Portfolio status

Progress

A further four small hydropower projects (SHP) achieved commercial operation during 2018 – Nyamwamba SHP, Lubilia SHP, Nkusi SHP, and Waki SHP – adding an additional 29.0 MW of power capacity to the Ugandan grid. Combined with the six projects already operational by the end of 2017, the total installed capacity of operational GET FiT supported projects is now 87.1 MW – approximately 55 % of the total installed capacity to be implemented under the Programme (158.4 MW).

As a result, GET FiT supported projects supplied 271 GWh to the grid during 2018, corresponding to approximately seven (7) percent of the total grid electricity supplied in Uganda. Cumulatively, the overall power supplied to the Ugandan grid by GET FiT supported projects thus far has totalled more than 410 GWh, equivalent to a saving of approximately 450,000 tonnes of CO2 due to displacement of power production from fossil fuelled electricity production.


Challenges in 2018
Construction progress during 2018 was again noticeably variable across the portfolio, with some developers and projects performing substantially better than others. GET FiT continued to more closely monitor progress of the remaining projects and tried to incentivise developers to complete construction and enable commissioning in a timely manner. For selected projects this included increasing the frequency of supervision visits at the cost of the developer; enforcing stops in construction where there were clear deficiencies in the developers’ capacity to plan and implement the projects in a timely, safe, and responsible manner; and imposing reductions in the overall subsidy amount allocated to the project where there was continued non-compliance with Programme requirements.


Several SHP’s were requested to partially stop construction during the first half of 2018 due to excessive levels of damage caused by construction approaches in steep terrain and close to rivers, or the risk of such damage due to the proposed construction approaches. Three of the projects modified their construction methodologies and/or the design of key project structures significantly, which was welcome in terms of minimising adverse impacts but resulted in programme delays, which were necessary in order to plan and implement the alternative approaches. A further project also experienced delays due to a naturally occurring landslide, which resulted in important design changes to improve the robustness of key project structures.


Two of the projects received a financial penalty during the first half of 2018 in the form of a subsidy reduction, a contractual mechanism used to improve compliance of the developers. These projects had received a warning of another subsidy reduction, in order to improve performance and construction practices and to minimise as far as reasonably possible adverse environmental and social impacts. For both projects, the threat of further subsidy reductions persists into Q1 2019. One project, which had already experienced substantial delays due to transboundary coordination issues, experienced a major setback as the Developer replaced the EPC Civil Contractor during the first half of 2018.


The Finishing Line
With most of the remaining projects on the home straight to achieving commercial operation in the coming year, the majority of planned GET FiT supported projects will be supplying the grid before the end of 2019.

The remaining seven SHPs still to achieve commercial operation are Kikagati, Kyambura, Ndugutu, Nyamagasani 1 and 2, Sindila, and Siti 2 SHPs. For these projects, key design decisions had largely been resolved, construction was well underway, and the procurement of critical equipment and materials had either been completed or was well advanced. Nonetheless, a considerable volume of construction works was still to be completed and several projects have challenges still to overcome. The timely implementation of power evacuation infrastructure, to connect the projects to the grid and ensure reliable evacuation continues to be a major issue for many of the remaining projects.

Table 1 summarises the status of key project milestones across the portfolio. Milestones that have been achieved are indicated by check marks, whereas the remainder are shown by the white or grey cells. The expected dates for key milestones that have not yet been achieved are shown. As indicated, most of the remaining projects are aiming to achieve commercial operation by the middle of 2019, whereas the experience of the GET FiT team and observed progress and capacity of the developers during 2018 indicates that some projects will be extended to much later in 2019 before achieving commercial operation.
 

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Table 1 - Project Milestones Overview

 

Consequences of Achieving COD during 2019

As outlined above, several GET FiT supported SHPs did not achieve commercial operation before the end of the 2018 calendar year, the end of the original window for GET FiT support. The GET FiT Steering Committee therefore resolved that, at the discretion of the GoU, represented by KfW, the contractual deadline for achieving commercial operation would be extended from 31 December 2018 to 31 October 2019. Furthermore, in order to incentivise developers to achieve commercial operation as early as possible during 2019, the following would apply:
 

  • The Steering Committee decided in 2018 that no disbursements of subsidy payments will be made after 2023 and therefore projects that achieve COD after 2018 will be subject to subsidy reductions.
     
  • Developers would be required to cover any additional costs resulting from the continued followup and supervision of their individual projects by GET FiT beyond 2018.


Expected Portfolio Output
An overview of the total planned installed capacity of the portfolio and how it is distributed across the supported technologies is presented in Figure 1. The overall portfolio capacity amounts to a total of 158.4 MW, representing approximately 93 percent of the original Programme target of 170 MW. The difference between the planned capacity of the current portfolio and the original targets is partly due to a reduction in the overall Programme funding in earlier years combined with a lower share of bagasse/biomass than originally anticipated. Nonetheless, adding an installed capacity of more than 150 MW to the Ugandan electricity supply network is a significant achievement and truly reflects the successful impact of the GET FiT Programme.
 

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Figure 1 - GET FiT Portfolio Build Up


Figure 2 provides a schematic illustration of the merit order effect of the GET FiT portfolio at the end of 2018 (includes the current installed capacity of 87.1 MW). The merit order effect refers to the reduction of highly priced peak energy that the utility needs to buy: As indicated in the graph, the GET FiT portfolio (green area) is off-setting expensive thermal generation (grey area) that is associated with high GHG emissions. Due to GET FiT approximately 13 % of total generation capacity has been added, thereby reducing generation from the heavy fuel oil (HFO) plants in the country.


 

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Figure 2 - Schematic Representation of Uganda's Merit Order
and the Effect of the GET FiT Portfolio


Note: The merit order effect is expressed in marginal energy price, not average energy price. Both thermal power plants have 7 MW generation guaranteed in their PPA. Additionally, most powerplants have take-or-pay PPAs. Therefore, the illustration is only a schematic representation of the effects, based on ERA data.

 

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1 Based on GET FiT estimates when developers are likely to complete commissioning tests.
2 As acknowledged in the 2017 Annual Report, GET FiT recognises the unique transboundary challenges experienced by the Kikagati SHP and the resulting impact on the implementation timeframe. Delays were further exacerbated during the fi rst half of 2018 by key changes in contracting arrangements – further details are provided in Section 2.2.