ERA and GET FiT announce the first 20 MW of Solar Photovoltaic (PV) projects to be developed in Uganda

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December 10, 2014 18:00

The Electricity Regulatory Authority (ERA) in cooperation with GET FiT Uganda, announce the conclusion of the process for the selection of the first 20 MW of solar photovoltaic (PV) projects to be developed in Uganda. After a competitive bidding process that was initiated in January 2014, the projects proposed by the Ugandan-Italian consortium – Simba Telecom Ltd./ Building Energy SpA ( http://www.the-simba-group.com , http://www.buildingenergy.it ) and the consortium of Access / TSK Electronica (United Arab Emirates/Spain) ( http://www.access-advisory.com ) have been selected by ERA and the GET FiT Investment Committee to benefit from the GET FiT Solar Facility, a dedicated support scheme for solar PV development. The two consortia will now each build, own and operate grid-connected solar projects of 2×5 MW in Tororo and Soroti Districts respectively.

The average tariff for the first 20 MW solar PV projects over the 20-year operation is USDc 16.37 per kWh. However, the end users in Uganda will only pay USDc 11 per kWh through the term of the projects. The remaining costs will be covered by the GET FiT Solar Facility in form of result-based premium payments per kWh of delivered electricity. The funding for the GET FiT Solar Facility is availed by the European Union Infrastructure Trust Fund through KfW, the German Development Bank.

Commenting on this project, the European Union Head of Delegation, Ambassador Kristian Schmidt said: “The GET FiT Program is a prototype for a partnership between Government and Development Partners: on one hand a strong commitment from the Government to get sector policy and regulation right and attract private investments; and on the other, an impact-oriented and cost-efficient synergy between Development Partners. As European Union, we are especially proud to have been instrumental to the extension of the GET FiT scheme to cover solar energy”

“Solar PV offers important advantages for Uganda: In addition to being quick to implement, solar projects can be built close to demand centres, thereby reducing transmission losses and stabilizing the grid,” said Dr. Benon Mutambi, the Chief Executive Officer of ERA. “By introducing a new technology to the generation mix, Uganda’s dependency on hydropower is reduced, making the country’s electricity supply more resilient to climate change.”

BACKGROUND

In 2013, the Electricity Regulatory Authority (ERA) approached KfW with a proposal to explore the possibilities of supporting solar PV development in Uganda. While relatively more expensive than other renewable energy technologies, the time was considered right to introduce solar PV into Uganda’s generation mix. The motivation for the introduction of solar PV was the relatively short lead-time to commissioning. In light of the constantly rising electricity demand, short-term supply deficits that otherwise needed to be covered by even more expensive and environmentally harmful thermal generation can be addressed by clean, renewable solar power.

With the support of the European Union, ERA and KfW were able to set up the GET FiT Solar Facility; a dedicated support scheme for solar PV development in January 2014. The Solar Facility is part of the larger GET FiT Uganda Program (http://www.getfit-uganda.org/) which has been facilitating private sector investments into small Renewable Energies (RE) since 2013. The Program, which in addition to the EU is being supported by the Governments of Norway, the United Kingdom and Germany, provides qualified private developers with a result-based premium payment on top of the regulated Renewable Energy Feed-in-Tariff (REFiT). Up to 20 small-scale RE generation projects (1 MW – 20 MW) with a total installed capacity of roughly 170/800 GWh p.a. will be supported. However, up until 2013, only hydropower, bagasse co-generation and biomass were eligible technologies under GET FiT. Solar PV was not included since only technologies with regulated REFiT were supported under GET FiT.

Determining the appropriate tariff for solar PV in East Africa is challenging due to the lack of reference projects. Therefore, it was agreed to follow a different approach for this technology. Pursuant to Section 32 of the Electricity Act, 1999, ERA launched a competitive procurement process for a total of 20 MW. The tender was supported by Agut Energy Advisory Services (Agut EAS) and followed the successful example of South Africa ́s Renewable Energy Independent Power Producer Procurement Program (REIPPP). Developers were asked to bid a price per kWh in a reverse bidding process. In addition to the price, bidders also had to comply with the Uganda Electricity Act and sector regulations as well as the technical, environmental/social (IFC PS), economical/financial as well as legal requirements established under GET FiT.

The pre-qualification was launched in late January 2014 and by the end of March 2014, a total of 24 Expressions of Interest were received of which nine, were pre-qualified and invited to submit technical and financial bids. Of these shortlisted developers, seven submitted offers by August 08, 2014, that were evaluated by Agut EAS in close cooperation with ERA and UETCL. The GET FiT Investment Committee met at the end of October 2014 to select the most responsive bidders that will benefit from the GET FiT Solar Facility and Simba/ Building Energy and Access/ TSK emerged with the best offers. The two successful consortia have consequently been invited to sign Power Purchase Agreements with Uganda Electricity Transmission Company Limited (UETCL), the single buyer of electricity in the country, and to conclude a financing agreement with the Government of Uganda represented by KfW for support through GET FiT. The entire selection process was concluded in 10 months and the projects are expected to start operation as early as the end of 2015.

The Electricity Regulatory Authority (ERA) is mandated by the Electricity Act, 1999 to regulate the generation, transmission, distribution, sale, export and import of electrical energy in Uganda. ERA recognizes that the future of Uganda’s electricity sector lies in the integration of least-cost renewable energy sources into the generation mix. The organisation is therefore committed to continued collaboration with Development Partners and key Government institutions to promote the development and uptake of renewable energy in Uganda.

KfW Development Bank has been helping the German Federal Government to achieve its goals in development policy and international development cooperation for more than 50 years. On behalf of the German Federal Government as well as other partners, KfW finances and supports programmes and projects that mainly involve public sector players in developing countries and emerging economies – from their conception and execution to monitoring their success. KfW’s goal is to help partner countries fight poverty, maintain peace, protect both the environment and the climate, and shape globalisation in an appropriate way.

The main purpose of the GET FiT Uganda Program is to fast-track a portfolio of up to 20 small-scale renewable energy generation projects (1 MW – 20 MW) promoted by private developers with a total installed capacity of roughly 170 MW/ 830 GWh per annum. So far, GET FiT has approved 15 projects (hydro, biomass, bagasse, solar) with an accumulated 128 MW. With five (5) projects expecting financial close and ground-breaking in the first half of 2015 and another 15 projects in the pipeline, GET FiT Uganda has become a front- runner in Sub-Saharan Africa for financial support of small-scale renewable energy projects and for attraction of private finance into the domestic energy sector.

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