Uganda s Solar Energy Market

Transcription

1 Project Development Programme East Africa Uganda s Solar Energy Market Target Market Analysis

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3 Target Market Analysis Uganda s Solar Energy Market

4 Authors Konserve Consult: Abdalla Kyezira Integrated Energy Solutions (IES): Mark Hankins Anjali Saini Paul Kirai November 2009 Editor Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH On behalf of the German Federal Ministry of Economics and Technology (BMWi) Contact Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Potsdamer Platz 10, Berlin, Germany Fax: +49 (0) Web: Web: This Target Market Analysis is part of the Project Development Programme (PDP) East Africa. PDP East Africa is implemented by the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) on behalf of the German Federal Ministry of Economics and Technology (BMWi) in context of the Export Initiative Renewable Energies. More information about the PDP and about renewable energy markets in East Africa: This publication, including all its information, is protected by copyright. GTZ cannot be liable for any material or immaterial damages caused directly or indirectly by the use or disuse of parts. Any use that is not expressly permitted under copyright legislation requires the prior consent of GTZ. All contents were created with the utmost care and in good faith. GTZ assumes no responsibility for the accuracy, timeliness, completeness or quality of the information provided.

5 Target Market Analysis: Uganda s Solar Energy Market V Content 1 STATUS QUO OF THE SOLAR SECTOR Brief Solar Sector Overview Major Market Segments The Solar PV Market The Solar Water Heating Market Local Capacities Solar PV Solar Water Heating (SWH) MARKET POTENTIALS Overall Sector Outlook Solar PV Solar Water Heating (SWH) Undeveloped Solar Market Opportunities The Household PV Market The Institutional PV Market Solar Hybrid PV Systems and Telecommunications The Small- and Medium-Sized Enterprises (SME) Commercial PV Market Solar Water Heating (SWH) Large-Scale and Grid-Connected Solar Applications SOLAR-SPECIFIC REGULATION AND FRAMEWORK Policies and Regulations Government Institutions for Solar Energy in Uganda Standards and Code of Practice Applicable Public Sector Support / Financing Mechanisms and Sources BUSINESS PARTNERS AND COMPETITORS Overview of Key Solar Market Players Overview of Major and/or Most Emblematic Solar Projects ANNEX

6 Target Market Analysis: Uganda s Solar Energy Market VI List of Tables Table 1: PV Market Segmentation... 2 Table 2: Typical PV System Prices... 3 Table 3: Local Solar Energy Capacity in Uganda... 5 Table 4: Major Solar Water Heater Suppliers in Uganda... 6 Table 5: Overview of Solar PV Market Potentials... 7 Table 6: Potential Solar Thermal Market Demand in Uganda Table 7: Summary of the Undeveloped Market Opportunities Table 8: Overview of Key Solar Market Players Annex Table 9: Subsidies from REF for Rural Electrification Table 10: Regional Equity Distribution Table 11: Insolation in Busia, Uganda Table 12: Insolation in Fort Portal, Uganda Table 13: Insolation in Gulu, Uganda Table 14: Insolation in Hoima, Uganda Table 15: Insolation in Kabale, Uganda Table 16: Insolation in Kampala, Uganda Table 17: Insolation in Iganga, Uganda Table 18: Insolation in Jinja, Uganda Table 19: Insolation in Kasese, Uganda Table 20: Insolation in Kitgum, Uganda Table 21: Insolation in Lira, Uganda Table 22: Insolation in Mbale, Uganda Table 23: Insolation in Mbarara, Uganda Table 24: Insolation in Tororo, Uganda... 24

7 Target Market Analysis: Uganda s Solar Energy Market VII List of Acronyms BOS BTS BUDS CBO CSP ERA ERT ICT IREMP LIREP MDI MEMD MFI NGO PV PVTMA REA REB SACCO SHS SWH UETCL Balance of Systems (non PV components of systems) Base Transceiver Stations Business Development Services Community-based Organisation Concentrated Solar Power Electricity Regulatory Authority Energy for Rural Transformation Information Communication Technology Indicative Rural Electrification Master Plan Locally Initiated Rural Electrification Project Micro-Deposit Taking Institution Ministry of Energy and Mineral Development Microfinance Institution Non-Governmental Organisation Photovoltaic Photovoltaic Targeted Market Approach Rural Electrification Agency Rural Electrification Board Saving and Credit Cooperative Society Solar Home Systems Solar Water Heating Uganda Electricity Transmission Company Ltd Currency 1 USD = USh 2,230 (May 2010) 1 = USh 2,733 (May 2010) Measurement W Watt Wp Watt peak Wh Watt hour kw Kilowatt kwp Kilowatt peak kwh Kilowatt hour MW Megawatt MWp Megawatt peak MWh Megawatt hour GW Gigawatt GWp Gigawatt peak GWh Gigawatt hour

8 Target Market Analysis: Uganda s Solar Energy Market VIII Summary Uganda s solar market has experienced steady growth and has currently approximately 1.1 MW of installed PV capacity with over 30 companies operating in the PV market. The PV market has been encouraged by government projects and donor support within the institutional (especially rural) sector and solar home systems, whilst solar water heating is still in its infancy. Opportunities within the PV sector are underlined by an ambitious target by the government to supply 61 % from a current 4 % of total consumed energy from renewable sources by Solar shall be a component but a target is not specified yet. The greatest potential is identified in the segment of solar home systems. The Rural Electrification Agency publishes subsidies and targeted approaches to encourage PV implementation, and has worked with the private sector, in co-operation with the World Bank, through the Energy for Rural Transformation Initiative for cost-sharing and market development.

