Uganda’s ability to implement complex energy projects within set timelines, which require both time and thorough technical assessments, remains a key challenge. Photo / File
Uganda has lived with the “developing” label for far too long. Now the country is eyeing robust economic growth, having stagnated at 6 percent and below for years.
But with just 2 gigawatts (GW) of electricity from 54 plants, the targeted growth might be a pipe dream.
Even that modest output - mostly hydro - peaks at 1,030 megawatts (MW). The plan? A bold leap to 52GW by 2040.
Ambitious? You bet
According to Uganda Electricity Generation Company Limited (UEGCL), half of that energy will come from biomass, a clean and green solution that seeks to tackle deforestation, while powering industries to meet surging demand.
With 25 industrial parks in the works, energy demand will soar to 8,000MW, while annual growth is set at 10 percent annually.
The big drivers: iron and steel plants gobbling up 6 percent, infrastructure projects such as the Standard Gauge Railway and a high-tech ICT city adding 1 percent, and e-mobility contributing another 4 percent. It’s a high-stakes gamble. But the authority in charge of Uganda’s electricity knows that rapid economic growth will soon outstrip current supply – therefore, no more room for complacency.
Climate change plays a big role in the plan. The 2023 energy policy lays out a diverse mix: 46 percent nuclear, 23 percent solar, 9 percent hydro, 5 percent green hydrogen, 3 percent thermal, and 2 percent waste-to-energy. Necessary? Absolutely.
“The goal is 100 percent electrification with diverse renewables,” says David Isingoma, the head of strategy and business development at UEGCL.
But here is the kicker: hitting 52GW will cost a jaw-dropping $245b, according to Ministry of Energy estimates.
Not all smooth sailing
Despite a seemingly surplus-installed capacity, Uganda faces a generation paradox. “Can we hit 2,000MW today? Not really,” Isingoma admits, pointing to hydrological issues, outages, and maintenance. Peak output is between 1,500 and 1,600MW.
This, he argues, highlights the urgency because “hydropower projects take over a decade. We can’t afford to delay”.
So how will Uganda hit 52GW? Public projects? Private investments? Either way, government insists tariffs must stay affordable - capped at $0.05 per kilowatt-hour, like most hydro plants.
Uganda’s electricity generation has come a long way, jumping from 380MW in 2005 to more than 2,000MW in 2024, thanks in part to the newly commissioned Karuma Hydropower Plant.
But generating power is just half the story - getting it to consumers is the real challenge.
Whereas there has been progress, a lot needs to be done. The transmission network has expanded from 1,132 kilometres in 2005 to 4,962km today, while the distribution network has surged from 17,745km to 76,976km.
These aren’t just stats. Electrification has soared from 5 percent in 2001 to 60 percent in 2024, with 22 percent on-grid and 38 percent off-grid, mostly through solar home systems.
However, affordability remains a hurdle. To help, government rolled out the Electricity Connection Policy (ECP) in 2018, subsidising connection costs for new households.
Consumers just need to wire their homes and pay Shs41,300 for a no-pole or single-pole connection - government picks up the rest of the tab.
Government is pushing power connectivity through the Electricity Access Scale-up Project. Photo / File
Meanwhile, the Energy Ministry, with help from the World Bank, is powering up the Electricity Access Scale-up Project (ESP), which seeks to connect over a million households, businesses, mining hubs, public institutions, and industrial parks.
But ECP hit a snag during Covid-19, as government had to juggle priorities, slowing connections. As a result, grid connection rates dropped from 24 percent in 2019 to 19 percent in 2022, with household growth outstripping new connections.
Isingoma, however, says progress now is steady, but getting affordable, widespread access is still the name of the game.
Government’s big move? Capping tariffs at 5 dollar cents per kilowatt-hour, targeting local generators such as Nalubaale, Kiira, Isimba, and Karuma dams.
Currently, power from the electricity generators averagely costs $6.3 cents per kilowatt-hour - down from $8 cents per kilowatt-hour before Karuma’s generation cost, now under 4 cents.
Eng Ziria Tibalwa Waako, the Electricity Regulatory Authority chief executive officer, says by cutting out transmission and distribution costs, power prices drop.
“Currently this starts from benefiting big factories by tapping high-voltage power straight from the source. This drives production, creates jobs, boosts the economy, and raises electricity consumption. So, while Ugandans won’t pay for the power they don’t use, tariffs get friendlier because increased consumption allows us to lower power tariffs for domestic consumers,” she says.
But while electricity demand is buzzing, what are we charging into? The risks aren’t exactly glowing in the dark, but they are there.
