REPUBLIC OF RWANDA - MINECOFIN · 2.3.4 Challenges within the Electricity sub ... Proposed Solutions to Key challenges facing ... and large users such as industry which will ...

EDPRS II: Energy Sector Strategic Plan

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REPUBLIC OF RWANDA

ENERGY SECTOR STRATEGIC PLAN

(2013-2018)

MINISTRY OF INFRASTRUCTURE

June - 2013


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1 Acronyms and abbreviations Table 1: List of acronyms and abbreviations

ACRONYM DESCRIPTION

AfDB African Development Bank

BEST Biomass Energy Strategy

BTC Belgian Development Corporation

CBOs Community-Based Organization

CDF Community Development Fund

CDM Clean Development Mechanism

CFL Compact Fluorescent Lamp

COMESA Common Market for East and Southern Africa

DRC Democratic Republic of the Congo

EAC East African Community

EAPP East African Power Pool

EDPRS Economic Development and Poverty Reduction Strategy

ELECTROGAZ Établissement Rwandais de Distribution de l'Eau, de l'Electricité et de Gaz

ESSP Energy Sector Strategic Plan

EU European Union

EWSA Energy Water and Sanitation Authority

FRW Rwandan Franc

GDP Gross Domestic Product

GEF Global Environmental Facility

GTZ German Technical Cooperation Agency

GWh Giga-Watt hour (measure of electrical energy)

HFO Heavy Fuel Oil

ICT Information and Communications Technology

IPP Independent Power Producer

KPI Key Performance Indicator

KWh Kilowatt-hour (Unit of electricity)

M&E Monitoring and Evaluation

MDGs Millennium Development Goals

MIFOTRA Ministry of Public Services, Skills Development and Labour

MINAGRI Ministry of Agriculture and Animal Resources

MINALOC Ministry of Local Government and Social Affairs

MINECOFIN Ministry of Finance and Economic Planning

MINIRENA Ministry of Environment and Lands

MINICOM Ministry of Commerce

MININFRA Ministry of Infrastructure

MOU Memorandum of Understanding

MTEF Medium Term Expenditure Framework

MW Megawatt (measure of electrical power or capacity)

NBI Nile Basin Initiative

NDBP National Domestic Biogas Programme


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NELSAP Nile Equatorial Lakes Subsidiary Action Program

NICA National Inspectorate and Competition Authority

NGO Non-Government Organization

PM Prime Minister

PPA Power Purchase Agreement

PPP Public-Private Partnership

PSF Private Sector Federation

PV Photovoltaic

RBS Rwanda Bureau of Standards

RDB Rwanda Development Board

RECO Rwanda Electricity Corporation

REMA Rwanda Environment Management Authority

RRA Rwanda Revenue Authority

RURA Rwanda Utilities Regulatory Agency

RWASCO Rwanda Water and Sanitation Corporation

SINELAC Société Internationale d’Electricitédes Grands Lacs

SWAp Sector Wide Approach

SWG Sector Working Group

UNDP United Nations Development Program

VAT Value Added Tax

Vision 2020 Rwanda Vision 2020 (long-term development programme)

WB World Bank


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Table of contents

1 Acronyms and abbreviations ............................................................................... ii

1. Introduction and executive summary .................................................................. 8

Introduction ................................................................................................................. 8

2 Overview of the Energy Sector .......................................................................... 11

2.1 Policy Context ................................................................................................. 11

2.2 Key sector challenges ..................................................................................... 13

2.2.1 High level strategy and link to EDPRS II objectives ........................................ 13

2.2.2 Policy Development ........................................................................................ 14

2.3 Electricity subsector ....................................................................................... 15

2.3.1 Off-grid Electricity: .......................................................................................... 16

2.3.2 On-grid Electricity ........................................................................................... 16

2.3.3 Recent Developments within the Electricity Sector ....................................... 17

2.3.4 Challenges within the Electricity sub-sector and proposed solutions ........... 22

2.4 Petroleum subsector ...................................................................................... 27

2.4.1 Recent Developments in petroleum sub-Sector ........................................... 29

2.4.2 Challenges and proposed solutions ................................................................ 30

2.5 Biomass energy subsector .............................................................................. 33

2.5.1 Recent Developments within the Sector ........................................................ 33

2.5.2 Challenges and proposed solutions ................................................................ 36

3 Strategic Framework ......................................................................................... 38

3.1 Mission and objectives of the energy sector.................................................. 38

3.2 Energy sector contribution to EDPRS II .......................................................... 38

3.2.1 Lessons leant from the EDPRS I ...................................................................... 38

3.3 Key projects to meet EDPRS II targets ............................................................ 39

3.3.1 EARP program and off-grid solutions ............................................................. 41

3.3.2 Understanding Electricity Demand ................................................................ 46

3.3.3 Development of a Generation and Transmission roadmap .......................... 50

3.3.4 Private sector engagement plan .................................................................... 56


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3.3.5 Strengthening the Investment management ................................................. 60

3.3.6 Operational efficiencies and financially sustainability of the utility .............. 60

3.3.7 Use of Biomass and transition to alternatives ............................................... 63

3.3.8 Petroleum subsector ...................................................................................... 66

3.4 Contribution to EDPRS 2 thematic Areas/Priorities ....................................... 68

3.4.1 Economic transformation for rapid growth ................................................... 69

3.4.2 Rural Development ......................................................................................... 71

3.4.3 Productivity and youth employment.............................................................. 73

3.4.4 Accountable Governance ............................................................................... 73

3.4.5 Cross cutting issues mainstreaming ............................................................... 74

4 Implementation of the Sector Strategic Plan ...................................................... 81

4.1 Background and implementation plan ........................................................... 81

4.2 Sequencing of interventions ........................................................................... 82

4.2.1 Roles and responsibilities of energy sector partners and stakeholders ........ 82

4.2.2 The role of Central Government .................................................................... 82

4.2.3 Mechanisms for co-ordination and information sharing ............................... 88

5 Monitoring and Evaluation ................................................................................ 89

5.1 Energy Management Information System ..................................................... 90

5.2 Evaluation ....................................................................................................... 91

5.3 Communication .............................................................................................. 92

6 Cost and Financing ............................................................................................ 93

Annex 1: Generation Investment Roadmap ............................................................. 94

6.1 Peat-to-Power Generation ............................................................................. 94

6.2 Hydro power generation .................................................................................. 1

6.3 Methane gas-to-power generation .................................................................. 1

6.4 Geothermal power development ..................................................................... 2

Annex 2: Summary of costs and required financing ................................................... 4

Annex 3: Monitoring and Evaluation Matrix .............................................................. 7


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List of figures

Figure 1 Illustrative view of portion of energy from different sources as planned by

2017 ................................................................................................................................. 12

Figure 2: Summary of EDPRS Vision, Objectives, Targets and approach ....................... 14

Figure 3 EWSA's decreasing cost to serve ....................................................................... 18

Figure 4: Correlation between energy consumption and development ......................... 24

Figure 5: EWSA's loss reduction plan .............................................................................. 26

Figure 6: Key challenges faced by the biomass subsector and high level solutions ....... 36

Figure 7: Objectives, goals and strategies to achieve EDPRS targets .............................. 39

Figure 8 Key policy priorities ........................................................................................... 40

Figure 9 Peak vs Absolute Demand ................................................................................. 46

Figure 10: Proposed energy generation mix ................................................................... 51

Figure 11: Generation roadmap to achieve 610 MW of installed capacity .................... 52

Figure 12 Projected capital costs ..................................................................................... 52

Figure 13: Transmission projects ..................................................................................... 55

Figure 14 Proposed competative process and responsibilities ....................................... 58

Figure 15 Projects to be submitted to competitive bidding process during EDPRS II

period ............................................................................................................................... 60

Figure 16: Impact of energy investments on EDPRS II thematic areas and priorities .... 68

Figure 17: Rwanda's internal migrations ......................................................................... 72

Figure 18: Peat to Power projects delivery plan ............................................................. 96

List of tables

Table 1: List of acronyms and abbreviations ..................................................................... ii

Table 2: High level policy considerations as outlined in the draft energy policy ............ 15

Table 3: New Time of Use (ToU) Tariff structure ............................................................ 19

Table 4: List of challenges and proposed sollutions ........................................................ 22

Table 5: Current Electricity consumption patterns ......................................................... 22

Table 6: Petroleum products importation (Litres) – 2011/12 ......................................... 28

Table 7: Petroleum products usage projections ............................................................. 29

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Table 8: key challenges in the petroleum sub sector ...................................................... 30

Table 9: Proposed Solutions to Key challenges facing downstream petroleum sub-

sector ............................................................................................................................... 31

Table 10: Proposed Solutions to Key challenges in the Biomass sub-sector .................. 36

Table 11: Demand projections under different scenario (Generation requirements

including losses) .............................................................................................................. 47

Table 12: Overview of Rwanda's indigenous energy resources ...................................... 51

Table 13: Potential areas with for geothermal resources ................................................. 3

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1. Introduction and executive summary

Introduction

Access to safe, reliable and cost effective energy is essential if we are to achieve the ambitious

levels of growth defined under the Economic Development and Poverty Reduction Strategy

(EDPRS II). There is a strong correlation between a country’s energy usage and the level of

development. The energy sector in Rwanda consists of three components: Electricity, Biomass

and Petroleum, with each playing a key role in Rwanda’s transition to a middle income country

by the end of the decade.

Energy is a service and a key input into economic development and household activity.

Different sources of energy have different uses and there is need to ensure that the most

appropriate form of energy is available in a cost effective, reliable and sustainable manner. As

an example, it would be impossible to charge a mobile phone using biogas and its as well not

cost effective to use electricity for cooking.

The primary source of energy will continue to be biomass, principally used in cooking. The most

basic forms of Biomass are firewood and charcoal. Across the globe, firewood is associated with

environmental, social and health problems, stemming from deforestation and the emissions

from wood and charcoal burning respectively. Rwanda has had considerable success over

recent years in addressing these issues to the extent that its one of only a few countries in

Africa where there is not a major link between Biomass and the negative environmental effects

of deforestation. To address the social and health problems emanating from use of biomass,

government is promoting use of alternative fuels such as Biogas from animal and plant waste.

This will free up the time of women and children currently spent collecting firewood, giving

them enough time to study and undertake more productive commercial activities.

Electricity is an essential driver of modern technology and socio-economic development. Use of

electricity is required for both low consumption devices such as lights and mobile phones and

and large users such as industry which will enable industrial processing activities, value

addition, driving exports and job creation. Electricity access can be through on-grid connections

to households and businesses and off-grid solutions such as mini hydros as well as small solar

generation. Network connections require significant capital costs but are able to provide the

reliable, high voltage electricity required for commercial and large residential users. Our priority

is to extend the network to allow heavy users of electricity across the country to connect to the

grid. For lighter users of electricity, grid connections are unlikely to make economic sense in the

short term and as such, off-grid solutions such as Solar PV and Microhydros will be prefered.

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Overall, government intends to support 100% of the population with access to electricity by the

end of EDPRS II.

To keep pace with the increased demand for electricity, government will ensure increased

electricity generation capacity above the current capacity of around 110 MW. Approximately

45% of the existing generation capacity runs on expensive imported diesel. Diversifying away

from diesel generation will enable the government maintain a regionally competitive tariff

whilst eradicating subsidies to the energy tariff. There is considerable private sector interest in

electricity generation from Rwanda’s indigenous resources such as the recent private sector

peat deal to generate 100MW of electricity from south Akanyaru peat reserves. Similary, a

unique project to generate 25 MW of electricity from methane held in Lake Kivu is expected to

be commissioned in 2013. However, if we are to meet ambitious EDPRS targets for economic

growth, our demand for electricity could be as high as 563 MW by 2018 and we will need

continued investment from the private sector if we are to be able to satisfy this demand.

Herein this document, we have developed a detailed roadmap of investments which will allow

meeting of energy requirement. Around 70 MW of additional generation is likely to come from

Hydro, whilst targeting the development of around 200 MW from Rwanda’s peat reserves.

Further development of methane reserves in Lake Kivu could deliver up to 100 MW of

additional generation. The most exciting prospect however is Rwanda’s geothermal potential.

Geothermal power is reliable, environmentally sustainable and can provide power at low costs

that could help to accelerate Rwanda’s economic growth. Studies over recent years have

indicated a significant possibility a commercially viable geothermal resource. Detailed plans

have been developed to undertake exploratory drilling to confirm these studies and we expect

to break ground in 2013. Our roadmap includes around 50 MW of geothermal by 2017. The cost

of this additional generation will be around $1.5 Bn. Government intends to use limited

resources wisely to undertake activities to reduce perceived investment risks in order to

stimulate private investment.

The other component of Rwanda’s energy mix is petroleum. Petroleum products are essential

for industrial use, lighting, and transport. Over the course of economic development,

maintaining a stable supply of low-cost petroleum products will become more and more

important. This is particularly important in aviation. Rwanda is planning to position itself as a

regional air transport hub, as such, supply of low cost reliable aviation fuels is essential if this

ambition is to be realised.

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Summary of Strategies and Proposals ELECTRICITY

Electricity

Generation

Electricity Demand: The current projections of demand for electricity range between 250 and 470 MW;

requiring installed generation of 300 – 564 MW (considering a 20% reserve margin). EWSA will revise this

forecast each year to ensure generation that is inline with demand.

Electricity Generation: The current target is to have an installed capacity of 563 MW by 2018. Government

is prioritising developing the feasibility of different generation sources to reduce the perceived delivery

risks and lay ground for more private sector participation.

Access to Electricity Government will support programs to ensure that 100% of households get access to electricity through

grid and off-grid solutions by 2018. This will be done through;

Grid connections(48% of households): The plan is to extend the network of electricity across the

country for grid connections. The national grid will be extended across the entire country connecting

commercial consumers who will drive economic growth and households consuming sufficient

electricity to make the connections financially sustainable

Off-grid installations (52% of households): Households located in a significant distance away from the

grid or those consuming insufficient electricity to make a grid connection financially viable will be advised

to get access through off-grid solutions such as minigrids or solar PV solutions.

Tariff and Subsidies Subsidies: Government plans to eliminate subsidies to the tariff by 2015 whilst maintaining a regionally

competitive tariff. This will be made possible through phasing out the use of Diesel as a major component

of generation mix.

Tariff Segmentation: RURA will in consultation with EWSA review the tariff structure in 2013 to ensure

that it is aligned with the EDPRS II objectives of economic development and poverty reduction.

BIOMASS

Sustainable

biomass solutions

Government plans to decentralise implementation of Biomass programmes from central to local

government level to streamline implementation. Specifically, government :

Target the delivery of domestic BioGas digesters. Promote the use of bio digesters within

households and government institutions. The target is to deliver 100,000 bidigesters by 2017

Improved Cook-stoves (ICs). Increase penetration of improved cook-stoves (50% to 80%)

More efficient charcoal production: Support Improved wood harvesting and charcoal production

techniques by scaling up the level of training given to local cooperatives. Government will also continue to

support the market and research of biomass alternatives such as LPG and Peat briquettes

PETROLEUM

Security of supply Increase Security of supply: 4 months’ supply will be stored by government and private sector.

Decreased import costs and Increased price stability: Through promoting and facilitating bulk purchasing

of petroleum with Rwanda’s regional neighbours

Maintain and increase quality: Improve standards and testing to ensure consistently high quality.

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2 Overview of the Energy Sector Chapter outline

This chapter gives an overview of the Energy sector, outlining key strategic approaches which

will be deployed to deliver on the EDPRS II targets(Outlined in greater depth in chapter 3). The

chapter further discusses the current status of each of the three energy sub-sectors in detail

(Electricity, Biomass and Petroleum), outlining key challenges therein and providing respective

policy guidance.

2.1 Policy Context

Rwanda’s economy has been growing at an annual average rate of 8.3% and government is

targeting to achieve an annual average growth rate of 11.5% over the EDPRS period. The third

generation of Rwanda’s development strategy (EDPRS II) enshrined in its 4 thematic areas aims

at achieving rapid economic growth, rural development, productivity and youth employment

and accountable governance. Ensuring access to affordable and modern sources of energy is

essential if the above EDPRS objectives are to be achieved.

Energy is a complex and diverse sector requiring prudent planning and significant capital

investment. Currently around 85% of the overall primary energy consumption is based on

biomass (Over 90% of all households using biomass for cooking), 11% on petroleum products

(for transport, electricity generation and industrial use) and 4% on electricity.

Energy is required for diverse applications including heating and cooling, lighting, moving

machines among others. However, it should be noted that no single energy source will meet

Rwanda’s energy needs in isolation. Each energy source has its own unique characteristics and

the most appropriate purspose it serves better. The use of Electricity for cooking is not likely to

be financially viable in the short to medium term in Rwanda forexample but is economically

feasible for lighting and charging modern appliances, while petroleum products will be

preferred in the transport industry. Electricity can be accessed through either connection to the

national grid or using a solar home system. Selection of any of the appropriate technology can

only be done by weighing up these advantages against each of their social, environmental and

economic costs.

The figure on the following page illustrates a high-level proportion of energy expected to be

generated from respective sources including Bio-products1, Petroleum products and Electricity

for different uses. Bio-products covers fuels developed from Biological material including Biogas

1 Bio-products include; charcoal, biogas and Biofuels

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from waste matter and Biofuels from crops such as Jatropha. A red arrow illustrates where we

expect a significant increase in the usage of a particular energy source for an activity in order to

drive socio-economic growth and poverty reduction targeted under EDPRS II.

Figure 1 Illustrative view of portion of energy from different sources as planned by 2017

Note: A red arrow indicates a significant rise in use of a particular energy source for a given

activity

To summarise the transition across the three energy sources:

Bio-products: Government acknowledges that Bio-products will remain the most

appropriate and cost-effective source of energy for heating and cooking. The

government 5-year strategy is to encourage cleaner, more efficient and sustainable uses

of Bio-products by transitioning away from wood to more clean technologies such as

Biogas and promoting efficient charcoal harvesting and use.

Petroleum: The demand for petroleum products will continue to rise on account of

increased transport vehicles and expansion of the fleet for the National airline. The

reduction of imported diesel for electricity production will be more than off-set by the

increased need for petroleum products in transportation, particularly aviation, and

heavy industry.

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Electricity: Though it currently represents a small portion of our Energy mix, electricity is

vital for the provision of modern services such as manufacturing and ICT and increasing

levels of both generation and access capacity is vital if we are to achieve the levels of

economic growth and poverty reduction planned over the next 5-years.

2.2 Key sector challenges

Delivering on the Energy sector targets will require concerted efforts from government,

development partners and the private sector. The key challenges facing delivery can be

summed up into financing constraints, human and institutional capacity gaps as well as

difficulty in raising the required demand to ensure productive use of electricity.

Across the entire sector spectrum, capacity gaps have been identified in project management,

contract negotiation and enforcement. Proposed remedies to that effect for the above

mentioned capacity challenges have been mostly reflected in the priority policy Matrix herein

this document.

2.2.1 High level strategy and link to EDPRS II objectives

Rwanda’s high level energy strategy is “the provision of “appropriate, reliable and affordable

energy supplies for all Rwandans”. This is what will drive the economic growth necessary for

Rwanda to develop into a middle income country by 2020.

Link to EDPRS II objectives: It is important to note that the development of energy

infrastructure or the production of energy will not in itself drive economic growth and poverty

reduction. There is need to ensure that the most appropriate infrastructure is developed

efficiently to ensure that energy can be provided at a price affordable to majority of the

population:

Economic growth will be driven by uninterrupted provision of energy, particularly

electricity and petroleum products at prices that are stable and regionally competitive

to stimulate business development. The approach to meeting regionally competitive

prices for petroleum is undertaking bulkpurchasing arrangements and clear pricing

methodologies. For electricity, the approach is capital-driven with a requirement to

spend up to $2.7 Bn on infrastructure. For both approaches, a carefully conducted

demand forecast is essential to a void demand-supply mismatches and associated

unplanned expenditure.