9 Target Market Analysis: Uganda s Solar Energy Market 1 1 Status Quo of the Solar Sector 1.1 Brief Solar Sector Overview Uganda has an average daily insolation of 5-6 kwh/m 2. It is estimated that about 1.1 MW of solar PV power is installed throughout the country. This includes both institutional and solar home systems with the former accounting for a greater portion of that installed capacity. The solar PV market in Uganda has steadily grown over the last 15 years with new players entering the market that include foreign investors. While ten years ago there were a handful of solar companies mainly engaged in institutional solar PV installations, there are now over thirty companies (see section 4.1) involved in the solar business (both PV and solar thermal). The market is in a state of transition where different players are yet to find their optimum servicing levels within the market. The historical growth in the market is accounted for by five key components: 1. Conducive regulatory policies that encourage investment and trade in the solar sector (section 3.1) 2. Government projects that specifically promote the use of solar in rural electrification (see section 3.2) 3. The demand for reliable electricity and modern energy services by an expanding middleincome society 4. The growth in the telecommunication sector 5. National awareness programmes that are facilitated through donor support. The solar thermal business in Uganda is relatively small in comparison to solar PV. It is still at a nascent stage with a few players. Growth in this subsector is slow because of the limited effort that has been put towards creating awareness and a lack of a clear government policy intended to support growth of this sector. As well, initial investment costs are still comparatively high and there are limited consumer options. 1.2 Major Market Segments The Solar PV Market Institutional public procurements account for the biggest portion of the installed solar PV systems, usually project or donor supported through government. The applications are mainly in the following sectors: health, water, education and local government. An on-going World Bank funded rural electrification programme, Energy for Rural Transformation (ERT), is currently the main driver behind most of the public procurements. Public procurements are expected to grow in the next four years as a direct result of the ERT programme. The solar home systems (SHS) market is one of the biggest areas for commercially driven solar PV business. The ERT programme also provides support under a strategy that has been referred to as the Photovoltaic Targeted Market Approach (PVTMA). The telecommunication sector and information communication technology (ICT) sector are another key PV market segment. The applications in this segment include small offices (in public institutions and commercial operations) which will require power ranging from kwp, ICT training centres that typically consume about 10 kva and base stations and repeater sites (VHF, UHF and cellular) for data, video and voice communication which typically require about 15 kwp per site.

10 Target Market Analysis: Uganda s Solar Energy Market 2 Table 1: PV Market Segmentation 1 Sector Education (public) Health (public) Degree of competition Communication Water and sanitation Electricity supply for lighting and medical equipment Refrigeration for drugs and vaccines Basic electricity supply for staff houses HF communication Powering Telecom BTS and Link sites Powering remote telecentres Water pumping for community water supply Households Public utilities Tourism Application and applied technology Basic electricity supply (mainly lighting) for rural off-grid boarding schools in dormitories, classrooms, offices and staff houses Basic household electricity supply. Specifically: Lighting and relatively small household appliances Hybrid backup power supply for urban households Street lighting Basic electricity supply (mainly lighting) for rural lodges and hotels Market driver Est. installed cap (kwp) Estimated financial volume (USD) Projects driven through government (e.g. ERT) Donor funding through NGOs and international aid agencies Private entrepreneurs who own schools 90 1,800,000 High Projects driven 120 1,600,000 High through government (e.g. ERT) Donor funding through NGOs and international aid agencies Private clinics Telecom service 250 5,500,000 High providers Internet service ,000 High providers Projects driven 250 5,400,000 High through government (e.g. ERT) Rural/ remote 200 4,000,000 Moderate households PV technical providers Microfinance Institutions (MFI) Saving and Credit Cooperative Society (SACCO) Projects through government Urban households 100 2,000,000 Moderate PV technical providers Local municipalities ,000 Low through local government Rural entrepreneurs 50 1,000,000 Low 1 Source of information includes market research through discussion and working with various solar PV technical providers, experience and knowledge; the Indicative Rural Electrification Masterplan; discussions with technical personnel at MTN and UTL and the Ministry of Energy and Mineral Development. (See Annex 5 for case studies of household systems).

