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Uganda: Energy for Rural Transformation Project
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Uganda: Energy for Rural Transformation Project
Emergency Energy Efficiency and Demand-Side Management Measures

PROPOSED COMPACT FLUORESCENT (ENERGY SAVER) LAMP PROGRAM
IN UGANDA


Background

With the current demand for electricity around 350 MW, Uganda faces a power supply
crisis. Out of the installed capacity of 300 MW (Nalubale and Kiira hydropower plants),
only 135 MW is currently available. If the weather situation worsens resulting in more
severe droughts, the power availability may go down further, to 80-90 MW in the next
several months. About 50 MW is produced by a diesel-based thermal plant (installed in
May 2005). The Government is considering adding 100 MW of thermal capacity, but this
is likely to be subject to high diesel prices resulting from price escalation in the
international oil markets. Efforts are underway to reduce transmission and distribution
losses in the power system network from 41% to 20% by 2011. Even with all these
measures, there is not enough capacity to cover the demand-supply gap, resulting in
acute power shortage.

Lighting energy use causes peak load shortages in the Uganda power system which is
currently facing increasing supply demand gaps. Although, efficient compact fluorescent
(energy saver lamps) have started being used in the market, its share is small. Most
residential customers use incandescent lamps because CFLs or Energy Saver Lamps
(ESLs) are expensive and often not of good quality. Higher penetration of efficient lamps
into the Uganda power sector can form an important part of the efforts to address the
electricity shortages in Uganda.

Current Market Situation

There are about 220,000 consumers in the UMEME power system, excluding large and
medium industries. About 140,000 consumers are in Kampala itself. Of these 220,000
consumers, about 75,000 are low-income consumers on lifeline tariffs who use, on an
average, 1-2 lamps per household, usually of 100 W rating, for more than 4 hours a day.
The remaining consumers are the middle- and high-income households, and small
commercial and public building sectors. It is estimated that an average middle-income
home uses 2 to 4 lamps on a regular (for more than 4 hours per day) basis. The high-
income and small commercial customers use 6-12 lamps per consumer for more than 4
hours a day. This results in the estimated total number of lamps used for over 4 hours a
day to about 850,000.

It is estimated that 100,000 CFLs and 1.5 million incandescent lamps are being sold
annually in Uganda. The latter figure translates into an additional market for 500,000 to
600,000 CFLs.

A wide range of CFLs with rating from 5 W to 23 W - are sold in the Ugandan market.
In addition to the well-known brands such as Philips and Osram, many other low quality
cheaper brands are available. All CFLs and incandescent lamps are imported and are
subject to duties and taxes that total almost 50%, of which import duty is 25% and VAT
is 18%. The landed cost works out to be about Shs 5,200 and Shs 450 for the CFLs and
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incandescent lamps respectively. The standard quality CFLs, with 6,000 hour life, retails
around Shs 7,000 ($3.90) to Shs 9,000 ($4.50) compared to incandescent lamps of Shs
800-1,000 each. The normal delivery schedule of CFLs is about 5 to 6 months from the
time the order is placed by the distributors.

As seen from the experience elsewhere (Vietnam, India, South Africa, etc.), the price of
CFLs could be between $1.00 and $2.00 if they are procured through bulk procurement
programs. The quality, in terms of light efficacy lumens/watt of CFLs, lifetime of CFLs
and the voltage fluctuations they can withstand, can also be assured when the
specifications, certified manufacturers and procurement protocol of the Efficient Lighting
Initiative (ELI) are used.

CFL Economics

CFLs have high initial costs but can provide customer a substantial amount of energy
and cost savings. Similarly, from the utility perspective, as lighting use generally
coincides with the peak loads of the power system, it provides the benefit of a cheaper
alternative to avoiding additional generation capacity additions.

CFLs offer a win-win proposition from both the utilitys and the consumers perspective.
At the average estimated CFL price of $2.00, which includes bulk procurement price of
$1.50 and program distribution and marketing cost of $0.50 per lamp, and assuming
T&D losses of 20% and peak coincidence factor of 0.8, the cost of peak load savings
comes to about $10 per kW per year which is lower than the cost of generation
alternatives. From the standpoint of the consumer, the energy savings due to a 60W
incandescent replaced by a 12 W CFL are in the range of 192 to 240 watt-hours a day.
At an electricity tariff of $0.12 per kWh, this results in cost (electricity bill) savings of
$0.70 per month or a 3-month simple payback period.

However, the higher first cost of CFL is still a barrier. As CFLs will result in energy
savings which would potentially displace the alternative diesel-based power generation
(in the business-as-usual situation), the emission reductions if processed through a
Clean Development Mechanism (CDM) project, could be sold in the carbon market to
make the economics of the program viable.

Program Design

The objective of this proposed program
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is to have UMEME, the local electric utility, do
the bulk procurement of 800,000 CFLs from one or two suppliers using the specifications
and list of certified manufacturers and products available through the international
standards under the Efficient Lighting Initiative. The procurement specifications will
include minimum of one year warranty and quality parameters such as efficacy of lamps,
life of lamps (minimum of 6,000 hours), and voltage tolerance (fluctuations of 170-260
V). The lamps procured through this program may also be branded by UMEME.

Of the 800,000 lamps, 600,000 will be distributed by UMEME channels (UMEME
contractors for bill delivery and others) free of cost to the residential and small
commercial consumers. The number of lamps to be distributed per household will be
determined by the last six months of bill records, with a maximum of up to 4 lamps per

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Designed during a World Bank mission to Kampala in April 2006.
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consumer. The replaced incandescent lamps collected from the consumers will be
destroyed and disposed off by UMEME. If CDM revenues could be earned under the
project, that would offset some of the barriers related to the investments in CFL
procurement.

About 50,000 lamps will be retained by UMEME for replacement during the warranty
period free of cost. The remaining 150,000 lamps will be available for post-warranty
sales at the bulk procurement price. This would enable a smooth transition into a
market-based pricing at a later stage which is expected to be closer to the bulk
procurement price.

The advantages injecting large number of lamps in the market will help market
development, which along with customer experience plus post-warranty replacement
sales should lead to positive future purchase decisions in favor of CFLs. It is also
expected that the program design will build up customer confidence and CFL image,
which will lead to increased market acceptance. Finally, it will bring down the market
price for CFLs in the Ugandan market. In the long-term, after the proposed 800,000 CFL
program is completed, UMEME may be able to devise a system of providing loans to
customers for purchasing CFLs, which would be recovered in installments through the
electric bills.

The program design includes three other key elements: (1) Comprehensive awareness
and promotion campaign- this would be carried out by UMEME in conjunction with
MEMD (ii) monitoring and evaluation component to be led by MEMD and/or an advisory
committee and (iii) product quality and standards compliance to be conducted by the
Uganda National Bureau of Standards.

Estimated Load Impacts

A typical CFL replacement (60W incandescent with 12 W CFL) results in 48W peak load
savings. With about 600,000 CFLs in place, an estimated 25-30 MW could be saved
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assuming T&D losses of 20% and peak coincidence factor of 0.8 for the system.

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A residential electricity consumption survey conducted by MEMD in June 2006 substantiates the analysis.