Large
Industrial Industries
76
Domestic commercial Medium Large
Industrial Industries
77
Annex 2:
Table 2.1: TEST FOR LONG RUN RELATIONSHIP (Test for stationarity of Residuals)
Domestic 0.927
Commercial 5.309
78
Table 2.2: TEST FOR STATIONARITY of Variables (Unit Root Test)
Test Statistic Before
Variable Differencing Test Statistic After Differencing
79
Unit Roots Tests after First Difference
Table 2.3:
Dickey-Fuller test for unit root Number of obs = 21
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value
Energy Z(t) -4.555 -3.750 -3.000 -2.630
GDP Z(t) -4.166 -3.750 -3.000 -2.630
Tariff Z(t) -2.891 -3.750 -3.000 -2.630
Table 2.3: Stationarity Test of Residual with Regression of Energy Sales, Tariff and GDP only
Dickey-Fuller test for unit root Number of obs = 22
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value
------------------------------------------------------------------------------
Z(t) 2.318 -3.750 -3.000 -2.630
Source: ERA
80
Table 2.4: Stationarity Test of residual with Regression of Energy Sales and GDP only, lags (0)
Dickey-Fuller test for unit root Number of obs = 22
---------- Interpolated Dickey-Fuller ---------
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value
------------------------------------------------------------------------------
Z(t) 5.286 -3.750 -3.000 -2.630
------------------------------------------------------------------------------
81
Annex 4: DETAILS OF COMMITTED AND CANDIDATE GENERATION PROJECTS
No. Project Name Technology Installed Estimated Comment Estimated
Option Capacity Plant Commission
(MW) Factor Date
82
No. Project Name Technology Installed Estimated Comment Estimated
Option Capacity Plant Commission
(MW) Factor Date
6. Waki Hydro HPP hydro 4.8 50% Under construction and 2018
qualified for GETFiT
Premium.
11. Albatros Thermal crude oil 50 90% Licensed to use local 2021
Power crude oil from Albertine
region.
12. Sindila HPP hydro 5.25 50% Licensed and under 2018
construction.
83
No. Project Name Technology Installed Estimated Comment Estimated
Option Capacity Plant Commission
(MW) Factor Date
13. Nengo Bridge hydro 6.7 50% Under construction and 2019
HPP qualified for GETFiT
Premium
17. Nyagak III HPP hydro 4.36 50% Licensed. Expected 2018
construction start, 2017
18. Kyambura HPP hydro 8.3 50% Licensed and qualified for 2018
GETFiT premium. Expected
construction start, 2017
84
No. Project Name Technology Installed Estimated Comment Estimated
Option Capacity Plant Commission
(MW) Factor Date
29. Muzizi HPP hydro 44.7 70% Feasibility study complete 2020
85
No. Project Name Technology Installed Estimated Comment Estimated
Option Capacity Plant Commission
(MW) Factor Date
34. Keere Small HPP hydro 6.3 50% Feasibility studies on-going 2020
37. Oriang HPP Hydro 392 65% Feasibility studies on-going 2024
86
ANNEX 5: ADDITIONAL INDUSTRIAL DEMAND
Customer Additional Location Time lines
load (MW)
1. Roofings (Namanve) – 28 Mukono 2017
43MW
2. Tian Tang Steel Works 26 Mukono 2017
(Mbalala) – 10MW (up to
30MW)
3. Tembo Steels at Lugazi 14 Lugazi 2017
87
Customer Additional Location Time lines
load (MW)
13. Yogi 2 Kayunga 2016
88