Governance in Energy
Presented by Energy DPG
November 14th 2013
Contents
• Overview of Energy Sector
• Introduction
• Regulatory Framework
• Sector Progress
• Conclusion
OVERVIEW
• Energy is central in Tanzania’s growth – it is
crosscutting and currently an expanding sector, and
has a bigger role to play in enabling other sectors to
flourish.
• Currently only 21% of the population has access to
the electricity grid, mostly those who reside in urban
areas.
• In past decade the national electrification status has
slowly increased, from 10% in 2002 to the current
21% of the population.
INTRODUCTION
• Energy Sources - Biomass continues to dominate the
total energy consumption Tanzania, at 90%, which
is leading to accelerate environmental degradation.
• State of Electrification - annual electrification
generation of 5,212GWh supplying 21% of the
population
• For the past decade, the undersupply of electricity
has been prominent with the increase in domestic
energy demand (Figure 1: Population Growth &
Grid Access),
Demand Forecast
• The demand for electricity has been rising at an exponential
pace that TANESCO hasn’t been unable to keep up with.
• Population Growth - 2012 census report published by the
National Bureau of Statistics shows that the Tanzanian
population has tripled in the last 45 years, from 12.3 million to
44.9 million, with an annual growth rate of 2.9%.
• Urban centers have higher population growth rates, while the
household size in rural areas is biggest — Dar es salaam has a
highest annual population growth rate at 4.4 million, and
Simiyu has the highest average household size at 6.9
Current Source of Electricity
Generation
Energy Supply
•
Tanzania’s electrification industry is centralized, with one monopoly in charge of
electricity provision that is mostly hydro-dependent and supplemented by imports.
•
The Tanzania Electric Supply Company (TANESCO) is a fully government owned
and vertically integrated utility that is responsible for national electrification
(Appendix 5: Electricity Capacity and Primary Sources), which includes
generation, transmission and distribution (TANESCO, 2013a).
•
TANESCO has an installed generation capacity of 1,509.85 MW (Msyani, 2013); of
which 54% is derived from hydro4 and 46% is derived from natural gas — 13MW of
the generated electricity is imported from Uganda and Zambia.
•
The historical dependency on hydropower has been affected by the nature of
climatic variation and seasonal change, reducing the availability of water resources
for power production, which has now focused on thermal.
•
The current reliance has also been problematic, since thermal generation under
Emergency Power Production has not been able to cover the deficit caused by the
lack of hydropower
Electricity Availability
• Electricity contributes less than 2% of the total energy
use in Tanzania, but it’s impact on the economy is
significant.
• In the short-term perspective, the financial viability of
TANESCO is far from credible. TANESCO is operating
with a deficit, and they have not been able to recover
operational cost due to historical low tariffs and
exorbitant power purchase agreements with Independent
Power Producers.
• In the long term this will prevent much needed private
sector investment in the sector, especially in electricity
generation capacity..
REGULATORY FRAMEWORK
• Energy Development Strategies - , Tanzania
Development Vision 2025, Power System Master Plan,
Big Results Now
• Energy Policies – National Policy, Electricity Act 2008,
Rural Energy Act 2005, Environmental Management Act
2004, PPP Act, Public Procurement Act 2011
• Electricity Tariff - tariff structure uses various currency
and varies between off-grid and grid-connected projects.
TANESCO proposed 90% tariff increase
• Energy Subsidies - EWURA should evaluate the
structure of the FiT and recommend REFiT
Key Electricity Stakeholders
• Government of Tanzania – President's Office Planning
Commission, Vice President’s Office, ministries, agencies,
research and development institutions
• Development Partners Group — DPG was established in
2004, and includes 17 bilateral and 15multilateral
• Civil Societies – Local think tanks, NGOs, CBOs
• Private Sector – IPPs, SPPs, project developers, SMEs
Electricity Tariff Structure
• Domestic Low Usage Tariff (DI): 230V supply with
consumption less than 50 kWh per month, is subsidized and
includes services; Residential consumers, with the first 50kWh
enjoying a lifeline subsidy
• General Usage Tariff (T1): 230V or 400V supply with
consumption above 283kWh; Residential, small commercial,
light industrial use, public lighting, billboards etc.
