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RENEWABLES: FINANCE
Kakira 20MW
bagasse cogeneration
FINANCING RENEWABLE
energy projects in Uganda
Exploring the GET FiT Uganda programme:
An innovative approach to facilitating private sector
investments into renewable energies
I n recent years, Uganda has been
impressed with solid economic growth
rates and political stability. The
electrification rate has been rising, slowly,
but steadily from less than 10% in 2010
to 15% in 2014. As a result, electricity
demand is increasing at an annual rate of
about 6-8%. This poses a big challenge
to the country, that being, adding about
50MW of new generation capacity to the
grid in order to avoid supply shortages.
A massive challenge, considering that
Uganda’s total available capacity today is
only about 600MW.
In the medium term, the Government
of Uganda intends to develop two large
hydro plants along the Nile River, namely
the 600MW Karuma and 188MW Isimba
hydro dams. However, building these
plants is taking some time and to avoid
power shortage in the interim, as well as
to improve technical and geographical
diversification of generation, there is a
need for investments in smaller, quicker
to realise generation plants.
MOTIVATING PRIVATE SECTOR
PARTICIPATION Uganda has rich renewable energy
resources for hydro power, biomass and
ESI AFRICA ISSUE 2 2015
solar. Since public funds are limited the
necessary investments cannot be made
by the government alone. Therefore,
there is a need for private capital, but the
private sector faces significant barriers to
invest in the Ugandan power sector.
Until recently, small-scale renewable
energy projects in Uganda remained
financially unattractive for private
developers due to low feed-in tariffs. In
addition, perceived, high political and
economic risks and the lack of access
to long-term debt and equity financing
kept investors from entering the market.
Therefore, very few investments were
made by the private sector in Uganda’s
renewable energy resources – despite
the huge potential.
This has changed since 2013 when
the GET FiT Programme was launched
to motivate the private sector investment.
The programme, jointly designed by the
Government of Uganda, the Electricity
Regulatory Agency (ERA) and KfW, the
German Development Bank to leverage
more private capital into renewable
energy generation. GET FiT is supported
with grant funding from the Government
of Norway (EUR equivalent of about 17
million), the Government of the United
Kingdom (EUR equivalent of 40 million),
the Government of Germany (EUR
15 million), the European Union (EUR
20 million) as well as the World Bank
through a Partial Risk Guarantee.
OBJECTIVES AND INSTRUMENTS OF
THE GET FIT PROGRAMME
The main objective of the GET FiT
Programme is to overcome investment
barriers for private developers of small-
scale (1-20 MW) renewable energy
projects. The programme enables the
realisation of about 20 energy generation
projects with a total installed capacity
of roughly 170MW. This will help to add
much-needed, low cost generation to the
Ugandan energy mix. In addition, GET
FiT tries to improve access to commercial
financing for renewable energy projects.
To accomplish its objectives, GET FiT
combines two innovative instruments:
1. GET FiT Premium Payment
Mechanism: In Uganda, low feed-in
tariffs have thus far undermined the
financial sustainability of renewable
energy projects. The GET FiT
Premium Payments are additional
payments per kWh – on top of the
regulated feed-in tariff (REFiT). The
Premium Payment Mechanism allows
developers of small-scale renewable
energy projects to earn an adequate
1. Source: Annual Energy Sector Performance Report
2014, Ministry of Energy and Mineral Development.
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