Uganda has set an ambitious agenda to develop its substantial energy and mineral resources, promote economic development, end energy poverty, and lead the country to a just energy transition. Uganda’s stated objective in Vision 2040 is to transform into “a modern and prosperous country”, ensuring a better future for its citizens. The energy sector will play an important role in helping Uganda achieve this.

Uganda is endowed with abundant natural resources, including fertile soils; petroleum deposits; and reserves of iron ore, phosphates, copper, cobalt, aluminium and gold. The agricultural sector employs over 80% of the workforce, mostly in subsistence farming. Uganda had a population of 47 million in 2022, around 25% of which was urban. The country’s fast population growth has undermined efforts to increase access to modern energy.

Final energy consumption was about 16 800 kilotonnes of oil equivalent (ktoe) (703 petajoules [PJ]) in 2021. Traditional biomass, mostly wood and charcoal used by households for cooking, accounted for around 87% of the total. Around 11% of final consumption was in the form of oil products, mostly petrol and diesel for transportation. Only around 2% was in the form of electricity, most of which was from hydropower. Households accounted for 61% of final energy consumption, industry 22%, transportation 7%, and commercial and public services together consumed around 9%.

The National Energy Policy for Uganda 2023 focuses on expanding the electricity transmission and distribution grid networks; increasing energy efficiency; promoting the use of alternative sources of energy; and strengthening the policy, legal and institutional framework. Uganda has developed a number of subsectoral policies, including the 2008 National Oil and Gas Policy (currently under review), the Renewable Energy Policy (2007), and the Electricity Connections Policy (2018).

In recent years, Uganda has improved the coverage, quality and timeliness of energy balances and related data. Although Uganda is a leader in the region in terms of energy statistics, as in many other countries, data collection, organisation and quality control often are not allocated sufficient and consistent resources.

While electricity represents only around 2% of Uganda’s total energy consumption, over 80% of generating capacity is based on hydropower. Most of the remainder is also renewable, including several solar photovoltaic (PV) installations and thermal power plants that burn sugar cane bagasse. The significant reliance on hydropower has implications for energy security, particularly due to uncertainties surrounding future climate change impacts on the region’s water resources.

Uganda increased its electricity generating capacity from about 320 megawatts (MW) in 2002 to over 1 346 MW at the beginning of 2023 and now has a significant surplus relative to its peak demand of about 800 MW. The Karuma hydroelectric power plant, expected to come fully online in 2023, will add a further 600 MW.

Investment in transmission and distribution has not kept pace with generation, resulting in an inability to fully use a significant share of the country’s generating capacity. Since past power purchase agreements (PPAs) signed with the state-owned system operator have often included take-or-pay clauses, the government has had to pay for energy that it has not been able to use, adding significantly to the cost of power.

The government has avoided subsidising electricity consumption. However, high tariffs have prevented many customers from consuming power, even when initial connections are subsidised. This, in turn, has made it challenging to finance grid extensions, as well as operation and maintenance; lowering the cost of power is one of the government’s priorities.

The Cabinet recently decided to merge the three state-owned entities covering generation, transmission and distribution into a new, vertically integrated company. This is part of a general policy to rationalise government agencies. In the case of electricity, the government hopes that eliminating private shareholders’ requirements for a guaranteed return on investment, as well as the ability of a government-backed company to obtain cheaper credit, will help reduce tariffs. It also cites the potential for closer co-ordination of transmission and generation investments as another benefit. However, some stakeholders, including some investors and development partners, have expressed concerns about the uncertainties related to the proposed merger and its timing.

Amendments to the Electricity Act passed in 2022 include the possibility for net metering and for generators to sell directly to customers instead of to the transmission company, which has served as the single buyer. However, regulations allowing market participants to take advantage of such measures have yet to be implemented.

The government has a scenario to develop a 1 000 MW nuclear power plant by 2031 and another 1 000 MW plant by 2040 in anticipation of rising demand. It is working with the International Atomic Energy Agency (IAEA), considered to be in Phase 2 of the IAEA Milestone Approach, and has signed non-binding agreements with companies in the People’s Republic of China (hereafter “China”) and the Russian Federation (hereafter “Russia”) to explore options.

Approximately 92% of Uganda’s generating capacity is renewable, of which about 80% consists of large hydro, 8% sugar cane bagasse-fired plants and 4.5% solar PV plants. Uganda aims to increase its non-hydro renewable electricity generating capacity, particularly from solar. It introduced PPAs with feed-in tariffs for renewable energy projects under 20 MW in 2007.

Individual and commercial solar systems can help the government meet its electrification targets and spur economic development in rural areas. However, the market for solar home systems and components has been significantly undermined in recent years by faulty installations, the import of substandard systems and poor after-sales service.