Poverty Alleviation will be supported by the provision of cost effective and appropriate energy

solutions to the poor, particularly in rural areas where energy services are currently scarce or

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expensive. As illustrated on the previous page, Bio-products and electricity are the key sources

of energy for heating and cooking and modern energy uses such as communications

respectively. In order to meet our macro-level objectives, respective targets have been set

within the energy sector as highlighted in the figure below:

Figure 2: Summary of EDPRS Vision, Objectives, Targets and approach

Note: Proposed strategic approaches to be employed to deliver on Rwanda’s vision for the

energy sector are discussed in detail in chapter three. The following pages below present a

high-level summary of policy development within the sector and then a detailed discussion of

each of the energy sub-sectors:

2.2.2 Policy Development

The challenge to deliver on the vision and objectives outlined above is significant. There is need

to establish an enabling institutional framework embracing intergrated planning and

cohenrence in policy orientation. Clear policy statements to guide decision making have been

articulated in the draft Energy Policy- that guided the development of this document. The high-

level policy statements set out in this plan are presented below:

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Table 2: High level policy considerations as outlined in the draft energy policy

Cross Sector policy considerations

Use of

indigenous

energy resources

Indigenous energy resources will be preferred over imports. Further, government will give

preference on future generation of electricity from renewable energy resources over non-

renewable resources.

Energy efficiency

and conservation

Energy Efficiency will be a key component of sector planning. Government will provide

economic incentives where feasible for all users of energy to consume in an efficient

manner

Energy pricing

and subsidy

policies

Energy prices will generally transition to reflect the cost of supply. Where cross

subsidisation exists or government subsidies exist, these should be transparent with a

clear economic rationale.

Financing energy

sector

investments and

Private sector

participation

Private sector investments will be encouraged at all levels within the sector. Where

economic to do so, government will mitigate private sector risk in return for reduced costs

through lower financing costs. Government investments in the sector should only be

made where there is a clearly value-for-money as opposed to private delivery.

2.3 Electricity subsector

The provision of cost effective electricity to businesses and individuals is vital to drive economic

development and poverty reduction. Currently, Rwanda has one of the lowest per capita

electricity consumptions(42Kwh/year/capita) compared to 478 kWh for sub-Saharan Africa and

1,200 kWh for developing countries as a whole. Although the densely distributed population

should facilitate network expansion and access to electricity, presently only 16% of Rwanda’s

households (350,000 customers) are connected to the grid.

Overall, the country vision is to ensure universal access to electricity from both grid and off-grid

solutions, over the EDPRS II period. Detailed plans have been developed to spread the

electricity network across the country. In tandem with the relocation driven by urbanisation

and resettlement policy, this should bring the grid within reach of around 48-50% of the

population.

Off-grid electricity such as from solar lanterns can be supplied at a lower cost compared to on-

grid electricity. For low energy consuming households as well as those in a far distance2 away

from the National grid, off-grid electricity will be supplied mainly from microhydros and solar

home lanterns. The fact that off-grid solutions have restricted usage, usually limited to lighting

and basic electronics such as mobile phone charging and radios, grid connection will be

required for more energy intensive uses for heating and cooling as well as running heavy

2 Those in 5 metres away from the grid will be connected to off-grid energy sollutions

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machinery. Both of these forms of electricity will have a role to play in meeting our EDPRS

objectives.

2.3.1 Off-grid Electricity:

It is ossible for people to access electricity without the need to connect to the Electricity grid

network. In such instances electricity is provided through off-grid solutions ranging from solar

lanterns for lighting and charging phones to power from small hydro installations. These

solutions will not provide the voltage or the stability provided through a grid connection but are

often far more economical for low usage consumers due to reduced capital costs. Government

plans to ensure the remaining households(52%) off the National grid to benefit from either of

the two off-grid systems.

2.3.2 On-grid Electricity

Grid connections provide stable, high voltage electricity required to power large domestic and

industrial machinery which will facilitate a shift from the current agriculture based economy

towards industrialisation. Grid connections do however require significant capital investment

which needs to be financed and repaid. Calculations indicate that consumption would have to

reach around 130 KWH / month to fund these financing costs. Government plans to extend grid

network to cover 48% of the households by 2017/2018.

Over recent years, there has been an aggressive program to increase access to the electricity

services by all sectors of the economy especially industry and Small and Medium enterprises.

The current strategy is set to increase electricity access generation from the current 110.44 MW

of installed capacity to around 563 MW and connectivity from the current 16 percent (end June

2012) to around 48 % percent in 2017/2018.

The provision of Electricity is inherently complex in Rwanda and every where in the developing

world. A number of challenges and complexities are associated with power generation and

supply as discussed below;

1. Electricity cannot be stored: Unlike other Energy sources, Electricity cannot be stored

on a large scale3 resulting in two important properties:

a. Careful planning and operation of the network is required to allow power to

travel instantaneously from the source of generation to the end user. During this

3 In a number of countries Electricity is stored through pumped storage (ie pumping water up a hill) this is extremely inefficient and

only appropriate where a country has a very cheap base-load energy resource such as nuclear or geothermal. We are investigating

the potential for pumped storage as part of the Nyabarongo II scheme.

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journey a significant amount of energy is lost as heat (around 20%). Proper

network planning and operation is essential to minimise these losses.

b. Generation output must continuously flex in line with end user demand; as will

be illustrated in chapter 3, user demand is not constant throughout the day. As a

result different generation technologies can fulfil different roles throughout the

day.

2. Electricity is capital intensive: Unlike other sources of energy such as petroleum where

the majority of the costs of consumption are variable associated with the commodity

cost, the majority of the costs of electricity production are associated with financing the

infrastructure investment, these costs are paid off over the useful (depreciated) life of

the asset – typically 15 – 25 years – leading to two key considerations:

a. A decision to invest or enter into an agreement with the private sector must

make sense not just for the next few years but for the entire life of the asset.

b. A small change in the financing costs will result in a large change in the total cost

of the infrastructure, and the long-term return brings with it inherent risks for

investors. As a result careful consideration must be given to ways to mitigate

investor risk.

2.3.3 Recent Developments within the Electricity Sector

In addition to the delivery of new generation and network infrastructure, a number of

significant Commercial / regulatory developments on the regional and international scene have

occurred over recent years:

2.3.3.1 Commercial / Regulatory developments

Evolution and Establishment of EWSA: The electricity sector has gone through some significant

changes in the last 12 years. The ELECTROGAZ, which had a monopoly for the production and

distribution of water and electricity until late 1990s, formally lost its monopoly power by a law

that was enacted in 1999. After extensive deliberations, ELECROGAZ was placed under a

management contract with Lahmayer International in 2003 which ended in 2006 when the

management of the company reverted to the Government and run by a Board of Directors. In

2008, ELECTROGAZ was split into the Rwanda Energy Corporation (RECO) and the Rwanda

Water and Sewerage Corporation (RWASCO) that were in 2011 integrated within the Energy

and Water and Sanitation Authority (EWSA). EWSA is responsible for generation, bulk

transmission and distribution and retailing functions on a commercial basis, while some of new

large generation projects are planned for development by the private sector that would sell to

the utility under Power Purchase Agreements.

The establishment of RURA: RURA was created in 2001, and is defined by law as an

autonomous entity with its own board of directors who are appointed by the Prime Minister's

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order. RURA’s mandate is to regulate an efficient, sustainable and reliable energy sector. To

address this mandate, the agency is responsible for promotion of competition, advising

government during formulation of energy policy, protecting consumers, educating

stakeholders, approving contractual undertakings with regard to distribution and transmission

of electricity and gas and most importantly approving requests for tariff changes.

Subsidisation and recent tariff adjustment: The average electricity tariff remained unaltered

between 2006 and 2012; accounting for inflation this represented decrease in real terms of

around 31%. Coupled with EWSA’s continued dependence on Diesel fuels this led to the need

to significantly subsidise the electricity tariff4. Such subsidies disproportionately benefit the

larger users of energy, typically businesses and wealthy urban population; a subsidised tariff

also acts as a disincentive to invest in our country’s energy sector.

EWSA’s actual cost to generate

1kwh of electricity in 2011/12 was

around 210 RWF; almost double

the current tariff.

However as illustrated in the figure

on the left, EWSA’s cost to serve

(the unsubsidised cost of supplying

energy) is projected to drop

significantly over the coming years

as new sources of generation

(notable 25 MW of methane from

KivuWatt and 28 MW of hydro from Nyabarongo) come on board.

EWSA proposed a tariff increase of 30% which would bring the tariff up to the level that would

be cost reflective from 2015. However, only 20% (Frw132-158 Frw) of the increase was effected

by RURA in order to protect consumers from too significant a price increase, bringing the new

tariffs to those illustrated below:

4 In the financial year 2011/12 EWSA received a government subsidy of 20.9Bn RWF, or 43% of the

company’s Electricity revenue

Figure 3 EWSA's decreasing cost to serve

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Table 3: New Time of Use (ToU) Tariff structure

Previous Tariff

Tariff from August 2012

Base with VAT Base with Vat

Average Tariff 110 129.8 132.00 155.76

Flat Tariffs

Domestic 112 132.16 134.40 158.59

Industrial 105 123.9 126.00 148.68

Time of Use

Low 80 94.4 96.00 113.28

High 140 165.2 168.00 198.24

Time of use tariff: As mentioned earlier in this chapter, the level of electricity usage varies

throughout the day. As we only have a limited amount of non-diesel generation (currently

around 60 MW) we are required to use diesel generation once consumption rises above this

level. These hours of peak consumption are in the early evenings, principally driven by domestic

demand for lighting and appliances. To reduce on the amount of Diesel, users are advised to

resort to RURA approved time-of-day tariff, aimed at encouraging the industrial and

commercial consumers to shift their electricity use to off peak periods.

Introduction of Feed in Tariffs: A Renewable Energy Feed In tariff (REFIT) scheme for

hydropower up to 10 MW was conducted by EWSA in close collaboration with RURA and

approved on the 9th February 2012. This is a significant step towards attracting private sector

investment. The existence of a standardised tariff leads to increased investor certainty and

removes the need to negotiate each contract on an individual basis.

2.3.3.2 Developments in regional trade

The Eastern Africa Power Pool (EAPP) is a relatively new institution that was formally

established in February 2005 by the seven countries who signed the Inter-governmental

Memorandum of Understanding. These countries included: Burundi, DRC, Egypt, Ethiopia,

Kenya, Rwanda, and Sudan. Tanzania joined the pool in 2010 and Libya in 2011 bringing the

number to 9 countries. Potential future members include Djibouti, Eritrea, Somalia and

Uganda. The aim of the EAPP is to foster coordinated power development by promoting

synergies among the region’s electricity utilities and therefore, optimize investments and

resource allocation. Presently, EAPP is in the process of building its technical and regulatory

capacity. A number of development partners (World Bank, AfDB, the European Union, the

Norwegian Government, and USAID) are providing support in the design of the power system

and control centre, harmonization of standards, preparation of grid codes and market rules.

20

There are also a number of power interconnection projects between EAPP countries that are at

different stages of implementation.

Several interconnections have already been implemented including a 296.5 km double-circuit

230 kV transmission link between Bahir Dar substation in Ethiopia and the Sudan border and a

155 km double-circuit 230 kV link from the Sudan-Ethiopia border to Gedaref Substation in

Sudan. The power export line from Ethiopia to Sudan is constructed on the basis of a three-year

Power-Purchase Agreement (PPA) under which an annual firm supply of 100 MW would be

purchased. Ethiopia has a large hydropower potential and has surplus power to export. The

nation could however benefit from imports of thermal power from Sudan to manage seasonal

variations in domestic generation.

Rwanda is a member of the Nile Basin Initiative (NBI) and the EAPP. However, apart from using

its share of regional hydro plants - SINELAC and Rusizi I (SNEL), we are not connected to any

regional transmission network. This limits the prospects for larger scale trade as our system

expands and as development of domestic resources may provide additional capacity that can

be profitably exported to the neighbouring countries. Expansion of cross-border

interconnections could be of significant benefit to Rwanda. Interconnectors could enable

import of power from Uganda or Tanzania that could provide a valuable source of power for

peak and mid-load while also providing an avenue for export of electricity from base-load

generation. The benefits of each interconnection fall into two categories:

i) Capacity saving benefits: Capacity saving benefits result from the possibility that the

interconnection allows Rwanda to share reserve margin with another country and to

take advantage of the diversity of demand between the two power systems

ii) Energy exchange benefits: Energy exchange benefits are based on electricity exchanges

during the peak and off-peak generation of both systems. The present

interconnection capacity of 30 MW with DRC and Burundi has served Rwanda’s

needs in the critical periods of the past shortages. The EAPP’s Master Plan has

designated the transmission interconnections among Ethiopia, Kenya, Tanzania,

Uganda and Rwanda as priorities for the development of the Eastern Africa power

market. These interconnections will create the transmission backbone for the

region.

The governments of Rwanda and Uganda recently reached an agreement with AfDB and Japan

(JICA), as part of the Nile Equatorial Lakes Subsidiary Action Plan (NELSAP), to develop the

Mbarara (Uganda)–Birembo (Rwanda) 220 kV transmission line. The line will be designed for

220 kV for a possible export/import capacity of 200 MW. However, it will initially be operational

21

at 110 kV with an interchange capacity of 20 MW. This 172 km line would form part of EAPP

and permit the countries in the region to trade power and reap benefits from the development

of the most competitive power generation candidates in the region. The project is estimated to

cost approximately US$56 million and is expected to be completed by 2015. The long-term

vision is that Rwanda will become an active electricity trading partner to the regional grids;

exporting electricity to the network while also importing power when cheaper supplies can be

secured from sources like hydro plants in the Lower Kafue Gorge of Zambia (to be imported via

Tanzania), and hydro plants in Ethiopia (to be imported via Kenya and Uganda).

International experience has shown that the establishment of wholesale trading arrangements

to facilitate full cross border trade can take considerable time and in the short to medium term

trade is likely to take place utility to utility. This gives light to come up with important

considerations which are detailed below along with their implications:

i) The ability to export power will be driven by whether we can provide electricity more

reliably and at cheaper cost than other countries in the region. Constructing surplus

generation for the export market therefore represents a considerable risk and if we are

unable to find a market the costs of this additional generation capacity will fall on the

Rwandan energy consumer. We will therefore undertake generation investment in line

with demand unless we can demonstrate that a market will exist for our electricity.

ii) As the trading arrangements transition towards wholesale trades, there will be need to

disaggregate costs clearly for use of our network to facilitate wheeling of power through

our country (for example from the Uganda interconnector into the DRC). We therefore

need to clearly split EWSA’s accounts into separate business units. See details on

EWSA’s credit worthiness in chapter 3.

The Eastern Africa Power Pool will offer a platform for implementation of regional projects under EAPMP, managing operations and transactions of power systems, EACPP market structure to manage long and short term transactions, managing an open access transmission system as well as undertaking regional power system planning. There are ongoing projects within the EAC that are building cross border interconnectivities. This will facilitate regional energy trade. These are numerous and discussed in the transmission section of this report, (chapter 3 – especially list of connection projects in figure 12).

22

2.3.4 Challenges within the Electricity sub-sector and proposed solutions

Table 4: List of challenges and proposed sollutions

Challenge 1: Lack of intergrated sector planning and required financing: The levels of finance

required for the development of energy infrastructure is significant and cannot be funded

through government reserves alone. There is need for more private sector involvement in

offering financing and even undertaking actual investment in return for a long term revenue

stream

Proposed Solution: In order to undertake this investment efficiently a clear investment

roadmap is required. Such a roadmap has been developed across generation, transmission and

electrification. In summary, a long a clear investment roadmap, government plans to undertake

initial investments to derisk potential projects in which the private investors will invest. The

approach to attracting private sector investment is discussed at length in chapter 3.

Challenge 2: Ensuring financial sustainability of network investments: The average annual cost

of each connected consumer is around $50 (around $45 in financing the loan required for the

connection and $5 for operations and maintenance). Under the current tariff structure, a

consumer would need to use approximately 130kWh per month in order to fund the cost of

their own connection. If they consume less than this, their connection will have to be subsidised

by other electricity users through a tariff increase, government subsidies or both. The table

below illustrates the current consumption patterns across all of EWSA’s consumers. As you can

see, currently around half of consumers are using less than 20KWh per month.

Table 5: Current Electricity consumption patterns

Proposed solution: If we are to achieve the levels of economic growth required , there will be

need to realise a significant increase in industrial and commercial use of electricity. We consider

it will be possible for these new medium and large users to consume enough electricity to

offset any short-term negative financial impacts, experienced as a result of the new conectees

via the EARP programme. International experience has shown that as the country develops

economically, household consumption will increase and this issue will become less acute.

Consumption per month (KWh)

0 to 5 18.4%

6 to 20 31.2%

21 to 50 26.1%

51 to 150 17.3%

151 and greater 7.0%

23

Challenge 3: Ensuring financial sustainability of the generation investment: Approximately

80% of the tariff is the cost of generating electricity. Of this, the majority of the costs are fixed(

paid regardless of consumption). Simplistically, these costs are divided amongst each unit (Kwh)

of electricity sold. If the generation capacity and demand are kept aligned, we can maintain an

efficient tariff. If demand fails to keep pace with increased generation capacity, then the tariff

will increase.

It is worth noting that there must always be a reserve margin(surplus of generation capacity

above maximum demand). Generation cannot run all of the time and at any moment it is likely

that some of our generation capacity will be unavailable, either through a planned outage for

maintenance or for other reasons (shortage of fuel, technical error). Following principles of

international best practice, the plan is to keep around 15% – 20% as . The exact reserve margin

will also depend on the level of uncertainty over demand and the nature of our generation plan

(more reliable plant would require a lower reserve margin). For these reasons it is likely that we

will require a reserve margin at the high-end of this range; the exact margin is a technical

decision which is best left for EWSA who will be monitoring Rwanda’s daily demand curves.

Proposed solution: This challenge will be addressed in three ways:

Enhancing EWSA’s planning capabilities: A master planning unit will be established in EWSA.

The master planning unit will be responsible for ensuring investment is coordinated and

undertaken at the most efficient time, considering national and international aspects. EWSA,

through this unit will have an obligation to report to MININFRA annually on the following:

A. Projected Demand: As illustrated above, a detailed understanding of electricity demand

is vital if we are to invest efficiently and maintain a tariff that is regionally competitive.

EWSA’s master planning unit will be required to undertake a full consultative demand

forecast, engaging governmental and non-governmental stakeholders such as Ministries

and large energy users, to build up a detailed picture of projected demand over the

coming 10 years. Such a demand projection will drive economic and timely investment

decisions.

B. Security of Supply: Security of supply(ability to maintain a reliable, consistently priced,

supply of electricity) is vital to attract and maintain investment in the country. There are

a number of factors that can impact our ability to maintain security of supply, most

notably the margin between generation capacity and energy demand. There are other

contributory factors too such as the age and condition of generation and network

assets, and the reliability of the inputs into our generation plant. Such inputs could be

24

affected by the global economy (Diesel prices), climatic conditions (Hydro power

reserves) or the political climate within the region (the level of investment we can

attract). In conjunction with the Demand forecast, EWSA should have a responsibility to

report on security of supply over a 10-year horizon; this information will also drive

investment decisions and possible government interventions.

Government measures to stimulate demand: There is a strong correlation between the use of

energy and economic development, as illustrated over the page:

Figure 4: Correlation between energy consumption and development

Energy drives economic growth by increasing productivity and freeing the population from

manual work that also jeopardises health and detracts from education. A concerted effort is

required across government to increase demand for electricity. Such a programme, if

undertaken in parallel with the development of our electricity investment roadmap, would help

to drive economic development and reduce the average cost of electricity which would act as

an accelerant to development by producing an environment that will promote the

establishment of businesses.

Challenge 4: Capacity to deliver the electricity infrastructure: Project development, monitoring

and implementation require skilled and experienced managers to ensure efficient coordination.

There is strong need to hire and retain enough qualified staff to monitor energy projects and

engage in strategic investment negotiations.

Proposed Solution: Government has instituted a specialised Investment Unit under EWSA to

Rwanda

25

oversee energy investments and negotiate on behalf of government to avoid government

landing on bad deals. Capacity of national staff to lobby and negotiate for efficient

implementation of regional projects with the EAC Secretariat should be strengthened. Previous

EAC-funded projects have been slow in their implementation and so, well-functioning regional

projects will help achieve national energy targets.

26

Challenge 5: Minimising system losses: A loss in energy between generation and consumption

is an inherent feature of electricity networks and such losses cannot be totally eradicated. They

can however, with thorough network planning and maintenance and best practice billing be

reduced. We are currently experiencing losses of around 20%, of which the majority occur

through heat losses in the distribution network.

