Uganda has one of the best climates in Africa that is moderate with cool temperatures, and receives rainfall throughout the year. The country has rich and green vegetation with tropical rain forests and water bodies covering most parts of the country. The River Nile, one of the longest rivers in the world, starts its long journey to Mediterranean Sea from Uganda. Uganda is home to the Lake Victoria, the largest lake in Africa and also the second largest fresh water lake in the world. Uganda lies astride the equator and enjoys a unique location at the heart of sub-Saharan Africa within the East African region.

The country has been able to achieve macro-economic stability when clouds of uncertainty rocked many regions of the world. Uganda is one of the fastest growing economies in Africa with GDP growth rate averaging 7.7% per annum since the year 2000, making the country the fastest growing economy in East Africa. In order to provide information to investors to Uganda, this energy sector profile has been prepared as a guide on the potential investment opportunities in the country.

The profile gives highlights on investing in a number of areas including: design, construction, sales and service support of biomass plants; assembly and marketing of solar units in Uganda; manufacture and marketing of charcoal briquettes; and acquisition, installation and services of micro hydro dams in Uganda. Uganda’s overall national development objectives are accelerated economic growth, through increased productivity and enhanced agricultural and industrial production, thereby increasing employment opportunities, an equitable distribution of income, and reduction of poverty.

The realization of these objectives requires, amongst others, that quality energy services are available in a sustainable, cost-effective and affordable manner to the people. Energy policies integrate economic, social and environmental objectives in such a way that improves the well being of the current generation whilst safeguarding the welfare of future generations.

1.2 Current activities, capabilities and players The current activities are geared towards domestic or small scale biogas application for cooking purpose; there are no players who use organic waste for electricity generation. Biomass as a source of generating electricity at small scale has not been explored in the African region except in South Africa [Dasappa, 2007]. A centralized plant that generates biogas from organic wastes (of grass, weeds, aquatic plants, crop waste and farm yard manure) will help manage the ever increasing organic waste in the country. Generation of power from garbage does not exist in Uganda, yet there is an increasing population which has led to increasing amounts of garbage generated. In Kampala City alone, it is estimated that the per capita generation of garbage is one kilogram per day. With a population of about 1.5 million, this works out to about 1,500 tons generated every day, [www.kcc.go.ug]. 

The City Council disposes 40 percent of the 1,500 tons of garbage to landfills. Feasibility studies have been carried out in many areas along the various rivers in Uganda to estimate the capacity of the sites under review. The studies depict potential Micro Hydro power Sites. However not so much has been done to exploit the Hydro potential which is abundant in Uganda. Available sites for Hydro power exploitation are estimated to be in hundreds, especially in the mountainous areas of the great lakes region.

1.3 Markets – in-country, regionally and beyond Uganda’s population is estimated at 30 million people and is growing at a rate of 3.5 percent per annum.  Most of this population is educated and economically active. This is a sizable market to depend on. The Ugandan economy has been one of the fastest growing economies in Africa, with an average growing rate of 6.4 percent for the last eight years. This represents an increase in the potential market for energy of two percent per month. Though this population has been dependant on rudimental methods of biomass for their energy needs, the economically active and progressive lot is desirous of adopting advanced forms of biomass that are energy efficient, highly combustible and smoke free. An investment in biomass aimed at serving this section of the public would be a welcome development. Investment opportunities exist for developing renewable energy sources to provide electricity. The potential for private sector participation in the provision of these services is quite significant in both rural and urban electrification. This is especially relevant in Uganda where the level of electrification is very low with only five percent of the populations connected to the national grid. There is a large potential market for micro hydropower and solar energy in Uganda and the region. Most households could be beneficiaries of Micro hydro power and solar energy. At medium-scale level, hydro power could be utilized in hotels and electrification of fast growing real estates housing projects.

At medium-scale level, solar energy utilization includes heating in hotels and electrification of fast growing real estates housing projects and for community solar water pumping. Micro hydropower and solar energy could also be used in small industries to run agro processing machinery and in the telecommunication industry for powering remote Base Stations (BS) which are off the main grid. Opportunities also abound in the manufacture and marketing of charcoal briquettes. The briquettes are best for the institutional markets, because they can directly substitute wood without modification to the stoves. Schools, restaurants, hospitals, etc are potential markets and future opportunities will be there especially if the Government and local authorities decide to further enforce the restriction on cutting down trees. The domestic market in Uganda notwithstanding, there is a great export market potential in the East African Community, with an estimated population of 120 million people and the Great lakes region which has a population of over 150 million people. Besides, there is the Common Market for Eastern and Southern Africa states (COMESA) which is Africa’s single regional economic grouping with an estimated population of over 389 million in 19 countries (www.comesa.int).

1.4 Competitiveness of the energy sector Energy is a vital force in the economic growth and development of any society. With the revitalization of the Ugandan economy coupled with a steady increase in population growth, additional demands for energy have been created. Only five percent of the total population is connected to the national grid; in the rural areas only two percent of the household are connected to the national grid and furthermore, the grid is unreliable characterized by load shedding and continuous power outages, which leaves a huge opportunity for investment in alternative electricity generation. 1.5 Rationale behind the project Energy is a vital force in the economic growth and development of any society and has been tightly linked with the Millennium Development Goals (MDGs). With the revitalization of the Ugandan economy coupled with a steady increase in population growth, additional demands for energy have been created. However the national grid has limited coverage and extension to rural folks is rather slow. Only 5% of the total population is connected to the national grid and further more the grid power is unreliable characterized by load shedding and continuous power outages. In the rural areas only about 2% of the households have access to grid power. Thus there is need for alternative power sources especially in the renewable sector. The demand and consumption of fuel wood and charcoal is increasing with the increasing rural and urban population. Household consumption of charcoal has more than doubled while the use of firewood increased by almost 70 percent. 30 percent less briquettes are required to replace wood.

Briquettes have the added advantage that they been proven to be more energy efficient, highly combustible, healthier and environmentally friendlier. The abundant sun light in Uganda presents wonderful prospects for harnessing solar energy for use in homes, businesses and institutions. Being astride the Equator, Uganda is assured of reliable sunlight all year round, all that is needed is equipment, technological know-how and investment to transform it to electricity. There are governments and donor funded projects and programs to facilitate uptake and utilization of solar energy but solar technology for electricity generation is wanting. Investments in Micro hydro power are much needed to compliment the huge power dams currently being constructed at Bujagali since the energy deficit in the country is bound to continue growing even with the completion of all power dams due to the rising population and economic growth in Uganda. The Uganda Ministry of Energy and Mineral Development with support from development partners have already carried out feasibility studies on the viability of the available sites in the country.