Ambitious Energy Expansion in Rwanda

To fulfill its growing demand for electricity, the East African nation has turned to its larger neighbors. This past week, Rwanda signed an agreement to import 400MW of power from Ethiopia and another 30MW from Kenya. Just last month, the Rwandan government, along with its counterparts in Kenya and Uganda, announced plans to build a 400KW regional power line through the three countries. Rwanda has recently become very aggressive to expand its citizens’ access to electricity, aiming to grow generation from 110MW today to an astounding 563MW by 2017. This has been particularly driven by rapid economic growth, which has averaged 7.5% over the past 10 years. In order to realize its full potential, Rwanda needs to extend electricity access, currently only available to a meager 17% of the population. This also comes in the context of greater regional integration in an ambitious drive by the government in Kigali to turn Rwanda into East Africa’s powerhouse.

Although Rwanda has experienced impressive economic growth over the past decade, it lives in the shadow of the devastating genocide 20 years ago that wiped out much of its infrastructure. Consequently, electricity consumption is one of the lowest in Africa and also the world. At 42KWh per year per capita, it is far below the the developing world average of 1200 KWh and the Sub-Saharan average of 478KWh. Lack of a widespread power grid has limited economic activity and left many Rwandans without basic necessities. Furthermore, Rwanda relies on environmentally unfriendly thermal generation (diesel and oil-based generation units) for about 40% of all electricity. A move towards cleaner power generation is necessary for sustainable energy growth; thus, the government has been determined to amplify electricity generation by tapping into a variety of its resources. By 2015, Rwanda is expected to add on 61.5 MWh of generation domestically: the Nyabarongo I hydroplant (28MW), the Kivuwatt methane project in Lake Kivu (25MW), the Gishoma Peat Plant (15MW) and the Giggawatt Solar power plant (8.5MW).

In order to meet its electricity targets, Rwanda has complemented its domestic investment by leveraging its important relationships with its neighbors. Ethiopia has been a key military ally of Rwanda for the past 35 years; it notably contributed support in ending the genocide in the 1990s. The two also signed a  Memorandum of Understanding in March of this year to strengthen defense ties.

Rwanda has also been expanding its partnerships with Uganda in recent years. Throughout their history, the two countries have worked closely on military issues due to their shared security interests in the Eastern Congo, and continue to do so in order to resolve the ongoing conflict in that region. At the same time, the two nations have worked for better regional integration in the midst of their soaring economic growth. The third-annual Uganda-Rwanda Business Forum was held earlier this month with the aim of coordinating the actions of the two countries’ private sectors and reducing trade barriers. Seen as a highly important program to facilitate interstate commerce, the event was even attended by Presidents Paul Kagame and Yoweri Museveni. The long-term potential for political and economic relations between Rwanda and Uganda clearly appears to have been a driving factor in the recent energy deal.

Although Uganda and Ethiopia are strategic allies for Rwanda, the two countries are surprisingly not major trade partners. On the other hand, Rwandan exports to Kenya have nearly tripled since 2007, making Kenya its largest trading partner. Greater engagement has been a driving factor: in April of this year, the 8th session of the Kenya-Rwanda Joint Permanent Commission to review and improve the two countries’ economic relationship.

Overall, these new deals will be a blessing for Rwanda’s economy. On one end, it will greatly benefit the average Rwandan, providing more electricity coverage for all and facilitating their access to other basic necessities. On the other, businesses stand to gain as well, as Rwanda will become an even more attractive place to invest. Long viewed as a remarkable African success story, the country has just moved up to 46th in the world on this year’s Ease of Doing Business Index. However, with such low rates of electricity access, improving coverage is necessary for creating a better investment environment. President Kagame tried to woo investors at the Global Africa Investment Summit earlier this week with over $23 billion in potential infrastructure deals. The security of the energy agreements should go a long way in boosting investor confidence. Although Rwanda’s current energy production is far from its goal of 563MW, the recent rise in projects undertaken by its government should give both onlookers and common Rwandans hope for the future.