Rwanda's 2025 energy policy to unlock $4bn investment

From the newsletter

A new energy policy launched by Rwanda this week opens up a $4 billion investment opportunity. The policy outlines the government's plan to achieve universal electricity access by 2035. It prioritises renewable energy sources such as solar and hydro, which are targeted to make up 65% of the energy mix by 2035.

• Almost half the opportunities will be in electricity generation ($1.5 billion) followed by transmission and distribution at $265.4 million.

• To promote domestic electricity demand Rwanda has incorporated electric mobility and clean cooking initiatives.

More details

• Rwanda has an installed electricity generation capacity of 406 MW. Hydropower accounts for more than 27% of this, followed by methane gas at 21%. The remaining capacity comes from other sources, such as solar, peat, and waste-to-energy.

• The government aims to increase capacity and diversify the energy mix, planning to more than double the current installed capacity by 2035. This expansion will include approximately 318 MW from hydropower, 50 MW from solar, 15 MW from wind, and 30 MW from geothermal sources. There are also long-term plans to explore nuclear energy (110 MW) and hydrogen (10 MW) for electricity generation.

• The energy policy addresses challenges and proposes solutions for each technology.  Hydropower faces issues like climate change vulnerability, limited storage, long project timelines, data gaps, and resource competition. Policy actions include a hydro risk mechanism, coordinated reservoir management, catchment conservation and construction of multi-purpose projects.

• Rwanda has good solar potential, but its current installed capacity is small, about 12 MW only. The policy supports hybrid solar and battery storage. It incentivises local production and the use of efficient solar systems. It also focuses on providing a framework for the connection of electricity generated from solar energy to national and isolated grids and attracting investment to reduce importation.

• Wind resources are generally limited in Rwanda but there are certain areas where the wind physical resource may be good enough to be tapped cost-effectively. The policy prioritises detailed resource assessment and a wind atlas update to guide investors. 

• Geothermal potential is estimated at 50 to 90 MW, though no conclusive determination of the suitability of these resources for the generation of electricity has been found to date. The policy supports geothermal resource assessment to manage the geothermal exploration risk and attract investors.

Our take

• Rwanda has been a pioneer in several areas. It was the first African country to ban the use of plastic bags and provided solar incentives when the market was nascent and the technology still viewed with doubt. This policy document simply articulates its forward-looking ambition to focus on renewables. Whether this ambition, especially on hydrogen and nuclear, is realistic remains to be seen.

• The private sector will play a key role in connecting rural populations through off-grid solutions, such as solar home systems and mini-grids. Kenya and Nigeria have made significant progress with similar approaches. These decentralised solutions are best suited for rural populations living in scattered areas since they can be customised.

• Achieving universal electrification by 2035, just ten years away, is a tall order. Over the past fifteen years, Rwanda has increased electricity access from a mere 6% to over 56%. But now with more mature and affordable solar technology, the pace of electrification is likely to accelerate. However, this progress must be rapid enough to outpace population growth to ensure the achievement of universal electricity access.