Governmental framework

Governmental institutions

Ministry of Energy and Minerals

The Ministry of Energy and Minerals is responsible for national energy policy and for coordinating activities in the sector. Its task is to create an attractive framework so that all stakeholders can operate successfully. The MEM draws up and reviews policies and strategies, as set out in the National Energy Policy and the National Energy Strategy, by means of decrees and guidelines. The current minister is George Simbachawene.

http://mem.go.tz/

 

Energy and Water Utilities Regulatory Authority (EWURA)

The Energy and Water Utilities Regulatory Authority is an autonomous multi-sector regulatory authority established in 2001 under the Energy and Water Utilities Regulatory Authority Act. It is responsible for technical and economic regulation of the electricity, petroleum, natural gas and water sectors.

The functions of EWURA include licensing, tariff reviews, performance monitoring and standard-setting with regards to quality, safety, health and the environment. EWURA is also responsible for promoting effective competition and economic efficiency, protecting the interests of consumers and promoting the availability of regulated services to all consumers, including low-income, rural and disadvantaged consumers in the aforementioned sectors.

http://www.ewura.go.tz/

 

Tanzania Electric Supply Company (TANESCO)

Tanzania Electric Supply Company Limited is a public organisation under the authority of the Ministry of Energy and Minerals. The company generates, transmits, distributes and sells electricity to mainland Tanzania, and sells bulk power to the Zanzibar Electricity Corporation (ZECO). TANESCO owns 60% of the installed generating capacity and all centralised transmission and distribution facilities on the mainland, as well as 20 isolated grids. The government of Tanzania abolished TANESCO’s monopoly as the sole power generation and distribution company in 2008 after taking initial steps towards market liberalisation in 1992.

TANESCO’s financial performance has deteriorated in recent years. A combination of outdated distribution systems, high system losses, reduced hydropower output, electricity tariffs below break-even level, low network voltages, significant use of emergency power and inadequate investment have weighed on revenue. At the same time, the cost of electricity generation has increased continuously since 2002, and there has also been a growing reliance on thermal energy.

http://www.tanesco.co.tz/

 

Rural Energy Agency (REA)

The Rural Energy Agency is an autonomous body under the Ministry of Energy and Minerals. Beginning operations in October 2007, its main role is to promote and facilitate improved access to modern energy services in rural areas.  The agency’s powers are set out in the Rural Energy Act no.8 of 2005.

The REA’s purpose is to support and encourage rural energy-system development by working in partnership with the private sector, non-governmental and community-based organisations, and government agencies. The mandate of the REA includes:

  • Promoting, stimulating, facilitating, and improving access to modern energy supplies for productive uses in rural areas to stimulate their economic and social development
  • Promoting rational and efficient energy production and use, and facilitating the identification and development of projects aimed at enhancing energy supply and activities in rural areas
  • Financing eligible rural energy projects through the Renewable Energy Fund
  • Preparing and reviewing application procedures, guidelines, selection criteria, standards and terms and conditions for the award of grants
  • Building capacity and providing technical assistance to project developers and rural communities
  • Facilitating preparation of tender documents for rural energy projects

http://www.rea.go.tz/

 

Independent Power Producers (IPPs)

The Tanzanian government differentiates between independent power producers, small power producers and emergency power producers. They currently account for 40% of installed capacity. Nine large power plants fired by gas, heavy fuel oil and diesel are run by private companies. Two emergency power producers, Aggreko and Symbion LLC, were hired by TANESCO to temporarily generate power in order to decrease the need for load shedding. All of the independent power producers are private companies running power plants with capacities of over 10 MW under a power purchase agreement (PPA). A number of SPPs have developed smaller projects (< 10 MW) under a specific SPP framework and sell the electricity they produce to TANESCO or to consumers such as producers of agricultural goods like sugar, tea, sisal or tannin. Their supply is usually based on renewable technologies, in particular bio-energy and solar PV.

 

Regulatory framework – act, policies and regulations

National Energy Policy 1992 (revised in 2003)

The National Energy Policy has undergone a review which was prompted by the social and economic changes taking place across the economy. The revised policy was launched in 2003. It focuses on market mechanisms as the means to create an efficient energy sector. The policy takes into consideration the need to:

  • Supply affordable and accessible energy nationwide
  • Reform the energy service market
  • Create an institutional framework that facilitates investment, the expansion of services, efficient pricing mechanisms and other financial incentives
  • Adequately account for environmental aspects in all energy-related activities
  • Promote energy efficiency and conservation in all sectors
  • Increase energy education and build gender-balanced capacity in energy planning, implementation and monitoring

The main elements of the policy relate to the development of efficient domestic energy resources, ensuring market-based energy prices, improving the reliability and security of electricity supply as well as commercialising and privatising the energy sector.

