Rwanda Energy Situation

1. Situation Analysis

1.1 Energy situation

Rwanda‘s energy balance shows that about 85% of its overall energy comes from biomass (99% of all households use biomass for cooking),11% from petroleum products (transport, electricity generation and industrial use) and 3% from hydro sources for electricity. In 2009 about 6% of the total population had access to electricity and the government has started a roll out programme to rapidly increase this to 16% by 2012 and at least 30% by 2020. The country has currently about 65 MW installed generating capacity (hydro and diesel) but there are a number of new sources coming on line within the coming years. The economic sectors with highest potential for growth (agricultural processing, tourism, IT) depend heavily on energy supply. While larger enterprises work mainly with expensive diesel generators, most of the small businesses in rural areas have no power supply. This limits their options for expansion and hinders productivity. At the same time, due to the shortage of energy, the greater part of the social infrastructure is unable to provide services efficiently.

 Hydro sector

There are only few providers of decentralized energy systems in the country. The PSP Hydro project will provide technical and business expertise to support the creation and development of economically sustainable small and micro energy providers. This will contribute to improve the power supply in Rwanda for productive applications (small and medium-sized enterprises), as well as the social infrastructure and electricity for households. A survey in 2007 prepared a micro hydro atlas which identified about 300 sites for small and micro hydro power which can be used for minigrids or connected to the national grid, depending on the location. There have already been a number of projects implemented through the Ministry with assistance of UNIDO, BTC and EU. These are constructed under direct supervision of the ministry and once operational, will be handed over either to the national power utility or will be managed through private companies or in joint venture.

Biomass sector

Biomass (firewood, charcoal and residues) remains practically the only source for cooking. LPG consumption is extremely low (consumption per capita is 1/50 only of Kenya, the market leader in the region) while kerosene is practically only used for lighting. The Government‘s Vision 2020 asks for a reduction of biomass consumption by 50% by 2020, but is it not clear what the alternative sources of energy will be. Government programmes have focused on the increase of wood production (already 80% of the country‘s firewood and charcoal come from eucalyptus) through plantations and agro forestry programmes and to increase efficiency in charcoal production and the use of improved stoves. Already over 50% of all households have improved stoves (different models depending on the fuel used) and the Government wants to increase this percentage to 100% while at the same time improving the efficiencies of the improved stoves.

Biogas

Biogas has been introduced in the country many years ago and Rwanda has gained international recognition for its programme in the prisons and large institutions. 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. The Ministry organised in 2009 a training programme for about 25 technicians and craftsmen. No further activities are taking place as there are no funds allocated to institutional biogas in the financial year 2009/10.

Activities in the domestic biogas sector started much later. It is estimated that over 120,000 households have dairy cows that are kept under zero grazing conditions to reduce soil erosion and also due to lack of grazing areas. These numbers are increasing due to the governments programmes to increase the number of families with dairy cows. The National Domestic Biogas Programme started in 2007 with the construction of 101 pilot digesters funded by Ministry and with technical assistance from SNV. GTZ/EnDev inputs became available Jan 2008. Since that time the focus has been on capacity building, training of technicians and entrepreneurs, awareness campaigns and promotion. In total another 201 digesters were build up to 30 Sept 2009. About 30 large biogas digesters have been constructed in institutions and Rwanda has received international recognition for the biogas systems that have been installed in the prisons over the last decade reducing firewood consumption by up to 40% and improving hygienic conditions. The Government has announced a policy for boarding schools, health centres and other large consumers to install biogas systems within the coming years.

Key problems of the energy sector

The following problems are noted for the energy sector:

• 1. Access to electricity remains low and in particular so in the rural areas even if roll out plans are implemented as *scheduled. Additional efforts are required to provide electricity to those will not be close to the national grid,
• 2. Costs of new connections are at least $500/household and are beyond the reach of most households in Rwanda,
• 3. There is general a lack of entrepreneurial capacity in the country and this hampers small commercial electricity projects,
• 4. The increasing population and rising incomes per capita will result in a higher demand for cooking energy,
• 5. Government wants a reduction of the consumption of biomass (firewood/ charcoal) but there are only few alternatives such as LPG and kerosene. However, these are more expensive while electricity is no real option due to the high costs and the low connection rate.

