Tanzania Energy Situation

Overview

United Republic of Tanzania
	Location Algeria.png
Capital	Dodoma (6° 10′ 23″ S, 35° 44′ 31″ E)
Official language(s)	Swahili, English
Government	Republic
President	Jakaya Kikwete
Prime Minister	Mizengo Pinda
Total area	945,203 km2
Population	42,746,620 (2010 estimate)
Population below poverty line	36%
urban/rural ratio	25%/75%
GDP (nominal)	$23.295 billion (2010 estimate)
GDP Per capita (2006, current prices)	$560
GDP growth rate	> 6%
investment profile	17,6% of GDP
Currency	Tanzanian shilling (TZS)
Time zone	EAT (UTC+3)
Calling code	+255
Human Development Index	0,40
commercial bank lending rates	15%
mobile phone penetration	14,723,000

Situation analysis and framework conditions

Tanzania’s energy supply depends mainly on biomass. Since 85-90% of the population are not connected to the electricity grid, the overwhelming majority of households use wood and charcoal for cooking. As a total, biomass makes up close to 90% of the total primary energy consumption in Tanzania. Unfortunately, this leads to the deforestation of 100,000 h per year, of which only about a quarter is reforested.

Other energy sources are petroleum, which makes up 7.8% of total primary energy consumption, natural gas (2.4%), hydropower (1.2%) and coal/peat (0.3%). About 6.6 percent of primary energy needs to be imported.

Electricity makes up only 0.6% of total energy consumption. In 2008, 4,414 GWh of electricity were generated in Tanzania, of which 2,655 GWh from hydropower, 1600 GWh from natural gas, 119 GWh from coal and 40 GWh from petroleum. Total installed capacity amounted to 1,219 MW, of which 561 MW was hydropower and 658 MW thermal power.

Out of Tanzania's 41.5 million inhabitants, so far only 12 percent of urban and 2 percent of rural areas are electrified, which means that less than 10 percent have access to grid-based electricity or other forms of commercial electricity.The national electricity connectivity is about 14%; though, it is expected that electricity demand will triple by 2020. On the supply side, TANESCO increased connections by almost 66,000 in 2010 bringing the total number of it's customers to 868,953 by the end of 2010. REA currently (2011) implements grid extension projects initially benefitting 20,000 new customers.  In the current setting demand will therefore even more outpace supply.

Moreover, Tanzania’s electricity sector faces another important challenge since it is heavily dependent on hydropower, which means that energy provision cannot be ascertained in times of drought.

This was clearly visible in the years 2010/2011, where recurring droughts effectively removed around 420 MW from a system of around 900 MW, forcing the country to endure a programme of load shedding coupled with unplanned outages. With consequently suppressed sales the countries' utility TANESCO financial situation became increasingly parlous (on top of economic losses for non productivity to the country as a whole).This led to the design of an 572 MW Emergency Power Plan at the end of 2011, to be fully fueled by liquid fossil fuels (HFO, JetA1, diesel) at (fuel) costs varying from 30-43 ct/kWhThese are to be financed by TANESCO tariff revenues and through government guaranteed loans, leading to an increasing weaker financial position of TANESCO. There is quite some critique on the EPP because it does not take into account planned natural gas supply projects, dispersed capacity owned by the private sector, and power projects to be commisioned already in the short and medium term. In general there is a disconnect between expected power demand (both unconstrained -1089 MW- and constrained) and the total generation capacity (1855 MW) proposed by the EPP.

Renewable energies

Solar energy

Tanzanian Solar industry has been fast growing over the last years. This is attributed to many factors, including frequent modern energy crisis in the country, increased level of awareness in some communities where promotional projects are in progress, globalization that has exposed rural Tanzanians to ICT and the growth of the number of organizations and commercial institutions operating in areas without electricity.

As of 2007, the total installed electricity generation from solar energy was estimated at around 1.7 MW. While in year 2005, for the first time, Tanzania crossed sales of 100 kWp per annum, the following year 2006, the sales doubled to more that 200 kWp. The situation indicates a positive growth in the sector which can also be seen from the number of companies operating in the industry. While the number of such companies was less than 3 in 1995, the number in 2007 is more than 20 companies. A number of promotional projects are also available in the country including two ongoing projects to remove market barriers: Sida/MEM and UNDP/GEF Mwanza.

