EU Technical Assistance Facility

for the "Sustainable Energy for

All" Initiative (SE4ALL) - Eastern
and Southern Africa
Tanzania: Proposed SE4All TA
Activities under NIP 2014-2020
European Commission
27 March 2014

inConsortiumwith

EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Tanzania: Proposed SE4All TA Activities under NIP 2014-2020

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This document and its contents have been prepared and are intended solely for European Commissions
information and use in relation to the EU Technical Assistance Facility for the Sustainable Energy for All
Initiative (SE4ALL) Eastern and Southern Africa Contract no.336063.
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EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
Southern Africa
Tanzania: Proposed SE4All TA Activities under NIP 2014-2020

Table of contents
Chapter

Pages

1.

Energy baseline situation

2.

Energy sector objectives of the Government of Tanzania

3.

National Indicative Programme (NIP) 2014-2020

4.

Proposed SE4All TA activities in the energy sector

5.

References

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EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
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Tanzania: Proposed SE4All TA Activities under NIP 2014-2020
(Please note that all information and proposed activities in this document are based on the reference
material mentioned in section 5. It is strongly recommended that the observations and conclusions are
verified and further detailed in direct discussion with relevant stakeholders in the country.)

1.

Energy baseline situation

With regard to SE4All objectives, the energy situation in Tanzania is characterized as follows:
High reliance on traditional biomass resources (90% of total energy consumption); need for more
efficient cook stoves, despite high number of new stoves already distributed in the past; in particular
rural households still lacking access to improved and clean cooking.
About 20% of population have access to electricity, with much lower rates in rural areas; only 14% of
population is electrified (12% in urban areas; 2% in rural areas).
Central electricity generation shared between hydropower (one third of total capacity) and fossilbased thermal plants (mainly domestic natural gas and imported diesel); hydropower has been
affected by severe droughts in the recent past and is constantly losing ground in relative importance.
Generation capacity not sufficient to meet increasing demand; frequent blackouts and load shedding;
costly emergency power plants had to balance power needs during drought periods; new power
plants to be based mainly on natural gas and coal.
Central electricity market dominated by state-owned utility TANESCO as single-buyer and operator
of transmission and distribution systems (also some off-grid systems); TANESCO still vertically
integrated and not unbundled, despite requirement according to Electricity Act of 2008 (now
expected to happen by 2015/16).
IPPs are invited to deliver electricity; currently six IPPs supply electricity to the central grid (including
emergency power plants with high generation costs).
Small Power Producer (SPP) programme allows for electricity supply (between 100 kW and up to 10
MW) from renewable energy sources to the central and isolated grids under defined tariffs (with
annual adjustments) and 15-year power purchase agreements; three independent generators supply
excess electricity to the central grid from use of biomass under this programme; SPP success limited
due to financial constraints of TANESCO (risk of non-payment for electricity supply); tariffs not
sufficiently reflecting generation costs and not differentiated by RE technologies.
The state-owned utility operates several isolated diesel-based mini-grids, while others are owned
and operated by private entities, NGOs and communities.
Tanzania has considerable untapped RE resources (wind, hydro, solar, geothermal, biomass) and
will further exploit new natural gas discoveries; currently 75% of domestic natural gas is used for
electricity generation.
Extending the national grid to many parts of the country is not financially and economically feasible
(long distances, low population density and limited purchasing power/electricity consumption).
Power Sector Master Plan sets ambitious targets and wants to almost double generation capacity
between 2010 and 2015 and achieve electrification rate of 75% by 2030; the share of RE in the
electricity mix is to increase to 14% by 2015 from 5% in 2010 (equal to an additional 300 MW,
excluding large hydropower).
GoT has removed VAT and import tax for main solar components (panels, batteries, inverters and
regulators) and exempted components (plastic bag digestors) for small-scale biogas production
from import duties.
Despite high tariff increases in 2013/14, electricity rates are still not cost reflective; current
subsidized rates are benefitting all customer levels; an Electricity Access Scale-up and Subsidy
Policy Study has been concluded in 2013; energy subsidy policy expected to be adopted by end of
2014.
Under the Tanzania Energy Development Access Project (TEDAP), performance grants were given
to grid-connected and isolated mini-grids using renewable energy, PV systems (including solar

