Power policy

By the end of 2019, Rwanda was just over halfway to its ambition of supplying 100% of households with electricity, real progress for a country in Sub-Saharan Africa. That is a major jump from just 10% in 2010. The country aims to achieve its goal using 52% on-grid connections and 48% off-grid solutions, such as solar home systems and mini-grids. State-owned utility Rwanda Energy Group (REG) says that 37% of households are currently connected to the national grid, while 14% access electricity through off-grid solutions.

Power prices and costs

Electricity prices in Rwanda are among the highest in East Africa, and commercial and residential tariffs have increased considerably since 2010. The biggest driver of this is “take-or-pay” contracts administered by REG. These contracts compensate developers for the contractual offtake from their projects even at times when power cannot be taken. On top of that, the power purchase agreements are signed in dollars and are exposed to currency and commodity price fluctuations. As a result, retail electricity is highly subsidized by REG and the government.

Power market

Small hydro remains the most popular source of electricity generation in Rwanda due to the strong network of rivers, accounting for just under 51% of the total mix. The country also relies on solar, natural gas and diesel, and takes advantage of methane from gaseous lakes in the southwest to produce power. Hydro and solar constitute 52% of total generation in Rwanda as of 2021, leaving a gap of 8% to achieve its 2030 targets.

The government’s power sector has ambitious targets to achieve 512 megawatts (MW) of installed power generation capacity, from 219 MW in 2021. Energy Development Corp., a subsidiary of REG, has been the most prominent developer, but there are also multiple private players involved in Rwanda’s generation sector.

Doing business and barriers

Rwanda prides itself on being one of the best markets to do business in Sub-Saharan Africa and has an appetite for domestic and foreign investment to serve its fast-growing economy. The Rwanda Development Board has been created to support private sector players entering the country, complementing the strong presence of commercial and donor-backed lenders on the ground.

Being a landlocked country, importing components into Rwanda is expensive, even if most are exempt from value-added tax. Access to local credit is a key challenge for off-grid companies, along with lack of purchasing power among the broader population. In addition, REG has said that it will not sign any new PPAs with developers, citing the country’s estimated 86MW oversupply of generation capacity.

EV market

Rwanda has targets to increase electric vehicles (EVs) introduced to the market to 70% by 2035, along with other relevant goals outlined in the National Transport Policy And Strategy For Rwanda. However, the EV market in Rwanda is at an extremely early stage.

EV policy

Rwanda’s Ministry of Infrastructure has an agency called Rwanda Transport Development Agency that handles electric vehicle (EV) development. The government has instituted a series of incentives for EVs, such as a reduced 15% corporate income tax and tax holiday for companies that manufacture and assemble EVs. The country does not have an upfront purchase grant or loan for EVs, but it has chosen to exempt import and excise duties on the vehicles, spare parts, batteries and charging station equipment to reduce the cost of ownership and maintenance. These products are also treated as zero-rated valued-added tax goods.

Meanwhile, electricity tariffs for charging stations are be priced at the industrial tariff level in the large industry category. This allows tariffs to remain at around 94 Rwandan francs ($0.09) per kilowatt-hour, significantly lower than the cost of residential consumption.

Buildings market

Rwanda’s objectives are to double the efficiency of biomass use and improve efficiency in the electricity sector by 2030. The Rwanda Building Code also sets minimum design requirements to promote the use of energy efficient technologies in buildings

Buildings policy

In September 2020, the World Bank Board of Directors approved $150 million in funding to improve access to modern energy for Rwandan households, enterprises, and public institutions and to enhance the efficiency of electricity services. Half will be provided as grant funding, and the other half will be provided as a loan.