Manufacturing sector energy demand mapping study

Manufacturing sector energy demand mapping study
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Situation

While the Ugandan power sector performance has significantly improved on several metrics since its privatization in the early 2000s, the performance can be described as sub-optimal relative to its full potential. The quality of service has been lagging behind the growth in demand for reliable power, especially from industry. Causes of underperformance are varied and complex and include, but are not limited to, misalignment between investments in Transmission and Distribution (T&D) on one hand and demand by industry on the other; high tariffs and grid growth and connection ambitions that are not matched by planned investments.

Recognizing the symbiotic link between the manufacturing sector and the Energy Supply Industry (ESI), in that a highly productive manufacturing sector is vital to the financial viability of the power sector and vice versa; the Uganda Manufacturers Association (UMA) partnered with ORI (funded under the FCDO funded Cities and Infrastructure for Growth Program) to deliver a manufacturing sector energy demand mapping study. The study focused on manufacturers located in the Greater Kampala Metropolitan Area (GKMA) industrial corridor.

Industries
Strategy, Data & Insights
Public Policy
Implementation Services
Program Design & Business Development
Cities & Infrastructure
Electric Power & Clean Energy
Manufacturing & Consumer Goods
Engagement

ORI partnered with UMA to conduct a comprehensive Energy Demand Mapping Study. We applied various tools, approaches, and methodologies to collect primary and secondary data research, interview manufacturers, triangulate large and complex data, and analyze it to derive insights, views, and recommendations.

The overall objective of the study was to support UMA’s policy and advocacy efforts with the Government of Uganda and the ESI aimed at increasing manufacturers' utilization of clean and renewable energy sustainably. Other objectives were:

  • To size the current and projected energy demand by manufacturers who are located in the GKMA.
  • To size the cost of unserved energy by sampled manufacturers based on firm-level data and analysis and project the total cost across the manufacturing sector.
  • To spatially map demand clusters of productive power in industrial parks.
  • To make recommendations for how to unlock unserved energy demand by industry.

ORI helped UMA by:

  • Deploying proprietary methodologies and databases, casting a wide net on available data, and utilizing spatial tools/GIS to deepen data sourcing and its accuracy.
  • Utilizing GIS to map industrial park locations and identify existing and planned investment in manufacturing across the industrial parks and older industries not located within parks.
  • Sampling a dataset of c.300 manufacturers, representing extra-large, large-, and medium-sized manufacturers in Uganda.
  • Analyzing extensive data derived from interviews with sampled manufacturers—and then triangulating it with secondary demand data obtained from the electricity distribution company and other secondary sources.
  • Collecting and synthesizing primary data, including average power demand per manufacturer, level of reliability and quality of supply, direct cost of diesel purchases to address unreliability of supply, and number of outage hours.
  • Collecting and synthesizing secondary data, including demand from major power users, power generation sites, transmission lines, substation locations, and planned investment, among others.
  • Applying analytical frameworks to determine current demand and make projections into five- and ten-year growth scenarios building on assumptions, for example, the projected manufacturing sector growth rate over the 5 to 10-year horizon.
  • Analyzing and categorizing major constraints, including reliability and quality of supply problems, insufficient investment, underdeveloped industrial parks, and inadequate strategic sector coordination.
  • Framing conclusions, recommendations, and proposed next steps.
Outcomes
  • Energy demand by extra-large, large, and medium-sized manufacturers in the GKMA industrial corridor (which comprises >80% of Uganda’s manufacturing capacity) is projected to grow by 78% by 2025, using 2019 as the base year.
  • The current scenario, where manufacturers bear the brunt of lost production, idle employee time, and high diesel fuel and generator maintenance costs due to the lack of investment in supply reliability and quality, is unsustainable. The average annual expenditure on diesel alone, which stands at $227k per manufacturer, is a stark reminder of the financial burden.
  • Improving the quality of energy supply is a strong incentive for manufacturers to increase investments in production capacity, resulting in faster load growth—and ultimately economic growth and jobs.
  • Unserved energy is highest for intensive energy users—iron and steel; paper, printing, and publishing; grain milling, food processing; pharmaceuticals, etc.
  • The significance of well-designed industrial parks, such as the Kampala Industrial and Business Park (KIBP), in maximizing energy infrastructure investment for enhanced supply reliability and quality cannot be overstated. Conversely, poorly planned industrial parks, particularly those in residential areas, pose challenges in efficiently resolving supply issues.
  • Designed a program for building the capability of UMA (on behalf of its members) to more effectively engage government and energy sector stakeholders on enabling policies and regulations.