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Key Issues in Uganda's Energy Sector

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Key issues in Uganda’s energy sector Pro-Biodiversity Conservationists in Uganda (PROBICOU) Robert Tumwesigye, Paul Twebaze, Nathan Makuregye, Ellady Muyambi This study, prepared by Pro-Biodiversity Conservationists in Uganda (PROBICOU), highlights the most salient energy-sector issues and challenges in Uganda, and provides recommendations to strengthen the sector’s performance. Access to energy series Series editor Emma Wilson First published by International Institute for Environment and Development (UK) in 2011. Copyright © International Institute for Environment and Development. All rights reserved ISBN 978-1-84369-831-9 For further information please contact: International Institute for Environment and Development (IIED) 80–86 Gray’s Inn Road London WC1X 8NH United Kingdom [email protected] www.iied.org/pubs A catalogue record for this book is available from the British Library Citation: Tumwesigye, R., Twebaze, P., Makuregye, N., Muyambi, E., (2011) Key issues in Uganda’s energy sector, Pro-Biodiversity Conservationists in Uganda (PROBICOU) / International Institute for Environment and Development. London. Designed by SteersMcGillanEves 01225 465546. Printed on FSC® certified paper by Emtone, Bath www.emtone.co.uk. Edited by Nina Behrman Disclaimer: This paper represents the view of the author and not necessarily that of IIED Key issues in Uganda’s energy sector Pro-Biodiversity Conservationists in Uganda (PROBICOU) Robert Tumwesigye, Paul Twebaze, Nathan Makuregye, Ellady Muyambi Table of Contents Executive summary 04 1 Introduction 06 2 Energy issues in Uganda 10 3 Legal framework for the energy sector 36 4 Institutional framework for the energy sector 42 5 Broader issues and recommendations 46 References 52 Acknowledgements Acknowledgements Acronyms The organisation was established EAERDP in 1999 and registered in November Alternative Energy Resources 2000 under the Non-governmental Development Program organisations registration Statute 1998. AfDB It was incorporated on 14th December African Development Bank 2007, under the Companies act, Laws of Uganda as a public limited Company. AFIEGO The mission of PROBICOU is “To Africa Institute for Energy Governance conserve biodiversity by promoting BoU sustainable development through Bank of Uganda shared responsibility and networking.” The organisation is committed to CBO improved community livelihoods community based organisation and sustainable utilisation of natural CDM resources. Its main programmes of Clean Development Mechanism work include: biodiversity conservation, waste management and chemicals CIREP management. Community Initiated Rural Electrification Project The organisation is currently the NGO focal point organization for CSCO Strategic Approach to International Civil Society Coalition for Oil in Uganda Chemicals Management (SAICM) in CSF Uganda, a member of National Steering Credit Support Facility committee on POPs in Uganda and a member of National Steering committee CSO on Elimination of child Labour. The civil society organisation organisation is also accredited by DWRM Global Environment Facility and is a Directorate of Water partner to UNEP on mercury waste Resources Management partnership area. For more information see: http://www.probiodiversity.org. EA Exploration Area EAC East African Community EAPMP East African Power Master Plan EDT Electricity Disputes Tribunal EIA Environmental Impact Assessment EITI Extractive Industry Transparency Initiative EPS Early Production Scheme 2 Acronyms ERA NFA SCOUL Electricity Regulatory Authority National Forestry Authority Sugar Corporation of Uganda Limited ERT NGO UCPA Energy for Rural Transformation non-governmental organisation Uganda Consumer Protection Association EWT NOGP Extended Well Testing National Oil and Gas Policy UEB Uganda Electricity Board GEF NRC Global Environment Facility Natural Resources Committee UECT Uganda Energy Capitalization Trust GOU NRPC Government of Uganda National Radiation UEDCL Protection Commission Uganda Electricity Distribution IAEA Company Limited International Atomic Energy Agency PAC Public Accounts Committee UEGCL ICT Uganda Electricity Generation information and PEAP Company Limited communication technology Poverty Eradication Action Plan UETCL IMF PEPD Uganda Electricity Transmission International Monetary Fund Petroleum Exploration and Company Limited Production Department IPP UIA independent power producer PERD Uganda Investment Authority Public Enterprises LIREP Restructuring & Divestiture UMA Locally Initiated Rural Uganda Manufacturers Association Electrification Project PPA Power Purchase Agreement UNBS MAAIF Uganda National Bureau of Standards Ministry of Agriculture, Animal PPDA Industry and Fisheries