Solar potential and distribution

Being in a “solar belt”, most parts of Tanzania have abundant solar resources throughout the whole year with the low point occuring in July. The lowest annual average is 15 MJ or 4.2 kWh/m2/day and the highest is 24 MJ or 6.7kWh/m2/day. With such high level of solar energy resource, Tanzania is naturally suitable for application of solar energy as a viable alternative source for modern energy services supply for rural electrification and in general. A Tanzania Renewable Energy Association exists. However, solar power has so far not yet been used for commercial power generation.

For information on challenges and issues affecting the exploitation of solar energy in Tanzania, click here.

Hydropower

At the moment about 45% of power generated in Tanzania comes from hydro. Planned large hydro's are at Ruhudji (360 MW), Rumakali (22 MW), ans Stieglers Gorge (2,100 MW). Small Hydro Power (smaller than 10 MW) so far has been only exploited up to 8 MW by TANESCO and private developers, whereas it potential is estimated at 315 MW, but interest seem to be raising. Studies also taking into account economic aspects highlight a variety of sites that could produce electricity at competitive cost to supply power to the national grid and through mini-grids to villages in the community.

For information on challenges and issues affecting the exploitation of hydropower in Tanzania, click here.

Biomass

Reports have identified Tanzania's capacity to install 200 MW of electricity generation from bagasse from four sugar factories. Moreover, 35 hectares of forest are exploited for firewood and charcoal. The wood products are also used for paper and timber which leaves after processing a waste stream that can also be used for energy generation.

Stove projects are ongoing, TATEDO as an important player. CAMARTEC houses the Tanzania Domestic Biogas Program (part of the HIVOS/SNV Africa Biogas Partnership Program http://www.snvworld.org/en/ourwork/Pages/Africa_Biogas_Partnership_Programme.aspx

and http://sites.google.com/site/biogas4all/

For information on challenges and issues affecting the exploitation of biomass in Tanzania, click here.

Biofuels

Plans exist to use Tanzania's land resources to cultivate jatropha and palm kernel for the use as biofuels. International actors in Jatropha are e.g. the Dutch private company Dilligent http://www.diligent-tanzania.com/index.php?id=1112 the German PROKON http://www.prokon-tanzania.com/ Both focus on developing sustainable and profitable cultivation and use of Jatropha oil in the local energy system and (some) export. But care must also be taken re Jatropha as the failure of the multimillion Sun Biofuels project has shown http://www.guardian.co.uk/environment/2011/oct/30/africa-poor-west-biofuel-betrayal 

guidelines, policy and regulatory framework for biofuels in Tanzania are currently under development

Wind

As of June 2009, there was no grid connecting wind systems in Tanzania and two known projects of over 50 MW in planning stages. (as per end of 2011 the joint energy sector review mentions the Singida site " should come on stream in 2012") Use of off-grid wind energy in Tanzania has been established for decades. At least 150 wind-pumping systems have been installed by missionary projects, communities and private individuals. There is a lack of comprehensive data about wind resources in Tanzania, and any developer of projects or seller of wind equipment will need to focus on gathering quality data. Available data is mostly from 10 m masts of Tanzania Meteorological Agency stations, and much of it is not suitable for predicting output of wind farms. Nevertheless, results are promising in a number of sites with average speeds exceeding 8 m/s in certain locations (e.g. Karatu (Arusha), Mkumbara (Tanga), Gomvu (Kigamboni), Litembe (Mtwara), Makambako, Singida).

For information on challenges and issues affecting the exploitation of wind energy in Tanzania, click here.

Kiwira Coal 100MW Project has the capacity to produce 200 MW.

Fossil fuels

Tanzania’s natural resources comprise natural gas and coal. In 2008, Tanzania exploited 21,383 TJ of natural gas and 90 kt of coal. The gas is used mainly for power generation (84%), the rest is used by the domestic industry.
Tanzania does not have own oil resources and imports are currently only able to cover 70% of the total demand. The main consumer of oil products is the transport sector.

Other energy resources of Tanzania are uranium as well as solar, wind, and geothermal power that remain mostly untapped.

Natural gas

Proven natural gas reserves in Tanzania are estimated at more than 45 billion m³. Natural gas deposits in Tanzania are found at Songo Songo in Lindi region, Mnazi bay in Mtwara Region and Mkuranga in Coast Region. The reserves at Songo Songo and Mnazi bay are estimated at 30 and 15 billion m³ respectively. A 232 km gas pipeline from Songo Songo Island to Dar es salaam has been constructed and is supplying natural gas for power generation and other industrial thermal processes.

