Over the last 5 years, how has the energy mix changed, and what have been the key drivers?

In 2015, the Government of the Republic of Rwanda (GoR) adopted the Rwanda Energy Policy (REP), seeking to promote the energy sector as one of the country’s most dynamic and attractive investment avenues.¹ The Energy Sector Strategic Plan (ESSP) for 2013-2017 outlined the priority strategies and actions accompanying the policy, including optimizing the energy mix by promoting private sector participation. The GoR notably set the following goals:

• Raise electricity capacity to 563 MW by 2018 which was later lowered to 446 MW by 2024.
• Reduce biomass use from 85% (2016) to 50% by 2018 and 42% by 2024.
• Guarantee security of petroleum supply by ensuring adequate storage infrastructure and strategic reserves.

The GoR also encouraged private sector participation by enabling an appropriate investment environment. In 2016, the Public Private Partnership Law was introduced seeking to facilitate PPPs. This encouraged innovative PPPs in the energy sector by enabling the Energy Utility Corporation Limited (the main energy utility services provider in Rwanda) to act as off-taker of electricity produced by private operators.

The 2016, the Rural Electrification Strategy also set out development plans for the off-grid sub-sector, including mini-grid development by private companies. Currently, there are over 20 companies operating in Rwanda, supplying systems to houses both through GoR programs and independently.

The REP also promotes more efficient production and use of biomass energy by households, to be complemented by enabling other sources of energy, including biogas, pellets, briquettes and Liquefied Petroleum Gas (LPG). The private sector has been participating in implementing this solution and 45 companies are currently active in the biogas business.

Moreover, the promotion of investment opportunities in power generation by the GoR has enabled private developers to tap into national hydro resources (through leasing, operating or directly owning hydropower plants).

Regarding the petroleum sector, Rwanda has, over the last five years, increased its storage capacity with three new facilities (in Rusororo sector, Gasabo district and Jabana in Kigali).

What is the outlook for the energy and natural resources sector in the next 5 years? In particular:

Key policy decisions

There have been recent changes in legislation relating to the sector as evidenced in the January 2021 Investment Code. The Code introduced new investment incentives for the energy sector such as a corporate income tax holiday of up to seven years with a preferential rate of 15%. It is expected that more investment incentives will be rolled out in the next few years.

Regarding biomass, the GoR admits that barriers must be overcome to promote the use of alternative technologies. For instance, LPG is currently imported (with the supply chain acting as a bottleneck), making it expensive.

Policies relating to the development of infrastructure and distribution for LPG and biogas are expected to be adopted in the next few years as well as more generally in the energy and natural resources sector.

Main policy challenges

To achieve the aforementioned goals, policy implementation could face the following challenges:Institutional framework: Various institutions share key responsibilities in the energy sector and are therefore involved in the implementation of the REP and ESSP. This means cooperation and effective coordination would be required between institutions involved to avoid duplication, gaps or misaligned allocation of responsibility and accountability.

Alternatives to biomass: Biomass is largely consumed for cooking, with wood used by most rural households (over 90%) and charcoal by urban households. Affordable, practical alternatives must therefore be made available if large-scale change is to be achieved. An alternative to biomass will also require a cultural change. Indeed, cooking fuel is culturally fixed in Rwanda. Therefore, encouraging transition to cleaner and environmentally friendly use will require a behavioral change that must be supported and promoted at the national level.

The anticipated role that renewables and/or new technologies will play

Rwanda is committed to the sustainable development of the energy sector by giving priority to renewable energy alternatives and new technologies. Solar power is expected to contribute a significant share of power generation as technology improves and battery storage prices fall. Moreover, the GoR plans to expand street lightning to all roads using high-quality technology amongst others.

What are the key investment opportunities in the energy and natural resources sectors over the next 5 to 10 years?

Key investment opportunities lie in building infrastructures for renewable sources such as hydro, methane gas, solar and other forms of energy for power generation. The GoR has identified the following investment opportunities:

• Hydropower – Including large, medium, small, mini and micro hydropower projects. Recent feasibility studies show a potential in micro hydro power generation in over 40 small sites.
• Methane gas – Further utilization of Lake Kivu’s methane gas is planned to develop more methane-to-power projects
• Solar and solar PV projects – Feasibility studies are being conducted on the development of a 30 MW power plant with storage facilities in the Eastern province.
• Peat – The GoR plans to commission further peat power stations that will be privately owned.

Power generation will continue to be a key investment area. Indeed, the 2017-2024 ESSP confirms that independent power producers will continue to be encouraged to finance and deliver generation projects through power purchase agreements.

Regarding the petroleum sector, the GoR plans to build new storage facilities and rehabilitate existing ones to increase capacity storage. Participation of the private sector is set to be promoted through companies getting involved by way of PPP lease contracts.

With particular focus on sustainability, and on reducing carbon emissions, how will the energy and natural resources landscape change over the next 5 to 10 years?

Rwanda’s total emissions are forecast to double between 2015 and 2030. In May 2020, Rwanda was the first African country to submit a climate action plan pursuant to the country’s obligations under the Paris Agreement. However, the ambitious plan seeks to reduce Rwanda’s emissions by 38% (equivalent to up to 4.6 million tons of CO2) through improvements in various areas, including in energy production and use.

For example, the GoR plans to reduce the number of households relying on firewood as a cooking fuel by promoting other energy efficient technologies.

There will be an increase in the number of private companies operating in the production and use of renewable energy. Indeed, investment opportunities in renewable energy have been identified in the following areas:

• standalone solar systems for households; and
• mini-grid systems from different resources (solar, hydropower, biomass) with 20 sites already identified.

Footnotes

¹ For further information on energy policy in Rwanda, please see:

• Rwanda Energy Group website
• Rwanda Development Board website
• Ministry of Infrastructure
• Ministry of Environment website
• Rwanda Energy Policy available on the Ministry of Infrastructure website
• Energy Sector Strategic Plan for 2013-2017 and for 2019-2024 available on the Ministry of Infrastructure website