By Kibekityo Gilbert
Electricity is not merely an industrial input in Uganda; it is a strategic economic enabler whose availability, quality and cost determine the trajectory of manufacturing sector growth. As the country pursues industrialisation through value addition, job creation and export diversification, the performance of the electricity sector increasingly dictates firm-level productivity, competitiveness and investment decisions.
Uganda’s Electricity Landscape: Capacity, Demand and Prices
As of June 2025, Uganda’s total installed electricity generation capacity stood at approximately 2,098 MW. This reflects significant expansion over recent years driven by hydropower, thermal, cogeneration and solar projects. More than 95 percent of this capacity is generated from renewable sources, with hydropower taking the largest share.
Peak electricity demand reached an estimated 1,300 MW by mid-2025, showing growing appetite for power but also a narrowing margin between installed capacity and actual utilisation, particularly in industrial districts.
For the fourth quarter of 2025 (October–December), the Electricity Regulatory Authority (ERA) approved time-of-use (TOU) tariff schedules that differentiate electricity prices by period and customer category. These follow the reduced tariff of 5 US cents aimed at boosting industrial growth and lowering power costs, with cheaper rates during shoulder and off-peak periods. Medium and extra-large industrial consumers benefit from this structured pricing, with off-peak rates such as UShs 184.6/kWh for large manufacturing significantly below peak charges of UShs 229.1/kWh.
Electricity Reliability and Manufacturing Growth
Manufacturing is inherently energy-intensive. Production lines, automated systems, kilns, refrigeration and precision equipment all depend on steady, high-quality power. The relationship between electricity reliability and manufacturing growth can be seen through three main channels:
- Capacity utilisation and output: Reliable electricity allows firms to operate multiple shifts, reduce cycle times and meet delivery schedules. Frequent outages suppress capacity utilisation and constrain production.
- Operating costs and competitiveness: Unplanned outages and voltage instability damage machinery, disrupt production, increase waste and force reliance on generators, ultimately driving up costs.
- Investment confidence and expansion: Predictable electricity supply lowers financial risk, supports capital investment and allows movement into higher-value manufacturing.
Time-of-Use Pricing: Theory and Practice
Time-of-use tariffs are meant to align electricity pricing with system demand patterns:
- Higher prices during peak periods
- Intermediate pricing during shoulder periods
- Lowest prices during off-peak hours to encourage load shifting
For manufacturers with flexible production schedules, off-peak pricing should be an opportunity to lower electricity expenditure, enhance competitiveness and free up resources for technology and skills investment.
How Unreliability Undermines Time-of-Use Benefits
In Uganda, however, the potential benefits of TOU pricing are often undermined by reliability challenges:
- Uncertainty during off-peak hours: Frequent outages discourage factories from scheduling production during cheaper periods, particularly at night.
- Equipment and process risk: Sudden power loss in sensitive production processes can cause major equipment damage and material losses.
- Forced backup generation: To reduce risk, many firms operate diesel generators during off-peak periods, wiping out tariff savings.
- Limited capacity to shift production: Instead of shifting to cheaper periods, factories often stick to shorter peak-time schedules, maintaining high energy costs.
Economic Implications for Manufacturing in Uganda
The connection between tariff design and reliability directly influences manufacturing potential:
- Reduced competitiveness: Higher effective energy costs weaken Uganda’s position against regional competitors with more reliable power.
- Investment deterrence: Investors factor energy risk into decision-making, leading to delays, smaller investments or relocation.
- Impact on job creation: Unreliable power limits output and slows expansion, undermining expected employment gains.
Making Reliability Central to Industrial Strategy
For TOU pricing to work, electricity reliability must be treated as a central industrial policy objective. This requires:
- Prioritised distribution upgrades in industrial parks and supply corridors
- Faster fault response and better monitoring, especially during off-peak hours
- Transparent outage communication to allow better industrial planning
- Tariff structures linked to reliability performance
Uganda’s installed capacity of over 2,098 MW and structured tariffs provide a solid foundation for efficient energy use and manufacturing expansion. But without reliable, predictable supply especially during off-peak periods the benefits of time-of-use pricing remain limited. Restoring reliability is therefore not just a technical requirement; it is a strategic priority for competitiveness, cost reduction and sustained industrial growth.
The writer is a Research and Policy Analyst, Uganda Manufacturers Association.