• The Songas Project is currently producing around 200 MW of electricity using natural gas.
• Some of the Dar es Salaam based industries using Natural Gas for thermal applications include Cement factories, Textiles, Breweries, Glass, Aluminium industry, etc.
• Plans are underway to expand natural gas use for power generation & other industrial applications.

Challenges/issues affecting exploitation of Natural Gas in Tanzania

A number of challenges/ issues affect exploitation of natural gas technologies in Tanzania:

• Limited technical know-how.
• High initial and investment costs for the technologies.
• Limited awareness and exposure to the existence and potentials of the technology of Tanzanians.
• Lack of financial facilities for energy investments.
• Lack of consideration and capability to calculate life cycle costs of different energy options for Tanzanians.

LPG

Currently, five major suppliers of gas share the market namely BP Gas, Oryx Gas, Alpha, Mohan Gas and Pan African/TPDC which is piloting bottling and distribution of natural gas. In particular in cities the LPG sector is growing; for instance in Kinondoni Municipality of Dar City, where mostly middle class families live, gas kiosks can be found less than a kilometre from each other.

Coal

Tanzania coal reserves are estimated at about 1,200 million tonnes of which 304 million tones are proven. Main coal reserves are at Kiwira, Mchuchuma and Katewaka. The available coal is bituminous with an average ash content of about 25% and calorific value of about 28MJ/Kg. Some coal from Kiwira is used to generate about 6 MW of electricity, it is also used in industries like cement and textile for heat processes.
Opportunities exist to promote use of clean coal briquettes for cooking in public institutions and households as a possible substitute to biomass fuels.
The Government of Tanzania is strategizing the option to generate electricity using Mchuchuma coal in collaboration with private sector.

Challenges/issues affecting exploitation of Coal in Tanzania

A number of challenges/ issues affect exploitation of Coal technologies in Tanzania:

• Limited technical know how.
• High initial and investment costs for the technologies.
• Limited awareness and exposure to the existence and potentials of the technology of Tanzanians.
• Lack of financial facilities for energy investments.
• Lack of consideration and capability to calculate life cycle costs of different energy options for Tanzanians.
• Limited political will.
• Selfishness of decision and policy makers.
• External interests especially from donors.
• Environment and safety issues of the technology

Energy situation

Primary fuels in urban areas

Lighting

	Dar	other urban areas
Electricity for lighting	56 %	28 %
Fuel for lighting	40 %	70 %

Cooking

	Dar	other urban areas
Firefood	5 %	34 %
Charchoal	70 %	55 %
Kerosene	12 %	7 %
Electricity	2 %	1 %

Primary fuels in rural areas

Lighting

Electricity for lighting	1.4 %
Fuel for lighting	90.4 %

Cooking

Firewood	91%
Charcoal	8%
Kerosene for cooking	1%

Source: Country Information Tanzania, 2010
 

Institutional set up and actors in the energy sector

Public institutions

Rural Energy Agency(REA)

is responsible for boosting modern energy services in rural areas, simplification of projects, and technical assistance of project development. The REA is governed by the Rural Energy Board (REB) which is an assembly of representatives of the ministries of energy, finance etc., of the private market, development partners and NGOs. It is responsible for approval of projects financed by REF, the supervision of REA and REF and the affirmation of REA's operational plans

Energy and Water Utilities Regulatory Authority(EWURA)

is responsible for technical and economic regulation of the electricity, petroleum, natural gas and water sectors

Ministry of Energy and Minerals(MEM)

is the most important political entity for energy questions and is responsible for facilitating the development of energy and mineral resources through participation of various stakeholders including public, private, public-private partnerships, local communities, NGOs and civil society

Renewable Energy Fund(REF)

is responsible for the financing of the by the REB accounted and by the REA implemented activities. The funds are coming from Tanzania's budget, from foreign donors, levies from electricity production and other levies as well as interest rates and returns

Electricity companies

Tanzania’s power sector is dominated by a single vertically integrated national utility, Tanzania Electricity Supply Company Ltd (TANESCO). The renewable energy commercial market is still quite small and has not sent adequate signals of the likely investment returns in the sector.

Equipment Suppliers

Several suppliers of energy equipment exist: M/s Tunakopesha Limited sells energy supplies such as PV on credit. The SERO Lease Financing (SELFINA) leases equipment and is testing PV equipment market. The Chloride Exide Ltd is a long-serving company in the energy sector that supply solar batteries and other equipment. Furthermore, the firm ENSOL sells solar PV systems to off-grid households as well as to public and private institutions in rural Tanzania. The company imports the needed components and installs them according to customer needs. Sahara and The Kisangani Smith Group are active in the efficient stoves market. In addition, Appropriate Rural Technology (ART) distributes Indian technology Moto Poa stoves.

