Eng. Albert BUTARE Minister of State Incharge of Energy and Communications RWANDA

1. DUAL CRISES OF MODERN ENERGY Eng. Albert BUTARE Minister of State Incharge of Energy and Communications RWANDA

2. Affecting ……….. • Burundi • DRC • Kenya, • Mali, • Madagascar, • Tanzania, • Rwanda, • Uganda, • Several other countries!

3. A case of Rwanda …………… today

4. Status • Growing economy constrained by high energy costs and supply shortages • 100% oil import dependence • Grid power shortages since 2003 – low lake levels for hydro, growing demand – alleviated by oil-based generation • Negative impact on income, employment, and attracting new investments. • Low geographic/demographic access to electricity and other modern fuels • Per capita consumption electricity ~22 kWh/yr; oil ~ 12 kgoe/yr. • High costs for the most significant fuels for the poor - Kerosene for lighting, wood and charcoal for cooking • Broad-based participation in, and benefits from, growth and poverty reduction strategies limited.

5. Grid Supply Shortages • Dramatic change from 2003 to 2006 • Domestic hydro generation drop by over 65% • Imports and jointly owned hydro drop by ~50GWh • Thermal generation from 0 to 140 GWh • Just when oil prices have increased ~100+% • Urban water supplies also affected (higher cost of diesel pumping)

6. Met by high cost diesel generation • Diesel now accounts for ~55+% of total Electricity generation • Fuel cost excluding taxes ~ US $0.70/liter • Variable production cost ~ US $ 0.20+/kWh • High system losses ~ 35+ % (technical and commercial) due to underinvestment and inadequate O&M

7. How the burden is met • Government rebates import duty and other taxes on diesel for power generation • (Self-generators still subject to tax) • Government financed new diesel capacity • Government lease payments for diesel • Consumers cover the full variable cost (so far)

8. What next and when? • New investments in generation • ~20 MW of HFO-based capacity (IDA +GoR financing) • 35 MW - Lake Kivu gas/power (joint public/private venture) ~ 2007 (hopefully) • 20 MW Rusumo Falls hydro and regional interconnections ~ 2011 • Small hydros to the grid • Network rehabilitation

9. Heavy cost of adjustment • Growth constrained • As also employment, tax revenue • Impact on the poorer segments • High electricity tariffs • Increase in bus fares (private) • Overall inflation (limited so far) • Vulnerability to further oil price increases • More so to oil supply disruptions

10. Squeeze from all sides.. • Further increases in oil prices, decline in commodity export volumes, and, disruption in oil supplies will • Require further tariff increases (from ~20+ US c/kWh upwards) • Continue to undermine export competitiveness and growth prospects • Raise inflation and perhaps budget deficits

11. Considerations…… • Creation of a ‘basket fund’ for technical assistance and capacity building • Creation of a ‘basket fund’ for rural and renewable energy investments and business development assistance • Intervention on the short term fuel and capacity on the rental power • Need quicker interventions!!!

12. Otherwise, …………… We die!!!!