New tariff fuels wind boost hopes

UGANDA: The Ugandan government's recent inclusion of wind power in a revamped version of its renewable-energy feed-in tariff (Refit) programme is likely to spark interest in the east African country, which has no wind turbines turning to date.

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The government introduced a Refit of $0.124/kWh and 20-year power purchase agreements for wind-power plant under 20MW earlier this year. This followed the introduction of a Refit for hydro and biomass cogeneration in 2007 that saw limited uptake.

The government's new focus on "priority technologies" including wind power, small hydro, geothermal, biogas and biomass generation aims to attract investors, but doubts remain as to whether the terms offered are sufficiently attractive.

The new Refit offers differentiated tariffs for each technology based on production figures and taking into account the cost of building plant, operations and maintenance, grid connection, interest rates and an acceptable return for investors. The rates are also linked to inflation. The idea is "to provide sufficiently high tariffs on the one hand and avoid windfall profits on the other," explained the Ugandan Electricity Regulatory Authority in its Refit guidelines.

Kenyan Refit

Uganda's Refit is very similar to Kenya's, according to Kyle Denning, managing director of renewable-energy consultancy Viability Africa. "What we have seen in the past few years in Kenya is the emergence of many players, both investors from abroad and local developers, who see an opportunity for business."

Denning does not underestimate the difficulties and the time involved in getting projects off the ground, but is confident there will be interest in Uganda's new regulatory regime. "People know that if they get in early, then they can seize a great opportunity," he said.

To avoid excessive increases in consumer electricity prices, the Ugandan government has set limits on each technology's cumulative capacity each year. The cap for wind is 50MW by the end of this year, rising to 150MW by 2015. Licences will be awarded on a first-come first-served basis. The government envisages part of the increased costs will be passed on to consumers, with other support coming from green-electricity sales, international donor organisations, climate-change funds and carbon finance.

Grid limitations and a lack of reliable wind data may act as a deterrent for investors looking to develop wind-power projects in Uganda, however, according to Eric McCartney, executive director of Chapin International, a project-finance and investment-banking advisory company active in Africa. While the Ugandan energy ministry has carried out some pre-feasibility studies and initial resource assessment, said Chapin, there is an acute need for further, site-specific data.

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