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During a recent high-level panel discussion on Thursday, Uganda’s private sector called for extended concession periods to facilitate the development of mini-grids, which are essential for the country’s renewable energy targets. The event, titled “Enhancing the Enabling Environment for Mini-Grid Development in Uganda,” took place at the Speke Resort Hotel in Munyonyo as part of Uganda’s Energy Week. Team Europe organized the discussion under its Global Gateway program, which supports Uganda’s transition to clean and equitable energy, in collaboration with the Ministry of Energy and Mineral Development.
Alex Wanume, the Country Director for NOA Uganda, highlighted the challenges faced by mini-grid developers. “We’re often viewed as exploiting rural communities by charging high tariffs, which obstructs our ability to operate effectively,” Wanume stated. NOA Uganda currently runs 31 mini-grids nationwide and has plans for additional projects. He emphasized the necessity of building trust and cooperation among stakeholders.
“To achieve our goal of 2,000 mini-grids by 2030, significant adjustments are needed,” Wanume continued. “A 20-year concession period would allow us to plan for expansions and reinvestments, while also managing demand risks and low capacity.”
Jeroen Van Linden, the Regional Project Coordinator for the Beyond the Grid Fund for Africa at NIRAS, pointed out flaws in the regulatory framework. “Effective frameworks should clearly define licensing, concession periods, tariff approval, grid arrival, and compensation mechanisms,” Van Linden explained. He also stressed the importance of clear options regarding grid encroachment, including abandonment or acquiring Independent Power Producer (IPP) status.
“The devil is in the details, which are often lacking, creating insecurity for mini-grid developers,” Van Linden noted.
Patrick Tutembe, the Chief Economist of Pricing at the Electricity Regulatory Authority (ERA), emphasized the importance of investment recovery. “One thing that is very clear in our regulations is that every investment must be recoverable. This includes operation and capital costs,” Tutembe said. To facilitate investment recovery, the government has capped customer charges at 30 cents, aiming to help investors recoup their expenditures.
Tutembe also mentioned that dynamic regulation, which incorporates government, private sector, and socio-economic considerations, is essential. He highlighted the challenges present in rural areas, such as low demand and limited economic centers. “These areas often lack significant economic hubs, which greatly affects considerations around tariffs and concession premiums,” he added.
Regarding concession periods, Tutembe stated, “If the grid arrives before the concession agreement is reached, the government may have to compensate the investor.”
Uganda aims to develop 300 megawatts of mini-grid capacity annually, making effective investment recovery strategies crucial to achieving this target.
Tutembe reiterated the need for balanced regulation: “Regulation must address the interests of all stakeholders, ensuring affordable tariffs and appropriate concession periods. This discussion helps prevent regrets when finding the right balance.”
Elizabeth Kaijuka Okwenjye, Principal Energy Officer at the Ministry of Energy and Mineral Development, mentioned that Uganda has identified up to 500 potential mini-grid sites.
Okwenjye addressed the significant challenges facing mini-grid development, referring to the 2023 Energy Policy. “These challenges include an inadequate regulatory framework, a shortage of anchor loads, a preference for grid connection over mini-grids, operational and maintenance issues, and limitations on license duration,” she explained.
To tackle these regulatory challenges, Okwenjye noted, “We have been working on the Promotion of Mini Grids Project. We’ve developed instruments and mechanisms, such as bundled tenders and a concession framework, to offer subsidies to developers and encourage private sector investment alongside government support.”
Okwenjye also highlighted growth opportunities, including a new concession framework based on lessons learned from previous projects and a debt access initiative funded by KfW to deploy 150 mini-grids. “Our bundled tender mechanism encourages competition among developers. We’re currently evaluating prequalification for the tender and look forward to opening the market to increase competition,” she said.
As Uganda strives to enhance its renewable energy output, mini-grids are poised to play a vital role. Industry experts are urging policymakers to address the limitations on concession periods and regulatory uncertainties to attract investment.
Henry Jumba, Country Coordinator for GET Transform under GIZ, stressed the importance of private sector participation. “We all recognize that government resources are limited,” Jumba said. “There is significant competition for different priorities in the country, and mini-grids are no exception.” He explained that public-private partnerships (PPPs) can effectively balance government and private sector interests.