The dream’s risks
Right now, Uganda’s Isimba and Karuma dams are up and running, and whether they are sailing smoothly or not, they have handed policymakers a few lessons on how to dodge future missteps. Isingoma says “from pre-feasibility to contracting, we need to make sure everything is covered in the contracts. Too often, we discover things missing during implementation - details that should have been nailed down in the design phase.”
Insiders from UEGCL and UETCL revealed that generation projects often stay locked away in Ministry of Energy’s boardrooms, with little input from other crucial players in generation, transmission, and distribution. The result? Skewed planning.
Another key lesson? A strong monitoring system to prevent things such as the six-year delays that plagued Karuma.
“We need a monitoring framework that covers quality, cost, and time - these are the three pillars holding the project together. And let’s not forget penalties. They keep someone accountable for the slip-ups,” says Isingoma.
In every project, there are risks government willingly takes on, which the private sector would rather avoid - depending on the setup.
Whether it’s an Independent Power Producer (IPP), a Public-Private Partnership (PPP), or a government project (like Karuma and Isimba dams), each comes with its own bag of risks.
Thus, getting the right policies and regulatory frameworks in place is key. And, of course, ensuring the electricity actually makes it to consumers without any bumps along the way.
Sometimes, government even steps in to handle land risks - but not with IPPs, where private players are left holding that bag.
So, how does government manage these risks? With a healthy dose of foresight, and a bit of risk math.
Take Bujagali dam, for example. Government took on the hydrology risk - no hydrology, no power. Simple as that.
Eng Emanuel Nsubuga Sande, Uganda’s Principal Energy Officer, explains that in PPPs, government uses a risk allocation matrix. “The contract clearly spells out who handles what - construction, operations, and maintenance. If things go south, you know exactly who’s footing the bill,” he says.
Then there are sovereign guarantees. Uganda has flirted with partial risk guarantees in the past, but the Global Energy Transfer Feed-in Tariff (GET FiT) programme didn’t exactly have fireworks and yet this is an option for private developers seeking a little peace of mind.
The bigger picture is that East African member states pushing for climate-resilient, low-carbon growth while fighting poverty and mitigating climate change, get cheap financing.
Let’s not forget power purchase agreements (PPAs), which keep utilities and government on their toes, with penalties for anyone who drops the ball.
All of this is backed by implementation agreements and direct deals with project lenders. It’s all one big, carefully choreographed dance of risk mitigation. But in reality, government can sometimes be the biggest risk partner, as Eng Nsubuga points out.
Shifting government policies and regulations can delay licenses, throwing a wrench in well-laid plans.
The solution? He suggests carefully crafted PPAs, with penalties for delays - because when things go off-script, someone’s got to take the fall.
For private developers, the stakes are high with risks in the legal, political, and financial realms.
“20 years ago, constructing Achwa 1 and 2 in Pader would have been unthinkable,” says Paul Odipio, Achwa Hydropower plant manager. “But thanks to international financial partnerships and government backing, here we are.”
This was possible because risks were diversified through collaboration - because when you are tackling a financial behemoth - it's good to have some big players on your team.
While resources remain limited, Odipio says: “With a consortium and strong funder backing, we have managed to mobilise enough to push through.”
But it’s not all smooth sailing. On the technical side, equipment failure comes with penalties for private developers who miss the 96 percent operational target. And connecting to the national grid sometimes feels like trying to solve a Rubik’s Cube blindfolded.
However, Odipio says they have it covered, focusing on in-house capacity building, through which they have groomed local talent to keep operations running like clockwork.
But there are other risks like market and offtake risks.
“What sets our plants apart,” says Odipio, “is that they are run-of-river. No need for giant reservoirs. We evacuate all the power at the plant - streamlined, flow-powered energy production with minimal storage headaches.”
And then there’s the hydrological wild card - climate change. The challenge here is that even the best surveys can’t predict nature’s moods.
Fluctuating river flows have posed challenges, but there’s no panic. “At Achwa, we have implemented an alternative source protection plan, working with local communities to protect water resources and keep the power flowing,” Odipio says.
Electrification now stands at 60 percent, with 22 percent connected on-grid and 38 percent off-grid, mostly through solar home systems. Photo / File
Climate vulnerability
For Uganda to hit its ambitious wattage targets, it must face some inconvenient truths – key among them, climate change. Sustainable power development isn’t just a trendy buzzword - it’s a survival strategy. It's about developing energy resources that are green and growing, without giving up on environmental sustainability.
Right now, Uganda leans heavily on hydropower and biomass, but with energy demand soaring at over 10 percent annually, climate risks are looming large.
As Isingoma points out, any energy source the country taps into must not only be resilient to environmental shifts but also, ideally, not add to the greenhouse gas pile-up.