Proposed Solution: A consultancy is undertaking a detailed analysis of our system and will

report back with proposals at the end of 2012 on measures to reduce system losses, on the

basis of which a a clear loss reduction plan will be developed. It is worth noting that reducing

losses requires capital expenditure and there will be a trade-off between the capital cost of loss

reduction and the operational costs we save. The chart below indicates EWSA’s current view on

what will be possible to address this challenge;

Figure 5: EWSA's loss reduction plan

27

Challenge 6: Scattered Settlements: A significant driver of the cost of any electrification

programme is the density of the properties that are to be connected. The more scattered the

settlements are, the higher the cost of extending the network between properties. In the

development of the plans for electricity connections, we have considered some level of

resettlement, but this needs to be promoted by the local communities and MINALOC in

particular.

Proposed Solution: The proposed solution to this, is implementing the the current settlement

policy to bring households in close proximity-in what is called the “Imidugudu” settlement

schemes. The Ministry of Local government with the mandate of designing and implementing

policy on habitat will be asked to speed up the umudugudisation program country over to keep

pace with the rollout program if we are to reduce the connection bill to build Medium Voltage

(MV) and Low Voltage (LV) lines and connecting new households.

On average, MINALOC committed to increase the number of households relocated to organised

settlements from 1.3 million households already relocated to a total of 1.9 million households

to be relocated to imidugudu settlement areas by 2018. Further detail on the proposed

approach to the EARP can be found in chapter 3 in this document.

2.4 Petroleum subsector

The Petroleum subsector is vital if government is to achieve required levels of growth over the

coming 5-years. Due to Rwanda’s geographical location and the fact that we have no proven /

commercially developed reserves, the economy depends entirely on imports to satisfy the

country’s need for petroleum products such as diesel, petrol, oil, kerosene and natural gas.

The price of petroleum imports is a significant driver of the price of other goods and services

produced with a bearing on Rwanda’s regional and global competitiveness, levels of inflation

and consequently ability to meet GDP and poverty reduction targets. Additionally the

international market for petroleum products tends to be extremely volatile and government

will ensure safeguards to protect the economy from this volatility.

The demand for petroleum products is forecast to grow at an average of 10% each year

between now and 2020. The cost of procurement has an important macro-economic impact. At

present, oil products account for 25% of import costs and the proportion of export revenues

spent on oil products is even higher at around 55%.

28

As illustrated in the table below, diesel and Petrol are the dominant petroleum product

imports-Diesel being mainly used in the generation of Electricity whilst petroleum products are

used in transport. Table 6: Petroleum products importation (Litres) – 2011/12

Product Annual consumptions (litres)

Petrol 82,263,817

Diesel 121,937,405

ILLUMINATING KEROSENE 15,222,724

HEAVY FUEL OILS 33,666,910

JET A-1 12,454,649

TOTAL 265,545,505

Source: MINICOM(Downstream Petroleum Policy, 2012)

29

Whilst we expect demand to grow at around 10%-15% per annum, this will not be evenly

distributed:

1. The volume of Diesel import is expected to fall following government plan to transition

away from Diesel to other lower cost, indigenous forms of generation. EWSA projects

the level of expenditure on Diesel generation to drop from around $64m from 2012 to

$31m in 2013 and $6.8m in 2014.

2. The consumption of aviation fuel is expected to grow at a significantly higher rate as

Rwanda is positioned to be a preferred hub for air transportation in the region5.

The table below illustrates current expectation on the growth of petroleum products over the

coming years.

Table 7: Petroleum products usage projections

Annual consumption (000’s litres) 2010 2012 2015 2017 2020

Petrol, diesel, kerosene &fuel oil 205,908 258,291 362,880 455,197 639,519

Jet fuel 13,000 17 ,000 27,000 35,112 53,401

Source MINICOM (Downstream policy, 2012)

2.4.1 Recent Developments in petroleum sub-Sector

Upstream

Preliminary Exploration work: The Government of Rwanda signed a Technical

Evaluation Agreement to conduct preliminary exploration on Lake Kivu and a

management prescription developed outlining best practice for sustainable extraction of

Rwanda’s Methane gas resources.

Development of the Legal and Regulatory Framework: A draft policy and strategy have

been developed for the upstream petroleum sector with the intention to “Promote and

accelerate petroleum exploration in Rwanda to achieve commercial discovery of

petroleum resources”. Details for the developments under the upstream side of

petroleum subsector are highlighted in detail in the Environment and natural

resources(ENRA) Sector strategic plan. An upstream petroleum strategy, policy and gas

law are currently pending approval by cabinet.

Petroleum sharing agreement on Lake Kivu: Negotiations are underway on a sharing

agreement to Lake Kivu’s resources between the governments of Rwanda and the DRC.

5 Achieving this is heavily dependent upon our ability to secure cost effective reliable imports of aviation fuel; see section XX00

30

Downstream

Regulations: In line with their role to regulate infrastructure within the Petroleum

sector, RURA has recently approved regulations relating to the storage and transit of

LPG (the LPG regulations) and Petrol station Facilities.

Downstream petroleum policy developed: In July 2012, downstream petroleum policy

and strategy were presented to Cabinet. The purpose of the policy was to lay the policy

framework through which Rwanda can “achieve cost-effective, affordable and high-

quality petroleum products”. The policy is currently before cabinet awaiting approval.

The key components of this strategy are presented in detail in the next chapter

2.4.2 Challenges and proposed solutions

The table below presents the key challenges within the sector, the proposed solutions and the

individual activities to make these solutions a reality. The following chapter 3 presents these

solutions in greater detail, including respective roadmap and costing.

Table 8: key challenges in the petroleum sub sector

31

Summary of Key Challenges

The petroleum sector is characterized by three main challenges. The government approach to

address each of these challenges is summarised below and in great detail in chapter 3 of this

document.

1. Volatile prices: Rwanda’s economy, as already discussed relies entirely on imported

petroleum products and is often a victim of supply side interuptions. The supply

disruptions following the 2007 Kenyan post-election crisis led to a significant spike in the

price of petroleum products and a requirement for government subsidies at the expense

of sacrificing other development spending.

2. High Costs of petroleum products: A combination of Rwanda’s geographic location and

the long and costly supply chain for petroleum imports as well as the fragmented nature

of petroleum products purchasing (There are over 20 oil marketing companies many

importing products individually) makes the cost of petroleum products within the

country significantly higher than the regional and international average.

3. Uncertain product quality: Lack of clear standards and quality control mechanisms and

capacities means that the quality of petroleum products imported and used within the

country can be compromisied. This has negative impacts of fuel efficiency.

The table below summarises some of the proposed solutions to the above challenges facing

downstream petroleum industry;

Table 9: Proposed Solutions to Key challenges facing downstream petroleum sub-sector

Development of

alternative supply

routes

Petroleum products are normally imported via the ‘Northern Corridor’ route

(pipeline to Eldoret, then road tanker through Uganda and then into Rwanda).

Transporting liquid fuels by land is expensive and government is studying

new, lower cost supply routes. Additionally our reliance on one main

transport route exposes the country to significant risk of an interruption in

supply. Government is currently considering two approaches to address this

problem:

Isaka / Kigali Railway route

Eldoret / Kampala / Kigali Pipeline route

Bulk purchasing

capability to address

issues of high fuel

prices

Purchasing petroleum products in bulk can realize significant savings through

economies of scale and the benefits of bulk purchasing power. The

fragmented nature of our petroleum market means such an effort will require

coordination. Such arrangements already exist in Kenya and Tanzania and

government commits to investigate the potential to establish synergies with

32

these schemes or develop local but similar arrangements.

Increase Strategic

reserves

Strategic reserves will be kept to preserve security of supply and help

militate against price shocks. Further, in order to allow government to realize

the bulk purchasing efficiencies described above, there is need to increase

fuel storage levels and strategic reserve capacities. Government plans to

increase fuel storage facilities to accommodate 5-month’s consumption

equivalent by 2017. out of the 5 government plans to request on the private

sector suppliers to store 1-month’s supply whilst the government will

purchase 3-months consumption equivalent in reserve.

Enforce price

stability and a

coherent

downstream

regulatory

framework

Govermment proposes to develop a robust fuel pricing methodology that will

in tandem with increased fuel strategic reserve, help to address the issues of

price volatility and create an environment more conducive to foreign

investment.

Develop safe and

efficient domestic

supply chain

As said herein this document, imports of petroleum products especially jet

fuel are expcted to increase significantly. As this happens, there will be need

to ensure that Rwanda’s workforce is equipped to appropriately handle

these products. NICA will take the lead in undertaking coordinated training

and education program to develop capacity of handling and distributing oil

products.

Develop and enforce

clear product

standards

To increase investor confidence in using petroleum products in Rwanda and to

protect the citizens from susbstandard products, RBS and NICA will be

responsible for setting and enforcing petroleum product standards.

33

2.5 Biomass energy subsector

Biomass resources are exploited in form of firewood, charcoal or agricultural residues mainly for cooking purposes by Rwandan households and also in some industries (MININFRA 2008a). In the rural areas, biomass meets up to 94 per cent of national needs; with the balance being met by other options such as kerosene, diesel, dry cells, grid and non-grid electricity, biogas, solar,wind and other renewable energies. Biomass is already in short supply with the country facing a biomass deficit of over 4 million m3 per year(BEST Strategy, 2009). In Rwanda, biomass energy subsector covers mainly wood, charcoal, biogas and biofuels. Although fuel wood consumption is expected to increase in the short-term, the long-term strategy of the EDPRS II is to reduce fuel wood consumption from 94% to 50%. Rwandan households may not eliminate use of woodfuels in the very shortrun. The use of wood

fuels is expected to be suppressed progressively with the introduction of enabling frameworks

for use of LPG and other alternatives including solar and thermal applications.

The overarching objective of the Biomass sector is to promote environmentally sustainable use

of biomass fuels, thereby mitigating social and health impacts. This will be achieved through the

following 2-ways:

1) Transitioning away from more rudimentary forms of biomass such as wood to improved

charcoal and biogas as well as alternatives such as LPG or Peat.

2) Increasing the efficiency and sustainability of Biomass solutions. This will be arrived at

through improved charcoaling technologies and improved cookstoves. Production

improvements will be done through a revised approach to wood harvesting and

utilisation.

2.5.1 Recent Developments within the Sector

2.5.1.1 Biomass fuels and improved cooking technologies

Currently, the average household uses around 1.8 tonnes of firewood in a year to satisfy its

cooking needs with a traditional stove. Whilst it must be noted that there are significant health

and social benefits of transitioning to charcoal, it is likely to increase the pressure on the limited

wood supplies. This issue is likely to be accelerated as more and more people move from rural

to peri-urban environments where use of charcoal is more common.

To combat this, one of the approaches used by Government is to focus on increased wood

production (over 80% of the country‘s firewood and charcoal currently comes from eucalyptus

trees through artificial plantations and agro forestry programs).

34

Charcoal is the preferred fuel for urban households and demand is pushing up the price. In 2003 only, the charcoal market had a turnover of US $30 million (World Bank 2006). The current trend towards increased urbanization and the declining state of forest resources points to the need to design effective policies to address some of the pressing challenges in the biomass subsector and the entire energy sector. The Government has put in place very strict tree harvesting regulations and only licensed

persons with tree harvesting permits are allowed to cut trees, including those from private

lands. These measures have helped to reduce deforestation and establish Rwanda as only one

of a handful of countries on the continent where the relationship between charcoal and

deforestation no longer exists.

2.5.1.2 Biogas Programmes

There are two distinct programmes under the biogas program:

1. Domestic Biogas program. The National Domestic Biogas Programme started in 2007

was targeted at generating useful Biogas from the waste produced by a mixture of

animal dung and urine. The initial focus of the programme has been on capacity

development, training of technicians and entrepreneurs, awareness campaigns and

promotion. As a result, by September 2012 over 2700 biogas digesters had been

constructed, over 200 masons trained and approximately 40 companies were actively

involved in the programme. The government is in the process of facilitating installation

of atleast 100,000 additional domestic Biogas digesters by 2017/18.

2. Institutional Biogas program: The Government in 2008 announced a policy to introduce

biogas digesters in all boarding schools (estimated at around 600 schools), large health

centres and institutions with canteens to reduce the consumption of firewood. Futher,

through this program, 11 out of the 14 prisons in Rwanda are currently using biogas for

cooking. To-date, altogether, around 70 large biogas digesters have been constructed in

several institutions in Rwanda. The biogas systems installed in the schools and prisons

have reduced firewood consumption by close to 60% and 40% respectively, along with

significantly improved hygienic conditions and revenue savings.

35

2.5.1.3 Biofuels Programs

The Institute of Scientific and Technological Research (IRST) drafted a policy in 2008 to promote bio-diesel exploration, production and use of in Rwanda. This came following a country study conducted by IRST on bio-diesel production that revealed its viability in Rwanda.

Biofuel is an alternative fuel to conventional petroleum-based diesel engine fuel, which is

manufactured from vegetable oils or animal fats by catalytically reacting these with a short-

chain aliphatic alcohol (methanol or ethanol), through a process called transesterification, or

alcoholysis. As mentioned earlier, Biofuels could significantly reduce Rwanda’s dependency on

imported petroleum products by replacing fuels(Especially transport fuels), with fuel produced

from domestically harvested crops. Bio crops (required to generate Biofuels) do however

require significant areas of land in order to produce any significant level of output. with the

challenge of land shortages, government will need to assess the trade-off between Bio crops

and crops for food production.

One of the proposals to address the conflict between land for agriculture and planning of

biocrops is to plant Bio crops on so called “marginal land” (land that is proven not suitable for

food production). In 2009, an agreement was signed between Rwandan government and a

private developer to establish a Jatropha-to-Bio Diesel harvesting and production facility on

10,000Ha of land, the majority of which is classified as marginal or non-farmable land.

36

2.5.2 Challenges and proposed solutions

The figure below outlines key issues faced in the biofuels subsector, summary of proposed

solutions and key steps required to deliver these solutions. Figure 6: Key challenges faced by the biomass subsector and high level solutions

Table 10: Proposed Solutions to Key challenges in the Biomass sub-sector

Proposed solution Description

Transition away

from traditional

biomass

Use of alternate Fuels: There are a number of alternative fuels to Biomass,

unfortunately all of them are currently more expensive and require significant

capital investment. Biogas program is currently implemented as a suitable fuel

for cooking.

LPG and Kerosene are both potential alternatives, as well as peat pellets that can

be used in cooking. Given their current prices, government needs a strong

downstream strategy of ensuring their affordability to the end users through

keeping strategic reserves of Kerosene to allow price stabilization interventions.

Further work is required to assess the technical and financial feasibility of LPG

and peat as suitable cooking fuels.

Accelerated delivery

plans

Biomass schemes are by nature small scale local activities. Reliance on MININFRA

or EWSA for continual approval and financing will slow down delivery. The

current proposal is to decentralize decision making powers to the district level to

accelerate delivery

37

Identify additional

wood resources

Whilst Rwanda has had great success in licensing the use of wood, there is still

great need and potential to develop more artificial forests such as ucalyptus to

gurantee wood supply. Government intends to undertake an audit of the

available land from where more wood trees can be planted.

High yielding trees such as eucalyptus will be planted in areas that do not

compete with other productive uses of land to provide future wood fuel and

charcoal required for cooking. MINIRENA plans to increase forest cover to 30% of

the total land area by 2017 through plantation of more trees to help manage the

potential impacts of fuel related forest harvesting on the environment. As a

matter of policy, every household in urban area will be expected to plant at least

10 trees while rural households are expected to plant at least 5 trees per annum.

Develop business

models for

dissemination of

biogas technologies

During the dissemination of the Biogas Digestors around 70 companies have

been registered with varying levels of success. 25% of the companies have been

responsible for installing 60% of the bio-Digestors. Government will learn lessons

from these business which will accelerate economical program dissemination.

Reduce the cost of

Biogas Digestors

MININFRA through the National Joint Taskforce is studying different biogas

models to arrive at an appropriate technology at a reduced cost. The taskforce is

assigned to examine how the actual cost of digestors can be reduced through

alternate technologies and other cost cutting measures such as voluntary works

on unskilled labor requirements. The team is also studying possibilities of

constructing shared digesters where about 4 households can be fed with one

installed digester. All this is intended to make the technology more affordable to

majority of the population

Promote

descentralised

delivery

As outlined above, these products are very much of local solutions and the

current approach intends to promote close working with district authrorities to

deliver the technologies. Some of the areas of district intervention include;

education and mass awareness, capacity building and monitoring and evaluation.

District authorities will be required to incorporate delivery of alternative energy

including biogas into their annual performance contracts and this promotes more

ownership.

Accelerate the

dissemination of

improved cook-

stoves

The GoR through EWSA is targeting to ensure that 80% of households have

access to improved cookstoves by 2017 and 100% of households by 2020. The

program was projected to cost around $0.25m in the financial year 2012/2013.

Clean Development Mechanism. To beef up program financing, government

plans to leverage carbon finance as much as possible to provide additional

financing required. This will encourage project developers to register their

projects for the UN Clean Development Mechanism (CDM) to attract revenue

and sustain their project financing requirements. Due to the administrative

overhead, this is not likely to be possible for small producers but MININFRA will

encourage this to be done on a collective basis.

38

3 Strategic Framework

Chapter outline

This chapter outlines the specifics of what is planned to be done under EDPRS II. The chapter

briefly discusses some lessons learnt from EDPRS I, followed by detailed discussion of strategic

approaches to deliver on the sector commiments. The chapter concludes with an overview of

how our plans will drive key thematic areas of EDPRS II and how it interrelates with cross

cutting areas such as Regional Integration and Gender mainstreaming.

3.1 Mission and objectives of the energy sector

Mission: The mission for the energy sector is to create conditions for the provision of safe,

reliable, efficient, and cost-effective energy services to households and to all economic sectors

on a sustainable basis.

Specific objectives:

Increasing Electricity Generation Capacity

Increasing Access to electricity

Maintaining an economic and regionally competitive tariff

Sustainable and efficient use of Biomass

Maintaining an economic and secure supply of petroleum products at predictable prices

3.2 Energy sector contribution to EDPRS II

3.2.1 Lessons leant from the EDPRS I

a. A clear plan to attract private investments: Whilst there has been notable potential

investment successes in recent years, significant time and resources have been lost by

passively reacting to expressions of interest from investors. This approach has led to

government being dragged into unplanned negotiations, often without key inputs such

as feasibility studies or an understanding of the role a particular technology will play in

our generation mix. Government is planning to proactive investor engagement on terms

that guarantee positive returns on investment. The government will often undertake

ground work in advance of progressing to negotiation, and wherever possible call for

competititve bids to realise value for money. Details on private investor engagement are

discussed in detail in this chapter.

39

b. Decentralized implementation: Implementation all energy projects was previously

Centralized. Implementation of the biomass programs for instance was previously done

at sector level that lacks direct touch with the end users. At times, lack of proper

coordination led to duplication of efforts by doing what at times could have been

committed by the local governments in their performance contracts. As an example,

dissemination of biogas digesters and cooking stoves was done by the central

government and these yields less that desired results. The current proposal is to

decentralise implementation of biomass programs to the local government levels to

improve the impact to the end users.

3.3 Key projects to meet EDPRS II targets

As outlined at the start of this document, a number of approaches have been proposed to

deliver on the energy sector plan, borrowing lessons from past successes. As an example, we

propose to continue the electrification exercise through extending the current EARP

programme confident of its remarkable success. The proposed strategies are outlined in the

illustration below and discussed in detail later in this chapter.

Figure 7: Objectives, goals and strategies to achieve EDPRS targets

Before discussing each of these approaches in detail, the illustration below presents a summary

of government key priority policy actions and their respective delivery timelines.

40

Figure 8 Key policy priorities

41

3.3.1 EARP program and off-grid solutions

The first half of the year 2012 marked the end of the first phase of EARP. The second phase of

the development and poverty reduction strategy known as EARP II will cover the period 2012–

2017. Government is determined to build on the success of the first phase and where

appropriate learn lessons that can help us deliver on the challenging 48% electrification target

over the coming 5-years. It is currently not economic to connect all of these households to the

grid irrespective of the location and level of income. The EARP programme will be “wiring up

the country” to ensure a network exists to connect the population on demand. In a number of

cases, households will need to move closer to the grid if they are to access a connection. Such

movement will happen as a result of the new settlement policy and further encouraged

through Rwanda’s urbanisation policy.

