The main objective of the GET FiT Program is to assist East African nations in pursuing a climate resilient low-carbon development path resulting in growth, poverty reduction and climate change mitigation.
Through the roll-out of phase one of the program, a portfolio of up to 15 small-scale Renewable Energy generation projects promoted by private developers with a total installed capacity of about 125 MW and approximately 780 GWh production / year will be fasttracked and by that transforming Uganda´s energy mix within a period of 3 - 5 years.
In terms of outputs, the GET FiT program is expected to result in:
- An increase in Uganda’s energy production by close to 20%, thus making a contribution to tackling an anticipated supply shortage that is likely to emerge in late 2014/ early 2015;
- Facilitating (or significantly improving) access to energy for at least 150.000 additional households (approximately 0.9M people), especially in rural areas due to added capacity and strengthening of the rural grids;
- Leveraging of approximately USD 375M (EUR 300M) in private finance for Renewable Energy generation projects (with a leverage ratio of public to private funds deployed of roughly 1:4.7), with a limited amount of grant funding (representing approximately 7% of overall cash flow to the Renewable Energy projects over 20 years);
- Emission reductions of roughly 11 million tons of CO2 over the 20-year lifespan of Power Purchase Agreements (PPAs).
In terms of outcomes, the GET FiT program will:
- Help stabilize Ugandan power sector finances by adding least-cost Renewable Energy generation capacity; more specifically, the program will reduce the average generation cost in the sector by more than 10%, thus creating the necessary financial space for future REFiT adjustments and to maintain cost-reflective retail tariffs
- Help enhance the overall enabling environment for private investment in Renewable Energy (and thus reduced transaction costs for future projects) through improvements in the REFiT system and its application (e.g. use of standardized Power Purchase Agreement templates, improved permitting and licensing procedures) as well as learning curve effects at the Electricity Regulatory Authority (ERA) as well as the Uganda Energy Transmission Company Limited (single buyer, UETCL);
- Enable Government of Uganda to pursue its ambitious electrification targets, thus contributing to enhanced productive use, socio-economic development and improved health (e.g., through electrification of health centres);
- Improve the availability of long-term commercial finance for small-scale Renewable Energy projects in Uganda, and will also help to set a new benchmark for long-term debt; and
- Help to decentralize and diversify of Uganda’s energy mix, thus enhancing security of supply.
By removing key hurdles to private investment in Renewable Energy, the program will help Uganda maintain substantial renewable energy component in the electricity generation mix, have more decentralized power production as well as less dependence on fossil fuel during a period of increased energy demand which is attributed to the anticipated rapid economic growth accelerated by the commencing of oil extraction.
The program builds on constructive efforts of Government of Uganda to build a power sector conducive to private investment, most recently symbolized by efforts to attain cost-reflective retail tariffs while also enhancing project’s financial viability.
The objectives of GET FiT will be accomplished through the combination of a so-called FiT Premium Payment Mechanism (a results-based top-up on the existing REFiT in Uganda on a per-kWh-basis), a Guarantee Facility to secure against off-taker and political risks, as well as a Private Financing Mechanism that will offer debt and equity at competitive rates.
In aggregation, these three mechanisms will address the key hurdles that are currently blocking more private investment in renewable energy generation capacity in Uganda such as the perceived low REFiT, high perceived off-taker risks, and lack of available of long-term commercial finance at acceptable terms and conditions).
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