That means a diversified energy mix, embracing renewables like geothermal, wind, and biomass.
The big question is, however, balancing the ever-growing demand with responsible energy development, which requires top-notch, integrated planning.
Technological innovation is seen as the backbone of Uganda’s energy future. Government is already putting its chips on renewables, especially solar power, leveraging Uganda's enviable solar potential.
ERA is betting on cutting-edge solutions, from hybrid hydropower-solar setups (both floating and ground-mounted) to wind, battery storage, green hydrogen, and even waste-to-energy systems.
“These efficient technologies, combined with better electromechanical systems, will modernise our generation plants,” says Isingoma, noting that financing innovation is tough, something that requires Uganda to rethink funding by relying more on local resources for sustainability.
“We need to innovate in both energy tech and financing mechanisms,” he says. The debate between public investments and PPPs continues. While PPPs bring efficiency, they also hike tariffs.
While public investments are affordable, they are slow and less innovative.
Thus, there is need to find the right balance.
UEGCL is exploring hybrid projects like the 10MW floating solar array at the Isimba basin, backed by Agence Française de Développement (AFD), which highlights the power of digital tools in energy optimisation.
Advanced AI, automation, and digitisation are being explored to boost Uganda’s four major hydropower plants’ performance.
Eng Nsubuga also says that Uganda’s energy future depends on sustainable financing and strategic partnerships that will “need to attract private sector investments through green financing and sustainable mechanisms”.
Nuclear energy offers untapped potential but requires international cooperation and capacity building. Without these, Uganda’s energy goals could face serious challenges.
However, government backing is critical. Eng Nsubuga stresses that robust legislative, regulatory, and institutional frameworks are necessary to support sector growth.
Development financiers, such as Marc Trouyet from AFD, agree, calling Uganda’s energy vision ambitious but feasible.
“Predictability and detailed feasibility studies are essential,” he says, adding that Uganda’s strong utilities and assets can inspire investor confidence.
But executing projects on time is key.
Trouyet notes that energy infrastructure projects require rigorous technical assessments and streamlined processes, especially for attracting climate-conscious financiers focused on environmental risks.
“Investors want to know how government will protect infrastructure from climate risks like erratic rains and droughts,” Trouyet says, adding that without assurances, interest from both private and public entities may remain uneven.
Insiders at the Ministry of Energy admit that Uganda’s 2040 energy goals rely on predictability - a clear transition plan backed by solid feasibility studies to win over international financiers, because for them, knowing what lies ahead is crucial.
A key challenge is programme capacity - the ability to implement complex energy projects within set timelines, which requires both time and thorough technical assessments.
Streamlining government processes is essential. “Clear management frameworks are vital,” says a source in the Ministry of Energy, preferring anonymity.
The source also emphasises that clarity paves the way for smoother investment flows, particularly from private players, without which, the lofty energy goals may remain just ambitions.
Footing bills?
Whereas government has got the plan, the question remains, who is footing the bill?
Uganda’s wattage ambitions require a hefty financial injection, with preference to upgrading to smart grids that can reduce outages and improve reliability.
This could be done through retaining earnings within energy agencies to fund projects or swap debt for equity to enable internal borrowing, Umeme showed the way, and UEDCL could follow suit, which Energy Minister Ruth Nankabirwa has previously said, is a possibility.
Other strategies include aligning investment timelines with financing tenures, exploring concessionary loans and leaning on PPPs and IPPs. Uganda’s energy goals are full of creativity - it’s about making the numbers work.
When it comes to financing Uganda’s energy sector, AFD has a toolkit ready with a mix of concessional loans (1-2 percent interest, paid over 20+ years) and grants that make large infrastructure projects more manageable.
Take the Kiira-Nalubaale rehabilitation project, for example. AFD is blending EU grants, its own loans, and the European Investment Bank to share the load.
“This blend lets us tackle complex projects like hydropower while ensuring long-term revenue,” says Trouyet, the AFD country director.
Predictability is key
Investors, particularly private equity, seek stability and clear long-term prospects, Trouyet says. AFD has already financed Uganda’s energy transition study, mapping a roadmap towards carbon neutrality and providing a guide for investors and government.
Beyond this, AFD is using innovation to address challenges. From financing digital energy projects to deploying French tech solutions under their FEXIT programme, they are proving that tailored innovations can scale.
AFD’s sister agency, Proparco, funds private-sector projects, offering equity stakes and guarantees for PPPs to mitigate risks and attract private investors.
“In Uganda, we are positioned to support independent power producers by mitigating risks and ensuring long-term investment viability,” Trouyet says.
Thus, this unified approach not only connects Ugandans to the grid but also champions clean energy solutions, ensuring a sustainable and inclusive energy future.