For the households that are too far away(atleast 5 metres) away from the grid network and

those without capacity to afford grid connection, grid connection is proven to be uneconomic.

such households will access electicity through either off-grid solar installations or mini-

grids(communal based minipower stations). Smaller scale solutions such as off-grid solar and

mini-grids are better suited to private sector investment; however the government must play a

role in allowing these private markets to flourish.

3.3.1.1 Sequencing and costs of EARP Programme

Based on the latest household survey data, It will be necessary to connect 770,000 additional

households between now and the end of 2017/18 to reach the targeted 48% connection rate.

This presents a considerable technical and financial challenge. At a practical level we propose

that connections can still be undertaken using the current approach to delivery viz;

1. Contractors for Medium Voltage lines

2. Construction teams from EWSA and EARP

3. Contractors for Low voltage and service connection contractors

4. EPC contractors (Engineering, Procurement and Construction).

The EARP will continue to buy all meters in bulk and other components such as lines, posts and

transformers will be bulk purchased for contractors. Engineering, Procurement and

Construction (EPC) contractors will be responsible for acquiring all components required with

the exception of the meters.

42

To better manage delivery challenges, a large section of delivery responsibilities will be granted

to EPC contractors. EARP will be encouraging local and African and regional suppliers to

participate. The EARP programe consists of two categories of electricity connection:

1. Direct connections: The EARP team have developed a detailed view of where all the

households are currently located and have identified exactly where the network

should be built. Houses reach of this network can be connected as the network is being

built. Such houses would be expected to pay an annual charge for this connection;

whilst the remainder of their cost of connection would be subsidised/publicly funded.

Due to this generous subsidisation policy we have assumed that 75% of households

that could be directly connected will be. This equates to 400,000 households, which in

addition to the 360,000 connections projected for the end of EDPRS I would equate to

760,000 households or 33% of the country by 2017/18. The cost of this initial network

development is $408m or just over $1,000 per connection.

2. Relocation and Fill-ins: Once the network has been extended into an area and the

assumed 75% of households within immediate reach of the network connected we

expect a significant volume of additional network connection requests coming from

either the 25% of households who did not connect when the network was initially

being built out or people relocating to be closer to the electricity network and other

infrastructure, driven by policies such as urbanisation and resettlement. Given that the

network will already exist, the cost of these connections will be substantially less than

the direct connections. The average cost of these connections is expected to be around

$470. Based on an assesement of relcation plans and the number of consumers for

whom a connection would make economic sense we expect around 340,000 additional

houses to connect in this manner, bringing our total number of connections up to 1.1m

or 48% of the population.

Note: It must be noted that achieving this target will depend to a significant degree on the

success of the urbanisation and relocation policies.

Subsidies and Customer Contributions: Currently, a customer is expected to make a direct

contribution of around $100 to the cost of their connection, repayable in monthly instalments

over a period of ≈ 10 years. The rest is funded through a combination of DPs grants, loans from

development banks and government contributions. The loans are ultimately repaid by EWSA,

and funded through the electricity bill. The impact having to repay capita costs on the National

Energy tariff is discussed at length in chapter 2 under financial sustainability. such users are

unlikely to consume enough power to make their connections financially sustainable for some

time. Of equal importance however is the government/ EWSA’s ability to raise required capital.

43

In light of this, it becomes clear that financing is required even for the customer contributions

since these will be paid off by the consumer over a period of time. Any increase or decrease in

the level of customer contribution will increase / decrease the direct link between a consumers

capital costs and the charges they face but will not impact the amount of finance we need to

raise.

A policy action in the first year of EDPRS II will be to review the levels of customer contribution

that different people are paying. It may be possible to set the level of contribution in line with a

customer’s income. This is a balancing act:

- If we set the contribution too low; there is no barrier to connection and we risk people

connecting who use little to no electricity, driving up the average tariff.

- If we set the contribution too high; our poor will not be able to connect which could

limit economic development and the rate of poverty reduction.

Tariff Segmentation: One approach to making electricity more affordable to the newly

connected is to establish a “progressive tariff” ie a tariff structure where the poor pay less per

unit of electricity than the wealthy. Under such an approach those with the highest

consumption cross subsidise those with a lower consumption. The way out to do this is to

adopt a ‘lifeline tariff’, where by all consumers would get a basic number of KWh per month at

a reduced price which would be cross subsidised through the tariff levied on consumption

above this limit. As with any change to customer contributions, we need to consider the impact

any increase in the tariff for high consumers may have on economic growth. Setting such a

tariff is a complex exercise requiring detailed projections of consumption patterns. We intend

to undertake a review of the existing tariff structure before the end of 2013/14.

3.3.1.2 Off-Grid Solutions

Some rural industry and manufacturing will require reliable and consistent grid electricity if

they are to reap required business returns. It is estimated that in the flour-milling sector, millers

on average loose three days of production a month due to unreliable electricity (PSD 2012).

Such losses in productivity can be addressed through reliable grid electricity offered by EARP.

However, other households may not necessarily require on-grid electricity and as already said,

it may not be of conomic sense for them to connect them to the grid. These users will mainly

use electricity to charge their phones, radios and for lighting. Energy for this purpose can be

provided through solar installations and micro-grids and power from these solutions could be

provided at significantly reduced capital costs, with minimal need for government subsidisation.

44

Solar Installations: Small solar installations can be used to provide sufficient electricity for most

home uses. Such installations are available for an initial cost of between $50 - $200 depending

on the appliances they are required to power, with no need to pay further energy costs. This

technology that can be delivered by the private sector, however, government will be required

to support the industry sharing information and educating the local population. To achieve

government target of universal access to electricity, the target is to facilitate access to solar

instaaltions for about 1.2 million households by 2017. Rwanda will borrow experience

worldwide to design the best possible programme including the following aspects:

1) Education of the population on Energy products available: Government will scale up

mass education of the citizens on the relative costs and advantages/ disadvantages of

off-grid technologies for them to make informed decisions. As outlined above, the grid

network will have been extended across the country by 2017, providing potential

households with the option of grid connectivity.

2) Sustainability: The government is planning to sustainability of this program in the

following key as[ects:

i. Maintenance and support: Whilst minimal maintenance is required for off-grid

solar systems, there is still a requirement for support to be available to ensure

the systems proper system maintenance.

ii. Protection against Obselecence: As Rwanda’s economy grows, energy

consumption will grow and more households will transition onto grid

connections. There is need to design a programme under which this econonomic

growth does not render any investment into these technologies obsolete.

iii. Environmental Sustainability: The production, import and disposal of solar

materials, particulalrly batteries must be done in an environmentally sustainable

manner.

3) Development of local economy: Solar presents an excellent opportunity to develop our

economy at a local level through employment of technicians to install and maintain

equipment right up to the macro where Rwanda could build on our ease of doing

business to become a hub for the development and distribution of products throughout

the region.

4) Information sharing between EARP and the private sector: The biggest market and the

for solar installations will exist in areas which will not be connected to the network for

some time. The EARP needs to share its connection plans with the suppliers of solar

systems for them to make informed investment decisions.

45

5) Access to Finance: Unlike the EARP programme where finance is being obtained by the

government and EWSA, finance for solar home installations will need to be sought

individually. The microfinance market is growing significantly at present but government

must play a role in ensuring appropriate financial products are available.

6) Regulations and Taxation: Whilst direct subsidisation to the industry is unlikely to be

required, the government must play a role in ensuring conducive legal and regulatory

environment supporting the industry to develop.

Solar in schools: One of the off-grid solar energy solutions is the IREARPPP project

designed to connect 300 schools in distant areas of Rwanda. The project is currently

over 50% progress with over 150 schools out of the 300 successfully connected with

solar systems.

Off-grid hydro projects: Plans are underway to develop more mini and PICO hydro power

projects to generate electricity to communities located in isolated areas away from the national

grid. Proposed off-grid micro hydros include Nyirabuhombohombo (0.5MW) and others that

will be connected with time. However, this should be in areas that are economically costly to be

connected to the national grid. Local investors will be encouraged in these small hydro power

projects as a way of developing local capacity to exploit Rwanda’s energy resources.

A clear policy on the implementation and management of the off grid solutions will be

developed. The policy should give clear guidance on the development of these resources, as

well as monitoring and financing mechanism of the power projects not connected to the grid.

46

3.3.2 Understanding Electricity Demand

As discussed in Chapter 2 it is vital that investments in Electricity infrastructure are in line with

demand if we are to strike the right balance between maintaining a reliable supply of electricity

and realising a tariff low enough to drive economic development and poverty reduction.

Demand can be measured in absolute terms( total volume of energy consumed in a given year

in KWh) and peak demand as the maximum consumption at any point in time during a given

period (in this case a calendar year), as illustrated in the graphic below: Figure 9 Peak vs Absolute Demand

Peak demand will dictate how much generation capacity needs to be developed. The shape of

the demand curve dictates what type of generation should be installed and how much this will

be used. This is discussed in greater detail in the next chapter on the Electricity Roadmap.

In deriving our peak demand for electricity, 4 major components of demand will be considered:

1) Residential Demand – A function of the number of households connected to the grid

and the level of consumption at a household level. Households tend to consume most of

their energy at peak times (around 18:00 – 19:00), so residential demand is a significant

driver of peak demand.

2) Industrial and commercial Demand – This covers all non-residential demand and the

significant contributors to this will be the mining, manufacturing and agricultural sectors

along with commercial premises. The coincidence with peak is less than with residential

demand. The current Plans to reduce consumption at peat times include the time of use

tariff.

47

3) Export Demand – As described in chapter 2 significant investment is underway in

infrastructure which will connect Rwanda to our East African trading partners. Rwanda’s

ability to export power will be entirely dependent upon he ability to supply electricity to

neighbouring countries at a favourable tariff compared to their domestic tariff. The

current assessment indicates that significant exports are unlikely given the investment

in cheap hydro being undertaken in the region – particularly in Zambia and Ethiopia. We

propose to undertake a detailed study over the coming year of our export potential but

until such a study is complete will consider export demand to be zero.

4) Losses - A loss in energy between generation and consumption is an inherent feature of

electricity networks and such losses cannot be totally eradicated. As will be discussed

later in this document, current power losses are currently at around 20%. Through

enhanced operational practices, the aim is to reduce these losses to bearable limits over

the coming years.

In addition to meeting peak demand, there is need for sufficient reserve margin on our system

to handle any reduction in generation capacity through planned or unplanned outages of

generation plant or the loss of network connectivity. In line with international best practice, the

reserve power is planned to be between 15-20%. For Rwanda it is likely to be at the high

end(20%) of that range to accommodate the uncertainty associated with potential demand

shocks due to growing economy.

3.3.2.1 Baseline Demand Forecast

By summing up demand from each of the above 4 categories and factoring in the reserve

margin, four generation requirements have been derived as detailed in the table below. The

underlying assumptions used to arrive at the demand forecast are detailed over the page:

Table 11: Demand projections under different scenario (Generation requirements including losses)

Demand scenarios 35% electrification by 2017 48% Electrification by 2017

Likely Demand scenario

Generation required: 300 MW

(Total demand: 250 MW)

357 MW


Reserve Margin(20%)

Ambitious Demand scenario

503 MW


563 MW


48

Key assumptions: The assumptions wee built on conservative principles, tending to

overestimate demand. Below are the assumptions used.

Assumptions common to both scenarios to 2017

Industrial

In addition to the levels of growth indicated below, demand will double before 2017 through existing facilities utilizing currently unutilized capacity (Source: MINICOM)

175 Ha of industry will come online through the 4 Industrial zones assuming the zones are 50% occupied (source: MINICOM)

Industrial

(mining)

An additional 40 MW of generation will be required by mines by 2017 (Source: RMIF)

Agricultural Irrigation pumps consuming approx. Additional 40 MW of electricity will connect to the grid by 2017 (source MINAGRI)

Scenario Dependant Assumptions to 2017

Likely Scenario Optimistic Scenario

Residential Average household consumption

will increase marginally above current levels

Average household consumption will triple from current levels

Commercial

(SME)

Electricity demand to grow @ 8% p.a

Electricity demand to grow @ 25% p.a.

Industrial Electricity demand to grow @ 8% p.a.

Electricity demand to grow @ 20% p.a.

Notes:

1) Commercial Demand: In reality the forecast includes a greater increase in Commercial

demand than that stated since a portion of the increase termed “Residential” will also

be small enterprises.

2) Industrial and Mining Demand: The rates of growth in industrial demand are in addition

to the assumptions on doubling of output, industrial zones and mining increase.

3) Residential Demand: Residential demand is a function of average consumption

multiplied by connections. Even for average consumption per connection to remain at

today’s level would be a significant challenge as we continue to connect those less able

to afford to the grid.

3.3.2.2 Continuously refining the forecast

A Demand forecast must be continuously revised in light of new information. Demand is also a

lot more complex than simply projecting peak consumption. In order to plan generation and

network investment appropriately EWSA needs to understand exactly where the demand is

projected to come from. Under the new energy policy, an obligation is placed on EWSA to

project demand and report on security of supply as follows:

1) Demand Projection: EWSA will be responsible for projecting electricity demand over a

20-year horizon. These projections will be updated annually and form the basis of sector

49

planning. All government stakeholders have an obligation to contribute to this process

in an accurate and timely manner.

2) Security of Supply: Rwanda will develop sufficient generation to satisfy domestic

demand and look to diversify our generation mix where possible, maintaining an

appropriate reserve margin. This reserve margin is dependent upon the make-up of the

generation mix, in terms of technology and unit size and will be determined by EWSA.

EWSA will be responsible for producing a report on Security of Supply on an annual

basis.

50

3.3.3 Development of a Generation and Transmission roadmap

The level of investment required in electricity infrastructure is significant. As already indicated,

about $570m will be required if we are to achieve our target of connecting 48% of the

population. A sizeable amount of investment will also be required finance generation and the

transmission projects that will determine the capacity to arrive at required levels of acess to

electricity. The investment decisions taken today, particularly in generation, will have an impact

on prices and competitiveness in future. Every MW of generation capacity installed must be

paid for whether consumed or not. This should inform decion making to ensure that investment

in generation is inline with demand.

3.3.3.1 Generation investment

In light of the costs of generation infrastructure, investments will be done in line with Demand.

If all the current pipeline projects are implemented, the installed capacity would be closer to

610 MW by 2017/18, slightly higher than required(563 MW). The justification for this is to

cushion against supply shortfalls due to projects being delayed as a result of technological or

financing issues. Delivery of the 563 MW required by by 2017 /18 will cost around $1.6Bn.

This chapter presents the Generation options available, optimal level of investment required,

timeline of activities, levels of investment required and opinion on government/private

financing mix.

3.3.3.1.1 The generation options available and their impact on the Energy mix

Energy resources available: Rwanda has a range of indigenous resources that complement

each other in the energy mix. The table over the page illustrates how this can be split across the

different generation technologies:

51

Table 12: Overview of Rwanda's indigenous energy resources

Resource

potential

Characteristics and Considerations

Hydropower

400 MW6

Hydropower has generated the bulk of electricity in Rwanda since 1960s. Its overall

potential is estimated at about 400 MW but the current installed hydro capacity is

64.5 MW. As a result of extremely low operational costs however, hydro is still one

of the cheapest forms of generation in the long run.

Geothermal

700 MW7

Rwanda’s geothermal resource is yet to be fully proven, however, studies

undertaken to date, indicate a likelihood to discover a commercially viable resource.

The exact size of the resource is not yet proven. This will only be determined once

drilling completes and once established, the low costs of Geothermal and its high

availability makes it the cheapest form of generation available.

Methane

350 MW8

Pilot projects have demonstrated the commercial and technical viability of extracting

methane from Lake Kivu. Following the completion of KivuWatt 1, this will be further

proven and we can expect increased interest in the resource from private investors.

Peat

700 MW9

There is considerable private sector interest in electricity generation from Rwanda’s

peat resources. Peat is a proven technology and less complicated than methane or

geothermal. The cost of electricity produced from peat will be slightly higher than

that produced from methane due to the costs of peat mining. However, its reduced

complexity means it can deliver increased capacity sooner.

The chart on the left illustrates our daily load curve (the

way demand fluctuates throughout the day) and the role

that different energy sources are expected to fulfil in the

future. All sources of energy are different and have a

different role to perform. Geothermal, Hydro and

Methane, once constructed have very low operating

costs and can run almost constantly so would provide

base-load power. Peat can be operated flexibly to adjust

to meet the evening peaks, whilst solar will only operate

during the day. The table overleaf outlines the full list of

projects through which we could deliver 610 MW by 2017/18, along with when they could be

delivered and projected costs of this investment outlined below the table.

6 Consisting of 250 MW of Domestic potential and 150MW of regional potential.

7 The main fields are Karisimbi with 320MW; Gisenyi with 200 MW, Kinigi with 200 MW and Bugarama with 20 MW.

8 Total resource is estimated at 55bcm of Methane or approximately 700MW; this is to be shared equally with DRC

9 Peat resources include 40,000 ha of peat bogs of various quality – 1992 Peat Master plan. Note this is currently being updated: revised version expected October this year

Figure 10: Proposed energy generation mix

52

Figure 11: Generation roadmap to achieve 610 MW of installed capacity

Figure 12 Projected capital costs

53

3.3.3.1.2 Matching Generation with Demand

The chart below illustrates how the proposed generation investment plan aligns to differing

demand forecasts. The lines indicate generation requirements, inclusive of reserve margin.

The following are some key points to note:

1) We will be able to meet our most ambitious generation requirements with the roadmap

presented on the previous page even if geothermal does not materialise over the

coming 5-years.

2) The large amount of, principally peat generation coming online in 2017/18 will allow us

to meet our generation requirements. Of more concern is the short term: 2015 / 2016.

For this reason we need to place an emphasis on developing small scale generation such

as small hydro and peat sites quickly.

3.3.3.1.3 Feasibility of energy resources and their repective technology roadmaps

All of our proposed generation projects rely on indigenous resources that in most cases are yet

to be fully proven. Proving these resources will require time and finance and any attempt to

shortcut this step is likely to bear negative economic consequences. Failure to develop a full

feasibility study for a project in advance of development is likely to result into one or more of

the following:

a. Without noticing, more of the country’s precious natural resources could be given away

to the private sector than needs to be the case, reducing the generation potential.

b. Because there is no proof of resource feasibility, a high risk premium will be attached to

the cost of rasing financing. This leads to more than necessary expenditure.

54

c. Difficulty raising finance. Developers will sign a contract but be unable to raise finance

as investors consider it too risky. Investors are often given 12-18 months to raise

finance and this will be wasted time.

The priority under EDPRS II in this respect is to focus on undertaking the feasibility work

necessary to demonstrate Rwanda’s energy resource potential. This will cost approximately

$100m, costs that the private sector are unlikely to bear and which must be funded by

government or development partners. This is discussed in greater detail in the next chapter on

financing:

Individual generation technologies can be found in annex A.

Geothermal Exploratory Drilling:

Demonstrate geothermal potential in Karisimbi (including generating 10 MW of well-head generation); the same costs in Kinigi.

Geothermal represents the best indigenous prospect for power generation due to its low production cost but the private sector may not wish to bear the risk of exploratory drilling and this will need to be financed by GoR.

Peat

Prove the feasibility and drain peat bogs in preparation for private investment:

Proving the feasibility and draining peat bogs will allow us to either develop our own plant or attract private investment quicker and more cheaply as the risk and timeline associated with the bog-development is removed.

Government proposes to fund the following:

1) Peat development capability 2) Detailed feasibility studies for 4 bogs: 3) Site drainage in advance of peat harvesting

Hydro We have already identified a significant number of local and regional hydro projects, however further

feasibility work is required. Finance is required to:

1. Complete feasibility work on the large regional projects. 2. Further develop the feasibility of our domestic Hydro resources

Methane We propose to fund a wide ranging pre-feasibility study to identify the range of opportunities available

for investors, assessing projects of differing sizes and based on different technology types.

