Uganda’s electricity generation tariff is expected to drop by about 18 per cent after government took over the operation and maintenance of the 50MW Jacobsen thermal power plant in Namanve, the largest such project in the country, a government statement has revealed.
The power plant, which had been run by Norway’s Jakobsen Elektro AS for 13 years up to September 2021, will now be managed by the Uganda Electricity Generation Company Limited (UEGCL).
Electricity tariffs remain one of the major costs that consumers and businesses incur in Uganda. The tariffs eat into the disposable income of domestic consumers and profits of businesses.
Power generation costs account for nearly 60 per cent of the overall tariffs, according to official data. That Jacobsen’s exit from the Namanve thermal power plant will knock that figure down by nearly 18 per cent is a relief in the market.
According to the statement, the cost of running the Jacobsen plant will now reduce by $12.5 million. It added that government will save Shs 7.7 billion (about $2.2 million) annually for the first three years. And then the saving will go up to Shs 9 billion ($2.57 million) thereafter.
The thermal plant is a back-up plan for the country in the event of a power blackout. Thermal power is more expensive to generate compared to other sources of energy such as hydro.
Uganda, however, maintained thermal power within the energy mix as a stop gap measure in the event of a drop in generation capacity of other sources.
Therefore, government has been paying some money to simply keep the machines running. This is in addition to the loan that the government has been paying to Jacobsen.
A statement from UEGCL notes: “After government completed paying back the € 66 million project loan and meeting its outstanding cost obligations towards Jacobsen, the Ministry of Energy on behalf of the government of Uganda officially received the power plant from Jacobsen on 22nd February 2022.”
Uganda has an electricity generation capacity of more than 1,200MW.
The UEGCL statement noted that “as of today, government has more power generated than what is consumed much as more power is needed to meet the ever-growing needs of the economy.”
“This takeover will enhance the capacity of UEGCL to independently operate and maintain power plants on behalf of the government,” said Harrison Mutikanga, UEGCL CEO.
Uganda’s generation capacity will shoot higher after the 600MW Karuma hydropower project is commissioned in the third quarter of this year. The commissioning of Karuma will also come with a lower electricity tariff.