African Nations Increase Hydropower Alliance

Some accuse the East African nations of having an over reliance on hydropower and cite recent power crises caused by low rainfall as evidence for their views. So it is with curiosity that many are watching the increased investment being put into hydroelectric power in Kenya, Tanzania and Uganda.

These countries – grouped together to form the East African Community (EAC) – are aiming for full economic integration within the next decade and the creation of a regional power grid is seen as one of the best ways of achieving this. They all rely heavily on hydro schemes and regional integration is likely to encourage construction of further dam projects as well as thermal plants, as investors take advantage of an increasingly integrated market in electricity.

An interconnector already enables Uganda to export electricity to Kenya but a new transmission line is under development between the northern Tanzanian town of Arusha and the Kenya capital Nairobi, thereby enabling much greater trade in electricity between the three countries. However, Rwanda and Burundi, which joined the EAC last year, also hope to connect their power grids to the rest of the EAC pack in the near future.

Transmission integration is viewed as the best long-term solution to the periodic power rationing that continues to undermine attempts to encourage greater industrial and manufacturing activity in East Africa. Droughts have become increasingly common, with severe cuts in hydroelectric production from 1997 to 1999 and more recently between 2005 and 2006. Towards the end of the latter period, falling water levels forced most Tanzanian hydro schemes to cut production by half. At the same time, consistently low water levels on Lake Victoria reduced the generating capacity of the Uganda Electricity Generation Company by 40%.

Kenyan concerns

The Kenyan government is being forced to seek long-term power import agreements from outside the EAC while it waits for new capacity to come on stream within the region. South Africa was originally the preferred option once the Arusha-Nairobi interconnector was completed, effectively making Kenya part of the Southern African Power Pool (SAPP). However, South African power utility Eskom is facing its own power supply problems and has put increased cooperation in jeopardy.

Last August, Kenya’s then newly installed Prime Minister Raila Odinga suggested that imports were most likely to come from Ethiopia where the Tekeze, Gilgel Gibe II and Beles dam projects jointly provide 1155MW of new generating capacity. However, a new transmission link would be required to transport Ethiopian electricity to the main areas of Kenyan demand.

Electricity consumption has increased by about 8% a year over the past five years and KenGen – which supplies about 80% of Kenya’s electricity supply – is only just able to satisfy today’s demand when hydro schemes are fully operational, so additional capacity is required as soon as possible.

So while it temporarily relies on outside sources KenGen is busy investing into its internal structures. The first of these is increasing the height of the Masinga dam that is being increased by 1.5 metres at a cost of $12m to boost water storage capacity in the entire Seven Forks Cascade by 12%. The Seven Forks Cascade lies on the River Tana, about 150-200km from Nairobi, and forms the heart of Kenya’s hydro backbone.

In addition, KenGen also increased the capacity of its two Kiambere turbines – two of Kenya’s largest hydro plants – by a further 12MW at the end of 2008, taking total capacity at the plant to 164MW.

As well as these upgrades a brand new hydro plant is also being constructed. The new Sondu/Miriu venture was due to come on stream last August but water levels were too low causing a substantial delay. However, when it is up and running it is expected to produce an average of 330GWh a year and has attracted $98m in financial support from the Japan Bank for International Cooperation (JBIC).

Rather than consisting principally of a dam like conventional plants, the Sondu/Miriu project is largely made up of a 6.2km tunnel and surface mounted penstock to take water down the Nyakach Escarpment to the turbines. Water will then be returned to the Sondu River 13km downstream of the intake via a 4.7km outlet. In addition, KenGen has constructed a 50km transmission line to connect the plant to the Kisumu substation. Once the Sondu/Miriu plant is completed, KenGen will have 737MW of installed hydroelectric generating capacity.

A large number of other attractive sites are also yet to be developed. The small 2MW Gogo plant was originally built to serve mining needs and could be expanded to 60MW but transmission problems in the southwest area would have to be tackled first. Downstream of Sondu/Miriu, KenGen plans to construct the 21.2MW Sang’oro plant and has already secured a US$46.6m loan from JBIC to cover all costs. Finally, a third 20MW unit could be added to Kindaruma and there is some potential for small hydro development in the country.

However, while the reliability five plants on the Seven Forks Cascade have an average availability of about 96%, a high figure by regional standards, most other potential hydro sites beyond the Cascade can not offer such a high degree of assurance.