1.2 Policy framework, laws and regulations

Vision 2020 (published in 2000) is Rwanda‘s long-term development blueprint seeking to transform the country into a middle income position. The Policy statement includes a pillar on infrastructural development, including energy with high priority to access to electricity for the population but also a reduction of the use of wood energy from 94% in 2000 to 50% in 2020. The EDPRS refers to Vision 2020 and for the energy sector has four main elements:

• a) Increased access to electricity for enterprises, households, health centres, schools and local government administrative offices,
• b) Reduced costs of supply of electricity and the cost of imported petroleum products,
• c) Diversified sources of energy supply and enhance energy security, and
• d) Strengthened governance framework and institutional capacity.

The EDPRS requires the increase of electricity generation form a variety of sources such as hydro and methane gas. It specifically asks for at least 50 MW of additional hydro power to be installed before 2012. The EDPRS has specific targets for the number of electricity connections to be reached by 2012 (initial target 200,000 but this has been increased to 350,000), 100% of all health and social centres to be connected to the grid or equipped with PV systems and 50% of all schools covered. The power supply grid had an extension of about 3,230 km in 2006 and it is targeted to reach 5,000 km in 2012. The international donor Page 124 of 136 community has pledged 228 M$ to support the implementation of the five year National Electricity Access Programme (2009-2013). There are also targets given for improved cook stoves (from 40 – 100% coverage) and 20% of cattle farmers using biogas. The Ministry has updated its energy policy 2008 – 2012 covering the EDPRS period with assistance from the EUEI. The policy covers all types of energy: electricity, biomass, petroleum, methane gas, geothermal, wind, PV etc. A specific Biomass Energy Strategy (BEST) was developed more or less simultaneously. Initially the BEST focused on the charcoal value chain for the urban areas but this was later expanded with a special energy survey among the rural population and specific recommendations.

Some of the most important aspects of the policies for the EnDev programme are:

• 1. Electricity tariffs which are currently around 0.23 US$/kWh but are subject to further studies and recommendations in order to reduce the costs to consumers and businesses,
• 2. Feed in tariffs are mentioned but there are no clear policy guidelines as such that may guide investments in small scale renewables such as micro hydro. An overall study was carried out in 2008 describing the tariffs and tax structures. This is to be followed up by a special tariff study which is provided more details,
• 3. A new Law for the electricity sector is under preparation. This law will regulate the liberalisation of the electricity sector in Rwanda and set the basis for the creation of an electricity market similar to those in place in the EU countries or the US. The Government has a proposed a draft to the Parliament for its revision,
• 4. The two key interventions of the PSP Hydro project, the development of MHP plants to increase power capacity in the country and the consolidation of the participation of private MHP developers in the energy sector, are in line with the national energy policy and complementary to the Government‘s efforts.
• 5. In the biomass sector a three pronged approach is recommended
• a) on the supply side, increased wood production through higher yields,
• b) higher efficiency in the value chain through improved legislation, more efficient charcoal techniques and improved cook stoves, and
• c) Promotion of alternatives such as LPG, kerosene and peat.

1.3 Institutional set up in the energy sector, Activities of other Donors

A number of Ministries and agencies play a significant role in the energy sector depending on the type of energy and the nature of activities covered. The most important institutions are listed below with a short description of their role.

Electricity Sector

The Ministry of Infrastructure, Energy Sector is responsible for the strategies, planning and monitoring of the implementation of the different programmes. The ministry also plays an important role in attracting private sector investment and coordinating support of development partners. The Energy and Water Board (created in 2009) is under development and this will take over the role of the coordination of energy programmes. Under the Board there will be an energy agency that will be charged with the implementation of the different programmes (a function that is currently still implemented directly by the Ministry) Electrogaz is the utility company (which is being separated into RECO and WASCO) is a public company but operates along commercial principles for the transmission and distribution of electricity. Currently most of the electricity is also generated by Eletrogaz but the government is promoting private companies to take over that function such as in the case of electricity production from Lake Kivu methane gas. Rwanda Utilities Regulatory Authority (RURA), which is among others responsible for ensuring that electricity tariffs reflect recurrent costs and all energy activities have to be approved and registered. Private sector role has been limited in the past but the Government is encouraging electricity production through PPPs at large scale (for example Lake Kivu methane projects) as well as in the hydro power sector to support management and construction.

