Solar Power Subsidy

In September 2007, the Ugandan government announced a 45% subsidy - increased from 14% - on all solar power equipment. The offer, made by government, the Private Sector Foundation of Uganda and nine donor agencies comes six years after the Rural Electrification Agency (REA) was launched. It is hoped that the subsidy will encourage private suppliers to invest in rural areas by reducing transaction costs and making solar systems more affordable, especially in rural areas.

The programme introduces subsidies through microfice institutions, either as a cash payout to those who install solar systems on loan or a loan-offset. Incentives are available as direct subsidies from the REA for solar system customers and line-of-credit for participating micro finance institutions (MFIs) or credit guarantees to participating micro-deposit taking institutions; grant advances to enable market entry or expansion, in the form of time-limited soft loans to the solar power companies, including rural dealers and one-stop application for REA subsidies, public-private sector grants and credit from MFIs, using one consolidated application form. The programme calls for delivery and installation of a solar PV system to a consumer before payment is made to the dealer, a condition that most financial institutions would not easily accept.

The programme will be funded by the Rural Electrification Fund, the World Bank Credit Fund, the United Nations Development Programme and microfice institutions.