55

Transmission investment

Significant reinforcements will be needed to the existing transmission system in order to accommodate the increased generation and demand over the coming years. These projects are outlined below: Figure 13: Transmission projects

N° International/

Domestic

Category

Tx / Dx

Subcategory

SS / Line

Transmission lines project/Substation Target (Connection, km, or

substation voltage level)

Expected closure

date

14 I Tx L Construction of 220kV transmission lines: Mirama

(Uganda) – Shango (Rwanda)

110 km (Rwanda side) Dec-14

15 I/D Tx L Construction of 220kV transmission lines: Kibuye -

Gisenyi – Shango

180 km Dec 2014

prequalification

phase for the

contractor

16 I Tx L Contruction of 220kV transmission lines: Kigoma to

Burundi Border

80 km (Rwanda side) Dec-15

6 I/D Tx L Construction of 220kV transmission lines: new Bugesera

Peat Power Plant to Shango Substation (via Rilima

(Airport) and Birembo substations)

60 km Feasability study to

end by July 2013

5 D Tx L Construction of 220kV transmission lines: new Karisimbi

220/110/30kV substation to new Ruhengeri substation


end by May 2013

18 I/D Tx L Construction of 220kV transmission line: Rusumo PS -

Rilima (Airport)

78 km 2016

24 D Tx L Construction of 220 kV transmission line Kibuye -

Kigoma


end by 2014

17 I Tx L Constructionof 220kV transmission lines: Rusizi III-

Kamanyora-Karongi-Kibuye

116 km (Rwanda side) 2016/2017

1 I/D Tx S Construction of Kibuye 220/110/30 kV Substation 220/110/30 kV May-14

36 I/D Tx S Construction of Shango 220/110kV substation 220/110 kV Feasability study

completed

39 I/D Tx S Upgrade of Birembo substation (220kV) 220/110/30 kV Feasability study

completed

37 I/D Tx S Construction of Rubavu 220/110/30 kV substation 220/110/30 kV Feasability study

completed

3 D Tx S Construction of Rilima (Airport) 220/110/30 kV

Substation

220/110/30 kV 2015

9 D Tx S Constrution of Ruhengeri 220/110/30 kV substation 220/110/30 kV Substation Feasability study to

end by May 2013

33 D Tx S Constrution of Karisimbi 220/110/30 kV substation 220/110/30 kV Substation Feasability study to

end by May 2013

34 D Tx S Construction of Mamba 220/110/30 kV substation 220/110/30 kV Feasability study to

end by May 2013

8 D Tx S Construction of Bugesera 220/110/30 kV substation 220/110/30 kV Feasability study to

end by May 2013

35 D Tx S Upgrade of Kilinda substation (220kV) 220/110/30 kV Feasability study to

end by May 2014

56

3.3.3.1.4 Regional and domestic transmission lines

Several power transmission projects are under development to connect us to our regional trading partners and facilitate planned power exchange under the East African power pool (EAC), Nile Equatorial Lakes Subsidiary Action Program (NELSAP) and CEPGL. Under NELSAP, we have the following projects in pipeline:

a. Construction of Mirama – Shyango 220kV transmission line interconnecting Uganda and Rwanda. A consultant has been hired and by January 2013, the EPC is expected to be signed.

b. Karongi – Rubavu –Goma – Shyango - Birembo 220kV transmission line interconnecting DRC and Rwanda. A Consultant in place awaiting anon objection from the financiers to launch the Tender for prequalified firms

c. Kigoma–Ngozi 220/110 kV transmission line interconnecting Burundi and Rwanda. Currently, GoR is in the process of hiring the consultant

3.3.4 Private sector engagement plan

It is not recommended and even then no reasonable for government to undertake all of the

investment outlined in our generation, EARP and transmission roadmaps as public

procurement. Both funds and skills are lacking for this endeavour. We need to encourage the

private sector to assume financing responsibility of this investment, particularly in the area of

electricity generation.

There is an already established Investment Management Unit within EWSA which will be

responsible for engaging with potential investors and structuring projects using competitive

bidding processes to guarantee Value-for-Money.

3.3.4.1 Overall policy approach

The latest energy policy is still in draft format but it is useful to list key elements determining

the Government’s approach and strategy towards attracting private sector participation.

1. Private sector participation, a preferred procurement strategy: Public Private

Partnerships will be a major component of the GoR strategy for the provision of public

services and both social and physical infrastructure including energy. Private sector

participation will be encouraged in all phases of the project lifecycle, including design,

build, and finance, maintain and operate.

57

2. Competitive and transparent projects procurement: Goveqrnment will strongly

promote using competitive and transparent procurement of all related energy projects.

Competitive tendering ensures that Value-for-Money to the Government will be

maximized. In exceptional cases only, listed below, energy projects may also be

identified by the private sector through unsolicited proposals and signing a MOU

between a private party and the envisaged contracting authority.

Written approval from GOR must be obtained before any unsolicited bid may be developed and

procured. Exceptions to this principle are listed below:

a) When there is an urgent need for ensuring continuity in the provision of the service and entering competitive procedures would be impractical;

b) Where the project involves matters pertaining to public security;

c) Where there is only one source capable of providing the required service, such as when the provision of the service requires the use of intellectual property, trade secrets or other exclusive rights owned or possessed by a certain person or persons;

d) In any other case where the GOR authorizes such an exception for compelling reasons of national or public interest.

3. Formalized processes: Government will establish a formal process to ensure that all energy projects move forward inline with GOR’s investment priorities. GOR approvals will be required at each of the following stages: (1) before release of bidding documents; (2) confirmation of selected bidder based on an evaluation report; and (3) final negotiated agreement with selected bidder. The chart below outlines the proposed investment process that is yet to be approved early 2013.

58

Figure 14 Proposed competative process and responsibilities

1. Decision to bring to market as a PPP

EWSA

2. Preparation bidding documents

EWSA

3. Tendering EWSA

4. Selection preferred bidder

Step procurement process Responsible entity Approvals required

MINECOFIN / MININFRA

None

MININFRA

EWSA MININFRA/RDB

5. Final negotiation contracts EWSA RDB / Attorney General

6. Signing contracts EWSA MINECOFIN / MININFRA / RDB /

RURA / Attorney General

4. Promotion of Rwandese private sector: The revised energy policy calls for serious

consideration to include local companies in international consortia undertaking

investments into energy projects, reflected in evaluation of technical proposals in

competitive bidding processes. Additionally, where appropriate, we will develop lots of

a scale that could be handled by local companies – this is likely to be particularly

appropriate for EARP projects.

3.3.4.2 Approach to attracting the private sector

As outlined previously, it will be vital to develop a pipeline of projects that are investor ready

such that investments are aligned to demand. To facilitate this, preparatory and project

development work are essential. For instance, proving geothermal resources is not likely to be

done by a private operator but rather the government has to commit to this, significantly

reducing risk profiles of individual projects. In turn this translates into lower feed in tariffs that

can be negotiated with operators.

The Establishment of an Energy Development

fund: It will be essential for government to

demonstrate the feasibility of projects before

attracting private investments as this stage in

project development is particularly risky. The

illustration on the left indicates: 1) the relative

costs and risk of the feasibility and delivery

59

stages of the project; 2) the usual balance of debt to equity funding; and 3) the parts of the

project we would expect an Energy Development fund to finance.

The Proposed Energy Development Fund is expected to finance a project up until it has been

proven commercially and technically feasible. In a number of cases we may also need to

provide further funding to bridge any perceived feasibility gap (ie the project doesn’t quite

make economic sense on its own but could do if we are prepared to fund a small part of the

project).

A relevant key policy action from EDPRS II will be the establishment of such a fund. Whilst there

are a number of different approaches, the following principles could be followed if we are to

have a successful fund:

1) Clear governance arrangements: On how the money is disbursed and strict monitoring

on the value for money the expenditure is realising in terms of additional generation

capacity.

2) Flexibility to release funds quickly: Currently a number of development partners fund

elements of feasibility work, however, the timescales and governance required often

result in funds not being released quickly enough. An Energy development fund would

be a means of channelling this funding through one simple vehicle.

3) Clarity of purpose: In administering the fund choices will often need to be made such as

selecting between two competing projects or determining whether to provide

additional funding to a project. To allow decisions to be made in a consistent way, it is

vital to define the objectives of the fund clearly.

A recent AfDB study of our Energy Sector proposed that if GoR would be able to capitalise such

a find with around $30m; additional finance could come from development partners. The

strength of the governance arrangements discussed previously will determine how much of

additional funding will be attracted from potential financiers.

Whilst it would be possible for such a fund to generate a return through taking equity stakes in

projects where the feasibility work has been funded, such arrangements are often difficult to

manage. The current proposal is to have this fund initially as a vessel through which

government and development partner finance for feasibility works could be efficiently

channelled with clear governance arrangements.

60

3.3.4.3 Competitive selection processes

Thye government focus in the shortrun (2013/14), will be to develop preparatory work

necessary to allow competitive process to find partners to enter into an EPC contract with. The

table below outlines the projects for which we are likely to undertake a competitive partner

selection process during EDPRS 2.

Figure 15 Projects to be submitted to competitive bidding process during EDPRS II period

Projects to be subjected to competitive process

Hydro Peat Methane Geothermal

i) 8 sites with a collective generation capacity between 13.25 and 39 MW10

i) 3 sites of around 15 MW each following conclusion of the feasibility work outlined earlier in this chapter.

i) A 50 MW site in lake Kivu

i) 50 MW of steam extraction and generation from Kinigi or Karisimbi (exact location to be determined following drilling early 2013)

3.3.5 Strengthening the Investment management

Establishment of EWSA’s investment unit: EWSA recently established an investment unit to

assume responsibility for the entire procurement process of energy projects with a private

sector participation including project inception, feasibility study and dissemination of project

information to potential bidders, procurement and contract negotiations. The EWSA

Investment Unit has been staffed with an international expert in private sector investment

management working to build the capacity of a team of locals. The unit will be tasked with

documenting the investment process to allow efficient handling of the procurement process.

Recruitment of transaction advisor: In addition to the investment unit, government has

recently contracted a firm of transaction advisors who will, under the direction of the

investment management team provide a pool of financial, technical and legal expertise to assist

in project packaging, development and negotiations with the private sector.

3.3.6 Operational efficiencies and financially sustainability of the utility

Subsidies and a transition towards a cost-reflective tariff regime: As outlined in chapter two,

the current electricity tariff is heavily subsidised, with almost 43% of EWSA’s revenue coming

10

Note the 13.25 MW comes from the Hydro Atlas whilst the 39 MW is a more optimistic projection developed by a private sector

developer. We will have a far clearer understanding of the generation potential once feasibility studies complete on these sites in

mid 2013.

61

through government subsidies in 2011/1211. These subsidies were introduced to insulate

consumers from the impact of the costly rented Diesel powered generation we needed to use

as our generation capacity failed to keep pace with demand. Based on the generation

investment roadmap and the demand forecast outlined earlier in this chapter, we will be able

to reduce rental diesel by 2015. This represents a key policy action in the EDPRS II plan.

As a result the costs to EWSA of generating electricity will drop significantly and it will no longer

be necessary to grant direct subsidies to the electricity tariff. In short, EWSA’s tariff will become

cost reflective. The transition towards a cost reflective tariff is important for a number of

reasons:

1) Direct subsidies to the electricity tariff disproportionately benefit the wealthy who

typically consume more electricity.

2) Direct subsidies are directly linked to energy consumption. The higher the consumption,

the higher the cost of subsidy. it should be noted that direct subsidies channel money

away from other government projects and retards development.

3) Direct subsidies inhibit investment in generation. The need for the utility to be

subsidised represents a significant political risk for investors and is likely to reduce the

level of investment or significantly increase the returns investors expect.

Transitioning EWSA away from operational subsidies is only one part of developing a financially

independent utility. In the long-term, EWSA should be able to raise finance on its own. This

level of financial independence would free up a significant portion of the government’s limited

ability to borrowing and would develop an electricity sector more conducive to foreign

investment. To achieve this, three high-level activities need to take place:

1) EWSA needs to separate its accounts between the different business entities

(Generation, Transmission etc) to allow any prospective lender to understand their

business operations and cash-flows.

2) EWSA would need to be converted into a corporation (still government owned). This

would allow EWSA to borrow money on its own account and the greater level of

independence from government would provide creditors with additional comfort.

3) EWSA would need to go through a thorough process to improve its credit worthiness.

The starting point would be the hiring of a consultancy or credit-rating agency to assess

their current business operations and organisational set-up and make

recommendations. Such recommendations are likely to include a requirement to change

the financial or organisational structure.

11

RWF 20.9Bn Subsidy of total revenue of 48Bn

62

Operational Efficiencies: EWSA’s operational performance has improved significantly over

recent years through rehabilitation of many of the main substations and key sections of the

secondary distribution network with financial support from the government and development

partners. As a result, electricity outages have declined by about 20% in 2005 to 2010 while

electricity losses have dropped from 25% in 2005 to approximately 19% in 2012. In order to

maintain a regionally competitive tariff, these efficiencies and operational improvements must

continue. There are a wide range of areas through which EWSA could achieve operational

efficiencies including but not limited to:

1) Improved dispatch: As our generation mix diversifies, we will have a wider range of

power plants to select to supply energy at any given time. Given the differing costs of

this plant, these decisions could have a significant impact on the cost of energy.

2) Reduced losses: As outlined in chapter 2, we are currently developing a loss-reduction

strategy to increase the portion of energy generated that arrives at the end consumer

3) Preventive maintenance: Prudent maintenance scheduling on network and generation

assets can proactively prevent outages and damage to components.

4) Supply chain efficiencies: There is always scope for efficiencies in the supply chain. Be it

purchasing items in bulk to reduce costs, sourcing alternate suppliers or reducing

storage costs.

63

3.3.7 Use of Biomass and transition to alternatives

Approximately 85% of Rwanda’s primary energy consumed is from biomass resources. The

energy sector strategic plan aims to reduce biomass consumption from 85% to 50% by 2017.

This will be done through promotion of use of biomass substitutes as well as introduction of

more sustainable methods of biomass energy consumption. This will reduce demand for

biomass energy resources and reduce strain on the environment. Potential biomass substitutes

referred to herein include the following;

Liquefied Petroleum Gas (LPG). LPG is used primarily for cooking and heating to replace

or supplement the use of wood and charcoal especially in urban and peri-urban areas.

There are already efforts to promote the use of LPG in Rwanda such as the temporary

suspension of VAT on LPG imports. Government will keep exploring other measures

such as eliminating the non-economic LPG cylinders (20Kgs), incentives on cost of

investing in required infrastructure, bulk purchase and storage facilities among others to

ensure affordability and efficiency of LPG facilities.

Electricity: Government is planning to ensure universal access to electricity by Rwandan

households through grid and off-grid sollutions by 2017. Affordable electricity can be

used for heating and boiling purposes especially in urban and semi-urban areas majority

of whose disposable income would enable them to have multiple uses of electricity

including heating by choice. As of now, ≈ 98% of all Rwandan families use biomass for

their daily cooking, including those households that are connected to the electricity

network in urban areas mainly due to the high cost of electricity that makes it less

economical for cooking.

Biogas: Government has put in place an elaborate program for disseminating bio

digesters in households, schools and prisons to reduce demand for wood and charcoal

and improve people’s health. The National Domestic Biogas Program (II) targets to

disseminate at least 100,000 additional bio-digesters in households by 2017. Through

the institutional Biogas program, government is promoting the use of biogas for cooking

and heating in schools, hospitals and prisons. To date, 11 out of the 14 prisons have

been connected with bio-digesters. Under the NDBP, EWSA will continue to give

technical assistance on the installation, use and maintenance of bio-digesters which

reduces the demand for wood fuels previously used in cooking. For the institutional

biogas program, EWSA will work with MININTER and MINEDUC to ensure effective

dissemination strategy for bio-digesters to the Rwandan prisons as well as schools

64

respectively. To fast-truck the program, a National taskforce has been instituted to

promote use of alternative sources of energy of which biogas is part.

Peat briquettes: Rwanda has estimated reserves of 155 12 million tons of dry peat

spread over an area of about 50,000 hectares in Akanyaru, Nyabarongo, Rwabusoro and

other areas. Peat lands have traditionally been thought to be prepared to supply peat

for electricity generation. However, though currently used on a very small scale,

government through EWSA will continue to explore possibility of large scale and

commercial use of peat briquettes as biomass alternatives for cooking in homes and

factories. These briquettes consist of shredded peat, compressed to form a virtually

smokeless, slow-burning, easily stored and transported solid fuel used in cooking. The

use of smokeless briquettes will reduce the emission of GHG to the environment and

reduce the demand for wood fuel and charcoal both historically used for cooking.

Kerosene: Kerosene widely known as “paraffin” can have multiple uses including

heating, lighting, cooking and to some extent in transportation (powering aircraft jet

engine). However, in Rwanda, kerosene is majorly used in lighting in remote areas

without access to electricity and to a lesser extent for cooking and boiling using

kerosene stoves especially in urban and semi-urban households. Although it may not be

the first best source of cooking and lighting energy due to its potentially negative

impacts on the environment (Emission of GHGs), it is the most economic alternative to

wood and charcoal in cooking, heating or lighting. Under the petroleum subsector, the

government through MINICOM (fuel imports) and MININFRA (fuel infrastructure) will

keep strategic fuel reserves including kerosene to ensure security of supply and price

stabilization practices. Cheap supply of kerosene will ensure low wood and charcoal

usage thus reducing the ever increasing wood deficit.

Other efforts planned to meet the strategic target of ensuring efficient use of biomass resources are categorized under demand and supply side interventions that promote sustainable use of biomass energy resources as discussed hereunder;

Demand side interventions

Promotion of improved charcoal and wood stoves. Government through EWSA will

support sensitization workshops and training seminars on the economic use of

improved cookstoves. This will boost demand for modern and improved cooking

technologies, increasing private sector motivation to invest in this business and reduce

the use of inefficient and traditional three stone wood stoves. The government target is 12

Peat Master Plan prepared by EKONO

65

to ensure at least 80% of the urban market with access to improved cookstoves by 2015

and 50% in rural areas. Ultimately, the target is to reach 86% and 63% of urban and

ruaral access to improved cookstoves by 2020 respectively.

Technical support on the choice of stove models. The Rwandan government initiated

an Improved Cook Stove (ICS) program in the late eighties to combat deforestation.

Various programs have been implemented since, leading to a penetration of ‘improved’

stoves of over 60% by 2012. EWSA as the technical lead in promoting the use of energy

efficient biomass resources will offer technical guidance on the selection of the most

fuel-efficient cook stoves, which will reduce the volume of firewood required as well as

the household budget spent on wood or charcoal for cooking. MININFRA through EWSA

will continue facilitating the promotion of “Canarumwe” and “canamake” propulary

known as rondereza(use of less fuel) cookstoves programs in rural areas to increase the

proportion of the population using ICs. A national cross sector task force is already in

place with full mandate to fasttruck the implementation of the alternative energy

prorams including improved cookstoves. The technical taskforce is currently planning a

massive m campaign and awareness creation to be carried forward through mass

media, public demonstrations and public gatherings like “Umuganda” and stakeholder

meetings to ensure effective implementation. All-level committes up to the village units

have been created to ensure effective awareness and implementation of the program

Energy conservation. Wood and charcoal are not demanded by residential consumers

alone. Government will promote energy conservation measures among large non-

domestic users of wood and charcoal such as those burning bricks, with the objective to

reduce their consumption by 2017. These are the biggest users of wood fuels and their

continued use of inefficient wood resources will greatly impact on the environment. This

will be through the of more carbonised charcoal, hydraulic charcoal and other improved

technologies.

Supply side interventions

Simplified licensing scheme for charcoalers. MININFRA will continue calling for a more

effective and simplified regulatory and licensing system for charcoalers from the

responsible instituions. This strategy proposes a more decentralized licensing system

done by local authorities following national guidelines to allow for a more transparent

and sustainable wood harvesting. Clear requirements for tree harvesting and

replacement should be put in public domain at local administrative levels to improve

public awareness and adherence to the said regulations.

66

Efficient management of public plantations. There are evident cases of illegal tree

harvesting practices on public (district and national) plantations that do not conform to

the environmental best practices(BEST report, 2009). Though the Ministry of

Infrastructure plays a secondary role in biomass conservation, the Ministry will work

with MINIRENA and other responsible authorities to Stop illegal harvesting of trees in

public plantations, set up management plans for restoring public national and district

plantations13, develop and promote adapted tree management and rational cutting

methods, train local bodies and professionals to ensure improved forest preservation

practices.