Public Procurement and UNFCCC Disposal of Assets United Nations Framework MEMD Convention on Climate Change Ministry of Energy and PREP Mineral Development Priority Rural Electrification Project UNEP United Nations Environment Programme MoFPED PROBICOU Pro-biodiversity Ministry of Finance, Planning Conservationists in Uganda URA and Economic Development Uganda Revenue Authority PSA MTTI power-sharing agreement UREA Ministry of Tourism, Trade and Industry Uganda Renewable Energy Association PSFU MW Private Sector Foundation for Uganda URSB megawatt Uganda Registration Services Bureau RDC NAPE Resident District Commissioner USSIA National Association of Uganda Small Scale REA Professional Environmentalists Industries Association Rural Electrification Agency NEMA VAT REB National Environment Value Added Tax Rural Electrification Board Management Authority WENRECO RET NEPAD West Nile Rural Electrification Renewable Energy Technology New Partnership for Company Limited Africa’s Development 3 Executive summary Uganda has abundant energy resources, In recent years, the government of Uganda has especially hydrological and other renewable promulgated a new Electricity Act and other relevant resources, yet there is widespread energy poverty laws. It created an independent Electricity Regulatory throughout the country. The country’s energy Authority (ERA), which has established a strong sector faces considerable challenges including track record in ensuring the financial viability of acute power shortages, increased demand, and the sector. The state-owned Uganda Electricity a lack of new power-generation projects. Climate Board has been ‘unbundled’ into separate entities change has had an impact on hydropower responsible for generation, transmission and generation; while investment in other forms distribution, and the generation and distribution of renewable energy is hampered by the high facilities have been concessioned to the private upfront cost of technologies such as solar. sector. The number of urban and rural households Rising international oil prices make thermal with direct access to electricity has been increased. power generation very expensive, while fuel- The government has promoted grid and off-grid supply constraints inhibit thermal power generation. private-sector-led rural electrification and Moreover, protracted procurement processes established a Rural Electrification Agency delay the implementation of energy projects. (REA). Least-cost power investments have been pursued to provide adequate and reliable service. In 1997, the Ugandan government formulated The Ugandan government has also collaborated a Strategic Plan to reform the energy industry. with the East African Community on regional This was led by the Ministry of Energy and power interconnection. This regional approach Mineral Development. The main objectives is expected to benefit all countries involved of the plan were to: by diversifying supply sources and reducing • increase the sector’s efficiency; investment costs. • meet the growing demands for electricity Despite the achievements of the Ugandan and increasing area coverage; government since 1997, the sector still faces ongoing challenges. Planning for modern energy • improve the reliability and supply in Uganda, especially electricity, has been quality of electricity supply; limited mainly to urban and semi-urban areas. • attract private capital and entrepreneurs to improve The power supply system remains inadequate the sector’s commercial performance; and and inefficient, due to stunted growth in generation capacity, poor transmission and • take advantage of export opportunities. distribution infrastructure and poor commercial utility practices. The sector badly needs large- scale investment and prudent utility practices. Sustainable development in Uganda is difficult 4 Executive summary to achieve, as it is incompatible with the poverty 1 The government should use the experience gained prevalent in the country. The government has in implementing reforms in energy policy to the challenge of expanding access to affordable, institute appropriate strategies and mechanisms reliable and adequate energy supplies as a to scale up rural access to energy services. way to address poverty issues. 2 An integrated approach to rural electrification Energy development in Uganda and environmental should be pursued, covering the whole damage are intricately related. The energy sector spectrum of energy resources. has bigger environmental impacts than most other 3 A strong policy and legal framework is economic sectors. Hence, energy investments required as a foundation for the reforms. in Uganda are subject to greater environmental scrutiny. The energy sector in Uganda is directly 4 Areas of high commercial risk, such linked to the other sectors
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