Plans underway to increase rural electrification in Rwanda

Electrification systems in rural Rwanda. Commercial banks are still reluctant to finance off grid energy projects due to lack of a legal framework and feasibility studies. PHOTO | CYRIL NDEGEYA |   NATION MEDIA GROUP

By ALEX NGARAMBE, Rwanda Today

In Summary

• The projects are aimed at increasing electrification in rural areas where REG master plan will not supply energy in the next five to 10 years.
• GIZ through result-based financing programme for village grids intends to reach over 18,000 people in rural areas through mini grids with over Rwf580 million investment.

Local banks are still reluctant to finance off grid energy projects due to lack of a legal framework and feasibility studies.

The Association of Micro Finance Institutions of Rwanda and GIZ, a Germany organisation, have
launched programmes to encourage potential financiers of the off grid projects in rural areas.

Village grids are small grids in rural areas, which are not connected by Rwanda Energy Group (REG) and powered by small hydropower plants producing between five to 50 kilowatts whose maximum investment is Rwf40 million.

The projects are aimed at increasing electrification in rural areas where REG master plan will not supply energy in the next five to 10 years.

However, with limited number of private investors, GIZ is trying to attract development banks, commercial banks and micro finance to subsidise the projects.

But financial institutions have been reluctant to fund these rural electrification programmes mostly because of the risks due to lack of feasibility and unclear business plan.

“The power, which is produced from these off grid projects is not measurable because household consumers in the villages don’t have metres and this makes it hard to fix a price per unit thus risks to invest,” said Benjamin Manzi, director of investment at Rwanda Development Bank.

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GIZ through result-based financing programme for village grids intends to reach over 18,000 people in rural areas through mini grids with over Rwf580 million investment.

With reluctance from banks, rural electrification could take a slow pace and this could also reflect rural development.

“We have carried out such energy projects previously of even bigger magnitude but we encountered challenges because we had not paid attention to details of the feasibility studies of the project and this is reason enough for taking due diligence,” said Mr Manzi.

Rwanda presently has about 44.8MW of mini and small hydropower plants in operation and it imports 15.5MW from regional projects among them Rusizi I and II.
The energy body has a target of increasing electricity connection in rural areas and the entire country to 70 per cent by 2017.

“There seems to be an absence of a legal framework to govern such projects in relation to distribution of energy to consumers in case there is no return on investment and this is reason for cautiousness,” said Innocent Bulindi, the chief executive of the Rwanda Development Fund.

REG has seen more than 50,000 household connected to electricity while 4,000 jobs have been created.

Rwanda has also has potential to produce power from solid waste and Kigali city alone can produce around 450 tonnes per day.