Analysis. The power regulator, Electricity Regulatory Authority (ERA), kicked up a storm last week after it published a notice on June 6 inviting public views on the planned feasibility study for a 360 megawatts dam at Murchison Falls, one of the few remaining jewels on the Nile. The planned giveaway of the falls not only casts a shadow over the tourism sector but also raises cost benefit questions at the time Uganda is producing more power than it can consume, writes Frederic Musisi.
In what is likely to be the original draft of President Museveni’s State of the Nation Address published on his website, it is stated that government plans to develop six hydropower sites, including the Murchison Falls, which has a capacity of 650 MW.
Others listed are Ayago (840 MW), Oriang (392 MW), Kiba (300 MW), Uhuru (300 MW), and Nshungyeezi (35 MW).
In the version of the address delivered on June 6, which was circulated by the State House press team, the list of the proposed hydropower sites was conspicuously edited out.
In the budget speech last Thursday, Finance minister Matia Kasaija, said: “With the rate at which we are industrialising, including the increase in demand for power by the population for various uses, it is prudent that more generation is added to have more power production to avoid entering into a shortage.”
Mr Kasaija listed Ayago, Oriang, Kiba and Uhuru (600MW) as the potential hydropower sites for development “in the medium to long term, in partnership with the private sector” to augment the country’s generation capacity.
The proposed Uhuru hydro power station will be situated at Uhuru Falls, an offshoot of Murchison Falls. Uhuru Falls came into existence in 1962.
It is said in 1962, heavy rainfalls triggered a tributary off the Murchison Falls. This created another waterfalls, which was christened Uhuru to coincide with Uganda’s self-rule from the British colonialists. Sources familiar with the matter say the proposed development targets both Uhuru and Murchison Falls. It is also said to develop a dam at Uhuru Falls, part of, if not the entire Murchison Falls, has to be given up.
Daily Monitor could not independently verify the claim, and no assessment has been made public yet on the practicality of hydropower dams at any of the falls. However, what has become apparent is the government’s desire to develop either one or both sites.
The idyllic Murchison Falls provide a perfect view for tourists as the roaring waters of the Nile cascade into a cauldron and majestically escape towards the north.
Droves of tourists from near and far visit the site to catch the breath-taking scene as the rays from the sun setting toe-poke the Nile.
Murchison Falls, locally referred to as Kabalega Falls, is symbolic of Uganda’s miracle – the tourism sector that continues to shoulder a wobbly economy.
As the highest foreign exchange earner, tourism raked in $1.2b (Shs4.5 trillion) in 2018, yet the tourism sector was allocated a budget of Shs193 billion in the financial year ending, and Shs175 billion in the new financial year starting next month.
The fear of hurting the tourism sector is what has prompted the public to demand that a feasibility study undertaken by the South African energy firm is shelved because this could result into the destruction of the falls, one of the few remaining jewels of the Nile.
Already, part of the ongoing oil exploration — Exploration Area (EAI) operated by French Total E&P lies within the park.
Is government jumping the gun?
The Energy ministry permanent secretary, Mr Robert Kasande, says: “The intent of going to the media (publishing the notice) is exactly what is happening.”
“The law requires that the regulator seeks public opinion, and we expect, in addition to the social media buzz, that Uganda Wildlife Authority, Uganda Tourism Board, and all other bodies to make their submissions, and we shall synthesise their responses,” Mr Kasande adds.
The government has already signed a memorandum of understanding with the South African firm, Bonang Power and Energy Ltd, to undertake the feasibility study at Murchison Falls but Mr Kasande said “it is not binding.”
On its website, the South African company, Bonang Power and Energy Ltd, says it was formed in 2014 and is an “African Independent power producer — formed to develop sustainable green energy generating capacity for Africa… with clean, renewable hydropower.
In May 2015, the company’s officials met with President Museveni at State House Nakasero about the deal to refurbish and upgrade Uganda’s oldest hydro-power dam — Nalubaale better known as Owen Falls — and its auxiliary Kiira 2 hydro-power station in Jinja District.