Uganda appears to have significant geothermal potential, which could help reduce the power system’s dependence on hydro. The main challenge for geothermal development in Uganda is the significant resource uncertainty and geological risk that private investors must bear in the absence of detailed data.

Given the high level of organic content in the country’s municipal waste, significant increases in the urban population, and constraints on land available for new dumps and landfills, waste-to-energy projects appear to be a particularly promising way to diversify the energy supply. The government also hopes to develop biofuels and build up domestic production capacity.

Achieving universal access to clean and reliable energy sources for electricity and cooking remains a challenge in Uganda and is a high priority for the government in achieving economic and social development.

With around 30% of the population having access to electricity and less than 6% having access to clean cooking fuels, Uganda continues to have one of the lowest electrification and clean cooking rates in sub-Saharan Africa. Although the share of people with access to clean cooking fuels has rapidly increased since 2010, the rapid population growth has led to the actual number of people without access to effectively increase. In its National Energy Policy 2023, the Ugandan government aims to reach universal access to electricity and 50% access to clean cooking by 2040. 

As of 2022, around 20% of the Ugandan population had access to electricity from the national grid, while a further 10% received electricity from solar home systems capable of providing a basic package of energy service. Another 20% benefitted from limited access through smaller solar lighting devices such as solar lanterns. It is estimated that approximately 50% of the country’s health centres and 20% of its schools have access to electricity, either through grid or off-grid solutions.

Low power demand undermines the entire power system, thereby contributing to grid instability and an unreliable supply that, in turn, undermines consumption. Further, the scattered and sparse settlement patterns of the predominantly rural population compound the cost and complexity of the country’s electrification efforts, making it necessary to consider both on- and off-grid solutions.

Around 95% of households rely on either wood or charcoal as their primary energy source for cooking, creating both social and environmental concerns. High reliance on biomass is contributing to deforestation in parts of the country. Millions of Ugandans are negatively affected each year by indoor pollution from cooking with biomass, which disproportionately impacts women and children.

Challenges include the high costs of improved cookstoves and fuels compared to biomass (which when collected is often perceived to be free), the lack of financing for stove distributers and potential customers, insufficient distribution infrastructure for liquefied petroleum gas (LPG), and cultural and awareness barriers. Even when households adopt clean cooking technologies, they often do so incompletely, continuing to use biomass for much of their cooking needs.

Affordability remains the main challenge to both electricity access and clean cooking fuel access. The government has implemented several instruments and mechanisms to lower the cost of electricity, such as a social/lifeline electricity tariff and a free connection plan. Yet the level of financial support for these initiatives has not been consistent, undermining efforts to help the 33 million people who still lack access to electricity. Similarly, a cooking tariff for electric cooking is available to all grid-connected customers, yet the low connection rate makes the option unavailable to most households.

While LPG for cooking is seen as a potential solution, it is not yet widely available outside urban areas; cylinders are not standardised across distributers; and there are currently no verifications of LPG quality or cylinder fill levels. The government is promoting the use of LPG, including through the distribution of free start-up kits (including free cylinders), the construction of filling stations outside Kampala and the standardisation of LPG cylinders, which could support increasing access through LPG expansion.

Reaching the 2040 access target for electricity and clean cooking will require more targeted government subsidies, foreign investment, awareness campaigns on cooking solutions, as well as better regulations on the sales of cooking fuels.

Oil accounted for less than 10% of Uganda’s total energy supply in 2021, with all oil products being imported through Kenya and the United Republic of Tanzania, and primarily used for transport.

Uganda’s first commercial oil discovery occurred in 2006 in the Lake Albert basin. Petroleum resources in the explored part of the Albertine Graben are estimated to be 6.5 billion barrels, of which 1.2 billion are considered recoverable, with an additional 0.4 billion barrels of contingent resources.

Two oil development projects are being pursued by a consortium of TotalEnergies and China National Oil Corporation, along with the Uganda National Oil Company. Commercial production is scheduled to begin in 2025, and peak production from existing projects is expected to reach about 200 thousand barrels per day (kb/d) by 2028. The three main upstream investors are developing an oil export pipeline in partnership with the Tanzania Petroleum Development Corporation. The planned East African Crude Oil Pipeline (EACOP) will stretch from Hoima District in western Uganda to the Tanzanian coast at Tanga, providing an outlet for landlocked Ugandan crude oil to the international market. There are also plans for an oil refinery to serve the domestic and East African markets.

