There has been a remarkable level of innovation in East African power-sector development, says Neil Ford in his overview of policy and investment in the region.
There have been numerous examples of progressive policy development in the region over the past year. For example, Uganda has adopted a pricing strategy for electricity from both the Isimba and Karuma hydro projects that offers low-cost electricity while enabling debt repayment.
Residential tariffs on Karuma have been set at $o.497kWh for the first 10 years, followed by $0.27kWh for the next five years and $0.117kWh thereafter. Those on Isimba will be $0.416kWh for the first 15 years, followed by $0.101Kwh thereafter.
It has been reported within the country that the current average cost of power is $0.8-$0.9kWh, so these are very low figures indeed. However, the Uganda Electricity Generation Company Limited still calculates that the Isimba plant will generate USh150bn ($41.6m) a year in revenue at the lowest projected rate, which it believes will be sufficient to service the debt on the project, meet operational and maintenance costs, and generate a small profit. The government also wants to refinance outstanding debts on the Bujagali hydro scheme, which was completed in 2012.
Kampala is financing the development of the transmission grid in such a way as to enable plentiful supplies in areas where it plans to develop 25 industrial parks. In addition, the grid is to carry electricity to all parts of the country as soon as possible, with 300,000 new properties connected every year. According to the Uganda Bureau of Statistics, the country's electrification rate currently stands at 20%. In the longer term, the government is also keen to export electricity to the rest of East Africa, including the Democratic Republic of Congo and South Sudan. However, domestic power demand is growing by 9% a year, which means that new capacity needs to be brought on stream regularly if domestic supplies are to be maintained.
THE KENYAN APPROACH
Nairobi's electrification success has been partly driven by wide-ranging innovation. Its decision to create a new independent regulator in 2006 --the Energy Regulatory Commission (ERC)--is often cited as a contributing factor to its success. While the Ministry of Energy focused on attracting new investors, the ERC was able to concentrate on sector regulation, licensing projects and setting tariffs.
Kenya has also innovated by offering lower tariffs to...