The National Energy Policy has been under further review since 2015 and the MEM has issued a first draft to relevant stakeholders.

 

Rural Energy Act 2005

The act established a Rural Electrification Board, Agency and Fund and describes in considerable detail the functions and relationships of these entities. Tanzanian law also provides more detail on sources of financing for the fund. The act is intended to promote improved access to modern energy services in rural areas of mainland Tanzania, and provides grants to developers of rural energy projects and to TANESCO for investments in the rural distribution system.

 

Electricity Act 2008

The Electricity Act liberalised electricity production and distribution in Tanzania, a responsibility previously carried out by TANESCO. The act facilitates and regulates the generation, transmission, transformation, distribution, supply and use of electricity, as well as cross-border trade in electricity, and the planning and regulation of rural electricity supplies in Tanzania.

 

Feed-in tariff

Tanzania introduced a feed-in tariff scheme for small power producers (100 kW to 10 MW) in 2008. The framework was reviewed in 2015. The tariff is negotiable for capacity of over 10 MW. In the second-generation SPP framework, EWURA applies two approaches depending on the technology: renewable energy feed-in tariffs are applied for small hydro and biomass projects whereas a bidding process is used for solar and wind projects.

The following tariffs for hydro and biomass came into effect in April 2015:

Size Hydro Tariff (USD/kWh) Biomass tariff (USD/kWh)
100 kW 0.155
150 kW 0.146
200 kW 0.141 0.179
250 kW 0.140
300 kW 0.169
400 KW 0.161
500 kW 0.134 0.157
750 kW 0.129 0.149
1 MW 0.123 0.147
2 MW 0.115 0.138
3 MW 0.108 0.128
4 MW 0.102 0.126
5 MW 0.098 0.123
6 MW 0.095 0.120
7 MW 0.091 0.118
8 MW 0.088 0.115
9 MW 0.087 0.114
10 MW 0.085 0.112

The tariffs are granted for the duration of the PPA, but are adjusted annually.

 

Standardised power purchase agreements (SPPAs) that were signed before April 2015 still fall under the first-generation SPP framework and the tariffs will continue to be adjusted annually. In 2015, the main grid tariffs are as follows:

Tariff Approved 2015 tariff, TZS/kWh
Standardised small power purchase tariff 190.94
Seasonally adjusted in dry season 229.13
Seasonally adjusted in rainy season 171.85

 

In 2015, the mini-grid tariff is:

Tariff Approved 2015 tariff, TZS/kWh
Standardised small power purchase tariff 493.97

 

To reduce transaction costs for the negotiation of PPAs, the government introduced a standardised PPA for projects with capacities of up to 10 MW. The second-generation SPP framework includes the following principles:

  • Purchase obligation
  • SPPs receive a fixed tariff for the duration of the SPPA
  • FITs are based on technology-specific costs for hydro and biomass SPPs. For solar and wind SPPs the tariffs are based on bid prices submitted as part of a competitive process designed to share the benefits of rapidly decreasing renewable technology costs with electricity customers
  • Cost-reflective tariffs for both calculated and bid-based FITs will safeguard investor security by providing a fixed price for the duration of the SPPA (up to 25 years)
  • Payments are in USD
  • The tariff does not distinguish between SPPs that inject electricity into the main grid and those injecting power into a mini-grid, providing investors in mini-grid power projects planning security against the backdrop of grid interconnection programmes
  • Development of solar and wind projects is procured under a competitive bidding process through tenders for sites proposed by SPPs or sites specified by utilities The initial capacity to be tendered is equal to the reserve margin requirement for the main grid (15% of system installed capacity), but may be infrequently revised by EWURA when appropriate
  • The distribution system operator bears interconnection costs for projects that are within ten kilometres of its nearest substation
  • Step-in rights are Extended

 

Standardised Power Purchase Agreement (SPPA)

In August 2015, the Ministry of Energy and Mines (MEM) issued model power purchase agreements for seven energy technologies to be used as guidance for projects larger than 10 MW. These technologies are hydro, natural gas, oil, coal, geothermal, solar and wind. The model PPAs were issued for use in negotiations between project developers and energy customers.

 

Power System Master Plan (PSMP)

Short-term and medium-term projects have been identified in the MEM´s Power System Master Plan 2007-2035 to replace short-term emergency generating plants. The plan was updated in 2012. The proposals include projects aimed at concluding number of PPAs relating to interconnections with neighbouring countries and IPPs, building new generating facilities (including 100 MW at Ubungo, 60MW at Nyakato-Mwanza, and 222 MW at the Rumakali hydropower project), expanding the high-voltage transmission network and carrying out further studies of wind energy projects. In total, the PSMP foresees the development of 3,564 MW of renewable energy capacity from hydro, wind, solar and biomass co-digestion plants.