NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Today, a coalition of global energy sector leaders launched a first-of-its-kind integrated energy pilot in Uganda. Led by Uganda’s largest power utility, Umeme, coordinated by Power for All and funded by The Rockefeller Foundation, the Utilities 2.0 Twaake pilot project unites Umeme Ltd, the centralized power utility company and several leading Uganda-based distributed renewable energy companies (DREs) to provide affordable, reliable, and clean power for all in what has been described as the utilities of the future.

In a country with only 28 percent of the population accessing electricity by the central grid, it would take over 10 million customers for Uganda to achieve universal access according to the World Bank. With the average cost of grid extension connection at $1,400, if grid extension is the sole method of service provision, the required investment would likely be in the range of USD $7 billion at USD—nearly a fifth of Uganda’s current annual GDP estimated at $35 million.

The Utilities 2.0 Twaake pilot is designed to at least halve this cost by relying on integrated energy. Integrated energy combines centralized and decentralized technology (including solar home systems, mini-grids, grid, and smart grid systems) into an intelligent and interactive energy network that can deliver customer-centric, clean energy solutions to end energy poverty at the lowest cost and transform billions of lives faster than isolated approaches. According to recent studies by Power for All and Duke University, connection costs can be reduced by 50 percent through reducing upfront capital cost by leveraging a utility’s ability to access cheaper capital while increasing the value of the customers through productive use applications that drive energy demand. Through this integration, Uganda’s energy customers will derive more benefit for each kilowatt consumed, creating more opportunities for business, education, health, safety and overall quality of life.

The integrated energy pilot is deployed across two sites: Nyenje (grid) and Kiwumu (non-grid DRE site). The grid connected Nyenje has been operational since July 2020 with over 26 percent of businesses to date receiving income generating assets for the purpose of productive use. Businesses that received asset financing increased their electricity consumption by over 50 percent and business revenues have increased by over 70 percent. In Kiwumu, the pilot has deployed a 40kWp mini grid in Kiwumu, Mukono district in Uganda to power 300 households and 60 local businesses. Over 50 percent of the businesses in Kiwumu will receive asset financing to assist businesses with productive use. By helping customers move beyond access with appliance financing and financial literacy, the pilot project is expected to deliver jobs and improve incomes across both villages.

With Twaake, Uganda joins a growing global network of integrated initiatives to accelerate access, drive demand and improve overall energy system performance. In partnership with Makerere University and several Ugandan companies, Power for All will evaluate the socio-economic benefits of integrated energy and the effectiveness of the business models tests in pilot. Together, the entire consortium will work with the Government of Uganda to achieve Uganda’s first successful interconnected mini-grid in June 2022, and identify approaches to replication and scale in order to accelerate energy access and deepen the benefits to the people of Uganda.

“Neither centralized or decentralized energy can end energy poverty alone. However, through partnership and leveraging comparative strengths, traditional utilities and innovative DRE companies can create a new frontier in the fight to end energy poverty,” said Kristina Skierka, Power for All CEO.

While addressing the participants, Eng. Cecelia Menya the Acting Director Energy Resources of Uganda’s Ministry of Energy and Minerals Development emphasized the importance of public-private sector partnership in development of the energy sector and highlighted the Government’s keen interest to learn from the lessons of this year-long integrated energy pilot project to extend the technology to other parts of the country.

Selestino Bubungi, Umeme Managing Director and CEO said, “Uganda is now facing a challenge of access to clean energy with about half of the population having access, of which 25% are connected to the grid and 26% using offgrid solutions like solar. Twaake is coming in to bridge the gap of delivering clean energy to the households. This partnership will ensure that we deliver clean energy to the population in this pilot phase, pick lessons and use it to scale up. The partnership will assist to drive Uganda’s electricity agenda.”

In addition to Umeme, the Utilities 2.0 project in Uganda also involves several private sector companies and other leading organizations, including Africa Mini-Grid Developers Association (AMDA), CLASP, CrossBoundary, East African Power, EnerGrow, Equatorial Power, Nxt Grid, Rocky Mountain Institute (RMI), University of Massachusetts Amherst, Duke and Makerere Universities.

Photo courtesy of Russell Watkins/DFID.