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EU Technical Assistance Facility for the "Sustainable Energy for All" Initiative (SE4ALL) - Eastern and
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lanterns), off-grid hybrid systems etc., operated by private enterprises, NGOs, Communities or
cooperatives; a matching grant is paid for technical assistance through training and consultancy
services; technologies supported were mainly small hydro and biomass projects.
REA with assistance from NORAD has prepared a Rural Electrification Investment Prospectus in
2013 that integrates grid-based electrification with use of mini-grids and stand-alone options.
REA has set up Sustainable Solar Market Packages (SSMP) to provide off-grid solar electricity for
public facilities and households; SIDA and UNDP are providing business development services to
solar companies in various regions.
Power demand growth of 10-15% per annum (but significantly lower during drought in 2011 with
insufficient hydro resources, also affecting negatively GDP growth), annual per capita electricity
consumption is growing at the rate of 11-13% per annum, but is still extremely low (about 100
kWh/cap.); average connection of 50,000 new customers per annum (maximum has been 90,000 in
the past), about 1 million customers connected, number of connections have increased by about
7.5% per annum over the last decade; connection charges have been reduced substantially in
January 2013.
High network losses: 5.2% for transmission and 19.7% for distribution (commercial or non-technical
losses).
Electric interconnections exist to Zambia and Uganda, but for very limited exchange (import) of
power (5-10 MW).
A Government roadmap for the Electricity Sector Reform is currently under development and should
be launched in mid-2014.
Rural electrification partly financed through levies on petroleum and electricity sales.

2.

Energy sector objectives of the

Government of Tanzania

Within its Five-Year Development Plan (FYDP) 2011/12-2015/16 and the actual Power System Master Plan
of 2012, the GoT has set ambitious plans against the baseline of 2010:

Increase per capita electricity consumption from 81 kWh to 200 kWh.

Increase electrification level from 18.4% to 30%, which implies connecting 250,000 new customers
per annum from 2013 to 2017 (in the past about 50,000 new customers per year); target of reaching
50% electrification of households by 2020 and 75% by 2035.

TANESCO target of 1.5 million customers by 2050.

Increase the share of renewable energy (excluding large hydro) in the electricity mix to 14% by 2015.

Increase electricity generation capacity from 1117 MW to 2,780 MW.

Upgrading of transmission and distribution lines and construction of some 3,000 km new
transmission lines.

Electricity losses are expected to be reduced from 25% (2010) to 20.5% in 2015 and 15.8% by 2035.

By 2019 all remaining isolated load centres are expected to be connected to the central grid system.

Furthermore, the 2013 Big Results Now (BRN) Programme targets the fast-tracking of 29 projects by 2016,
aiming at the installation of some 1,300 MW new generation capacity, constructing more than 3,000 km of
high voltage transmission lines and connecting 590,000 new customers by 2016.

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Tanzania: Proposed SE4All TA Activities under NIP 2014-2020

3.

National Indicative Programme (NIP)

2014-2020

It has been agreed in the NIP that Energy will be a focal sector.
NIP mentions the following priority areas for change in the energy sector:

Core reforms in the electricity sector, notably to restore the long-term financial viability of the utility
operator and to adopt transparent, cost-effective and efficient management measures, including
institutional reforms and capacity development.

This may include restructuring of TANESCO, measures to improve planning and attract investments,
measures to strengthen transparency for public procurements and measures to promote energy
efficiency and renewable energies.

Strengthen capacities and governance systems in the oil and gas sector.

Scaling-up of access to modern energy services and rural electrification through infrastructure
development and capacity building of relevant agencies.

Promotion of renewable generation capacity in Zanzibar (based on outcome of initial project under
the 10th EDF).

Specific objectives:

To improve sector governance and support sector reforms to sustain energy access goals, enhance
energy security and trade and ensure efficient service delivery also through increased private sector
participation;

To increase access to electricity and modern energy services.

Results have been formulated for the objectives above and qualitative indicators have been established.
Those indicators will need to be quantified in further agreements with the GoT.

4.

Proposed SE4All TA activities in the

energy sector

Possible intervention/support areas are:

a.

Improved access to modern, safe and sustainable energy services

Support to the promotion of stand-alone and mini-grid systems through strengthening of the Rural
Energy Fund and the Small Power Producer programme. In particular, private investors will need to
be guided in setting up bankable business plans, doing prefeasibility studies, and attracting state
guarantees.
(Rationale: So far, the SPP programme had only limited success; some restructuring of this programme will be
necessary to attract more investors; and projects will need to be accompanied during all phases of preparation
and implementation.)

