Uganda’s 6.7 MW hydropower project to start next month.

From the newsletter
The construction of the ORIO Mini Hydropower Project, a series of nine hydropower plants with a combined capacity of 6.7 MW in Uganda, is expected to start next month. The project, which will cost $13.7m to build, is funded by Invest International of the Netherlands Government, with co-financing from the Government of Uganda.

• Implementation of the project will be undertaken by the Uganda Energy Credit Capitalisation Company (UECCC), which was selected as the designated implementing agency for the project.

• The project will involve the construction of a 288 km local distribution network and connect approximately 71,000 households and 2,300 Small and Medium-sized Enterprises (SMEs) in rural western Uganda.

More details

• Connecting people to electricity requires serious planning from the government. Regions with high demand are usually prioritised. This demand is mainly in urban areas where industries and commercial activities are plentiful. In rural areas, there is less demand and consumption. As such, they are less of a priority.

• Decentralised energy systems like small hydropower and solar mini-grids have been effective. They are easy to deploy and less costly. But such projects have struggled to find anchor customers (businesses or institutions with significant electricity demand that can guarantee a stable revenue stream) to make them economically viable. Small hydropower has fared better than solar mini-grids. Most small hydropower plants have been constructed in agriculturally-based areas with agricultural processing plants being anchor customers. This has worked to boost electricity consumption and revenue.

• In Kenya, particularly, small hydropower plants have been constructed to power tea factory operations in the rich agricultural areas. Despite the challenges of droughts affecting river flows, such projects are hybridising with solar power and battery energy storage.

• As such, small hydropower plants have always attracted financing. The latest is one from Eswatini which reached a financial close and construction kicked off this month. But in the big hydropower projects, there is slow movement in terms of investment and more caution from investors. Despite renewed interest in hydropower, few big projects are getting to financial close.

• Ethiopia's Grand Renaissance Dam and Uganda's Karuma Dam are some of the few big hydro projects that raised enough money for construction. Uganda's Karuma Dam completed construction last year and Ethiopia's dam is about 97% complete.

• But many projects have failed to attract investment. Egypt's Ataqa Mountain pumped hydropower project failed to kick off and is now re-advertising its tender. Kenya's Grand Falls Dam and Rwanda's Grand Inga Dam haven't attracted financiers.

Our take

• Hydropower remains one of the most reliable and affordable electricity sources. Yet its potential in Africa remains largely untapped. Long construction times and land permitting issues have affected mainly large hydro and scared away investors. Governments can take the lead in this and facilitate smooth processes that guarantee investors fewer conflicts.

• Small hydropower, though, has bigger potential. It has a shorter construction time and fewer land conflicts as no displacements are required. Focusing on small agricultural industries as anchor customers can make these projects economically viable, even with low residential consumption.

• There needs to be proper involvement between project developers and the local community to ensure alignment with their needs. Customised energy solutions for the targeted communities are what energy companies should focus on.