East African powerhouse

The untapped Seven Forks sites aside, KenGen is more likely to rely on supplies from Ugandan dam projects than hydroelectric schemes on other Kenyan rivers. The government of Uganda has long touted the country as the powerhouse of East Africa, with large untapped hydro potential waiting to be developed to drive economic growth across East Africa. Yet the country still has just 300MW of capacity and suffers from its own power shortages.

A decade of frustration over a major scheme in Bujagali has deterred interest in the country’s other planned dam ventures. However, construction work on Bujagali began late 2007, reigniting enthusiasm for the landlocked nation’s other proposed hydro projects.

Today Uganda relies on the 180MW Nalubaale and 120MW Kiira hydro schemes, both of which lie on the Ugandan stretch of the Nile, north of Lake Victoria. Bujagali, which will be located downstream of the existing two dams, has long been mooted as the next most attractive hydro site in the country but funding problems held up development for many years.

Multilateral funding bodies have been encouraged to invest in the Bujagali project after they received World Bank support. The European Investment Bank and the African Development Bank will provide credit to the tune of $135m and $110m, respectively. The scheme is to be developed and operated by Bujagali Energy Ltd (BEL), a joint venture of Industrial Promotion Services (IPS) of Kenya and US firm Sithe Global Power. IPS is the industrial development arm of the Aga Khan Fund for Economic Development.

It is hoped that Bujagali will help to satisfy demand within the Ugandan market but BEL also expects to make a significant proportion of production available for export. A large number of companies are involved in Bujagali, including the turnkey contractor, Salini of Italy, and substantial progress has already been made on turning the project into a reality.

To diversify the generation mix, the Ugandan government has also proposed the construction of a 100MW thermal power plant. In addition, oil has now been discovered in the Lake Albert Basin that ministers have suggested can be used as power sector feedstock but it remains to be seen whether field operator Tullow Oil & Gas will prefer to market its production as a vehicle fuel.

Tanzanian temptations

At Steigler’s Gorge on the Rufiji River in Tanzania African specialist firm Energem Resources plans to develop a 900MW hydro scheme. Development, however, is by no means certain, as the project was originally planned by Norwegian donors in the 1980s and then shelved because of limited regional demand at that time.

Energem provided Infrastructural Development Finance (IDF) with just a $1.2m loan to secure a 40% share in the venture in May 2008, leaving IDF with 40%, the Rufiji Basin Development Authority 10% and private investors the remaining 10%. At the time, Energem chairman Brian Menell said: “The indications are that it’s a robust project – subject to the updating of the feasibility study, which will be completed over the coming months.”

Construction costs are already estimated at about $2bn, so securing the required funding may not be easy. Menell’s intention is to end up with a significant position in the project without significant cash equity participation, suggesting that sizeable donor support and investment from additional sources will be required. World Bank support will be crucial, particularly given its new found enthusiasm for large hydro ventures in Africa but the fact that Stiegler’s Gorge is located in the Selous Game Reserve, the second biggest protected area in Africa, could prove a stumbling block.

If the Rufiji dam is developed, it would be the biggest hydro scheme in East Africa and would provide a huge increase in the region’s generating capacity. Alongside exporting to the EAC, it could also export electricity to Zambia. After decades of economic stagnation, the reforms of the past 20 years have resulted in economic growth in Tanzania consistently in excess of 5% a year and a boom in mining industry activity that will require much greater power supplies within a decade.

At the other end of the consumption scale, the Tanzanian government hopes to use renewables to drive its rural electrification programme. At the Washington International Renewable Energy Conference (WIREC) in March 2008, it pledged to provide electricity to one million rural inhabitants by 2023 through renewable energy projects, with small hydro and wind power schemes the most likely options. The programme is being backed by a $105m loan and $6.5m grant from the World Bank’s Global Environment Facility (GEF).

Total national small hydro potential is 300MW but most sites have not yet been developed because they would be too expensive to connect to the national grid. However, the new emphasis on rural electrification makes such projects more rather than less attractive precisely because such remote rural areas are distant from the grid.

The hydro sector accounts for the lion’s share of electricity produced in East Africa and is likely to continue to do so for a long time to come. Some thermal capacity may be added, particularly in Tanzania, where gas reserves are being developed, but as in most of Africa hydro remains the cheapest form of power production. With small hydro an excellent method of promoting rural electrification, it seems clear that East Africa will provide a growing market for companies involved in the hydro industry for years to come.