Tanzania’s Ambitious 1.9 Billion plan to upgrade electricity Distribution.
Frequent power cuts in Tanzania could soon become a thing of the past once a 1.9 billion
dollar project to upgrade the distribution of electricity around the country is completed.
Under this project, many power sub stations and transmission lines in the country which
have received little or no electricity over the past decade will get attention.
According to the government, even though the project is quite expensive, it is very much
necessary and highly critical for the growth of Tanzania’s economy.
This comes as good news to many inhabitants and business people living in Tanzania, recent
statistics from the World Bank revealed that businesses lost about 15% of their annual
turnover due to power cuts.
With the constant supply of electricity, it will help these businesses save thousands
of dollars in revenue, which would have been spent on alternative sources of energy which
are very often more expensive.
Upgrades on the electricity network is part of the Tanzania’s grand plan to improve
electricity supply in the country.
Currently, Tanzania generates about 1,600 megawatts of electricity mainly from natural
gas.
Once this project will be completed, about 2,000 megawatts of hydroelectric power will
be added to the grid.
This will be consumed locally, and the excess will be exported to neighboring countries.
The government plans to renovate 19 power sub stations, while building 59 new ones.
If old infrastructure can be renovated and new ones built, then the government believes
it will create some sort of support mechanism for the economy.
Tanzania With a population of 55 million and relatively high and stable growth rates, averaging
about 7% per annum throughout the last decade.
Tanzania is generally an attractive market for German businesses.
Nonetheless, the country is facing huge social and infrastructural challenges: with an annual
GDP per capita of approx.
USD 1,100, Tanzania is one of the world’s poorest countries and its electrification
rate was only 18% in 2017.
The country, however, has huge potential when it comes to renewable energy sources, the
use of which could speed up the country’s transition towards a middle-income economy.
This potential, however, would have to be first of all recognized by the country’s
government and appropriately integrated into its development plans.
In today’s video, we will be taking a look at Tanzania’s 1.9 Billion dollar plan to
upgrade the distribution of electricity throughout the country.
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Tanzania is the second largest country in Eastern Africa.
In October 2015, John Magufuli was elected the 5th President of the United Republic of
Tanzania, and his government aspires to convert Tanzania into a middle-income country by 2025
as part of “Tanzania Development Vision”.
The official seat of the government is in Dodoma, but the country's political and economic
hub is the former capital city of Dar es Salaam.
The official language is Swahili, but also English is used as the language of instruction
and communication in Tanzania.
Tanzania is still one of the world’s poorest countries.
Tanzania ranks 137th out of 190 economies in the “Ease of doing business” ranking
and 99th out of 180 economies in the “Corruption Perception Index”.
In 2017, Tanzania’s electrification rate was only 18%, which has a huge impact on the
state of the country's development.
The energy sector is thus the key to achieving the pursued transformation of the Tanzanian
economy.
In addition, in 2018, Tanzania decided to join COP 21 and thus pledged to limit greenhouse
gas emissions.
The electricity market in Tanzania Tanzania is a very resource-rich country.
The country has large reserves of black coal and gas, the majority of which are still untapped.
The situation is similar in renewable energy whose potential is far from exhausted: geothermal
energy could add a further 5000 megawatts to the base load; wind and solar are not exploited
nearly at all yet.
The installed capacity comprises main- and isolated mini-grid power stations and off-grid
power plants.
In 2018, the total installed capacity was 1,445 megawatts.
The strategy for Tanzania's electricity market is developed and defined by the Ministry of
Energy and operationally implemented by the Energy and Water Utilities Regulatory Authority,
EWURA.
The functions of EWURA include, among others, licensing, tariff review, monitoring performance,
and standardisation.
The task of bringing electrical power to rural areas is assigned to the Rural Energy Agency,
REA.
As regards electricity generation, transmission and distribution, these key functions are
assigned to the state utility TANESCO Tanzania Electrical Supply Corporation.
The government’s expansion plans In order to achieve its development policy
objectives, the government has implemented two capacity expansion plans: Powering Vision
2025 Power System Master Plan
The former provides for the expansion of the grid capacity to 10,800 megawatts by 2025.
The latter was revised in 2012 and aims for a grid capacity of 9,000 megawatts by 2030.