11 Target Market Analysis: Uganda s Solar Energy Market 3 Small- and mediumsized enterprises (SME) Electricity supply for small productive business applications: mobile phone charging, barber shops, grocery shop lighting and rural video entertainment halls Fish farming and breeding electricity supply for powering water pumps and pond water filters Rural entrepreneurs ,000 Moderate Fish Farmers 5 100,000 Low TOTAL 1, ,500,000 The biggest application in the solar PV sector is for stand-alone PV systems and in recent years there has been a steady growth of the power backup sector. This is mainly applied in the urban centres of Kampala and Entebbe where the grid electricity supply is available but characterised by unreliability and poor quality electricity. PV is therefore a choice of convenience. There is a surplus of demand for the small size PV systems and products ranging from 10 W 50 W. Typically, a solar PV system in this range costs between USD and USD per Wp. However, this surplus situation is only created when there is end-user financing in form of credit. Therefore affordability does not always meet the demand. The prevailing market conditions in the PV sector are: Ease of importing solar PV products Products (including BOS) are exempted from taxes There are no significant entry / exit barriers Most of the firms tend to maximise profits with the watt peak of a unit module reaching the end user at about USD 4.8 USD 5.0. The vast range of products both in quality and capacity keeps prices competitive for the consumer. Table 2 below is an indication of typical prices within a range of different PV capacities (often there is no standard price. Price depends on the product quality, design and supplier). Table 2: Typical PV System Prices 2 System description Solar home systems Average size Wp lower quality Cost (USD) upper quality Micro systems (lanterns) One light and phone charging/small transistor radio Two light and radio system Four light system or higher , ,450 Larger systems (inverter or hybrid) ,800 In pricing different components account for the total system cost as follows: 2 Data is based on sales information from four solar system integrating firms (Incafex Solar Systems Ltd; Solar Energy Uganda Ltd; Power Options and Power & Communication Systems).

12 Target Market Analysis: Uganda s Solar Energy Market 4 Solar PV modules account for 30 % - 45 % Balance of System (BOS) (includes the battery bank, charge controller, cables and accessories) account for 45 % - 60 % 5 % - 10 % for installation and commissioning. Predominant operator models There are six distinct business models in the solar PV sectors. It is common that a single company will apply two or three of these models in its business implementation for an assured market of products. 1. Product franchising: Suppliers identify rural based dealers to promote a product that they supply. In most cases there is direct cash exchange between the dealer and the supplier. The model developed from a loose relationship with limited trust between the dealer and the supplier, however, the user will usually know the dealer as a local community member. In some cases, if the dealer is consistent and a relationship grows, they may get limited quantities of products on credit. 2. Brand franchising: A rural based dealer is assisted to promote the suppliers brand. The supplier will give marketing support to the dealer to promote their product and a limited quantity of stock in form of credit. An example would be traders in electrical accessories. 3. Hire purchase: The supplier or system integrator creates a specific solar product and promotes it in a group of common income earners, which are usually rural based civil servants, farmers groups or clustered communities. This model requires a high quantity of stock, a good financial resource and a network of community-based agents to assist in promotion and collections. A typical organisation that promotes this type of business model is Solar Energy Uganda Ltd. 4. Microfinance Institutions (MFI) and Saving and Credit Cooperative Societies (SACCO): This is one of the most dominant models of selling solar PV systems. In some cases the MFI simply acts a conduit of collection and benefits by charging an interest on the system without actually paying for the solar product to the supplier. This model has become very popular. The government is promoting its end user subsidy through this approach in Post Bank and FINCA. 5. Direct off-the counter sales: The clients include end users, dealers and system integrators. All the solar supplier companies that have any basic stock will do a direct sale. 6. Bids and tenders: This is most applicable through projects. Periodically, government and large donor institutions advertise project-specific procurements. There are firms that specialise in the bids and tenders to run and most firms usually participate in partnership with international suppliers The Solar Water Heating Market The solar water heating market in Uganda uses a variety of technologies. Most providers utilise flat plate collectors. In the domestic market, passive solar water heaters (heaters that rely on gravity and the tendency for water to naturally circulate as it is heated) installations are used. While in the larger hotels, active solar water heater installations are applied using circulatory pumps. Indirect solar water heaters are mainly imported from Australia. Solahart is a well-known market brand supplied by one of the leading distributors of these products. Two other companies supply direct water heaters from Israel and assemble the collector in Uganda.

13 Target Market Analysis: Uganda s Solar Energy Market 5 There are also other heaters imported from China, Austria and Turkey. The most common technology from China is the evacuated tube. Most of the domestic solar water heaters are supplied with separate water tanks. 1.3 Local Capacities The solar market is generally characterised by relatively small solar firms with annual turnovers ranging from USD 100,000 to USD 3 million. Potential consumers are not well educated or informed about the products. It is common that potential consumers will be unable to distinguish between PV and thermal applications. Table 3: Local Solar Energy Capacity in Uganda Partner companies Craftsmen and contractors Capacity building programmes General strengths Can do basic installation, maintenance and design of household PV systems Informal training ground for general technicians and plumbers into solar experts Good collaboration among each other despite being competitors Quite knowledgeable about the market (especially the rural market) Offer their services in the rural areas Support the promotion and awareness about solar PV Good at individual marketing Through projects a few consulting firms have developed good training curriculum Are usually focused on specific subjects and are short hence maintaining business operations General weaknesses Limited experience in large solar PV installations. This is usually related to the technical capacity. PV companies cannot compete with telecom companies for fairly well qualified engineers and technicians because of their low turnovers and therefore pay. Low advertising budgets and therefore use poor marketing skills. Target only local market yet there is a vast market around the country Uganda. Most lack focus in terms of business models and target markets hence spreading too thin. Poorly equipped with tools and general tendency not to use tools well or effective. Limited knowledge hence usually bad system installations and designs. Limited follow-ups of training programmes that are project driven. No syllabuses focused on solar PV training in the curriculums. Limited qualified trainers. Project driven as they are usually expensive and individual private companies cannot afford to do invest in training. Education system quite traditional and is not yet open to new energy sources.