Micro Hydro

District Governments play an important role in the decentralized governance structure in Rwanda and have the capacity to authorize the installation of MHP plants and mini grids in their territory.

Biomass Sector

The Ministry of Infrastructure focuses on efficient use of the available biomass resources through improved charcoaling and stove technologies. The energy sector is implementing a number of efficiency programmes in the sector and also investigating and promoting of alternatives such as biogas for domestic use and for institutions, LPG, kerosene, peat, papyrus and waste briquettes. The Ministry of Natural Resources and it agency NAFA is responsible for the regulations and the management of natural forests, plantations. The Ministry of Agriculture is promoting agro forestry which also is a source of biomass. The Ministry of Local Government which through the district and sector authorities is responsible for the implementation of forestry laws, the issuance of tree cutting and charcoal production permits and the protection of the natural environment.

Sector-comprehensive organizations and institutions:

Rwanda Environment Management Authority (REMA): this institution has to approve the environmental suitability of all electricity and distribution electricity activities in the country. Private Sector Federation (PSF): most of the private companies in Rwanda are registered at the PSF. This institution guaranties the application of good practices within the private sector. PSP Hydro works in coordination with all these institutions. Their collaboration is essential in order to obtain the necessary permissions. In addition, PSP Hydro advice these institutions whenever this is required and keeps then informed about the progress of the ongoing activities.

Other Government and donor activities in the energy sector related to the EnDev programme

In March 2009 the Ministry entered into a sector wide programme with the developing partners that are involved in the energy sector. This has resulted in a large scale programme for the roll out of electricity network and the increase of household connections from 100.000 to 350.000 by 2012. The costs of this programme are estimated at US$ 380 million and will be implemented mainly through the utility company. The Government and Electrogaz are contributing 20% of the budget while the balance is provided by the donors including the WB, ADB, Arab Funds, EU, BTC, DGIS, JICA and others. The implementation has started in 2009.

There are a few programmes in the energy sector that more directly related to the EnDev programme as these are activities in the hydro and biomass sector but none directly engaged in the biogas area. The most relevant programmes are:

• 1) UNIDO programme constructing 4 micro hydro power plants. The plants are funded by the Government and UNIDO,
• 2) Government funded hydro power plants, 8 units in various stages of progress. Total 6.4 MW,
• 3) BTC programme for the construction of 5 SHPP. Costs of the construction are supported by BTC, management of the plants will be through Electrogaz. In addition, BTC participates in rural electrification based on photovoltaic systems and they will carry out the wind atlas for Rwanda in the coming months,
• 4) EU programme that supports the construction of 2 SHPP with a total output of 3 MW,
• 5) Forestry programmes by BTC (with additional funding of the Netherlands and agro forestry programmes (MINAGRI/IFDC with Netherlands funding) to increase supply of (fire) wood,
• 6) The Ministry of Infrastructure has a number of programmes to support the efficient production and use of biomass focusing on regulation, cookstoves and charcoal kilns. These programmes are funded through the Government budget,
• 7) The Ministry also has started a programme to support the Government‘s policy for the construction of institutional biogas systems for all boarding schools and hospitals. In 2009 about 50 technicians and engineers received theoretical and practical training which included the construction of three biogas systems in schools,
• 8) GTZ supports the health sector in Rwanda and it has a plan for 2009/10 to introduce and test biogas systems in a limited number of health centres especially as a source for energy for cooking and possibly for the sterilizing equipment,
• 9) Manna is a US based organization will introduce PV/UV water purification systems in schools. The programme is expected to generate carbon credits that will be used to support biogas installation in the same schools. However, the methodology of the approach still needs to be proven. Also MANNA does not have the expertise in biogas and will require technical support from MININFRA to set up a large scale programme in this sector,
• 10) The WB/GEF is preparing a programme of US$ 5m to support the energy sector and is expected to start early 2010. The programme will work in number of areas including:
• a) private sector development and entrepreneurship development through an incubation approach,
• b) support to the private sector in the micro hydro area,
• c) promotion of PV and stand alone renewable energy systems,
• d) promotion of improved stoves and charcoal kilns.

The EnDev programmes contribute towards the Governments energy policies and the EDPRS. PSP Hydro also works in continuous coordination with BTC and EU for the development of local capacities, the planning of the new sites and the sharing of experiences.