Train charcoaling professionals. To manage supply side constraints whilst maintaining

the right volume of trees harvested for charcoal, MININFRA will promote the use of

improved charcoaling techniques that ensure high yield (kgs wood/kgs of charcoal)

through training programs and sensitization workshops to the local levels. More efforts

will be directed to the dissemination of improved carbonization techniques and

reorganization of charcoal supply chain in supply centres of Rwanda. From the last

biomass survey undertaken in 2009, the charcoal yield14 was found to be ≈ 12%. The

target of the energy sector strategic plan is to have this improved to at least 15%

efficiency by 2015. MININFRA will use existing local authorities to indentify local

cooperatives involved in charcoaling who will also train other charcoalers in improved

charcoal harvesting.

3.3.8 Petroleum subsector

Rwanda currently imports all the petroleum products from other producing and supplying

countries. The cost of oil imports is on average ≈ 25% of total import costs and takes ≈ 55% of

the entire export revenues. Besides, the fact that Rwanda is a price taker, given the unstable

international oil prices, oil products have always been among the leading contributors to

inflationary pressures that pose risk to macroeconomic stability in Rwanda. Herein the energy

sector strategic plan, several measures have been proposed to remedy the above challenges

summarized in the following areas of interventions.

Reserve /storage capacity. To ensure security of supply, GoR commits to ensure that an

equivalent of 4 months of fuel consumption will be kept for commercial and strategic

purposes to cushion the economy from future oil crises like what happened in 2007

after the Kenyan political turmoil. GoR through the Ministry of Commerce will provide

13

GoR aims to have over 50% of public plantations under an organized management system. We will ensure rational cutting

practices by 2015 (75% by 2020) 14

BEST report(2009)

67

incentives to the private dealers to keep 3 months equivalent of fuel consumption as

reserves while government will keep 1 Month equivalent of fuel for strategic reasons by

2017.

Price stabilization. We have seen from the analysis above that Rwanda is a price taker

and always victim to exogenous price shocks since the economy relies on exclusively

imported petroleum products. To manage the impacts of exogenous price shocks,

government will motivate the private importers to enter bulk purchase arrangement to

enable government administer price stabilisation policy. Government will borrow a leaf

from other countries like Kenya and Tanzania where this scheme has been successful to

ensure that the same is done in Rwanda, taking into consideration country unique

situations. Further to this, government will develop an appropriate domestic fuel pricing

strategy, that incorporates major concerns of the business community. Government

will specifically study the possibilities of addressing the high price fluctuations in the

aviation fuel market as Rwanda aims to become an aviation hub in the region.

Ensure appropriate Petroleum standards. As already discussed in chapter 2, in this

document, lack of clear standards and quality control measures will compromise the

quality of petroleum products imported and used within the country. Other than price

stabilization, in order to increase investor confidence in using petroleum products in

Rwanda and to protect the citizenry from substandard products, , RBS and NICA will set

and enforce product standards for all the Develop downstream petroleum activities.

Petroleum standards will encompass the quality of infrastructure (storage and import

vessels) as well as petroleum products imported into the country.

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3.4 Contribution to EDPRS 2 thematic Areas/Priorities

Figure 16: Impact of energy investments on EDPRS II thematic areas and priorities

Economic

transformation

for rapid growth

Diversifying the economic

base for exports

Energy must be available and cost effective to drive

economic growth; this requires minimising the tariff

through efficient investment. Petroleum products as a

form of energy is drives the transport sector and

petroleum price movements impact on macroeconomic

balances.

Private sector development,

competitiveness and service

delivery

Unlocking infrastructure

requirements

Urbanization Availability of energy services will accelerate urbanisation

and human settlements. There is a tendency for the

exodus of households from un electrified to areas with

electricity. This comes with emerging rural socio-economic

amenities that are engines of rural growth.

Rural

Development

Human settlements

Agriculture modernization The availability of sufficient and cost effective energy

solutions will drive agricultural mechanisation (electricity

and petroleum products)

Environment and natural

resource management

Sustainable use of biomass energy resources is mandatory

of we are to achieve sustainable development. Improved

biomass sollutions such as biogas and improved

cookstoves preserves the environment and promotes

clean growth.

Productivity and

youth

employment

creation

Education and skills

development

Access to electricity is essential to facilitate education on

use of modern technologies. Youth training centres such as

TVETs require affordable electricity.

Ensuring a healthy workforce

A Transition away from traditional biomass to cleaner

energy forms will promote a healthier workforce

Job creation Significant employment will be generated in the

installation of our modern energy infrastructure.

Additionally cost effective energy solutions open the door

to increased job opportunities through improved business

productivity

Accountable

Governance

Judiciary reforms and rule of

law

Energy products are less appropriate here. However,

providing affordable electricity is a form of government

accountability to the electorate

Citizen centered approach –

including public

accountability

Development

communication

69

3.4.1 Economic transformation for rapid growth

Energy undergirds civilization and has powered sweeping economic changes that have

transformed the world over the last two and a half centuries. However, just as the economy

has changed, so has the energy mix that fuels it. The development of the modern world has

been a story of evolving new uses for energy and constantly growing energy demand. New

forms of energy and new technology to harness that energy have been developed over time,

shifting the energy balance and expanding the menu of energy sources(World Economic Forum,

2013)

Rwanda’s economy like any other economy derives its growth significantly from energy

resources. All the sectors of the economy from transport, manufacturing, construction, mining

and agro processing among others all require energy supplied adequately and cost effectively if

the investors in these sectors are to reap economic benefits. At a micro level, energy enables

people to cook, heat, transport, and entertain, all these being the dominant areas that employ

most of the people of Rwanda. Electricity to power our TVs, fuel for our cars, or heat for our

homes, is supplied by the energy sector. It is therefore apparent that economic growth is

inextricably linked to energy. As energy is tied to our economy, our required economic growth

is dependent upon equitable access to energy, sufficient supply at affordable rates.

Under the EDPRS II Economic Transformation, thematic area, energy and Private Sector Development (PSD) emerge as the leading sectors, accounting for more than half the total cost of financing. Most of the costs are derived from surveys, feasibilities and development of popwer pojects that promote Rwanda’s self-reliance in power supply.

Boost on business15 Development: The cost of power contributes a significant portion to the

overall cost of production in Rwanda. Rwanda has one of the highest tariff rates(US$ 21

cents)compared to the region. The sector strategy looks to ensure affordable and sufficient

power supply by utilizing other alternatively cheaper sources to replace expensive fossil fuels.

This will boost local investments into large, Small and Medium Enterprises, creating

employment opportunities and positively impacting on the state of people’s welfare. People

will be able to use electricity for income generation activities like putting up welding shops, hair

salons, kiosks, grain milling centres and others where majority of Rwandans are employed.

Promoting agricultural transformation: Agriculture sector is a backbone of Rwanda’s the

economy employing over 80 % of the population and contributing approximately 35 % to

Rwanda’s GDP. The revised vision 2020 targets indicate that agriculture sector is planned to

grow from the current annual average growth rate of 5.8% to 8.5 percent by 2020. The planned

15

Small, Large and Medium Entreprises

70

structural shift from conventional farming methods to agro processing will require cheap and

sufficient energy supply in powering machines and value addition. The sector strategy looks to

provide over 70 percent of access to communities including agro based dealers and business

units and this is hoped to support the planned sector growth significantly supporting economic

transformation.

Further, in order to reduce seasonal disruptions in agricultural productivity through reduced

harvests, an elaborate irrigation program has been designed by MINAGRI. Irrigation systems

require adequate power supply in form of electricity to pump the water to irrigated areas or

adequate supply of affordable fuel to run diesel generators. The energy strategy will aim to

ensure security of supply of both electricity and fuel to irrigation projects that promote

agriculture transformation. We expect that providing reliable power supply to rural and semi

arid areas will make it possible for farmers to keep to their irrigation schedules, conserve water,

save on pump maintenance costs and use labour more efficiently. These and other benefits will

help drive agricultural production to new heights while improving the quality of life for agro

based households.

Promotion of mining and mineral value addition: Rwanda’s private sector is getting heavily

involved in mining activities. Currently some of the mining companies still lack sufficient

electricity and complain of high electricity tariff. The two smelting companies in Kigali and

Gisenyi are not operational due to the high cost of electricity. Providing access to affordable

and sufficient power supply is a positive step towards efficient mining activities especially in

mineral smelting. Further, as the mining sector looks to ensure value addition to mineral

exports, there is need for unhampered supply of cheap and adequate electricity if these

activities are to be successful.

Enegy efficiency: The energy sector strategy is considering energy efficiency measures that are

poised to ensure reduced power usage through the use of energy efficient technologies. EWSA

will ensure continued use of energy saving products to reduce power consumption without

negative consequences on output. Saving watt hours used per day is vital since it will reduce

the energy bill to the households, businesses as well as government. This income saved can be

used for other productive activities.

Boosting industrialisation plans. For Rwanda’s economy to be transformed, we need a

structural shift from traditional agriculture to industry and service sectors. Industries and

factories will require sufficient energy solutions to generate desired output. The national

energy strategy will ensure sufficient supply of electricity required in industries and factories

and at economically affordable tariffs and this will be a formidable tool for economic

71

transformation. The target for the next 5 years is to ensure 100% sufficient access to clean and

affordable energy by industries and Medium and large enterprises that are engines of economic

growth.

Reduce declining trade Balance. The petroleum strategy looks to improve oil strategic reserves

capacity to a tune of 150 billion litres by 2017 to avoid future supply shocks that affect fuel

prices. Oil products contribute significantly to Rwanda’s import bill (over 25% of revenues) and

an unplanned price fuel price hikes affect government planning and worsen the trade balance

due to a spike in oil import bill. The upstream petroleum looks at fast tracking oil exploration to

ascertain whether Rwanda can have its own oil reserves to reduce on transport costs and so the

oil import bill. In the medium to near long term, a mix of ensuring appropriate supply routes

and bulk purchasing arrangements will be the advisable ways of managing fuel prices before we

are able to determine our own fuel prices.

Demand stimulation: Increased energy prices reduce demand by reducing use of energy

services and motivating selection of higher conversion efficiency equipment. For example, the

price per litre of petrol will affect transport and other costs of running machines, with a final

price implied to the final consumers. This will affect demand especially for commodities with

fairly elastic demand. The energy strategy looks to ensure affordable power supply that in a

way will have a systemic price effect on the final commodities on the market and act as an

indirect approach to demand stimulation since reduction in commodity prices is the same as

increase in consumers’ income. Higher effective demand is a stimulus to economic growth and

transformation.

3.4.2 Rural Development

There are currently visible disparities between rural and urban areas in terms of access to

electricity and income levels. Rural access to electricity stands at ≈ 4.7 percent compared to 46

percent for urban areas. The aim of the energy sector strategy under the Electricity Access

Rollout Program (EARP) is to increase electricity access from the 16 percent (2012) to 45 and 55

perecent through grid and off-grid connections respectively by 2017. EARP will mainly target

rural areas and a great deal of rural households and business units are set to benefit from this

program. This effort will bridge the rural-urban disparity in access to electricity , thereby

improving on businesses start ups, enable long working hours and promote rural based

employment.

The target of the EDPRS II is to create regional economic zones in the 4 the regions on top if

the existing Kigali-based Special Economic Zone. Rural electrification will support the initiatives

to construct better schools, hospitals and clinics, roads and other social amenities and there will

72

be no more need for rural dwellers moving to urban areas in search of better quality of life.

Established social infrastructure and reduced Rural Urban Migration (RUM) will ensure

retention of productive labour force to rural areas, reverse to urban rural exodus and support

rural development.

Table 1.5 below shows the direction of migration for internal migrants, taken from the last

Integrated Household Survey(EICV III, 2010/2011) . According to EICV III, the direction of

migrations tends to grow towards the capital city compared to EICV2. In the last five years, the

proportion of the migrant population opting for the capital city increased from 19 to 27%

indicating possibility of lack of adequate infrastructure including electricity and opportunities

for growth in rural areas compare to urban areas.

Figure 17: Rwanda's internal migrations

Source: National Institute of statistics (EICV III)

It should be noted that rural electrification enhances quality of life at the rural household level

and stimulates the economy at a broader level. The immediate benefit of electrification comes

through improved lighting, which promotes extended hours of study, reading, business

operations and other household chores, and in turn contributes to better educational

achievements and business productivity due to long hours of work. Lighting can also benefit

many other household activities, such as sewing by rural women, social gatherings after dark to

engage in productive discussions and other resourceful engagements.

Electronic devices such as radios and television are common media of communication to rural

areas, thereby bridging the rural-urban knowledge gap and information asymmetry especially

market related issues. All these quick mediums of communication require reliable power

supply to avoid delayed information dissemination.

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In addition to boosting income flows, rural electrification has its strongest impact on school

attendance by children in households adopting electricity since electricity substitutes fire wood

collected over long distances consuming much of the time of school-going children and creating

rampant absenteeism. These impacts obviously have a long-term influence on the welfare of

the country given the impact of education on economic transformation as these children move

into adulthood and form a formidable workforce..

3.4.3 Productivity and youth employment

By the standard definition, a youth is anybody between the ages of 14 to 35. According to the

last integrated households living conditions (EICV 3) survey, there are a total of 4,159,000

people between the ages of 14 and 35 in Rwanda.. Overall, 14–35 year olds make up 39% of the

total population of Rwanda of all ages and this is a formidable tool to Rwanda’s future

economic prosperity. However, this group requires skills and expertise if they are to meet the

labor market demands. Government has established Technical and Vocational Education

Training colleges to accommodate these youth and equip them with hands-on skills into

carpentry, welding, plumbing, building and construction as well other engineering activities,

there is strong need for cheap and adequate energy resources if these activities are to bear

meaningful results.

The energy sector strategic plan will ensure steady supply of affordable energy services to TVET

centres to promote youth productivity and boost employment opportunities. In Rwanda most

of these youth are employed in Small and Medium Rwanda (SMEs) like video centres and

photography, hair salons, cinema halls and others. These require sufficient uninterrupted

power supply or else they burn heavy fuels expensively disrupting their business profitability.

3.4.4 Accountable Governance

It is the responsibility of any pro people government to provide socio-economic necessities. The

fact that government raises its big part of resources internally from tax revenue paid by

Rwandan residents, the tax receipts ought to be well spent on strategic investment projects

that pay back to the people including provision of efficient and affordable energy services. It’s

incumbent upon government to make clear fulfilment of its promises and commitments related

to electricity and other energy sevtrices in form of exemplary accountability to its people.

Government plans to ensure more local participation in the development of their own energy

resources. This reflects a deliberate effort by government to make its citizens part of the nation

state governance though direct or indirect ownership of their development process.

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Government can communicate effectively through its administrative structures to the people

using various foras such as emails, radios and television, twitter and other media. This even

allows direct link between the last unit (Umudugudu) to the top of the leadership hierarchy and

this cannot be done easily without electricity. The proposed rural electrification program is

therefore meant to promote good governance through effective government policy

communication that has an impact on compliance and development.

3.4.5 Cross cutting issues mainstreaming

3.4.5.1 Capacity building

The current levels of human and institutional capacity is not sufficient to deliver on the sector

commitments with ease. To implement energy sector projects, on time, and scale up project

delivery, an enabling institutional framework and skilled personnel is a pre-requisite. This

energy sector strategic plan puts in place measures of improving energy sector organization and

management and develops capacity building plan to cover incumbent skills gaps for the sector.

Trainings and Knowledge transfer-The capacity of energy sector staff will be enhanced

through knowledge transfer from long term experts and through short training courses.

There will also be recruitment of external expertise for major transactions in order to

ensure that government is getting beneficial deals.

Strategic Capacity Building Initiative (SCBI)-The ministry has hired both local and

international sector counterparts sponsored by the Strategic Capacity Building Initiative

(SCBI) to boost the energy sector. Local counterparts will learn from their international

counterparts and it’s hoped that with the expirely of their (international counterparts)

contracts, local expert’s contracts will be able to move the sector to further desired

levels.

3.4.5.2 Gender and family promotion

Some of the most profound impacts of the energy sector will be improvements in the lives of

rural women. Reliable electricity supports SMEs in which majority women are employed, raising

their incomes and saving time spent on domestic household chores like firewood collection.

The average duration of study time for school going females will increase, and female dropout

rate is expected to go further down. On the demand side, especially in rural areas, there is a

need to relieve women and children from the burden of searching for firewood collected in

long distances away from their homes. All stakeholders within the energy sector need to

participate and take deliberate sensitization actions to encourage women participation in

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energy related education, training sessions, programmes and projects, planning, decision-

making including energy policy implementation

Women Economic Empowerment: Empowering women is empowering the nation. In Rwanda

like anywhere else in the world, women are exclusively held in domestic household chores of

cooking, fetching water, and collecting fire wood especially in rural areas without access to

affordable electricity. It should be noted that women contribute over 55% of the population yet

they are held up in unpaid care work and their role in the economy is often overlooked.

Providing easy access to electricity for boiling water and cooking will specifically address

women’s time burden and they will use their time productively for paid employment. The

Biomass strategy looks to ensure supply of improved cook stoves to especially the rural poor

(predominantly women). This will help reduce women’s burden of collecting fire wood, reduce

government cost of preserving the environment through reforestation and ensure women

productivity.

Adult women spent most hours of their day cooking and collecting water and fuel wood, which

leave them with little time for other productive activities. Without modern fuels and stoves,

and a lack of mechanical power for food processing and transportation, women often remain

tied to drudgery. This strategy is set to provide solutions to such challenges.

Gender energy related data: The first step towards ensuring that the specific basic needs of men and women are addressed over the short and long term is to collect data broken down by sex. Collecting, analyzing and using gender-disaggregated data both at national and decentralized levels is necessary for the energy sector to take effective gender based policy decisions. The sector will reinforce the production, presentation and use of gender disaggregated data and regularly shared with interested parties and decision makers using the sector Management Information System (MIS) and other reporting platforms. Future policy making and strategy reviews should be very much informed by the gender disaggregated data. Energy sector gender strategy: The Government of Rwanda recognizes the importance of

promoting gender equality and women’s empowerment as an effective pathway for combating

poverty and foster sustainable development. A national gender policy was developed to

facilitate processes of addressing gender disparities and engender all policies and development

programmes/projects at all levels. In order to institutionalize gender equality across all sectors,

one of the requirements of national gender policy is that each sector will develop a sector

specific gender strategy. The purpose of the sector specific gender strategy is to examine how

energy sector policies, programmes/projects and conditions relate and impact on women and

men’s needs by taking into account the different needs and conditions of women and men in

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the sector. This enables the sector to come up with appropriate policies, programmes/projects,

plans and activities that clearly responds to different needs of men and women. It is in this

context that the energy sector will develop and implement an energy sector gender strategy to

accelerate and continue to promote gender equity and equality in the sector

3.4.5.3 HIV Issues

The Ministry of Health broadcasts all her health related programs on radios and Television

alongside other social media like twitter, face book and YouTube. All these facilities require

constant power supply without which communication will be delayed and or derailed. HIV

awareness campaigns to be broadcast over the same media will help reduce on infection and

transmission rates as well and treatment provided by health centres. The energy sector

Strategic Plan targets to electrify 100 percent of health administration centres to promote

health services provision and facilitate campaigns to combat killer diseases such as Malaria and

HIV/AIDs.

3.4.5.4 Environmental conservation and green growth

Rwanda has chosen to embark on a low carbon development pathway reflected in its recent

National Strategy on Climate Change and Low Carbon Development. Rwanda has potential for

renewable low carbon energy resources mix which is the foundation for a low carbon economy.

Although diesel is currently used for 39% of electricity production, this is planed to be phased

out and replaced with geothermal, hydro and solar which are all clean energy sources.

The strategic objective of the climate change and low carbon development strategy is to

achieve Energy Security and a Low Carbon Energy Supply that supports the development of

Green Industry and Services. Green growth is an emerging concept that recognizes that

environmental protection is a driver of global and national economic development.The

development of Rwanda’s energy resources will be in harmony not in contradiction with the

green growth strategy that was adopted by cabinet. In line with the above, Rwanda is planning

to enact relevant legislations such as requiring new energy using infrastructures to incorporate

green design to ensure efficient use of energy solutions. These may include; provisions for solar

water heating systems, natural lighting, ventilation and open office design among others to

reduce the demand for energy. The strategy for low carbon development is the first attempt

towards a climate resilient and low carbon development pathway for Rwanda.