14 Target Market Analysis: Uganda s Solar Energy Market Solar PV On the supply side, the solar PV subsector can be divided into three distinct categories: 1. Distributors, mainly comprised of foreign investors, there are very few local companies in this role. Some distributors represent specific manufacturers while the others are general distributors representing various manufacturers from Europe, India, China and the USA. 2. System integrators from the majority of the local solar companies combining their trade with some small importers (this is usually related to large projects). However, the bulk of their products are locally procured from the larger locally based distributors that are mostly based in Kampala and target large system installations. Besides solar PV they are also engaged in the power backup business. 3. Dealers and installers that are typically rurally based but loosely linked with the city based local companies. Their biggest target market is the stand-alone solar home systems market. The recent growth in the market has further attracted a couple of solar consulting businesses. These are involved in offering engineering services (design and installation), training and solar market business development Solar Water Heating (SWH) The solar water heating (SWH) sector has fewer companies operating. There are three leading companies in competition with all the products imported. These include Solar Construct, Balton and UltraTec. Solar Construct is a Danish / Ugandan joint venture that has an unique model: It sources its tank, pipes and panel from different parts of the world. Solar water heaters are still a product for the rich and most applied in the rich urban centres of Kampala and Entebbe. In all cases this product has to be paid for on a cash basis. The cost of a solar water heating system is based more on the water quantity heated. Table 4: Major Solar Water Heater Suppliers in Uganda Supplier Balton UltraTec Solar Construct name address P.O.Box 852 Kampala, Uganda Tel.:(+256) (0) Attn: Mr. Zeev Shiff P.O.Box 4520 Kampala, Uganda Tel.:(+256) (0) Attn: Mr. Abhay Shah P.O.Box Kampala, Uganda Tel.:(+256) (0) Attn: Tank Chromagen Israel SolarHart Australia Turkey solar plate Chromagen Israel SolarHart Australia Batec Denmark capacities/ Cost Cost Cost panel area USh USD USh USD USh USD 120L/1.9m 2 2,000, L/ 2.2m 2 2,300,000 1, L/ - - 3,230,000 1, L/2.6m 2 2,800,000 1, ,900,000 1, L/4.4m 2 4,000,000 1, ,800,000 2, ,900,000 2, The SWH sector is purely a cash market with hardly any rural market players. The selling model is an over-the-counter model. Most of the solar water heater dealers have external plumbers who they work with to assist in the installation of these products. In most cases, failed performance of the solar water heater is a responsibility the suppliers always account to poor plumbing. While this may be true, it becomes a challenge for the client: if the system does not work, it will be difficult to get support.

15 Target Market Analysis: Uganda s Solar Energy Market 7 2 Market Potentials 2.1 Overall Sector Outlook The Government of Uganda has initiated a renewable energy policy with an overall goal of increasing the use of modern renewable energy, from the current 4 % to 61 % of the total energy consumption by the year 2017 (except large hydro which account for 20 % of total electricity production). In this national target, it is not clear what percentage solar technologies are expected to contribute in terms of consumption. However, it is anticipated that the combination of photovoltaic and thermal applications will account for 2.5 % of total consumption Solar PV Uganda s potential market for solar PV is estimated at almost 70 MWp (Table 5). Over the long term, the commercial SHS market is seen to have the largest potential. The telecom systems market is also quite large with over 800 off-grid BTS and transmission sites and most ready through a project approach that combines turnkey systems with system modifications. Table 5: Overview of Solar PV Market Potentials 3 Sector Application Estimated potential (KWp) Estimated financial volume (USD) Education Basic electricity supply (mainly lighting) for rural offgrid 450 9,000,000 boarding schools in dormitories, classrooms, offices and staff houses Health Electricity supply for lighting and medical equipment ,000,000 Refrigeration for drugs and vaccines Basic electricity supply for staff houses HF communication Communication Powering telecom BTS and link sites 1,500 33,000,000 Powering remote tele-centres 260 5,200,000 Water and Water pumping for community water supply ,960,000 sanitation Households Basic household electricity supply. Specifically: 55,000 1,210,000,000 lighting and relatively small household appliances Hybrid backup power supply for urban households 10, ,000,000 Public utilities Street lighting 90 1,350,000 tourism Basic electricity supply (mainly lighting) for rural lodges and hotels 200 4,000,000 Small- and mediumsized enterprises (SME) Electricity supply for small productive applications: mobile phone charging; barber shops; grocery shop lighting and rural video entertainment halls Fish farming and breeding electricity supply for powering water pumps and pond water filters ,000, ,000,000 TOTAL 69,800 1,545,510,000 Obstacles / constraints Incomes in the rural areas are dependent on agricultural activities. This means that affordability for farmers in rural areas is seasonal. Currently feed-in tariffs and power purchase agreements are negotiated on a case-by-case basis. This increases transaction time, costs and leads to low investor turn out. 3 Source IREMP (Indicative Rural Electrification Master Plan)

