Page 5 - AfrElec Week 09

AfrElec COMMENTARY AfrElec
capacity, even though there is an emerging power surplus.
There has also been criticism that the feed-in tariffs (FiTs) for the country’s 50MW of solar projects at four locations are too high. This means that end-user tariffs for customers are also high.
Also, new generation projects must be accompanied by grid improvements, otherwise developments risk being left under-used. Con- nected with this, Uganda does not have enough export capacity to absorb any power surplus in an efficient way.
Across the Ugandan economy, China is financing developments such as the Karuma and Isimba dams.
These are key projects that the Ugandan government says are critical to fast-tracking expansion.
China is also financing transport infrastruc- ture projects like the expansion of Entebbe Inter- national Airport.
Investment issues
Indeed, Chinese involvement in Uganda’s solar sector, and the questions raised by the ability of large-scale hydro projects to foster economic development, come as access to power in a sus- tainable manner is a key issue for foreign inves- tors and donors.
Alongside China, Russia, Japan, France, Ger- many and other developed countries are all com- peting to invest in African energy.
The continent aims to provide universal power access by 2025, which will cost $60-90bn per year over the next five years, according to the
African Development Bank (AfDB). This will require 160 GW of new capacity, 130mn new on-grid connections and 75mn new off-grid connections.
Renewables is a key element of providing uni- versal access in less developed rural and urban areas, although fossil fuels, mainly coal and nat- ural gas, are set to continue to play a major role in providing power for industry in the continent’s industrial powerhouses of South Africa, Nigeria and Egypt.
The Ugandan situation shows the risks asso- ciated with large hydro and indeed fossil fuel generation projects. To be efficient and econom- ically attractive, they must have major indus- trial customers that can absorb the electricity produced.
Otherwise, for Africa, off-grid solutions are better for rural, and indeed urban, areas such as slums that have poor existing infrastructure.
Back in Uganda, President Yoweri Musev- eni takes Chinese investment seriously, and in 2019, travelled to China to talk up investment in Africa, saying that China and Africa had a shared vision for the prosperity of their people.
Chinese FDI investment in Uganda reached $607m in 2018/19, making it the leading for- eign investor by far and accounting for 60% of total FDI, according to the Uganda Investment Authority. Crucially, Uganda’s debt to China now stands at $1.6bn, or 20% of the total.
China’s investment leaves Uganda high risky. Uganda must pursue a more diversified policy of both energy development and invest- ment flows if it is to foster sustained economic development.™
Alongside China, Russia, Japan, France, Germany and other developed countries are all competing to invest in African energy
Week 09 05•March•2020 w w w . N E W S B A S E . c o m
P5