Both plans are, however, too ambitious considering the fact that the current grid capacity as
at 2018 is 1,445 megawatts.
Tanzania would have to increase their electricity sevenfold by 2025, or according to the revised
plan, sixfold by 2030.
The planned construction of the Rufiji Hydroelectric Power Station with a capacity of 2,100 megawatts
clearly stands out amid the assumptions of the expansion plans.
The power station is located about 220 km southwest of Dar es Salaam and would more
than double the current grid capacity.
Any excess electricity could be exported to Tanzania’s neighboring countries.
The construction project is led by Arab Contractors.
TANESCO has set itself ambitious goals also in the area of connecting final consumers
to the grid.
In 2011, the company declared its new objective to win 100,000 new customers per annum.
So far, this objective has not been achieved in any year.
In addition, the company raised its objective to 250,000 new customers per annum but it
is very doubtful whether this will be achieved.
The Power System Master Plan also provides for the expansion of hydro power, while the
Powering Vision 2025 relies on increasing the number of coal-fired power stations.
The capacities involving renewable energy sources excluding hydro power, that is wind,
solar and geothermal, should be expanded as part of the Powering Vision 2025 from 11 megawatts
as at 2018 to overall 500 megawatts in 2025.
At approx. 43% of all electricity generating stations, the share of Independent Power Producers
is relatively high; none of them, however, uses renewable energy sources.
In other words: in Tanzania, Independent Power Producers are currently involved only in fossil
fuels and are not present in the renewable energy sector at all.
Small Power Producers, also play a vital role in Tanzania’s electrification strides.
Small Power Producers with a power plant of between 100 and 1,000 kilowatts can distribute
its electricity to public but not private distribution grid operators.
This categorisation is decisive in the light of statutory regulations concerning the acquisition
and connection of very small and micro power producers to the distribution grid.
German project developers and power plant constructors should also consider instruments
offered by German or international development banks and international financial institutions.
For example, European Investment Bank, World Bank, or African Development Bank offer a
broad range of products that should be further analysed depending on the project and individual
needs.
Tanzania is expected to face the following challenges.
Generally, for decades, Tanzania has relied too strongly on energy sources such as natural
gas, wind energy and cost-intensive emergency power sources.
Deficient sector control and too low awareness of the potential of one’s own country have
further aggravated the already critical situation in the electricity sector.
The problem here is that the government and the financial sector do not fully realise
and exploit the large potential of Tanzania in the technical and economic sense.
Political barriers such as the monopolist position of TANESCO and deficiencies in the
legal framework for renewables curb private investment.
In addition, the grids are not sufficiently developed, and corruption, bureaucracy, and
high taxes slow down the development of renewable energy.
The lack of transparency and communication of objectives and targets, as well as an unclear
direction in energy policy, additionally hampers the contribution of citizens and investors.
In Tanzania, there are still huge political, technical and cultural barriers for private
investors.
The government has not yet recognised the large potential especially of wind and solar
energy and is defensively pursuing a policy relying on tried and tested energy sources
such as hydro and fossil fuels.
Furthermore, in 2010 and 2011, the country was hit by massive droughts, which rendered
the use of the majority of hydro resources impossible.
This again put TANESCO in a very critical situation in terms of supply.
It thus remains to be hoped that the government will further diversify the electricity market
and will become more open to Independent Power Producers.
The focus of the very ambitious capacity expansion plans is clearly on fossil fuels.
Therefore, it remains to be hoped that the decision makers will take a realistic and
reasonable course towards a compromise with a high share of renewables.
This should be accompanied by a more intensive dialogue between ministries, International
Financial Institutions and project developers to enable a sharper focus on COP 21 obligations
and developing appropriate solutions.
Focus should also be a medium and long-term improvement of market conditions for Independent
Power Producers and further private investments, not least based on the development and energy
policy objectives.
As Tanzania’s Energy minister January Makamba said the project will entailed upgrading Power
sub stations and transmission across the country to stabilise power supply.
Tanzanian’s may have to sacrifice for a few years until the project is realized, but
the expectation for Tanzanians therefore is that this 1.9 Billion dollar investment would
contribute to changing the status even a little bit.
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