Sources familiar with the matter told Daily Monitor that the deal did not materialise. However, the company lists the proposed Uhuru hydropower as one its interests in Uganda. As government pushes for the construction of this dam, there are fears that the decision is not informed by a cost benefit analysis.
Uganda currently has an installed electricity generation capacity of 1,182.2 mw largely from hydropower dams.
Of these, 813 megawatts is from large hydropower dams, such as the recently commissioned Isimba dam with an installed capacity of 183megawatss, Bujagali with a plant capacity of 250 megawatts, and Nalubaale and Kiira dams with a combined capacity of 380 megawatts. Solar, thermal plants and bagasse generate the rest of the power. However, despite the large generation capacity, average peak demand for electricity stands at 630MW leaving the larger 552MW as a surplus.
With Uganda’s population estimated, by Uganda Bureau of Standards, to clock 41 million people next year, and with electricity access around 22 per cent, this means that a sizeable percentage population does without power despite the surplus.
According to the Electricity Regulatory Authority (ERA), as at the end of last year, there were at least 1.3 million electricity customers on the national grid, 93 per cent of whom were served by the monopoly utility provider, Umeme, and the remaining customers served by mini grids spread around the country.
About 25 per cent of Ugandans earn less Shs4,500 a day, which is the standard measure for those below the poverty line.
Yet even a greater number above the 25 per cent of those trapped below the poverty line cannot afford to purchase the cheapest unit of electricity for domestic consumption at Shs718.5. The low demand for electricity also means that the few who consume it have to pay expensively in order to offset the investment cost and interest rates.
Karuma and Isimba dam, which was commissioned earlier in March, cost a combined Shs6.7 trillion, 80 per cent of the money, a loan from China’s EXIM Bank. With less power from the two dams being consumed it also means that part of the loan will have to be paid back using taxpayers’ money — from the Consolidated Fund.
The Auditor General, Mr John Muwanga, in an audit report on the Energy ministry released early this year warned that the Uganda Electricity General Company Limited, which overseas Karuma and Isimba dams “shall not realise sufficient funds from the energy sales to meet the loan repayments, including the costs of operating and maintaining the facilities.”
The Uganda Generations Limited Company chief operations officer, Mr George Tusingwire, says the matter to service the loan is being discussed with the Finance ministry.
According to the power purchase agreements signed between the Uganda Electricity Generation Company Limited (UEGCL) and Uganda Electricity Transmission Company Limited (UETCL) in relation to the two dams, which was approved by EXIM Bank, the transmission company pays the generation company only for what is consumed.
The lesser consumption of power is partly attributed to a derelict distribution infrastructure and a lack of infrastructural backbone to export electricity to neighbouring countries.
In April 2018, Cabinet sanctioned a decision to borrow Ush782.2 billion ($212.7 million) from China Exim to build infrastructure to be able to increase the number of domestic customers connected to the national power grid. It is not clear yet whether the Exim bank has approved this loan as the Chinese bank of recent has become reluctant to lend to countries with a high debt portfolio.
Uganda’s lofty energy dream
By the end of the year, generation capacity will be augmented to 1,782 megawatts after the completion of the 600 MW Karuma dam in Kiryandongo district.
However, the increase in generation capacity does not necessarily mean increase in access nor decrease in unit cost.
“I think the demand is there, and it is growing,” Mr Tusingwire said. “In terms of demand; it is growing around 10 per cent, that’s even before we have all the industries that we’ve planned. Once all these materialises, soon you’ll find that the Karuma we are talking about is a baby.”
UEGCL was however noncommittal on whether they supported the planned feasibility study for a 360 megawatts dam at Murchison Falls.
“The gestation period of establishing a hydro power plant in Uganda is about 10 years; from conception to studies to tendering to actual civils,” Mr Tusingwire said. “We were actually lucky that Karuma and Isimba came on board at once otherwise…”
The plan to increase the country’s generation capacity is enshrined in the Vision 2040, the policy blueprint that details government’s lofty ambitions of changing Uganda from a predominantly low income to a competitive upper middle-income country within 30 years. The Vision 2040 document charts a plan to exploit the country’s water resources and develop all the hydropower potential, which is estimated at 4,500 megawatts along various rivers.