16 Target Market Analysis: Uganda s Solar Energy Market 8 Recommendations to German enterprises Creating partnerships with local enterprises can ease the cost of market entry and further ease access to the market Solar Water Heating (SWH) The solar water heating sub sector is mostly located in urban centres where consumer electricity costs are among the highest in the world (USD 0.21/kWh). Such costs justify replacement of internal electric water heaters with solar water heaters. Potential in the commercial sector (hotels, restaurants) is also high, despite the bundled tariffs that makes electricity slightly cheaper compared to households (commercial tariffs are USD 0.17/kWh). 2.2 Undeveloped Solar Market Opportunities The Household PV Market The current government policies (described further in section 3) allow for market growth. Most solar products are zero rated in terms of taxes and duties. While a very large number of households may be able to afford a micro solar PV system, the financial value attached to these systems is less than 45 % of the overall market potential for households, meaning that systems above 50 Wp are most interesting in terms of potential turnover. A few key statistics for potential market expansion: Up to 60 % of the rural households can afford micro-solar systems of 2-20 Wp (lanterns, phone chargers, radio systems). 10 % of the rural population can potentially afford medium to larger SHS PV systems (50 Wp 150 Wp). 30 % of the rural households would be considered too poor to afford a solar PV system. Through the World Bank funded ERT Programme (implemented through the Rural Electrification Agency, REA), incentives have been put in place to bring down PV costs for end users. This initiative started in 2002 and provides a direct subsidy to the end-users through rural based micro financing institutes of USD 5.00 per Wp (with a maximum system size of 50 Wp). Recommendations to German enterprises The Solar Home Systems Market is not guaranteed without substantial effort in marketing and use of creative methods of making solar PV more affordable through suitable financing schemes. Finance institutions have a considerably importance in assisting interested households to access solar PV systems. It is therefore important to have links with the finance institutions The Institutional PV Market The institutional market in Uganda is driven by national procurement projects. There are a wide variety of opportunities through national projects in the water, health and education sectors. These sectors are being promoted specifically through the World Bank funded Energy for Rural Transformation (ERT) programme that has recently scaled up and is just entering its second phase. In this phase, there is an opportunity for many off-grid solar PV installations for rural boarding secondary schools and health centres that will be procured through a bidding process.

17 Target Market Analysis: Uganda s Solar Energy Market 9 In the national programmes, there is a market potential of close to 5 MW in solar PV driven through the ERT project initiatives with associated business opportunity for maintenance, design and training to support this market area. Recommendations to German enterprises For an investor to have immediate impact on the ground, work with in joint venture with the smaller local firms that are usually engaged in the business as system integrators and have a full understanding and experience of the market. Most of the procurement (in case of international bidding) conditions require such a local presence. Local companies should be seen as partners, however, most of the bids are based on international procurement standards (e.g World Bank) that local firms are unable to meet Solar Hybrid PV Systems and Telecommunications The telecommunication sector is one of the most highly competitive commercial sectors in Uganda. With five companies competing in the mobile phone sector, national coverage has become crucial for all the telecom operators. There are over 800 off-grid Base Transceiver Stations (BTS) / link sites nationally and many more are being built each year to maintain guaranteed coverage. Today over 95 % of the off-grid sites are powered by diesel gen-sets with the cost of running these sites on diesel extremely high, therefore solar PV is being considered an alternative that reduces costs at off-grid sites. There is a potential of over 2 MW demand already for energy needs at the existing BTS / Link sites where the application is not fully stand-alone. A potential of over 8 MW for stand-alone power supply at the BTS sites. A potential of over 25 MW for hybrid and backup power for over 3,000 on-grid BTS/ Link sites There is a significant potential on the commercial side of the telecom companies, including ensuring power for franchises in the rural areas. Recommendation to German enterprises Many of the telecom companies can easily afford to construct solar PV solutions but need to be convinced that a company can provide reliability and service and that the solutions are proven. German companies can demonstrate this through site visits to existing installations where the technology is in use. Participating in bids and procurements is one means of directly accessing the market while joining it at commercial level. In the procurement market, less effort is required in promotion and marketing than in lobbying The Small- and Medium-Sized Enterprises (SME) Commercial PV Market The small and medium-sized enterprises (SME) commercial market may be defined as: a. Solar energy for income generation (productive energy use) b. SME and business institutions that need solar energy for effective operation.

18 Target Market Analysis: Uganda s Solar Energy Market 10 Solar PV has been used in rural Micro-Small Enterprises (MSEs) such as: Cell phone charging and village public phone power Barber shops Video entertainment halls and Grocery shops. There is further potential in Food processing to expand on trial crop-drying schemes that were initiated through UNESCO. Typically these schemes were systems that were setup as hybrids that combined different sources of energy and electricity to dry products (tomatoes, bananas, pineapples and pepper), powered by 400 W of PV power that circulates solar-heated air. Dairy industry accessed through farmers cooperatives in Uganda. There are over 60 milk collection centres in Western Uganda with a potential power requirement of 0.75 KW each representing a local market of 4.5 MW. Mini-grids in clustered communities with support through GTZ for subsidised funding for the setup of such systems. The challenge to this is managing the distribution of electricity from the mini-grid. Recommendations to German enterprises Creativity is a key factor for success in commercial solar PV applications and recognising the SME businesses that would benefit the most from guaranteed access to power. Many small cottage industries have limited turnover because of the lack of modern energy Solar Water Heating (SWH) In Uganda solar water heating technologies are generally considered a luxury for urban dwellers and those that understand the energy saving benefits of using solar water heaters. This market is poorly developed and there is no specific programme aimed at promoting solar heating, rather the systems have been established through individual private initiatives. At the institutional level, outside of general policy statements, there are no specific government initiatives aimed at promoting solar water heating in hotels, schools and hospitals. Table 6: Potential Solar Thermal Market Demand in Uganda 4 Sector Application Market driver Est. installed cap (m 2 ) Est. potential (m 2 ) Potential financial volume (USD) Households Tourism Urban household water heating Hotels water heating Urban households Technical service providers < , ,500,000 Hotel Owners < ,000 55,000,000 TOTAL > 350, ,500,000 4 Assumption that 1m 2 replaces 0.7 kw of electric power