There is no production nor consumption of natural gas in Uganda, though estimated gas resources include 7.1 billion cubic metres (bcm) of associated gas and 9.5 bcm of non-associated gas. Both the Tilenga and Kingfisher projects are expected to produce some gas associated with their oil output, and both plan to use this to generate on-site power and produce LPG for the local market. Additionally, the governments of Uganda and Tanzania have agreed to work towards developing a natural gas pipeline from Tanzania to Uganda to supply natural gas for the iron and steel industry as well as for domestic and commercial uses.

All tax and non-tax revenues for the government from oil will be received by the Uganda Revenue Authority and will be deposited in the Petroleum Fund, which was established by the Public Finance Management Act 2015. The Fund is designed to ensure that the revenues from petroleum resources are well managed and allocated for the benefit of current and future generations of Ugandans, with an emphasis on infrastructure development.

There have been some concerns expressed by international and local groups about the potential environmental and social impact of the EACOP oil project. Social and environmental assessments were conducted for the current oil projects and these have been approved by the respective regulatory agencies. The government sees oil development as a way to diversify energy supplies, improve energy security by cutting reliance on oil imports, build technical competencies for other industrial activities, and provide revenue for the country’s economic and social development.

Uganda has no production of critical minerals, but initial exploration in the 2000s suggests that the country has reserves of several minerals critical for the energy transition. Moreover, Uganda’s abundant hydropower and renewable energy could help make the country a relatively low-carbon source, potentially giving it a market edge over competing suppliers.

Higher upfront costs, low levels of access to modern energy and a lack of adequate data present important challenges for energy efficiency policy making in Uganda. Until recently, the absence of a legal framework for energy efficiency has stalled important measures, such as the enforcement of building codes, minimum energy performance standards (MEPS) and labelling regimes. Efforts are underway to develop a legal, regulatory and enforcement framework for energy efficiency following the adoption of the 2023 National Energy Policy and the anticipated adoption of the draft Energy Efficiency and Conservation Bill.

Uganda’s fleet of predominantly older and imported vehicles is inefficient compared to global averages. For example, light-duty vehicles (which include passenger cars) consume over 25% more fuel than the average globally. E-mobility initiatives for two- and four-wheel vehicles are being deployed with the support of international donors. The government has set a target to electrify 30% of the motorcycle fleet by 2030.

As part of its efforts to expand affordable electricity access while growing demand for productive uses of energy, the government has an opportunity to lay the foundations for energy efficiency and ensure greater cost-effectiveness and affordability in the medium and longer term. 

Uganda’s current CO₂ emissions from fuel combustion equal 5.7 million tonnes carbon dioxide (Mt CO₂), mostly from the transport sector. Electricity only accounts for 1% of emissions. Challenging environmental issues in Uganda’s energy sector include deforestation, land degradation and indoor air pollution related to the use of biomass in residential cooking; the vulnerability of the country’s large hydropower-generating capacity to climate change; and the future impact of oil and gas operations on land, water and air resources.

Uganda has signed and ratified the Paris Agreement on Climate Change, which requires parties to develop climate change policies, strategies and plans promoting adaptation and mitigation. Priority adaptation actions for the energy sector considered in Uganda’s Nationally Determined Contribution (NDC) include improving access to electricity to reduce dependence on biomass, promoting the use of renewable energy sources and energy-efficient technologies, increasing access to clean cooking options, and rehabilitating and climate-proofing electricity transmission infrastructure.

Reforms to improve the investment environment in Uganda include the Investment Code Act 2019, which created the Uganda Investment Authority to act as a one-stop shop to simplify administrative procedures. The Act also lays out a series of tax incentives and other key protections for international investors.

In the power sector, over USD 270 million have been mobilised into independent power producers (IPPs) with private involvement over the last decade. Transmission was recently opened to the private sector, with a pilot project currently under negotiation. Within the distribution sector, there are several private concessions, although ongoing sectoral reforms and the decision not to renew the largest distribution concession have created some uncertainty.

Oil investments so far have been led by Western and Chinese companies, though pressure on financiers, particularly in Europe, to align their portfolios with a net zero scenario may reduce the capital available for such projects going forward. Mining for critical minerals remains nascent but is likely to attract private capital once geological viability is confirmed and the regulatory framework fully established.

The cost of capital remains one of the major challenges. Small and medium-sized enterprises in the off-grid space rely heavily on local commercial banks, but these banks often struggle to assess the risk of off-grid solutions. They, therefore, can only provide loans at prohibitive rates. While there is potential for domestic institutional investors, especially pension funds, to play a larger role, high yields on government securities reduce the incentive to invest in alternative assets. Climate-related funds can serve as a source of capital for clean power projects, though the government’s experience with such funds so far has been with procedures that are often long and complex. The Ugandan government has established the National Climate Change Mechanisms Taskforce in 2022 to address opportunities related to both Article 6 and voluntary carbon markets.