Support to the Rural Energy Agency in defining rules for the operation by private entities, NGOs,
communities of off-grid rural electrification systems (mini-grids), in particular in terms of supply
quality (periods of power delivery, compensation in case of blackouts, allowed deviations of voltage
and frequency, etc. see example of Lesotho), connection fees, energy supply tariffs, etc.
(Rationale: Specific rules need to be established for off-grid operation by entities other than TANESCO to
protect consumer rights and establish sound conditions for a long-term economically viable operation).

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Support in setting up long-term plans for grid extension and off-grid supply of electricity
(Rationale: To attract private investment in off-grid electricity supply it is essential that long-term guarantee
exists that their investment will not be stranded due to competition from central grid by unexpected extension of
transmission and distribution lines; it is therefore necessary that long-term planning for on- and off-grid rural
areas takes place.)

b.

Diversifying energy mix and mobilising RE

Support in setting up competitive tenders for utility-scale (> 10 MW) wind and PV projects by IPPs,
including design of model Power Purchase Agreements (PPAs) and other enabling regulations for
such purpose
(Rationale: Despite huge potential for wind and solar power there are currently no concrete projects for any
large plant installations at utility scale; private investors could be attracted if adequate framework conditions are
in place, such as long-term PPA, financial guarantees, priority dispatch for intermittent electricity, gridconnection rules, etc.; see the example of South Africa).

TA support for selection of sites for mini-grids based on hydropower or hybrid generation systems
(diesel in combination with RE sources), feasibility studies, rules and application of Environmental
and Social Impact Assessments, selection of operators, financial support mechanisms; support in
converting existing diesel-based mini-grids to hybrid generation (in particular through use of minihydro plants).
(Rationale: Large areas of Tanzania can only be electrified economically through local grids; the involvement of
private investment in isolated rural electrification grids has been limited in the past; diesel-based systems are
the main generation source in most isolated grids and have shown high costs and insufficient reliability.)

Support in developing standards for all types of solar electricity systems and their components
(Rationale: Solar electric systems have not always shown high quality in the past. Standards have played a role
in donor-funded procurements, but are not generally applied.)

Support in establishing new businesses and financing mechanism for basic supply of electricity to
Bottom of Pyramid (BoP) customers for lighting and communication (e.g. solar lanterns and micro
PV)
(Rationale: A large proportion of the population does not have sufficient financial means in the near future. They
will have to rely on rudimentary electricity provision for basic needs, in accordance with their income capacities
and in line with current expenditures for energy. In order to achieve the GoT targets, upscale of the market is
needed with new business actors and adequate financing schemes.)

Support in investigating opportunities for electricity (co-)generation in the sugar industry and other
agro-industrial sectors based on biomass residues or energy plantations for self-supply and
electricity export to the grid
(Rationale: Only two sugar factories export excess power from burning of bagasse to the grid. Also other
agroindustrial sectors may have potential for generating electricity and/or heat from indigenous biomass
resources.)

Support in diversifying RE electricity generation on a regional basis by identifying opportunities for

more RE integration in the northern part of the country
(Rationale: All major hydropower stations are located in the southern part of the country, while most load
centres are in the northern part.)

Support Zanzibar in its ambitions to become more independent from fossil fuel imports and submarine (unstable) electricity supply from mainland Tanzania by developing its RE resources.
(Rationale: The current electricity supply is not sufficient to cover future demand, while existing RE sources
remain largely untapped. In particular, its role as touristic destination makes Zanzibar attractive for RE
technology deployment).

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c.

Energy Efficiency improvement

Support in setting up Energy Efficiency Programmes and Incentives, including minimum

performance standards
(Rationale: Currently there are no sufficient EE programmes and incentives in place to make better use of
energy; the viability of using and enforcing standards needs to be verified; activities of the past to establish
standards and labels within the East-African Community should be followed and continued, demand-side
management initiatives should be established (e.g. replacement programmes for outdated electrical equipment);
concrete measures on Energy Efficiency have been outlined in the BRN initiative.)

Assist in setting up an Energy Efficiency and Conservation Fund

(Rationale: In analogy to the rural electrification fund, such fund for addressing the huge saving potential in all
energy consumption sectors could provide financial support for triggering relevant investments, in particular in
the industrial sector.)

