Rwanda’s post-conflict recovery resulted in a strong demand growth during 1995-2004. The ever-increasing demand, in combination with unexpectedly low lake levels due to prolonged regional droughts during 2003-2005, led to a rapid drawdown of the hydropower reservoirs Rwanda depended on for its power supply. The power supply shortage and the unreliability of the utility’s dilapidated network rapidly led to extensive and lengthy power cuts beginning in early 2004. Load shedding increased to about 50 percent of peak demand during 2004-2005 with power being cut to nearly all households daily for hours at a time. The supply shortages and unreliability raised the cost of doing business, weakened the prospects of attracting new investments, and forced the utility to switch to higher-cost diesel water pumping to supply urban areas with potable water. The UERP was designed to address the three core challenges in the energy sector - adjusting the physical and financial shortfalls in the power sector, strengthening the capacity of sector institutions, and initiating the preparation for the development of locally available energy resources, at a lower cost than fuel imports, for development of a long-term sustainable power sector.
To eliminate the load-shedding, it was decided to rehabilitate the national grid, focusing on the main growth center of Kigali, and invest in added thermal (petroleum based) electricity generation to increase the available power supply quickly and provide a much needed diversification from the dependency on hydro resources. To strengthen sector capacity and enable Rwanda to develop a long-term strategy for domestic and regional energy supply, sector staff in the Utility and Infrastructure Ministry were trained and paired with international expertise to accelerate the reform of the energy sector, improve the ability to plan for future development and open the sector for private sector investments in additional generation resources.
The UERP is focused on alleviating the power outages and improving the capacity of energy sector institutions in Rwanda. It has contributed to set the stage for the turn-around of the Rwandan electricity sector and put an end to the load shedding that was so damaging to the Rwandan economy. The UERP provided support to improvements in several key outcomes:
- Reduction in outages: The UERP contributed to eliminating load shedding in Rwanda by financing an additional 21MW of power generation capacity. The Jabana 21MW HFO power plant was operational in May 2009. The investment, combined with the government’s own initiatives, increased Rwanda’s electricity generation capacity from 41MW in 2004 to 75MW by 2010 and load shedding going from approximately 50 percent at peak hours in 2004 to zero percent in 2010 and significantly improved the access, reliability and quality of electricity supply for 750,000 people in Rwanda.
- Revised power sector framework promoting private sector participation: Technical assistance and capacity building provided by UERP contributed to the drafting of new Electricity and Gas laws, currently under consideration by the Rwandan Parliament. Advisory services also assisted the government of Rwanda to conclude negotiations on the country’s first private sector owned and operated power plant (100MW), using domestic methane gas from Lake Kivu. The involvement of the private sector will bring much needed technical expertise to develop Rwanda’s indigenous gas resource as well as significant flows of foreign direct investment (FDI) capital to reduce the burden on the country’s budget (first 25MW phase of project is expected to attract up to US$100 million in FDI).
- Transmission and distribution grid rehabilitated: IDA and Nordic Development Fund support through the UERP enabled the utility to rehabilitate the national grid, building a new city distribution ring (20 kilometers of new 15 kilovolt (kV) lines and 4 new ring main units) as well as a new main substation (Birembo) for Kigali distribution zone. The project also completed the rehabilitation of five other key 110/15kV substations across the country.
The IDA allocation to UERP was US$25 million equivalent. Of this amount, US$15 million financed the construction of the Jabana power plant, with government cofinancing, for a total cost of US$23 million. A further US$6 million was spent on distribution investments to increase the reliability of the Kigali distribution system.
There is a strong partnership among key development partners in Rwanda’s energy sector. The sector is coordinated through a Sector Wide Approach, with regular meetings of the sector working group, with participation of key government, development partner and sector stakeholders. The IDA support is co-financed by approximately US$10 million from the Nordic Development Fund and approximately US$10 million of counterpart financing from the government of Rwanda. The project financing is complemented by projects funded by the governments of the Netherlands, Japan, Belgium as well as multilateral organizations such as the European Union (EU), African Development Bank (AfDB), the Organization of the Petroleum Exporting Countries Fund for International Development (OFID) and the Arab Bank for Economic Development in Africa (BADEA).
The Second Re-engagement and Reform Support Program was followed by a Third Re-engagement and Reform Support Program—a larger operation (US$11 million equivalent) which continued and deepened economic governance reforms and reforms to spur private sector investment for growth. The strong ownership of the reforms by both the government and citizens is leading to the evolution of social accountability mechanisms to ensure the sustainability of the reforms.
The UERP has affected everyday life in Rwanda, especially in urban areas, by helping to eliminate the power cuts affecting thousands of households every evening for hours on end. The elimination of widespread power cuts has also enabled businesses to increase their competitiveness since they do not have to operate costly diesel generator sets and increased the attractiveness of Rwanda as an investment destination.