19 Target Market Analysis: Uganda s Solar Energy Market Large-Scale and Grid-Connected Solar Applications To date no large grid-connected projects have been attempted in Uganda. The donor partners that support much of the power sector have tended to push for investments in hydro and thermal backups. Solar energy is seen mostly as an off-grid choice and as a demand-side management tool. Consequently, there have been no incentives for grid connected solar power in the country. Similarly, there have not been any consumer-led initiatives to introduce net-metering, though the government policy would seem to support consumer-led solar in the current electricity-starved environment. Indeed, battery-backups with inverters that can serve as connection points with PV systems are widespread. Obstacles / constraints There is a need for the country to build up experience with large-scale solar. There is no question that solar will be part of the solutions to power production in the country. However, at this stage the country is focused on short-term solutions to power problems, and solar PV and Concentrated Solar Power (CSP) are not seen as least cost solutions. Currently, there is no standard feed-in tariff for solar PV electricity generation and would thus have to be negotiated on a case-by-case basis.

20 Target Market Analysis: Uganda s Solar Energy Market 12 Table 7: Summary of the Undeveloped Market Opportunities Market Application Classification (Wp) Anticipated potential (MW) Applicable support Risks / constraints Household Stand-alone power using PV < 50 Wp End-user subsidy Marketing, 50 Wp-100 Wp End-user subsidy up to 50 Wp capacity, user abuse > 100 Wp End-user subsidy up to 50 Wp Hybrid backup with PV > 200 Wp None Solar water heating (As a replacement for electricity) L None Marketing and promotion > 200 L None Marketing and promotion Institutional National PV projects Health sector 2.00 Trade with government Slow / delayed payment due Water sector 3.00 Trade with government to bureaucracy Commercial Education sector 1.00 Trade with government Rural offices 0.50 None Marketing Telecom power BTS/ link sites None Slow / delayed payment due Commercial outreach 2.00 None to bureaucracy Water heating in tourism sector Urban hotels None Marketing Rural lodges 5.00 None MSE/ SME electricity Phone charging 2.50 ERT end user subsidy USD 3.00 Hair cutting 0.50 / Wp Entertainment 0.50 Grocery shops 1.00 Productive energy using PV Milk collection centres 5.00 ERT end user subsidy USD 3.00 / Wp Drying of agriculture produce 0.50 Mini-grids kwp Subsidy through national projects Not clearly defined Marketing, capacity, user abuse Marketing and finding interested entrepreneurs Management of mini-grid & finding partners

21 Target Market Analysis: Uganda s Solar Energy Market 13 3 Solar-Specific Regulation and Framework 3.1 Policies and Regulations Two government policies approach solar energy technology in Uganda: a. The Energy Policy Under the existing Energy Policy, solar energy falls in the category of new and renewable sources of energy. The policy with regards to solar provides a financing mechanism that makes it possible for both PV consumers and vendors to obtain credit from banks for solar rural electrification. The statutory issues related to the generation and distribution of electricity in Uganda is handled under the Electricity Act. The Electricity Regulatory Authority (ERA) in Uganda is the body mandated to enforce matters related to this act and to carry out all administration, compliance and issuance of licenses for the generation, transmission, distribution or sale of electricity, to approve standards for electricity generation and to establish and approve tariffs. The Electricity Act is fairly comprehensive with regards to investment and land use thus requiring investment in substantial PV power generation for land acquisition for generation and transmission of electricity, except stand-alone small Solar PV systems do not require a license. No feed-in tariff regulation exists for solar PV. Standardised tariffs are based on the avoided cost of the system for sales to the grid of electricity generated by renewable energy systems. b. The Renewable Energy Policy The overall objective of the Renewable Energy Policy is to diversify the energy supply sources and technologies in the country. In particular, the policy goal is to increase the use of modern renewable energy from the current 4 % to 61 % of the total energy consumption by the year It will require legislation for urban and local authorities to achieve this goal Government Institutions for Solar Energy in Uganda Uganda Electricity Transmission Company Ltd (UETCL) Uganda Electricity Transmission Company Ltd (UETCL) is the holder of transmission licenses (including solar) and is the only designated entity to purchase electricity fed into the grid. Rural Electrification Agency (REA) The Minister of Energy and Mineral Development (MEMD) established the Rural Electrification Agency (REA) as a semi-autonomous agency in 2001 to operationalise the government s rural electrification function under a public-private partnership. It functions as the Secretariat of the Rural Electrification Board (REB) which carries out the Minister s rural electrification responsibilities, as defined in the Electricity Act of The Rural Electrification Agency (REA) is mandated to facilitate the government s goal of achieving a rural electrification rate of at-least 10 % by the year 2012 from 1 % at the beginning of the decade.