On the other hand, government of Rwanda looks to concentrate on developing more clean and

renewable energy resources that ensure environmental conservation. The new domestic

generation technologies such as geothermal, methane and solar would be used to replace

expensive diesel power generation but also preserving the environment.

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Rwanda currently is planning to develop its indigenous energy resources to scale up generation

capacity to desired levels in line with demand. Rwanda’s energy sector is heavily dependent on

environmental resources with around half of Rwanda’s electricity coming from hydropower and

more than 80% of the population depending on fuel wood for their energy needs.

In recent years, poorly protected watershed areas and erratic rains have affected Rwanda’s

hydroelectric power generation resulting in a need for additional diesel generation. Diesel

generation costs the government over $65,000 per day (in direct fuel inputs only). It also

contributes to greenhouse gas emissions. With all the above in mind, government has put in

place measures to mitigate the potential negative impacts of energy resources exploitation and

be able to strike a balance between energy generation and the attendant negative

consequences.

Overall, efforts to mitigate impacts of climate change and preserve the environment include the

following among others;

Reduce reliance on traditional biomass energy. Government is working on a campaign

to reduce reliance on traditional forms of biomass from 85% to 50% by 2017). This is

being planned through the use of improved cooking technologies that reduce demand

for wood fuel and emit less GHGs to the environment. Other initiatives related include

the biogas program that is proposed to replace wood fuels for cooking as well as

Improved charcoal carbonization techniques, reducing charcoal yield and so does the

demand for wood cultivation.

Focus on local and renewable energy sources. The policy for the next 5 years going

forward is to put preference on the exploitation of domestic resources such as

geothermal, methane gas and solar resources to replace expensive diesel fuels that

even more are environmentally hazardous.

Increasing energy efficiency. This will be done through energy efficient devices such as

CFLs, Solar Water Heaters. Over 400,000 CFLs have been distributed and more 400,000

were yet to be disseminated by the end of 2012. This is estimated to have saved over

36 GWs of electricity. Government intends to make it a policy to have all the new

buildings installed with solar water heating systems to reduce use of electricity and

biomass energy for boiling water. This is expected to reduce a great deal of the impact

on the environment.

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Mandatory Environment Impact Assessment (EIA). All power projects are presupposed

to have environmental clearance and the Impact certification before project

implementation. This is even compounded in the RDB’s requirements before issuing an

investment certificate to any investments into energy resource development. Where

plants are operational before environmental clearance, a mandatory Environmental

audit is proposed by REMA.

3.4.5.5 Risk mitigation and control measures

Energy sector infrastructure can double as a potential cause for and victim of likely disasters in

Rwanda. Flooding, earthquakes and others such as volcanic eruptions may destroy energy

investments and disrupting national energy services provision and development in general;

likewise, oil spills, methane gas explosions as well as fire explosions at fuel storage facilities can

be catastrophic to humanity and the surroundings. In respect with the above, it is therefore

important to integrate a Disaster Recovery Plan into energy sector planning for the next 5

years. Key areas for mainstreaming disaster management plan into the energy sector include:

Conduct vulnerability and risk assessment in all energy related investments specifically

on the exploitation of Methane Gas and fuel storage facilities.

Develop contingency and evacuation plans in case of methane explosion in Lake Kivu

Promote alternatives energy sources( e.g. biogas) for environment protection in order

to reduce disaster risks

3.4.5.6 Regional integration

Rwanda fully supports the deepening of regional cooperation and integration in the energy

sector. In particular, Rwanda is committed to participating actively in the formulation of the

Regional Energy Master plans being coordinated by the East African Community (EAC), and

similar regional energy planning such as Common Market for East and Southern Africa

(COMESA) a subsidiary of the Communauté Economique des Pays des Grands Lacs (CEPGL) and

other regional initiatives. Other regional initiatives addressed under the national energy

strategy for the year 2012/2017 include;

o Regional strategies for efficient procurement, transportation and storage of petroleum

products.

o Regional electrical power projects promoted under the auspices of the East African

Power Pool (EAPP)

o The Nile Equatorial Lakes Subsidiary Action Program (NELSAP), which falls under the Nile

Basin Initiative (NBI)

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o Joint development with the DRC of Lake Kivu methane gas and petroleum exploration.

The EAPP is a regional intergovernmental body based in Addis Ababa Ethiopia with the sole

mission of pooling of electrical energy resources in a coordinated and optimized manner to

provide affordable, sustainable and reliable electricity in the region. The long term Vision of the

energy sector in this context is to promote regional exchange of power resources. The EAPP is

at an advanced stage in preparation for the necessary structures to commence market

operations (estimated to begin in January 2013) based on the strategic road map. Trade in

electricity and ancillary services will be available and coordinated at the soon to be established

Coordination Centre for the East African Power Pool (EAPP). As a member of the East African

Power Pool and the Nile Basin Initiative, Rwanda also has the opportunity to export/import

electricity generated from hydropower plants from further afield in the region. In this sense,

interstate energy activities will be supporting regional economic integration.

The strategic plan considers undertaking projects for regional interconnectivity. This will

consider connection networks between Rwanda Burundi, Tanzania and Uganda. Other energy

related initiatives (projects and programmes) to promote regional integration include;

Regional Strategy on scaling up access to Modern Energy Services in EAC: The strategy has 4

main targets, which were approved by EAC Energy Ministers in August 2005, to be fulfilled by

2015, in line with MDG framework in Scaling-up Access to Modern Energy Services. These are:

1. Provide access to modern cooking practices for 50% of the population that currently

uses traditional cooking fuel;

2. Provide access to reliable electricity for all urban and peri-urban poor;

3. Provide access to modern energy services for all schools, clinics, hospitals and

community centres; and

4. Provide access to mechanical power for heating and productive uses for all

communities.

The Strategy has four service areas that include:

1. Policy harmonization at regional and national level;

2. Capacity building of both public and private sectors to implement the strategy;

3. Formulation and implementation of investment programs; and

4. Strategic coordination and Programme management at regional and national level.

The EAC Regional Cross-Border Electrification Policy and Model Power Supply Agreement:

Cross-Border Electrification (CBE) allows consumers to benefit from resources across the border

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that are nearer than domestic alternatives, and can allow marginal projects to become feasible

when aggregating loads at both sides of the border. CBE is therefore defined as follows:

1. The extension of the distribution network and services from the network of one Partner

State to communities and other load centres of a neighbouring Partner State.

2. The development of a trans-boundary energy resource with its associated distribution

network for the purpose of supplying electricity to the communities and load centres

within the borders of two or more Partner States.

Eastern Africa Power Pool (EAPP) and East African Community (EAC): Under the EAPP - EAC

identifies power generation and interconnection projects, at Master Plan level, to interconnect

the power systems of EAPP and EAC countries in short to Long term. The EAPP - EAC developed

common Transmission Interconnection Code in order to facilitate the integrated development

and operations of the power systems of EAPP and EAC countries. EAPP – EAC contains the

institutional capacity building for the EAPP and EAC through training of counterpart staff. The

development of institutional capacity will enable EAPP/EAC to implement the subsequent

activities, including the updating of both the Master Plan and the Interconnection Code. The

EAPP - EAC covers the following countries in alphabetical order: Burundi, Djibouti, Democratic

Republic of Congo, Egypt, Ethiopia, Kenya, Rwanda, Sudan, Tanzania and Uganda.

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4 Implementation of the Sector Strategic Plan

4.1 Background and implementation plan

Energy sector is the widest and the most controlling sector given its systemic link and influence

on the performance of almost all the sectors of the economy. The sector covers electricity

(hydrological resources, solar, methane gas, peat resources, geothermal, waste-to-energy and

wind-still unexploited). However, the sector goes beyond electricity to include other sources of

energy like biomass (biogas, bio-fuels and charcoal) and oil products (petroleum, kerosene, LPG

and natural gas). The sector is strongly linked to other key sectors like transport,

manufacturing, agro processing, mining and others. Further, as government tries to modernize

other sectors, , it will be paramount to supply sufficient, reliable and affordable supply of

energy products to end users.

Implementation of this energy sector plan will be done prudently to a void significant

disruption to the entire economy. Further, this will be a joint effort of all key players from

policy makers, investors and financiers. Some of the challenges to the implementation of the

energy sector strategy include issues of coordination given the complexity of the sector (from

petroleum to biomass), financing requirements, exogenous forces (price fluctuations) and

others. The basis for this strategy though is to create an elaborate approach of remedying these

current and future anticipated challenges. An energy SWAP secretariat was created to that

respect to ensure coherence and synergy, ensure cross-sectoral collaboration, bridge all key

sector players in consultations on strategic actions required for the sector to grow. The sector

Wide Approach Secretariat (SWAP) is charged with ensuring the realization of cross-sectoral

coordination and collaboration with in the energy sector.

The process leading to the development of the Energy Sector Strategic plan was of a

consultative nature. All the key stakeholders both private and government were exhaustively

consulted and their decisions and ideas form the basis of this strategy. During the strategy

development process, majority of stakeholders were practically involved in the entire exercise

from the start to ensure a sense of ownership of the ideas and commitments reflected herein

this strategy. This participatory approach has and will be maintained during the implementation

and monitoring and evaluation phases, hence recommending the need to further strengthen

the SWG and TWGs approach. As mentioned, key stakeholders will keep in the loop through the

implementation process with the SWAP secretariat on the lead and the SWG playing its usual

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oversight role. For matters of clarity, some of the institutional members of the Sector Working

group are enlisted below;

The lead Ministry-Ministry of Infrastructure

The Lead Donor

Prime Minister’s Office

The Ministry of Finance and Economic Planning (MINECOFIN)

Provincial and Kigali city representatives

Development Partners(DPs)

Civil Society Organizations

Private sector institutions

4.2 Sequencing of interventions

As described in chapter 3.

4.2.1 Roles and responsibilities of energy sector partners and stakeholders

4.2.2 The role of Central Government

Central government covers government Ministries, autonomous and semi-autonomous institutions, government Parastatals and implementing agencies. The leading Ministry for this case is the Ministry of Infrastructure. Ministry of Infrastructure Ministry of Infrastructure (MININFRA) is the lead Ministry and is charged with elaborating an enabling policy, legal and regulatory framework within which sector activities will flourish. MININFRA will offer Policy over sight, political guidance in the preparation and implementation of the energy sector budget, lead in the sector resource mobilization together with the Ministry of Finance and Economic planning. MININFRA will ensure the provision of technical guidance on engineering aspects, support the development of the necessary infrastructure, and structural integrity of downstream petroleum facilities. Specific energy related roles of the Ministry of Infrastructure are summarized below;

To develop institutional and legal frameworks, policies, strategies and master plans relating to the energy sector

To initiate the development of national energy infrastructure

To initiate, and monitor the supppy of sustainable power generation facilities and uninterrupted energy for the country and the region

To design and implement programs to enhance human resource capacities in the entire energy sub-sectors

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To supervise, monitor and assesss the the implementation of national policies and programs on matters relating to energy,

To lead in resource mobilization and partnerships in the area of energy at a national and regional level

Energy Water and Sanitation Authority (ESWA) Following law No 43/2000 of 7/Dec/2010, the two National Parastatals in charge of energy and

water distribution (RECO& RWASCO) respectively were merged into one multipurpose

authority in the names of EWSA. According to the law above, the mission of EWSA is to

implement government policy for developing energy, water and sanitation sectors through the

coordination, conception, development, monitoring and evaluation of the actions and

programs that are within the framework of its mission. Specifically on energy, EWSA’s key roles

include the following;

Coordinating the implementation of all activities related to and programs aimed at development and exploitation of energy sources,

Protection of Lake Kivu and its shores, the lake environment( people and animals plus aquatic life) residing around it during and after Methane gas extraction activities,

Ensuring proper management of electricity infrastructure, gas and petroleum products.

Coordinating activities and programs aimed at promoting and exploiting energy resources in the country;

Conducting analytical studies on energy supplies and demand, evaluation and programming of actions for energy sector activities.

Organising sensitization campaigns for consumers of energy in all its forms to boost products demand

Ministry of Commerce (MINICOM) The Ministry of Commerce will mainly take a lead on the development and implementation of the downstream side of the petroleum subsector that is part of the entire energy sector. MINICOM is specifically, charged with the following;

Formulating and overseeing the implementation of the downstream petroleum policy.

Establishing and developing downstream petroleum related legislations

Promoting and building durable petroleum energy sector resource capacities

Promoting the development of petroleum infrastructure and a competitive economy in line with the goal of this policy.

Adjusting institutional framework conditions to meet any emerging changes.

Promoting a guided development of a petrochemical industry in the country

Assessing and communicating petroleum demand and supply requirements

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Ministry of Natural Resources (MINIRENA) The Ministry of Natural resources will proactively engage and influence other ministries to

follow and comply with environmental concerns during energy related investments like

assessments of the potential impacts of developing energy resources on the environment.

Rwanda Natural Resources Authority (RNRA)-An autonomous authority under the

Ministry of Natural Resources that is in charge of management of Rwanda’s natural

resources(hydrological resources, land, forestry, etc). It is entrusted with

supervision, monitoring and implementation of all issues relating to promotion and

protection of the above natural resources. RNRA will also provide technical services

in the Upstream Petroleum activities; promoting Rwanda’s petroleum prospects,

supporting the work of International Oil exploration companies in Rwanda, and

monitoring their activities to conform to relevant contracts with GOR

Rwanda Environment Management Authority (REMA) - REMA leads in ensuring that the relevant environment regulations in relation to the upstream petroleum sector are in place and that the same are adhered to. A framework including monitoring and evaluation of oil companies operating will be crucial and REMA will monitor project implementation to ensure compliance to environmental standards.

Ministry of Local Government (MINALOC) - The Ministry of Local Government being the lead

ministry in promotion of decentralized services delivery will help in promotion of improved

rural based energy technologies like improved cooking stoves, biogas digesters and other

energy initiatives targeting rural areas. Further, MINALOC will speed up the implementation of

the National settlement program (“umudugudu” settlement schemes) that is targeted to

reduce the cost of electrification per household.

Ministry of Finance and Economic Planning (MINECOFIN) The Ministry of Finance and Economic Planning will ensure the provision of necessary funding to support undertaking of the responsibilities for the different Ministries that are party to the energy sector and operational/managerial agencies arising out of this policy. Most importantly, as an example in this case, MINECOFIN will fund the securing of national strategic reserves of 1 month equivalent of consumption and hospitality fees for the 3 months reserve requirement by the private sector in line with the petroleum Downstream policy. MINECOFIN will fund the government strategic reserves and any related replenishments under progressive budget commitments or other modalities as may be found to be appropriate (see page on petroleum for details)

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MINECOFIN will provide strategic guidance to the national development planning processes and lead the resource mobilization and allocation process. MINECOFIN will also provide for any necessary incentives for the private sector to carry out petroleum exploration activities under the upstream petroleum policy. With respect to planning and resource allocation, MINECOFIN will assist to link the upstream petroleum strategic outcomes with the EDPRS and higher level plans. It will facilitate resource mobilization meetings with development partners and approve new innovative financing mechanisms for this strategy. It will ensure that key ministries with upstream petroleum responsibilities prioritize and allocate sufficient funds to upstream petroleum activities.

RURA-Rwanda Utilities Regulatory Authority is responsible for licensing investments into construction of power projects and petroleum infrastructure like fuel storage facilities and filling stations. This is jointly done with the Ministry of Infrastructure. RURA will ensure that the operations of oil exploration companies comply with set national standards (upstream) MINEAC-The Ministry for East African Community Affairs is a coordinating body for EAC and Rwandan priorities within EAC Protocols, Treaties, Strategies and so forth. MINEAC follows commitments signed by Rwanda on energy projects and ensures Rwanda and Partner States deliver to these commitments. As the regional integration process intensifies over the next five years, the role of MINEAC in the energy sector on regional projects will become more important. Towards the end of the EDPRS II period, a larger proportion of energy will be sourced from joint regional projects and transmitted through EAC-funded transmission lines. It is therefore important for MINEAC and MININFRA to work together to ensure these come on line in a timely and efficient manner to assist in achieving the national energy goals. Additionally, there are alternative sources of funds available for regional projects that can be examined over the next five years. The Local Governments Local governments have the authority and the mandate to implement discrete enabling policies

that Drive Rwanda’s economic transformation. The local government will ensure that all the

guidelines and directives from the central government are fully disseminated to the country

side. Local Government Authorities under decentralization policy have direct responsibility for

all decentralized services, including ownership and use of energy products. With increased local

government finance through the CDF and through direct transfers, local authorities have

considerable resources to finance their DDPs and Performance Contracts (Imihigo) and energy

products are part of these obligations.

EWSA’s utility programs are seeking to target the communities and sectors for the greatest

efficiency opportunity and to cost-effectively scale up programs to serve more end users of the

energy products.)

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4.1.1 The Private sector The private will be responsible for undertaking investments into the sector through IPPs or Joint

ventures with government where the engagement manifests proven value-for-money. For the

petroleum subsector, private investoprs will be requested to carryout actual exploration work

at their cost, however, recoverable under the PSC. There is therefore need for effective and

efficient cost tracking mechanism. More specifically, the private sector will be responsible for

the;

Establishment of energy generating and supplying projects like power plants,

strategic storage facilities, filling stations, biogas digesters, solar systems as well as

LPG supply chains.

Research in petroleum exploration studies and commercial development.

Technology improvements in exploration, exploitation and maintenance.

Managing all the energy products supply chain

Financial institutions and Development partners

Financial institutions and development partners have a critical role to play in the energy sector.

Financiers and development Partners (DPs) will offer financing opportunities to energy

entrepreneurs, energy end users (like credit on domestic biogas users, etc). Detailed roles of

the financiers and development partners are outlined hereunder:

Provide required financing to energy investors;

Offer reasonable guarantees and risk insurance to potential investors into the

sector such as PRG and MIGA offered by the World Bank.

Support research and feasibility works undertaken by either government or the

private sector to prove energy resource potential.

Provide technical support to both private and public institutions engaged in

development of energy resources(support to capacity building initiatives)

Support technology transfer through recruitment of international experts to train

Rwandans on modern technologies of developing energy resources in a

sustainable manner leaving local ready to replace them successfully.

Research and Educational institutions Research and educational institutions will work together with MININFRA to promote the best

utilisation of energy resources in a sustainable manner. With the help of the National Institute

of Statistics of Rwanda, research and academic institutions will collect and analyse energy

related data, make situational reports and propose recommendations to guide future policy

making.

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Rwanda’s research, educational, training and technology institutions (including IPAR, NUR, and

KIST, IRST, ISAE and others) will need support to research on energy resource development

technologies, measures for improvements to meet best practice and issues of sustainable

energy resources development. These institutions will adapt their training programs and

capacity building to provide skills and knowledge in the implementation of the energy policy

and strategy.

Academic institutions like schools will work with MININFRA to ensure appropriate

implementation of the National Institutional Biogas program. Science and technology

institutions and universities in Rwanda have a key role to play in research and capacity building

for the energy sector. Government should instruct higher institutions of learning to revise their

curriculums and make them tailor made to provide students with sufficient knowledge on the

energy sector, modern energy technologies like hybrid wind/solar technologies, biogas digester

construction, assembling and maintenance of solar solutions, manufacturing of improved

cookstoves and efficiency technologies. To reach such objectives, training institutions should

stress on the following issues:

Adapt their curricula to peculiar requirements of the energy sector labor market.

This will be done through responsiveness to the needs of the private sector in

the recruitment of staff, development of course material, design of internships in

energy industry, and in the skills transferred to students;

Development of library and reference resources for researchers;

Provide assistance to students in their search for employment following

graduation;

The Civil Society The civil society will also play a vital role in support of implementation of the energy sector

Strategic plan. Civil society will majorly be keen on providing education, awareness and

advocacy campaigns as their key focus areas. One of the significant foras in which government

work with the civil society is through the Energy Sector Wide Approach (SWAP) secretariat

chaired by the Lead Ministry deputized by the lead donor for the sector. Civil society through its

umbrella organization called Rwanda civil society platform with over 15 member organizations

would be expected to actively participate in advocating, supporting and promoting productive

use of energy resources and advocating for quick service delivery to the citizens. Specific roles

of the civil society herein in this strategic plan can be summed up into undertaking policy

advocacy, energy education and people empowerment.

