Improving energy efficiency among SMEs in Uganda
Institutionalisation of energy efficiency in Uganda: An evidence-based multi-stakeholder approach (IEEUganda)
Background, challenges and context
Energy efficiency is an integral part of Uganda’s national strategy, with one of the many targets set out by the government being to reduce industries’ electricity consumption by 15-25% by 2025, relative to business as usual. However, despite its high-level commitments, Uganda is far from reaching its targets.
In Uganda, enterprises are confronted with a host of challenges that contribute to a poor uptake of energy efficiency technologies. They include technological inertia, limited access to finance, a lack of confidence or adequate awareness about the long-term benefits of energy efficiency, a lack of enabling policies, and a poor culture of regulatory enforcement. Enterprises interested in adopting energy efficiency technologies are also discouraged by the transaction costs associated with gathering and processing information, weighing risks and benefits, and enforcing contracts in the purchase and installation of technologies.
Industries often view energy as an operational cost, and energy savings as incidental benefits, when, in fact, industrial energy efficiency measures can enhance competitiveness. Energy efficient technologies and practices can reduce a company’s costs and boost savings, subsequently increasing its productivity. Such technologies can also improve the resilience of firms by limiting dependence on potentially volatile energy markets. The link between efficiency and productive use of energy, however, remains mostly unexplored.
Research overview and objectives
Using a multi-stakeholder deliberative approach, where participants were encouraged to engage in considered debate and modify their views based on information and shared views, this research project aimed to address some of the barriers and transaction costs industries face, and increase uptake of energy efficiency mechanisms.
The team sought to develop a deeper understanding of the institutional, behavioural, technical, and financial drivers and barriers that influence attitudes towards energy efficiency. The project also considered underlying interests, incentive structures, historical legacies, and social trends to observe and analyse how these factors affect industries’ attitudes and preferences.
The study focused on two industries: cement and iron/steel, which are among the most energy-intensive industries in Uganda. The Uganda Vision 2040 government strategy recognises them as economic lifeline industries essential for job creation, infrastructure development, and technological growth. Over the last two decades, the two sectors have been growing at unprecedented rates due to the booming housing and construction sector in Uganda and in the region (e.g. South Sudan).
To establish the baseline of Uganda’s policies and regulation on energy efficiency, the team undertook initial scoping and stakeholder mapping, including desk reviews, analysis of existing data, and in-depth interviews with stakeholders across government agencies, the private sector, and civil society.
At the centre of the study was the Long-Range Energy Alternative Planning (LEAP) open-source energy modelling tool. LEAP was used to identify and analyse the long-term economic, environmental, and energy saving implications of energy efficiency related policies and technologies.
A scenario-based planning framework was used to assess the future energy demand and associated greenhouse gas emissions from 1) the cement sector and 2) the iron/steel sector.
The impact of different energy policies for the cement sector was analysed by considering two scenarios: best practice with current technologies, and best available technologies.
For the iron/steel sector, the team collected data from five iron and steel producing companies and interacted with technical personnel in four of them. The discussions were guided by a data collection template and questionnaire aimed at identifying current practices and technologies applied. Data was collected on installed production capacity, annual energy consumption and production, sources of energy and percentage contribution to total demand, type of technologies applied in the production, the status of energy management, and any implemented energy saving measures.
The modelling exercise for the iron/steel sector followed three scenarios: business-as-usual, best practice with current technologies, and best available technologies. A combined scenario was also used, where iron and steel firms adopt energy efficient practices and gradually replace existing technologies with the best available efficient technologies.
Importantly, the modelling work was used as a platform to bring stakeholders from the energy and the two industrial sectors together for considered deliberation on the costs, benefits, and trade-offs that are associated with different technological and policy pathways. The project engaged stakeholders in problem identification, scenario building, data gathering, and interpretation, with the objective of identifying solutions and encouraging commitment.
Research results, key messages, and recommendations
Industrial energy efficiency
While supply-side crises often trigger a demand for energy efficiency, the pace and extent of policy adoption and regulation (i.e. operationalisation and enforcement) are frequently determined by the perceived legitimacy of the agenda by different interest groups and the political and technical capacity of institutions to monitor compliance.
Building on this observation, the research team argue that the success of energy efficiency as a policy agenda depends on the ability of its proponents to build consensus among key stakeholders and national priorities.
To reap its benefits, industrial energy efficiency needs to be an integral part of national energy security, with its mandate embedded within the broader energy governance framework.
Energy efficiency in Uganda’s cement and iron/steel industries
Over the next two decades, the demand for cement in Uganda is projected to grow by 7% a year on average. Hence, energy demand from cement factories is projected to increase by 300%.
The Government of Uganda has set out a plan to increase the production of steel from iron ore and the per capita consumption of steel from 13kg to 30kg by 2030. This will result in an increase in energy demand for iron and steel production, and a growing contribution to greenhouse gas emissions of the sector.
The findings show that policies that promote the deployment of energy efficient technologies could result in a significant decrease in energy demand and greenhouse gas emissions from the cement and iron/steel industries – while ensuring their positive contribution to economic growth.
The (Draft) National Energy Policy sets out a plan to promote energy efficiency among high energy consumers. Once the policy is adopted, efforts must focus on building capacities and developing tangible incentives.
Updating and legislating the Energy Efficiency and Conservation Bill (2010) is important for the establishment of institutions that can support and stimulate efficiency in energy management and ensure synergies between the different policy priorities.
In the meantime, regulators should encourage industries to reduce ‘process emissions’ from industrial activities by defining specific goals for specific processes based on negotiated agreements with the sector stakeholders and best practice targets.
This project aimed to advance knowledge beyond the traditional view of energy efficiency as merely delivering energy demand reductions, and to recognise the critical role it can play in delivering solid social and economic improvements.
Through the sharing of research findings and ongoing engagement between the research team and public institutions in Uganda, the project has led to a policy change in the country. The Permanent Secretary of Uganda’s Ministry of Finance, Planning and Economic Development recognised the project’s contribution and has now committed to including the cement and iron and steel sectors in the Sustainable Public Procurement National Action Plan, with the objective of using the Government’s buying power to influence best practices on energy efficient equipment and processes in those industries.
Uganda Cleaner Production Centre (UCPC)