 

Power Generation

Currently, several companies in advanced stages of investing in Wind Energy exist in Tanzania: Ms Wind EA that is planning to invest in Kititimo Singida with MW 50 to MW 200 potential and Power Pool East Africa and Sino-Tan Renewable Ltd, New Energy Group Ltd, Infranco and M/S Songas Ltd.

 

Nongovernmental service providers for rural areas in the field of energy

TaTEDO

based in Dar es Salaam, is an organisation composed of professionals, artisans, farmers, community based organizations and micro enterprises that promote renewable energy systems, namely improved cook stoves. It implements projects in cooperation with the European Union, Norway, the Netherlands and the United Nations.

Non-governmental Organisations

Tanzania Renewable Energy Associations (TAREA)

network of various stakeholders working in the renewable energy sector

Development Partners and stakeholders

German Firms

In March 2010 a German delegation of eight leading solar enterprises visited Tanzania (and Kenya) in order to become acquainted with the market and to establish contacts with local actors. The trip was organised by the GTZ Project Development Programme.

The following enterprises participated in the business travel: Asantys Systems GmbH, Centrosolar Group AG, Donauer Solartechnik Vertriebs GmbH, Energiebau Solarstromsysteme GmbH, Hoppecke Batterien GmbH & Co KG, Phocos AG, SMA Solar Technology AG, SUNSET Energietechnik GmbH.

EU Energy Facility

to be elaborated

Development Organisations

• Sida: implements a five-year project for developing the PV market in rural areas
• ADfB: Rural Energy Master Plan 
• World Bank: Energizing Rural Transformation
• UNDP: Transformation of Rural PV Market
• GVEP: approach to accelerate pace and scope of enery interventions to improve access to energy services
• ProBEC (Programme for Basic Energy and Conservation): ProBEC is a programme of the SADC and is implemented by GTZ. It focuses on networking and information exchane amongst some Southern African Development Community countries. ProBEC aims at thermal energy needs of rural and urban household and takes also into account small business and instiutions using biomass energy (woodfuel, agricultural residues) for thermal processes. The interventions consist of three components: efficient use of energy devices, providing policy advice to the secretariat of teh SADC on basic enery solutions and research on the viability of sustainable biofuel production. It works with a variety of private actors to disseminate the supported technologies: Individual farmers in Iringa (Tabora), M&R Appropriate Technology Engineering and Green Ceramic Products and Environment, Uniliver Tea Company, Mufindi Tea Company, Kibena Tea Company, Tanzania Wattle Company LTD, Association of Tanzania Tobacco Traders (ATTT, Tabora), Envotec Services Ltd.,  VICOBA Sustainable Development Agency (Songea), West Usambara Women Education, Marangu community Development Association
  
   

Policy framework

Poverty reduction strategy

Tanzania's official homepage on poverty monitoring www.povertymonitoring.go.tz/

Energy policy

The Government of Tanzania (GOT) is the prior player in terms of policy and regulatory environment.

In 2003 the 'National Energy Policy' was launched which aims at developing Tanzania by boosting an efficient and reliable energy production. The main elements of this policy consist of developing efficient domestic energy ressources, boosting of market-determining energy prices, improving the reliability and security of energy, commercialising and privatising the energy sector, reducing deforestation and developing of human ressources.

In order to achieve these goals Tanzania has introduced rural energy and power sector development strategies:

(i) the electricity act of 2008 whose main task is the privatisation of the electricity market and an improved framework for market introduction of renewable energy technologies in particular in rural areas;
(ii) the Rural Energy Act of 2005 which established the Rural Energy Agency and Fund (REA/F) whose main task is to promote access to modern energy services and to provide performance based subsidies for rural energy including renewable energy systems;
(iii) the Energy and Water Utility Regulatory Authority Act established in 2001 which provides the regulator with the responsibility of tariff setting effecting also the independent renewable energy power producers.
The GOT has adopted the Power System Master Plan (PSMP), by this plan the GOT has both a short-term (2009-2012) and medium- and long-term (2013-2031) plan. The plan estimates an increasing demand for energy/electricity at an average rate of 8.5-15% per annum. In order to be able to ensure adequate energy supply, the Electricity Act of 2008 gives procedures for providing electricity from different sources. The Energy and Water Utility Regulatory Authority (EWURA) created a model for Standardized Small Power Purchase Agreement/Tariff (SSPPA/T) for private producers providing less than 10MW.

