Rwanda has ruled out opening its electricity transmission and distribution networks to private investors, bucking a regional trend as Kenya and Uganda move to expand the use of public-private partnerships (PPPs) to boost energy access.

 

Kigali will continue to allow private players to participate in electricity generation projects, both through partnerships and as independent power producers (IPPs). However, transmission and distribution infrastructure will remain fully under state control.

The policy marks a departure from a trend gathering pace across East Africa and the wider continent, where governments are increasingly turning to private investors to upgrade existing transmission and distribution lines and build new ones as growing electricity demand outstrips public financing capacity.

Electricity transmission and distribution have historically remained the preserve of state-owned utilities across Africa, but that is changing as governments race to close the continent’s energy access gap by 2030. Increasingly, countries are turning to PPPs to bridge the funding gap.

Rwanda will need up to $3 billion to achieve universal energy access by 2030, of which $922 million is expected to come from the private sector. None of that private investment, however, will go into transmission and distribution.

Claver Gukwavu, acting managing director of the Energy Utility Corporation Ltd (EUCL), Rwanda’s utility company, said the decision was intended to keep electricity affordable.“This was intentional on the side of the government. We cannot have the private sector in everything, energy prices will be too expensive for Rwandans to afford,” he told The EastAfrican on the sidelines of the Africa Energy Forum in Cape Town last week.

For electricity generation, Rwanda will require investments of up to $1.1 billion, of which $801 million, or 73 percent, is expected to come from the private sector, according to the country’s energy compact presented at the forum.

Electricity transmission and distribution will require investments of $215 million and $381 million respectively, all of which the government plans to finance. The state will also cover the $198 million needed for regional interconnections and the $491 million required to connect households to the grid.

Different modelsUganda has taken a different path in its efforts to expand electricity access.

To increase access from the current 60 percent of the population to 85 percent by 2030, Kampala estimates it will require up to $17.7 billion, according to its energy compact presented at the forum.

Unlike Rwanda, the Ugandan government expects to finance less than half of this amount, with the remainder coming from private investors across all segments of the electricity sector.

Private players are expected to inject $6.5 billion of the required $9.8 billion into electricity generation, $450 million of the $2.5 billion needed for transmission and $350 million of the $2.2 billion required for distribution.

Kampala also expects the private sector to invest $950 million in off-grid energy access, $600 million in clean cooking and $80 million in sector reform and capacity building.

Monica Musenero, Uganda’s Minister of Energy and Mineral Development, told The EastAfrican that the country had chosen to expand private sector participation to accelerate progress towards its electrification targets.“Utilities are a sensitive area to bring in the private sector, but Uganda has now worked out the frameworks, which make the private sector work comfortably in those segments, so that we can accelerate our growth, rather than waiting for the public sector to bring in all this money and brain,” she said.

She rejected suggestions that greater private sector participation would push up electricity prices.“Before we allow the private sector to come into the utilities, we have put in place a solid, robust, time-tested regulation framework that understands business on one hand, but also the need to stabilise these critical utilities,” Dr Musenero said.“You must recognise that these investors are coming in because they, like you, are investing money and they need to have a return on their investment.”Transmission shiftHer sentiments are shared by Kefa Seda, director-general of the Public-Private Partnerships Directorate at Kenya’s National Treasury, who argued that PPPs must be structured to benefit both governments and investors.“Tariffs should be cost-reflective of the investment first, then the regulator comes in to see if it’s something that’s affordable by users or if it’s going to expose users. There has to be a balance between bankability and affordability,” Mr Seda said.

Both Kenya and Uganda are now at advanced stages of developing what are expected to be Africa’s first independent power transmission (IPT) projects, marking a major shift in the continent’s energy sector.

In Uganda, the Amari IPT project, developed by US firm Gridworks, reached financial close in March. Kenya’s Lessos-Loosuk and Kisumu-Musaga transmission project, developed by Africa50 and India’s Power Grid Corporation, is expected to reach financial close by August.

In addition to the transmission projects, the two countries have also begun liberalising their power distribution sectors, paving the way for greater private sector participation.

Funding gapAcross Africa, there is growing consensus that private investment will be critical if the continent is to achieve its energy access targets by 2030, given increasingly constrained public finances.“African countries, including ours, have limited fiscal capacity to invest in energy. The only way to expand access fast enough is through cooperation with the private sector,” said Marc Mandaba, Central African Republic’s Minister of Economy, Planning and International Cooperation.

The Central African Republic plans to attract up to $600 million in private investment into its energy sector by 2030, accounting for 30 percent of its financing needs.

Mr Mandaba acknowledged, however, that working with private investors presents challenges.“They ask a lot of things to come in. They take a lot of time to come in, the investment process is long and the contract negotiation is also long,” he said.

Experts argue that private capital offers Africa its best chance of meeting its electrification goals.

“The reason countries haven’t achieved universal energy access is that they don’t have the money. With private capital, it can happen. And there has to be contracts to ensure a reasonable balance between profitability and affordability.”The differing approaches underline a broader debate across Africa: whether faster electrification requires deeper private sector participation, or whether keeping critical grid infrastructure under state control remains the best way to ensure affordability and equitable access.

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