Unpacking Rwanda’s power prices & market trends

Rwanda's energy landscape is on the brink of a significant transformation, with methane gas projects like Shema Power Lake Kivu playing a pivotal role in the country's transition towards sustainable and affordable energy sources. In a recent interview with CNBC Africa, Shruti Aggarwal, the Executive Director of Shema Power Plant Lake Kivu Ltd, delved into the dynamics of energy pricing trends, the future of power generation, and the challenges and opportunities present in Rwanda's power sector. Aggarwal highlighted Rwanda's ambitious goals to expand access to reliable energy while striving to make it more affordable for its citizens. The government's efforts to reduce electricity prices have been constrained by long-term power purchase agreements, some spanning 25 years, which limit price flexibility. However, developments in hydropower projects like Nyabarunga II and RwCZ III signal Rwanda's commitment to diversifying its energy sources, ultimately aiding in the long-term goal of price reduction. Despite the stable energy prices in Rwanda over the past four years, the country still sustains some of the highest prices in East Africa. The 25-year contracts provide security for investors like Shema Power, ensuring a steady return on investments while offering limited room for price adjustments. Aggarwal acknowledged that reducing the dependency on imported power through domestic production could potentially lead to price fluctuations and a more competitive market. Shema Power currently contributes 50 megawatts to Rwanda's national grid and has proposed an expansion plan to increase its capacity by an additional 28 megawatts. With a projected investment of $70 million, this expansion aims to bolster the country's energy supply and reduce reliance on imported electricity. The company's track record of reliability and stability positions it as a key player in Rwanda's energy sector, driving the country toward self-sufficiency in power generation. Aggarwal expressed optimism that the introduction of hydropower plants and the expansion of projects like Shema Power could lead to a potential decrease in energy prices for consumers and industries in Rwanda. By offering the government more flexibility in pricing mechanisms, new power generation ventures hold the promise of a more competitive market that benefits all stakeholders. As Rwanda continues its journey towards a sustainable energy future, collaborations between public and private entities, alongside strategic investments in renewable energy projects, will be crucial in shaping the country's power landscape. With a focus on innovation, efficiency, and affordability, Rwanda is poised to emerge as a leading example of successful energy transition in the region.