The required electricity capacity will also be generated from other areas such as geo-thermal—1,500 megawatts, nuclear—24,000 megawatts, solar—5,000 megawatts, peat—800 megawatts, biomass—1,700 megawatts, and thermal—4,300 megawatts.
“The source of energy and its contribution will be determined after detailed feasibility studies of energy mix,” the Vision 2040 document reads in part. Of the 41,800 megawatts targeted in the Vision 2040, officials say hydroelectricity is the cheapest source of power in terms of cost per unit.
Mr Kasande said hydropower remains the cheapest and environmentally friendly form of power but government “is aiming for an energy mix.” The energy mix refers to the usage of hydro, solar, nuclear, and all other forms.
“Of course we want the least cost generation; we want power that is friendly for the environment, and is comparatively cheap,” Mr Kasande says, adding: “That is why we are doing feasibility studies; to get a comparative analysis, which includes technical, social and environment, and economic analysis.”
Larger dams not economically viable
In March 2014, two scholars Atif Ansar and Prof Bent Flyvberg co-authored a paper titled Should we build larger dams?
The evidence based on the most extensive dataset of its kind is conclusive: large dams in a vast majority of cases are not economically viable. Instead of obtaining hoped-for riches, emerging economies risk drowning their fragile economies in debt owing to ill-advised construction of large dams, the report concludes.
Emerging economies of Brazil, China, Ethiopia, Indonesia, and Pakistan, among others, are rushing to build mega-dams on an unprecedented scale. Yet since 2000, when the World Commission on Dams published its findings, no systematic, global, and independent research has been carried out on the outcomes of large dams.
The findings show the construction costs of large dams are on average 90 per cent higher than their budgets at the time of approval, in real terms.
This result is before accounting for negative impact on human society and environment, and without including the effects of inflation and debt servicing; including these items, costs and cost overruns are much higher.
Another review paper titled Sustainable hydropower in the 21st century published recently in proceedings of the National Academy of Sciences of the United States of America, a peer journal, detailed that the true costs of hydropower projects are often underestimated, with harmful financial, social, and environmental consequences resulting in a wellspring of hidden costs.
“Big dams stopped being built in developed nations because the best sites for dams were already developed and environmental and social concerns made the costs unacceptable. Nowadays, more dams are being removed in North America and Europe than are being built,” the paper suggests.
“The hydropower industry moved to building dams in the developing world where the same problems are being repeated: disrupting river ecology, deforestation, losing aquatic and terrestrial biodiversity, releasing substantial greenhouse gases, displacing thousands of people, and altering people’s plus affecting the food systems, water quality, and agriculture near them,” it adds.
The paper indicates that sustainability of “these undertakings are commonly insufficiently scrutinised by those promoting them.” Yet, the government appears unrelenting in its plans of building more dams.
With more surplus power that cannot be consumed at home, the government plans to sell some to neighbouring South Sudan and DR Congo under the auspices of the East Africa Community power pool agreement, which advocates for member states to interconnect electricity to each other depending on proximity.
As of March 2017, Uganda was exporting 51.1 megawatts to Kenya: 14.94MW to Tanzania and 0.27MW to DRC. Exports are premised on proximity as border towns are easily served by the neighbours’ grids.
The move to sell the surplus electricity is also aimed at getting money to pay back part of the loan to the Chinese government, spread over a period of 30 years.
Yet without a robust cost benefit analysis, investment in infrastructure to connect households to the national grid and a reduction in power prices, taxpayers will continue to pay for a surplus of electricity, which is not consumed.
At least 48 per cent of the electricity is consumed by large industries, 23 per cent consumed by domestic users, 16 per cent by small and medium industries, and 13 per cent by commercial users.
Generation capacity increased to 1,182.2 megawatts.
Of these, 813 megawatts is from large hydropower dams such as the recently commissioned Isimba Dam with an installed capacity of 183 megawatts, Bujjagali with a plant capacity of 250 megawatts, and Nalubaale and Kiira dams with a combined capacity of 380 megawatts.