Executive Summary

The GET FiT Uganda Program was formally launched in May 2013. The Program is designed so as to simultaneously target the key barriers confronting investors looking at potential investments in small renewable energy projects (1-20 MW) in Uganda and thereby fast-track some 20-25 projects1, representing up to 170 MW and 830 GWh/year. The main feature of the Program is a front-loaded results-based premium payment designed to top-up Uganda’s own REFiT and be paid out over the first five years of operation.

The initiative is being spearheaded and implemented by Uganda’s Electricity Regulatory Authority (ERA), the Government of Uganda (GoU) and the German Development Bank KfW, with funding contributions from the Governments of Norway, Germany, UK and the European Union (EU). The World Bank supports the Program through a Partial Risk Guarantee facility.

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The past year has been a progressive one for GET FiT Uganda; through a second Request for Proposals (RfP) round for hydro, biomass and bagasse projects, and the first ever on-grid solar PV tender in Uganda, the project portfolio grew to a planned installed capacity of 128 MW. Thus, with a promising pipeline for the third and likely final RfP to be concluded in the first half of 2015, the Program is well on track to achieving a sizeable and diverse project portfolio of renewable energy generation projects. This was indeed confirmed by the major breakthrough in early 2015, when four GET FiT projects became first in signing their Power Purchase Agreements (PPA) with the Uganda Electricity Transmission Company Ltd. (UETCL). However, the pre-defined target of 170 MW of installed renewable energy generation capacity and an annual energy generation of some 830 GWh is currently subject to significant risk, due to the rapid depreciation of the EUR vs. the USD in late 2014 and early 2015. If the current (January 2015) exchange rate level was maintained, the portfolio’s MW target would need to be reduced by 10-15 %. KfW and the GET FiT Secretariat are continuously monitoring this development, in order to ensure full utilization of available funds and maximizing the capacity of the GET FiT portfolio within the various exchange rate scenarios.

A key milestone in 2014 was the approval of four solar PV projects representing an installed capacity of 20 MW to be commissioned in early 2016. The competitive bidding process, successfully lead by ERA under the GET FiT Solar Facility, ensured a significant and historical step in the right direction for Uganda’s solar market. Importantly, the interest from project developers throughout the tender was considerable with 24 expressions of interest, boding well for a bright future for on-grid solar power in the country. The potential for solar PV development in Uganda is still vast, and additional projects are expected within the near future. To that end, ERA is keen to secure extra funding to support an additional 30 MW of solar PV, potentially under a new tender of the GET FiT Solar Facility. 

Nonetheless, the Program faced a range of challenges throughout the year, and extensive efforts have been made to overcome critical barriers to achieving the overall targets in a timely manner. The close cooperation between ERA and other parastatals, KfW, Development Partners, Project Developers and the GET FiT team, along with the flexible and tailor-made design of the GET FiT concept, has thus far proven highly efficient in identifying and addressing issues as they arise, in a targeted and efficient manner. 

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The year’s highlights in numbers


The most prominent challenge emerging over the past year was related to grid integration for several projects in the GET FiT portfolio. It has become clear that investments of some MUSD 90 are needed to reinforce and extend the existing distribution and transmission grid in order to ensure adequate interconnection and full power evacuation for significant parts of the GET FiT portfolio. Also here, key GET FiT stakeholders including GoU and its relevant parastatals, the private distribution companies, Development Partners and project developers have displayed great determination and flexibility in identifying these bottlenecks and how to best address them, in a coordinated and timely manner. Based on the findings of a dedicated Task Force comprised of GoU parastatal representatives led by ERA, a list of required grid infrastructure investments and associated Technical Assistance (TA) support has been prepared. Extensive efforts are currently being made by GoU and GET FiT Development Partners to secure additional funding for these interventions. This is necessary to fully safeguard the original targets of the Program, while also introducing a range of additional benefits, like increased rural access, improved grid stability and national employment.

Other issues arising over the past year have mainly been legal and regulatory barriers, preventing projects from reaching financial close and thus starting construction. Final adjustments of standardized PPA and Implementation Agreements (IA) requested by UETCL and GoU, as well as uncertainties resulting from the amendments to the tax legislation have contributed to delays in this process. At the same time developers are struggling to bring their projects in line with national and international standards, especially with regard to the environmental and social standards. However, through targeted and dedicated efforts of GET FiT stakeholders, issues have been largely resolved and progress maintained. As a result, several projects are expected to reach financial close and to finally break ground in 2015, thus probably making the upcoming year even more interesting and eventful.  

 

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1. The estimate has increased from previous estimates of up to 15 projects. Mainly due to smaller average project size and introduction of four solar projects to portfolio.