Energy sector stakeholders have called for the enhancement of policy and regulatory frameworks to promote the development of mini-grids in Uganda.
The calls were expressed during the "Enhancing the Enabling Environment for Mini-Grid Development in Uganda" panel session organised by Team Europe under its Global Gateway program.
The event was held on Thursday at Speke Resort Munyonyo as part of Uganda’s Energy Week.
The session aimed to address challenges and explore ways to create a more conducive environment for mini-grid development through offering a chance to discuss recent developments in Uganda's legal framework and regulations, and how these have catalysed mini-grid development.
During the session, Henry Jumba, the Country Coordinator for GET Transform at GIZ, emphasized the importance of enhancing Public-Private Partnerships (PPP) to mitigate risks in the enabling environment, which would improve access to and affordability of energy.
He explained, "And here, the risk means for some of these early-stage markets, for mini grids, for example, you have so many risks whereby the developers, not even the developers, the financials, are not willing to invest into this environment.
So what the PPP does is balance the interest, so you have both government and then the private sector playing into the same objective. So on the side of government, perhaps the interest is social equity and ensuring that the energy provided is affordable, but then also there is access,"
He added, "Now on the private sector side, the interest is, how can I recoup my investment, and recouping that investment with making some profit on it as well? So that is the idea of a PPP,"
Jumba pointed out that over the past eight years, GIZ has been exploring PPP models that could unlock benefits, particularly in attracting private capital despite financial challenges.
Jeroen Van Linden, the regional project coordinator for the Beyond the Grid Fund for Africa (BGFA), which is funded by Sweden, pointed out that over the past six years, they have observed that regulatory frameworks frequently lack clarity, making it difficult for potential developers to find clear investment guidance.
He emphasized the need for regulatory frameworks to clearly define aspects such as licensing, concession durations, tariff approvals, grid connection, and compensation mechanisms.
"However, grid encroachment is often addressed superficially. A well-worked-out framework would detail options for mini-grid developers when the grid arrives, including abandonment or acting as an Independent Power Producer (IPP)," Van Linden said.
"These options require clarification on financial implications, compensation mechanisms, and asset valuation. The devil is in the details, which are often missing, causing insecurity for mini-grid developers." he added.
In response to concerns about the lack of a sufficient regulatory framework, Elizabeth Kaijuka, a principal energy officer in the Renewable Energy Department at the Ministry of Energy and Mineral Development, stated that the government is actively addressing this issue through the Promotion of Mini Grids Project by creating various tools and mechanisms.
She explained that these mechanisms include bundled tenders and a concession framework designed to offer subsidies to developers and encourage private sector investment with government assistance.
Regarding the duration of licenses, which developers prefer to be longer in order to recoup their investments, Kaijuka emphasised the need to balance this preference with the interests of rural communities.
"Now, what are the opportunities like? We have a concession framework in place, built on lessons learned from previous mini grid projects. We've developed instruments like lease agreements, subsidy agreements, and implementation agreements with the government," Kaijuka said.
She also noted that the ministry is currently assessing the pre qualification process for the grid connection tender and is eager to open up the market to foster greater competition.
Patrick Tutembe, a principal economist at the Ministry of Energy, pointed out that suitable locations for mini grid expansion in Uganda are often remote rural areas with limited economic centres, which complicates the issues surrounding tariffs and concessions.
To address these challenges, he suggested that ensuring sufficient energy demand is essential for enabling investors to recover their costs.
"One thing that is very clear in regulation in our context, is that any investment has to be recovered. Costs of investment have been recovered, including cost of operation and the cost of capital. However, for that to happen, it means that we must be having adequate demand from these areas for us to be able to have the developers sell energy that can help them recoup their investment,"
Uganda's electricity mini-grid market has made significant progress in recent years, with over 45 operational mini-grids countrywide. The country targets to meet universal access to electricity by 2030.
Team Europe has supported to bring electricity to 1.5 million individuals in Uganda since 2014, with at least 3 million people more expected to be reached by 2027. In this undertaking, a particular focus is put on vulnerable groups, productive use of energy and rural communities.
According to Jan Sadek, the Ambassador of the European Union to Uganda, the European Union through the Global Gateway strategy is committed to building resilient connections with the world and which has significant implications for Uganda's energy landscape.
"The Global Gateway embodies the EU's commitment to contribute to bridging the global infrastructure investment gap, which is projected to reach USD 15 trillion by 2040. This strategy supports smart, clean, and secure investments in both soft and hard infrastructure, upholding the highest environmental and social standards,"
He says that by investing in climate-resilient infrastructure, the Global Gateway will accelerate sustainable development, offering solid financial conditions and an ethical approach so that infrastructure projects do not create unsustainable debt, drive inclusive growth, and create quality jobs.