The Power Purchase Agreement (PPA) contain a standardized power purchase agreement and a non-negotiable purchase tariff based on avoided cost principles for electricity sales to TANESCO national grid and mini-grids. EWURA, which is the regulatory body, is currently working on issuing guidelines to help developers to develop their projects efficiently. Moreover, EWURA is developing procedures for formulating tariffs for mini-grid consumers.

The Rural Energy Agency has provided subsidies to TANESCO in order to extend grid electricity in areas where it seems not be economic to invest. In 2008/9 the REA plans to use TZS 18.0 billion (US$ 13.33 million) to subsidize the grid-rural electrification.

 

Called for by the 2008 Electricity Act MEM produced a position paper on the reform of the electricity sector, which is currently (end of 2011) under the consideration of the Cabinet. The paper is expected to give guidance to the further sector development. The 2010/2011  Joint energy Sector Review gives the following priorities for the electricity sector:

• electricity sector planning (collaborative preparation of the power sector master plan)
• strengthen demand forecasting
• develop DSM en energy efficiency programs
• implement, monitor and fine-tune the EPP
• raise TANESCO tariffs based on cost analysis
• electricity sector restructuring
• formulate a clear national policy on subsidies (implementation scheduled for budget year 2013)
• a rural electrification master plan, prioritizing rural electrification investments, focussing on centres with significant potential for new jobs and income from the use of electricity (ensuring viability for TANESCO)

Specifically for renewables the Review  defines the following action points:

• government to invest more in promotion of renewables
• follow-up on research for development of large scale geothermal energy
• scale up of RE technologies that have proven feasibilty, viability by prior projects
• follow-up on large scale wind power projects
• promote demand side management trough energy efficiecny and conservation
• improve availability of hydro power through research
• encourage large scale growers of oil seed for biodiesel to build processing plants
• support research in ocean energies
• facilitate further support to companies involved in the manufacture of RE equipment such as small wind turbines and small water turbines
• develop and implement a rural energy master plan prioritizing rural electrification investments(plan projected to be available by the end of 2012), incorporating EUEF project " integrated rural electrification planning" 

Electricity Prices

In Tanzania four different price levels exist:

• Domestic Low Usage Tariff (DI): applies to customers using on average less than 50 kWh per year, is subsidised and includes services
• General Usage Tariff (T1): applies to consumption above 283 kWh per year, voltage is 230V in monophase and 400V in triphase
• Low Voltage Usage Tariff (T2): applies to cunsumers with a consumption of 400V and a more than 7.500 kWh, but less than 500 KVA
• High Voltage Usage Tariff (T3): applies to consumers of

In january 2011 a 18,5% price hike took effect in Tanzania, where TANESCO actually had proposed for 34,6% to move towards more cost recovering incomes. At current (after the price hike), TANESCO's recovering rate is about 80% of its costs. If the EPP is implemented however, this rate will drop considerably.

Subsidies on renewable energy technologies

Exemption of customs is given on imports of wind and solar products. Subsidies of PV systems exist:

In the case of SHS

• 0-14 Wp: 2.5 $/Wp
• 14-100 Wp: 1.5 $/Wp
• > 100 Wp: now subsidies

in the case of public institutions

• < 300 Wp: 1.5 $/Wp, but maximum 450 € per institution

The government supports Small Power Procuders (SPP); effecient concepts for regulation and pricing are developed in order to improve electricity supply in rural areas

Key problems hampering access to modern energy services in rural areas

 

 

Obstacles for off grid energy technologies and services

  Cooking energy

A 2011 desk study by RTA and SNV provides a good overview of the actual status and challenges of the ICS sector in Tanzania. These are manyfold, but basically the sector is highly informal with over the years a variety of programs and projects which however seemed to lack mutual cooperation and coherence to develop a true sector. Second, the end user perception towards ICS is not well included in design, promotion, marketing of stoves and quality perception is rather low. Third, cost saving arguments, especially with firewood stoves in the past have not been convincing as many rural households did not pay for firewood. This seems however to have changed in some reasons in the last years. Fourth are unclarities whether, or under what circumstances, a profitable business case for stoves producers can be made which is sustainable over a longer period of time w/o subsidies or grants.

 

 

Further Literature

EAC Strategy to Scale-up Access to Modern Energy Services, Tanzania Country Report and Implementation Workplan, May 2008