Assist in setting up EE and conservation strategies at national and sector levels, including national
action plans and regulations (EE act), demand side management programs, and in developing
monitoring systems for measuring progress; contribute to energy efficiency study report (as
mentioned in the PSMP update 2012)
(Rationale: Energy Efficiency has not received priority attention in the past, despite huge saving potentials in
particular in urban areas and the need for a more efficient use of electricity and other types of energy in the
residential, public, commercial and industrial sector.)

Support measures for the reduction of technical and non-technical losses in transmission and
distribution of electricity
(Rationale: Currently, losses are in the range of 25%. In order to increase the financial performance of the stateowned utilities responsible for transmission and distribution, it will be necessary to reduce those losses through
adequate means, e.g. through improved metering and billing systems and investment plans for replacing
outdated equipment in transmission and distribution.)

d.

Overarching issues

Support to update the National Energy Policy

(Rationale: The actual National Energy Policy has been approved and published in 2003 and was updating a
previous version of 1992; it is now time to draft a new update that will reflect the changing environment and
cover all energy sectors; this update was originally due in 2010, but is still pending).

Support in elaborating the SE4All National Action Plan

(Rationale: Tanzania has opted in participating in the SE4All initiative. A Rapid Assessment and Gap Analysis
has been drafted, but the required National Action Plan is still outstanding.

Support in updating the Power Sector Master Plan(PSMP) of 2012 with a focus on the integration of
RE sources (other than large hydro)
(Rationale: The PSMP will need constant update and revision according to changing conditions and future
planning and requirements of the electricity sector.)

Support in progress monitoring, incorporating the tracking mechanism developed in the framework of
SE4All
(Rationale: The monitoring system for tracking progress in programme implementation is currently not adequate
and needs to be enhanced, while indicators may need to be adjusted.)

Support in enhancing existing institutions or creating new facilities for assistance in renewable
energy investments, development of rural electrification and providing technical advice on energy
efficiency measures

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(Rationale: Currently all institutions are not sufficiently competent in supporting the private sector in relevant
questions of RE technology deployment, business development, EE measures etc.; therefore it needs to be
considered if existing entities can be strengthened through capacity building or new facilities should be
established (Energy Agency).)

5.

References
European Commission: Specific Terms of Reference, Energy Sector Policy Support Programme
Formulation, draft, February 2014
European Commission: Specific Terms of Reference, Rural Electrification Programme
Implementation of Phase II of the Rural Electrification Prospectus Formulation, draft, February
2014)
Ministry of Energy and Minerals, The National Energy Policy, February 2013
Ministry of Finance and Economic Affairs: National Strategy for Economic Growth and Reduction of
Poverty II NSGRP II (MKUKUTA), July 2010
Santos Kihwele et.al.: Visions, Scenarios and Action Plans towards next Generation Tanzania Power
System, in: Energies 2012
Stockholm Environment Institute (SEI): Sustainable Energy Market in Tanzania, September 2012
Sustainable Energy for All, Rapid Assessment and Gap Analysis Tanzania, Draft 1, June 2012
The Electricity Act, 2008
The Revolutionary Government of Zanzibar: Zanzibar Strategy for Growth and Reduction of Poverty
(TSGRP II) 2010-2015, MKUZA II, October 2010
United Republic of Tanzania, Planning Commission: Tanzania Development Vision 2025
United Republic of Tanzania: National Strategy for Growth and Reduction of Poverty II, July 2010
United Republic of Tanzania: Poverty Reduction Strategy Paper, April 2006
United Republic of Tanzania: Power System Master Plan, 2012 Update, May 2013
United Republic of Tanzania: Scaling-up Renewable Energy Programme (SREP), Investment Plan
for Tanzania, April 2013
United Republic of Tanzania: The Tanzania Five Year Development Plan 2011/12 2015/16, May
2011
Joris Pieter Meijer, The Crux of Sustainable Energy Provision An explorative study of cluster
strategies in rural Tanzania, August 2012

The consultant did not have access to the following documents:

Energy Subsidy Policy report, 2013

Access Scale-up and Subsidy Policy Study, CRISIL, January 2013
NORAD, Rural Electrification Investment Prospectus, 2013
EWURA Annual Reports after June 2010
Evaluation of rural electrification projects supported under the 10th EDF (as mentioned in the new
NIP)
Big Results Now! Programme 2013
Information about the sustainable biomass energy strategy under development with EU support

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