Uganda’s rural households will be energy deprived unless swift action is taken

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Uganda’s rural households will be energy deprived unless swift action is taken

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new report by the Bill & Melinda Gates Foundation warns that the 2013 Sustainable Development Goals (SDG) targets will not be achieved based on the current course of action by world leaders. One of the SDG goals is achieving 100% access to the electrical grid.

The 2014 Africa Energy Outlook showed that more than 620 million people in sub-Saharan Africa live without electricity, a figure that has not closed much in the years since its release. Focusing in on Uganda, according to the World Bank, only 1 in 5 households had access to the electric power grid in the same year. When comparing rural and urban homes, the situation is much direr with over 89% of rural households not reached by the grid compared to the still inaccessible 34% unconnected in urban areas. Without reliable access to modern power, these homes are left to utilize other more dangerous forms of energy such as kerosene, charcoal and wood burning, whose harmful effects on the environment are well known. Why are these statistics scary?  Low electrification rates equal lower productivity and earning capacity.  But it doesn’t have to be this way.

Poor commitment to off-grid energy solutions may realistically help countries achieve 100% connection by ensuring the poorest, in the last mile are included. About 35% of Uganda’s population live on less than $1.90 a day.  Off-grid energy solutions are a great means for inclusion for those that have been left in the dark and financially excluded. They allow for affordable access to lighting as well as financial inclusion through pay as you go financing.  This is an opportunity for financial service providers, telecommunications companies and innovative energy companies to create a footprint as a result of their products and services being appropriately modelled for a lower income and informal segment, which happens to be a majority of the adult population.

To increase the rate of grid connection, in 2016, the Ugandan Ministry of Energy and Mineral Development entered into an Energy Compact with the United Kingdom’s Department for International Development (DFID) to accelerate the deployment of solar photovoltaic systems for electricity generation in homes and rural areas whose closest access to electricity is in towns and trading centers. As part of this Compact, the Government, DFID and other development and private sector players are working to make what’s called distributed energy i.e., sustainable energy solutions that are off the electric grid, more available safely and affordably to the general population. This is a good start.

Solar solutions have been around for years, with more than 200 companies having opened operations in Uganda over that time. Currently 72 of them are members of the Uganda Solar Energy Association, a key partner in the energy compact. Innovative companies such as M-Kopa Solar and Fenix International have managed to reach thousands of households, offering a myriad of services including innovative financing solutions. Many of the new distributed solar home systems (SHS) companies have technology that allows for users to make mobile payments to incrementally buy solar power and the home system, called pay as you go solutions. In the event of non-payment, the power can be remotely switched off.

This innovative approach to asset financing is one that enables these homes to not only access power, but also access formal financial services.  By making a daily payment of as little as $0.40 for about a year, these 500,000 homes create records of payments that create a credit history. This is important since a big hurdle for financial institutions in providing credit solutions to people is a lack of credit history. These records are a good starting point to bring previously excluded people into the formal financial services sector. This leads to further benefits such as diversification of services-financing for other assets and allow for users to graduate to higher order electrical solutions that support devices such as fridges to store food for longer.

Such innovation and growth is hampered by the lack of consumer awareness and education on counterfeit and low-quality products that ruin customer experience and create poor perception of solar solutions. On the consumer protection side, the Energy Association in conjunction with Uganda National Bureau of Standards (UNBS) are working on the enforcement of standards and an information and awareness campaign for consumers to be empowered in knowing what to expect from a proper off grid system. Consumer protection is a key element of the Compact with several stakeholders in the energy sector coming together to craft not only strong education campaigns but also enforcing standards among their membership as well as those of Lighting Global, an initiative of the World Bank .

Through the Compact, policy reform is being addressed to allow for specific off-grid energy approaches to become part of all key strategies for energy development including the Rural Electrification Strategy that targets universal electrification by 2040, the National Energy Policy and the Renewable Energy Policy to help in planning and support the roll out of the grid versus off grid solutions and avoid duplication of efforts and abandonment of those in rural areas far from the grid.  Policy reform, improved partnership and sector coordination, access to finance for SHSs companies and clients and elimination of burdensome taxes on SHSs accessories need swifter action across Africa.

While it may still be a stretch for Uganda, like many other African countries, to achieve 100% connection in 2030, creating an enabling environment for the increase in investment in off grid solutions and innovative financial services whilst ensuring customers are protected is the best way to try.

Jacqueline Musiitwa, an Aspen New Voices fellow is the Executive Director and Joel Muhumuza is the Partner Support Specialist at Financial Sector Deepening Uganda( FSD Uganda)

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