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The Media The media has played and will continue to play a crucial role in raising public awareness of

efficient energy consumption practices and adoption of modern and more efficient

technologies as well as reporting on energy related local concerns where necessary. The media

in Rwanda can be effective agents of change, especially as mass media (particularly radio)

remains the main source of “authentic” information from government to the residents.

The Initial target groups for awareness and sensitization in the residential sector forexmaple

could be high-end consumers whose homes or apartments use substantial amounts of energy

in heating, cooling and lighting. The mass media (print, broadcast, and others) will be effectively

mobilized and empowered with the knowledge, skills and information for effective, accurate

and regular energy market reporting to communicate government programs to the end

beneficiaries. Areas of intervention by the media fraternity include the following;

Providing awareness programs for the population;

Undertaking press coverage for energy efficient campaigns, covering special events like

investments foras, energy weeks, etc.

Spreading by air or by print press forest policies and legislation clipboard on energy

resources. This will be supporting susutainable use of biomass.

Collecting and disseminating information on the energy products market and new

technologies on the market such as improved cooking stoves, biofules, etc.

4.2.3 Mechanisms for co-ordination and information sharing

SWAP secretariat: A focal point for government-donor coordination. The secretariat will ensure effective communication between government and development partners and keep records of the SWG members.

Joint Sector Reviews and Energy Sector Working Group: A forum under which government meets energy sector stakeholders to deliberate on matters affecting the sector. The sector working group meetings review past sector progress presented under backward looking joint sector review reports and agrees on plans going forward(Forward looking sector reviews).

Joint Delivery Committee: An inter-ministerial Committee chaired by the office of the Prime Minister to discuss measures to unblock potential contraints curtailing projects delivery. This commiiteee will coordinate government ministries responsible for energy sector development and give political guidance on resolution of key issues affecting the sector.

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5 Monitoring and Evaluation

This section aims to describe mechanisms for systematic gathering of sector information and

data on specified indicators to inform management and the main energy sector stakeholders of

ongoing energy sector operations and the extent of conformity or not to the desired

commitments. The section also reports on the extent of progress and achievement of results in

the use of allocated resources for the energy sector investments. The objective of this will be to

determine the relevance and fulfilment of objectives, as well as efficiency, effectiveness and

sustainability of commitments reflected herein this strategy.

High level monitoring of the energy sector performance in line with the EDPRS II energy related

targets will be jointly done by the Ministry of Infrastructure closely wit thye Ministry of Finance

and Economic Planning. (MINECOFIN). For the energy sector, this will primarily involve tracking

two main performance indicators(the generation capacity towards the targeted 563 MW and

45% grid access to electricity by 2017 with Minecofin concentrating on the government

financing obligations for the underlying energy investments.

MININFRA is responsible for detailed Monitoring and Evaluation of the programs, projects and

activities required to achieve commitments reflected herein this sector strategic plan.

Procedurally, the Ministry of Infrastructure will monitor and evaluate sector performance

progress as compared to set targets through the following steps;

Scrutiny of the evolution and reporting on the performance indicators overtime

Examination of progress and drawing of conclusions for further policy reviews

Incorporation of observed occurrences and conclusions reached into future policy

reviews to give new direction to the implementation process.

Note: There is an established Management Information System(MIS) under EWSA. A

comprehensive database as well as an effective Management Information System(MIS) will be

vital for effective monitoring and evaluation. The MIS is responsible for planning, directing and

coordinating the energy information systems for the sector as a whole. The office will need

more capapcity to deliver and report on time.. In related development, a Monitoring and

Evaluation tool has been developed and is currently used by MININFRA and EWSA to track

weekly progress of energy sector projects.

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5.1 Energy Management Information System

Following the recommendations of the last ESSP, a database for energy Management

Information System Was put in place at EWSA to support planning, monitoring and evaluation

of the energy sector. Efforts are currently being made to develop sustainable data collection,

reporting and quality assurance mechanisms and provide training to all the stakeholders

involved in system operation, including particularly the primary data providers. The energy

sector Management Information system looks at:

Development of an energy sector baseline database, annually updated

Maintenance of a comprehensive set of statistics on energy which will be useful for

researchers and policy makers

Designing and implementing a system of planning, monitoring and evaluation of the

financial status and physical progress of energy projects

Creating a system to give regular, comprehensive reports on the execution of the Energy

Sector Strategic Plan (ESSP) for 2013/2017

Results based management will be used to monitor and evaluate the activities planned herein the energy sector strategic plan. Results-based monitoring is a continuous process of collecting and analyzing information, comparing actual results to expected results in order to measure how well a project, program or policy is being implemented.

Results-based evaluation is an assessment of a planned,ongoing, or completed intervention to determine its relevance,efficiency, effectiveness, impact, and sustainability. The intention is to provide information that is credible and useful,enabling incorporation of lessons learned into the future decision making processes. This approach will provide crucial information about energy sector performance and help policy makers understand whether or not promises were fulfilled, providing a view over time of the status of a project, programs and implementation of enegy subsector policies.

Results based Monitoring and Evaluation will be undertaken based on the following key steps;

Conducting a Readiness Assessment

Agreeing on Performance Outcomes to Monitor and Evaluate

Selecting Key Indicators to Monitor Outcomes

Baseline Data on Indicators

Planning for Improvement(Setting realistic targets)

Monitoring for results as planned

Clarifying the role of Evaluations

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Reporting Findings

Using Findings Sustaining the M&E System Within the Ministry.

Sector Performance reviews-Energy Joint sector reviews will be held semi-annually to assess

progress on the achievement of targets set herein and agree on the sector plans and

commitments going forward. Key information on energy sector performance and EDPRS II

related indicators will be shared with the stakeholders as a form of accountability and

information sharing responsibility. EWSA will work together with the National Institute of

Statistics to ensure compatibility and synergies between the National data collection surveys

and the web based Management Information system.

The sector MIS will inform coordination foras such as the Energy Sector Working group(ESWG),

Thematic Working Groups(TWG), The Development Partners Coordination Group, Joint Delivery

Committee(JDC) and Cabinet on the developments into the sector and key challenges that

require political guidance. Below is an outline of key institutional stakeholders that will be

involved and pray a significant role in the implementation of the energy sector strategic plan;

5.2 Evaluation

Evaluation is the systematic assessment of the substance or merit of the project or program.

This note serves to highlight the need for and the process of ensuring that there is results based

evaluation at all sector levels. Standard evaluation and reporting formats will be drawn up and

agreed upon between Districts and the central government lead by MININFRA. Regular sector

reviews will be organized internally and with other partners, particularly in the EDPRS thematic

working groups to evaluate sector performance in line with commitments reflected herein.

The objective of this section is to give guidance on the future assessment of how the energy

sector strategy will have been implemented. The evaluation process will include ongoing

monitoring of trends that may be impacting the progress of implementing the plan or lack of

progress towards the goals. The process will entail;

Identifying individual goals and objectives that are progressing well according to

the plan, and those that are falling short, and suggesting any actions or

adjustments that may be needed for the energy sector strategic plan to succeed.

A final evaluation will be done after implementing the strategic plan to

determine overall success and impact of the strategy on achieving EDPRS II

objectives.

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A clear evaluation plan will include; who is responsible for reporting, gathering,

and evaluating data, data collection measures and timeline for completion of the

exercise.

5.3 Communication

So as to improve the implementation of the ESSP issues arising from the evaluation process

which requires redress will immediately be dealt with inside MININFRA and/or communicated

to relevant parties outside the Ministry through the Sector Working Group. EWSA, given its

leading role in projects and programs implementation follow-up will be particularly resourceful

in this respect. For the next 5 years (2012/2017,) MININFRA will be responsible for regular

communication of progress and reporting on the status of implementation of the Energy

projects, to the sector stakeholders. Specifically, this will be done through the ways highlighted

hereunder

Regular meetings will be held with the Energy Sector Working Group, which will

participate in joint reviews of performance of the sector

MININFRA website will be updated quarterly , with significant information about the

Strategy and key sector achievements, opportunities as well as plans in pipeline,

accessible to the public

Local media (newspapers, radio and television) will be used to communicate about the

Strategy and state of the sector. This will be partly meant to raise mass awareness on

new sector initiatives such as energy efficiency technologies.

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6 Cost and Financing

Total financing: Total financing requirement for 5 year (2013/2017) energy sector plan

including generation, transmission and access program as well as petroleum and biomass

energy is estimated at US$ 2.847 billion (Frw 1.708 trillion) as summarized in table 13 above. Of

the total financing requirements, total public funding requirements including donor support is

estimated at US$ 1,551.2 billion(54%) while the remaining US$1.295 billion(46%) is planned to

be generated by the private sector.

Expenditure on electricity: Total expenditure on electricity investments alone is estimated to

take close to 97% of the total energy sector capital expenditure. The remaining 3 percent is

shared between biomass and downstream petroleum activities. Expenditure under biomass

energy resources will mainly be directed to meet the cost of subsidy16 for the installation og

biogas digesters as well as awareness and sensitisation programs.

Petroelum: Under down stream petroleum subsector, government through the Minstry of

infrastructure is in charge of managing petroleum storage infrastructure. As already noted in

this document, to ensure security of supply, government plans to have storage facilities capable

of storing 5 months consumption equivalent of petroleum products by 2017. The petroleum

downstream policy requires to keep 417 months consumption equivalent as reserve for

commercial and strategic purposes. Government will therefore need to secure and prepare

enough land for this infrastructure. The US$ 4.5 million budgeted is meant to pay hospitality

fees for private storage of government fuel reserves and maintenance of petroleum storage

facilities. See Annex 2 on financing for details

16

Government policy is to provide a flat subsidy of 300,000 to whoever is installing abiogas digester. 17

3 months fuel consumption equivalent will be kept by the private sector while 1 month will be kept by government

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Annex 1: Generation Investment Roadmap

6.1 Peat-to-Power Generation

A Peat master plan was developed in 1993 which indicated that we have the potential to

develop around 700MW of generation from our Peat resources. This study however was

undertaken at a high level based primarily on a small number of samples and desk based

research. The study does not constitute a basis on which to undertake multi-million dollar

investments in generation and significant time and finance must be dedicated to developing a

full understanding of Rwanda’s peat resources if we are to avoid the pitfalls outlined on the

previous page. Time and finance to undertake such studies has been factored into our planning.

A map outlining the current understanding of Rwanda’s peat reserves can be found at the end

of this section.

The table below outlines peat projects planned to be implemented over the EDPRS II period to

deliver the demand driven roadmap.

Hakan (100MW) expected to deliver in 2017

Gishoma Peat to Power (15MW) expected to deliver in early 2014

Small Peat (3* 15 MW) to deliver at the end of 2015, mid 2016 and the end of 2016.

100 MW of additional Peat generation expected to be delivered via a PPA 2017.

Implementation is already underway for the Hakan and Gishoma plants so we will focus our

discussion on the small peat and additional 100 MW plant.

Small Peat (3*15 MW): As illustrated in chapter 3, the need for additional generation

capacity is likely to be most pronounced over the next 3 years and so herein this

document is the proposed plan to accelerate delivery of additional peat generation. We

propose to undertake feasibility studies and prepare / drain our own peat bogs as a

critical path activity in Peat Generation development. This can take place in parallel with

sourcing the necessary private sector investment. If the two were to take place in

sequence, the project would likely be delivered at least one-year later. It would also

help us to better understand our peat resources and ensure any future engagement

with the private sector makes best use of our limited resources.

Hill top and hill side peat bogs are the quickest to develop as the topography of the land

provides natural drainage. It should be possible to prepare such sites within around 2-years of

completing a full feasibility study. In early 2013, we will have completed pre-feasibility studies

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on 7 such sites (one has already been completed and suggests the site is suitable for a 15 MW

plant). We anticipate at least 3 of these sites being suitable for developing small scale (15 MW)

generation as earlier proposed.

Once a site is prepared, it is necessary to harvest the site for around 6-months to build up

sufficient stock pile of peat for generation. Our current view is that this harvesting / peat

mining should be undertaken by the private sector and if possible the same party that will

develop and own the power station. There are clear benefits to keeping the supply chain intact

as each interface between companies poses additional risk.

100 MW of additional peat generation: Following the conclusion of the PPA with

Hakan, there is considerable private sector interest in developing generation from our

peat reserves. Based on the expressed interest, we propose to initiate a competitive

tender for a private sector developer to develop and operate mining and generation

infrastructure to provide an additional 100 MW to the grid. We have a number of

potential sites including the Akanyaru and around Akagera. As a priority, government

must conclude feasibility studies in these areas before progressing to competitive

selection of a private partner. The timelines for this are outlined on the gant chart on

the following page.

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Figure 18: Peat to Power projects delivery plan

Assumptions: Publicly Funded activities: Hiring of International Experts: To coordinate the peat testing, and any public peat mining we would need international expertise; we have assumed 2 experts @ $250k p/a for 3 years. Sampling and testing:

Sampling: For 25 MW of generation capacity you will need approx. 1500 Ha of land. Sampling every 500m would require 77 samples. Sampling every 200 m would require 416 samples. We will assume 200. 2 People could take 10 samples per day or 50 per week. therefore a team of 8 samplers could take all samples in a week. Additional staff to transport the samples to the testing site are required. We assume it would take around one month to prepare the site for sampling. Testing: Each sample is a vertical sample going down approximately 4 meters; a test needs to be done on each meter. Therefore 800 tests need to be completed. Each test would take approximately 1/2 a day. In total to complete the tests with 20 ovens would take 4 weeks or one month. Testing can begin in parallel Costs for feasibility studies are based on 30 people at $1000 / month.

Lab Equipment: Our $0.5m estimate includes the purchase of 20 ovens for testing the peat samples, 10 sampling rods and 3 trucks and premises for the laboratory. Public / Private Partnership: Peat Drainage To expedite Peat Mining and to ensure GoR maintain control over this valuable resource we are proposing the establishment of a state-owned peat company. The costs oan the Peat Mining operation include the capital costs of the peat mining equipment as well as the staff costs during the bog preparation phase. We have assumed it would take around 27 months to prepare a bog in advance of power generation. Note the peat mining operation would be Private Finance: Power plant construction: Once the resource has been proven and a commitment has been made by GoR to mine the peat through a state owned peat company the risk for the private sector should be significantly reduced and we could sun a competitive process to select a partner with whom to enter into a PPA. We propose undertake a 3 month tender process and then allow the selected partner 2-years to construct the power generation plant.

1

6.2 Hydro power generation

Hydro power, where correctly sited, can deliver an economic supply of base-load power. We plan to develop around 70 MW of domestic Hydro projects between now and 2017, as illustrated in the roadmap at the start of this chapter. As with peat, the individual nature of each Hydro site necessitates a feasibility study be carried out in advance of development or contracting with the private sector. The table below outlines the projects we propose to undertake during te EDPRS II period:

28 MW from Nyaborongo to deliver in 2013/14 and 2014/15, 14 MW in each period.

5 MW of additional generation from Rukara in 2014/15

32 MW from small scale Hydro for which feasibility studies will complete in 2013 (2015 – 2018).

Projects under implementation/contracted: Nyabarongo, the Micro-hydros, Giciye, and Rukarara V are all either under implementation or we have already signed a PPA. EWSA and the Ministry need to ensure these projects are delivered on time. Potential projects for competitive tendering: Feasibility studies are currently underway on a number of projects identified through a Hydro Atlas which was complete in 2008. These studies are expected to be completed in 2013. Upon their completion we will undertake a competitive process to identify a private sector partner, as outlined in chapter 3. Possible addition of Nyabarongo II Multipurpose Dam: A feasibility study was undertaken in 2007 which proposed the placement of a dam along the Nyabarongo River approximately 30km North East of Kigali. The projected cost of the project was significantly above the benchmark for a hydro project purely for electricity generation. The development of the site is however likely to generate other benefits such as irrigating local land to increase the agricultural yield and supplying drinking water. A full feasibility study is currently underway which will be reported this year. Based on this feasibility study we will take a decision on whether the project should go ahead and how the costs can best be shared between the water and electricity consumers and the beneficiaries of the newly irrigated land.

6.3 Methane gas-to-power generation

The reserves of methane held in suspension within Lake Kivu represent a significant natural

resource which can be used for the generation of electricity. In 2013/14, we expect 25 MW of

new generation to come online through the KivuWatt project. In addition to providing much

needed additional generation, this will prove the technical feasibility of extraction and

generation at this scale. The table below outlines the projects which we will need to achieve

over the following 5-years:

25 MW from KivuWatt I in 2013/14

50 MW of additional Methane in 2016/17. The partner will be selected via competitive process.

3.6 MW from the rehabilitation of REC generation plant in 2014.

2

Feasibility work: Whilst we expect the commissioning of the KivuWatt plant early in 2013 / 14

will go a long way to proving the feasibility of lake Kivu methane gas, we also propose to fund

a wide ranging pre-feasibility study to identify the range of opportunities available for

investors, assessing projects of differing sizes and based on different technology types.

KivuWatt: KivuWatt are due to deliver 25MW of generation in 2013 / 14; once this has

been demonstrated to be successful, we could partner with them to deliver an

additional 75 MW

REC: We are currently looking for technology providers and investors to partner with

us to rehabilitate our REC generation plant.

50MW of additional generation: We consider it could be possible to attract additional private

sector interest to construct 50MW of additional methane capacity, and in early 2013 launched

a competitive process through which we will select a private partner.

6.4 Geothermal power development

Geothermal energy is a clean and reliable source of energy, which is not affected by short-

term fluctuations in the weather or world producer prices of oil. Most of the geothermal

plants when installed have relatively very low maintenance costs and high availability.

Geothermal energy is not dependent on whether it is day or night as solar energy is, or

whether the wind blows strongly or not. We will give the development of our Geothermal

Resources the highest priority over EDPRS II period.

10 MW from Test Generation site at Kinigi

10 MW from Test Generation site at Karisimbi

50 MW of production scale generation at Kinigi / Karisimbi

Feasibility and our Resource: Based on surface studies we have identified three sites with

geothermal potential. The most promising of which are Karisimbi and Kinigi where it is likely

we will discover a commercially viable geothermal resource18 for power generation using

either binary or condensing steam turbines. A summary of our possible geothermal resources

is detailed in the table overleaf:

18

As verified by an international expert in Geophysics employed by EWSA.

3

Table 13: Potential areas with for geothermal resources Geothermal Prospect Karisimbi Gisenyi Kinigi Bugarama Other areas Total

Resource Area (Km2) 25 30 25 50 20

Developable area (Km2) 8 5 5 2 2

Number of wells per Km2 10 10 10 10 10

Average well productivity (MWe) 4 4 4 1 1

Resource potential (MWe) 320 200 200 20 20 760MW

Completed work Surface studies

Surface studies Surface studies No surface studies No surface studies

Next steps Infill studies, infrastructure, exploration drilling, production drilling & power plant construction

Recon surface studies

Recon surface studies

Surface exploration Costs (US$) 900,000

Complete

900,000

Complete

900,000

Complete

1,400,000

Not started

200,000

Not started

4.3m

Infrastructure costs (US$) 2,000,000 2,000,000 2,000,000 1,400,000 600,000 8.0m

Water supply 5,000,000 2,000,000 2,000,000

Exploration wells (3 wells) 21,100,000

21,000,000 21,000,000 21,000,000

Well Testing (3 wells) 120,000 120,000 120,000 120,000

Production wells The cost of production wells same as exploration wells but costs can be reduced if Rwanda owns rigs

Power plant Estimated cost of US$ 2,000 to 3,500 per Kw installed for commercial plants

We will start drilling in Karisimbi in 2013 and, assuming a commercially viable resource can be

found intend to progress to production development immediately. The costs of exploratory

drilling in all three sites are likely to be around $100m. We propose that the private sector

undertake both production drilling and generation.

A detailed Geothermal Strategy and Geothermal Act have been developed which will both be

formally approved

4

Annex 2: Summary of costs and required financing

5

6

7

Annex 3: Monitoring and Evaluation Matrix

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REPUBLIC OF RWANDA - MINECOFIN · 2.3.4 Challenges within the Electricity sub ... Proposed Solutions to Key challenges facing ... and large users such as industry which will ...

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