22 Target Market Analysis: Uganda s Solar Energy Market Standards and Code of Practice In terms of regulation, there are standards based primarily on international standards upon which solar products in Uganda must conform. The Uganda National Bureau of Standards is responsible for setting standards and enforcing them. Solar PV modules entering Uganda need to satisfy the following standard specifications: IEC for crystalline solar modules European CEC Specification No. 503: Ver 2.1, 1990, OF THE Joint Research Centre, Ispra of the Commission of European Communities. Certification of requirements of PVGAP. 3.2 Applicable Public Sector Support / Financing Mechanisms and Sources Rural Electrification Subsidies The Rural Electrification Agency (REA) published its Subsidy Policy in March The types of rural electrification projects that will be processed by REA comprise grid extension with electricity supplied from the main electricity generation plants in the country, and mini-grids around isolated generation plants and stand-alone systems. Project sponsors are either private parties, or communities/ cooperatives, the government or individuals, sometimes in combination. REA can also initiate projects by tendering out packages. Projects that can receive subsidies must be outside the urban triangle of Kampala, Entebbe and Jinja, but there may be interfaces with the UETCL-owned distribution network. Eligible projects are: The local distribution part of grid-connected generation projects Mini-grid distribution system around an isolated generation plant Grid-connected distribution extension without generation Small stand-alone systems with one or few consumers (PV, small diesel or pico hydro) Solar PV Targeted Market Approach In March 2007, REA published the Solar PV Targeted Market Approach (PVMTA) in response to the slow pace of PV implementation under the BUDS-ERT grant scheme. The approach aims to: Promote partnerships between rural MFIs, NGOs, community-based organisations (CBO) and private commercial companies Strengthen rural infrastructure through specific measures to ensure that rural based solar PV entrepreneurs (agents, franchisees, etc.) can access grants and trading capital Include Micro-Deposit Taking Institutions (MDIs) and selected Saving and Credit Cooperative Society (SACCO) in the subsidy framework for disbursement of subsidies to rural end-users Introduce a new complementary subsidy paid direct to consumers of 4.4 USD/Wp for SHS between 31 and 50 Wp and 5.5 USD/Wp for SHS between 10 and 30 Wp Provide a special grant programme that will be implemented by REA through tendering of specific target market segments in areas that have lagged behind in implementing solar PV Increase credit options for consumers

23 Target Market Analysis: Uganda s Solar Energy Market 15 Business Development Services-Energy for Rural Transformation (BUDS-ERT) Business Development Services-Energy for Rural Transformation (BUDS-ERT) is managed by the Private Sector Foundation of Uganda to provide cost-sharing assistance for carrying out of preliminary, feasibility and other studies for market entry in the solar PV sector, the design of business plans and capacity building (technical and business). The next phase of the ERT initiative will take into account solar water heating technology and support market development.

24 Target Market Analysis: Uganda s Solar Energy Market 16 4 Business Partners and Competitors 4.1 Overview of Key Solar Market Players Table 8: Overview of Key Solar Market Players Full name Core business General business information Annual turnover (est. in USD) Staff Contact details AB Matra Supply of solar PV equipment Import and sell solar PV products to dealers and system integrators through branch network. Main brands are Kotak (India). Unknown 7 Bhavin Ruparelia CBD Kampala, Along Entebbe Road Tel: (+256) (0) UltraTec (U) Ltd Supply of solar PV equipment, power backup equipment and solar water heaters Sells to Kampala based system integrators; rural based installers / technicians and rural based dealers through both product and brand franchising. Involved in large institutional installations. Represents various international brands / manufacturers: Steca, Outback, Victron, First Power and Solarhart. USD 2 million 12 Abhay Shah Kabalagala, Kampala Tel:(+256) (0) ultratecworld@infocom.co.ug Ital Trade (U) Ltd Supply of solar PV equipment, power backup equipment and water pumps Sells to Kampala based system integrators. Involved in high end large installations. Represents various international brands/ manufacturers: Phocos, Outback, Victron, Rolls and Lorentz. USD 3.5 million 6 Andre Marinelli Kansanga, Kampala Tel: (+256) (0) ASE Solar Energy Ltd Supply of solar PV equipment Sells to Kampala based system integrators and rural based dealers, small DC SHS, Solar modules and batteries manufactured and imported from China. Represents Topraysolar a chinese manufacturing firm. USD 1 million 5 Wu JingBao Steve Mbuya Hill, Kampala Tel: (+256) (0)

25 Target Market Analysis: Uganda s Solar Energy Market 17 Pulsee Int Investment Co. Ltd Supply of solar PV equipment Sells to end users mainly solar water heaters, solar cookers and some PV products that are imported directly from China. USD 100,000 5 Wu Erfang 62 Luthuli Av. Bugolobi Kampala Tel: (+256) (0) Balton (U) Ltd Agro inputs, agro machinery; communication and ICT equipment; and electromechanical products Divided into five divisions. Solar thermal falls in the electro-mechanical products which include Aircons, generators and solar water heaters. This accounts for about 20 % of the company turnover. The water heaters are installed by plumbers that were trained by Balton. USD 10 million 87 Zeev Shiff 47/51, Mulwana Rd. Industrial Area Tel: (+256) (0) balton@balton.co.ug Solar Construct Solar water heaters Assemble water heaters in Uganda. Tank imported from Israel, glass from China, copper pipes from Denmark. Tanks designed based on high quality European Standards. The leading solar water heaters' supplier and installer in Uganda. N/A 8 Franz Eichinger 45 Mulwana Rd. Industrial Area Tel: (+256) (0) info@solarconstruct.com Solar Energy Uganda Supply and installation of solar PV systems Import some of the products (mainly solar modules) needed for service delivery from various international distributors and suppliers. Often locally purchase other products if not in stock. Involved in both SHS installations and institutional government installations. USD 800, Richard Kanyiike CBD Kampala, Wilson Road Tel: (+256) (0) soenergy@africaonline.co.ug Incafex Solar Systems Ltd Supply and installation of solar PV systems Import some of the products (mainly solar modules) needed for service delivery from various international distributors and suppliers. Represent Mastervolt. Involved in both SHS installations and institutional government installations. USD 450, Henry H Nganwa 9/6 Bombo Road, Gathani House, Kampala Tel: (+256) (0) incafexsolar@africaonline.co.ug