• Low Voltage Usage Tariff (T2): 400V supply with consumption
above 7,500 kWh, but less than 500 KVA; Industrial consumers
with monthly consumption greater than 7 500kWh and
demand less than 500kVA
• High Voltage Usage Tariff (T3): consumers using 11kV and
above. The average tariff is 12.6USc/kWh; Industrial
consumers.
Institutional Obstacles
• Energy infrastructure investmentt — grid expansion
and system rehabilitation
• RE requires a significant upfront cost to meet capital
requirements. This includes the cost of feasibility
studies and securing land for project development.
•
The effort by the Ministry to establish a clear
subsidy structure
Financing Energy
Development
• RE project development is complex — local banks and
pension funds do not understand RE project finance and
the process to obtain long tenors required to finance these
projects
• Interest rates from local banks are too high for local
private developers
• Currently local banking institutions are not well position
for RE projects . Typically, bilateral and multilaterals
must be approached as the most viable institutions
prepared to take on the commercial and political risks
associated with the financing of RE projects.
SECTOR PROGRESS
• Several private companies - SPPs have been operating, in
addition to IPPs support grid expansion
• GoT implemented PPP arrangements for RE project
developers, also funding from TEDAP under REF
(managed by REA) - REA has implemented several
projects (on-grid and off-grid)
• Tanzania Investment Corporation (TIC) was established
to support private sector in RE investments — revised
TIC website to help potential investors and streamline the
investment process
Access to Modern Energy
• Main objective of the current 5 years development plan.
• Rural Lighting Initiatives - the Ministry and it’s Rural
Energy Agency is working hard to increase rural
electricity access through increased connection to the grid
and decentralized renewable energy technologies through
support to both on and off-grid connection (TEDAP)
• Overall the RE subsector lacks focus, with barriers
preventing private sector participation in the development
of the sector.
Renewable Energy Feed-in
Tariff
• REFiTs are recalculated every year based on existing budget
costs (adjusted from the Consumer Price Index for that year)
and executed through a standardized contract (Power Purchase
Agreement).
• Eligible projects (currently TANESCO and IPPs) with fulfilled
technical requirements are restricted to have a minimum
distribution capacity of 100 kW, and maximum export of
10MW depending on the connection voltage level.
• Differentiation of tariff structure is limited to SPP (gridconnected and mini-grid). There’s no retrofit based on
generation technology, size, fuel-type or application, but the
structure is highly dependent on the season (dry and wet) —
2012 average for grid-connected was 152.54 Tsh/kWh, while
for the mini-grid was at 480.50 Tsh/kWh.
Connection Rate
• Steady increase in connections, and hence increased
coverage of services reaching the population, at
more than 1,032,000 electricity customers
• A clear definition of electricity access is needed,
with emphasis on increased productive use of
electricity to enhance economic growth.
CONCLUSION
• Proposed Energy Sector Indicators
1. TANESCO arrears and operating deficit - TANESCO
improved collection rate by *20% ( *Negotiable)
2. Roadmap for sector reform - BRN: To be published by
June 2014
3. Subsidy Policy - PAF: Policy approved by Oct 2014
• TANESCO’s power system development plan will
increase supply to various regions with up to 3,262 MW
through investment in energy infrastructure - some of the
planned projects are behind schedule.
Moving Forward
• GoT should seek local funding (or from GBS) to develop solar
and wind maps for the country to reduce up front costs of RE
and support grid supply.
• MEM and EWURA should make the cost reflective tariff a
priority in order to get TANESCO back on a firm financial
footing.
• This should be done together with a subsidy program financed
by the MoF as a transition to ensure that TANESCO can pay
its bills going forward and provide comfort to potential
investors to invest in the industry.
• Increase the role and awareness of TIC’s work — coordinate
efforts among public and private RE stakeholders