26 Target Market Analysis: Uganda s Solar Energy Market 18 Power Options Supply and installation of solar PV systems Import some of the products (mainly solar modules) needed for service delivery from various international distributors and suppliers. Represent Sunlight battery manufacturers. USD 380,000 4 Musoke Kivumbi Teachers House, Bombo Road Tel: (+256) (0) poweroptions@africaonline.co.ug GiraSolar (EA) Ltd PV systems integrators Rural SHS installations. Back end support for technical installations for engineering designs and solutions by Konserve Consult Ltd. USD 180,000 5 Kato Musigire P.O. Box 6494, Kampala Tel: (+256) (0) girasolar@girasolar.co.ug Power & Communications Ltd PV systems integrators Rural SHS installations. Also involved in supply of generators and communication equipment. USD 150,000 5 Joshua Mudduawulira Namugongo Road, Kireka Kampala Tel: (+256) (0) powercomsysug@gmail.com Konserve Consult Ltd Technical and businesses consulting services in solar PV Engineering designs, energy efficiency solutions and project development. USD 410,000 8 Abdalla Kyezira 164 Upper Mawanda Road, Kampala Tel: (+256) (0) /8 konserve@konserve.co.ug Internet: Solar Sense Ltd Supply and installation of solar PV systems Rural SHS sales and installations. USD 220,000 8 Musooka Kiwanuka P.O. Box 6494, Kampala Tel: (+256) (0) solarsenseug@gmail.com

27 Target Market Analysis: Uganda s Solar Energy Market Overview of Major and/or Most Emblematic Solar Projects The Energy for Rural Transformation (ERT) supported the Photovoltaic Targeted Market Approach (PVTMA) Programme on end-user financing. The GTZ/ MEMD supported the Promotion of Renewable Energy and Energy Efficiency Programme (PREEEP). The ERT supported the Business Development Services (BUDS-ERT) Programme.

28 Target Market Analysis: Uganda s Solar Energy Market 20 References Electricity Regulatory Authority (July 2010). Energy Institute of Uganda: (July 2010). GTZ (2009): Business Guide Uganda, Eschborn. Ministry of Energy and Mineral Development: (July 2010). Rural Electrification Agency: (July 2010). Strategic Plan of the Rural Elecrification Agency ( ): (July 2010). Uganda Electricity Transmission Company Ltd: (July 2010). Uganda s Energy Policy: (July 2010). Uganda s Rural Electrification Strategy and Plan ( ): E+Plan.pdf/ (July 2010).

29 Target Market Analysis: Uganda s Solar Energy Market 21 Annex 1: RE Subsidies for Off-Grid Projects Subsidies for Rural Electrification Available from Rural Electrification Fund (REF) Table 9: Subsidies from REF for Rural Electrification Type of project Mini-grid generation & related distribution Private LIREP CIREP PREP Basic subsidies in USh o USh/ kw 2,150,000 2,580,000 2,580,000 USh/ kw 640, , ,000 Existing concessionaire Grid connection & mini-grid distribution MV USh/m MV Route 15,500 18,600 18,600 18,600 15,500 USh/ kva 125, , , , ,000 LV USh/m LV Route 11,000 13,200 13,200 13,200 11,000 USh/ Conn. 125, , , , ,000 A LIREP (locally initiated rural electrification project) can be initiated by a small private investor without access to finance on international capital markets, whereas a CIREP (community initiated rural electrification project) can be initiated by a local community. In both cases, the costs of the development of the project are met jointly by the investor / community and the REF. Projects may be either grid extensions or mini-grid electrification and can be within or outside a distribution concession footprint. Communities are also able to form cooperatives to be concessionaires. Regional Equity The subsidy policy further provides for the concept of regional equity, i.e. the support of projects to obtain a more even distribution of electrification geographically. Areas which are more remote, poorer and/or that experience security problems are targeted to receive a premium over-and-above the normal subsidy. Table 10: Regional Equity Distribution Zone Zone adjustment Remoteness (> 60 km from Grid) Poverty and low population density Security (Civil/unrest/ insurgency) Maximum adjustment Centre +0.0 % +2.5 % +0.0 % +0.0 % +2.5 % East & West +2.5 % +2.5 % +5.0 % +2.5 % % North East & North % +5.0 % +5.0 % +5.0 % % West Nile +5.0 % +2.5 % +2.5 % +2.5 % %