Tanzania Energy Sector Overview

The Government of Tanzania’s (GOT’s) Big Results Now (BRN) initiative for 2016 aims to phase out high cost emergency power plants (EPP), increase generation capacity to 2,780 MW, reform the public utility’s (TANESCO’s) operations, and meet new demand through low-cost solutions, such as developing new gas resources and mini and off-grid renewable opportunities. Recent gas discoveries have quadrupled Tanzania’s known resources. A new gas pipeline, necessary for new gas generation from southern Tanzania to Dar es Salaam is under construction and scheduled for completion in late 2015. Tanzania has 1,226 MW of grid installed generation capacity to serve its population of over 47 million, and an additional 82 MW in isolated mini-grids. High reliance on expensive thermal and emergency generation sources that utilize diesel, heavy fuel oil or jet fuel have made the sector financially unviable.

Tanzania has made progress by entering agreements with independent power producers, who bring know-how and technology, and establishing feed-in tariffs that provide many of the commercial terms that would otherwise delay negotiations on power purchase agreements (PPAs). The GOT is publicly committed to improving TANESCO’s viability through tariff reform allowing for full cost-recovery and operational improvements to the management of the utility. TANESCO’s received a 39% tariff rate increase from the regulator, EWURA, effective January 2014, increasing the average rate to 17 cents/kWh and the Electricity Supply Industry Reform Strategy and Roadmap was adopted by the GOT in June 2014.

Power Africa Support

Power Africa is supporting the Tanzanian energy sector through transaction assistance for priority generation projects, technical advice to release the constraints to private sector investment, and capacity building for key institutions. The 150 MW Kinyerezi I gas-fired thermal plant continues to advance, with the final two of four GE turbines delivered at site and on-track for commissioning by June 2015.

The 10 MW Kiwira River small hydro project received a Power Africa portable loan guarantee and received four term sheets from local banks. Final loan source is agreed and finances will close by June 2015. Power Africa’s collaboration with EWURA on revision of renewable energy feed-in tariffs is working towards an improved PPA for renewable energy projects, while support to TANESCO on load management strategies has potential to limit future usage of high-cost EPP generation and reduce TANESCO losses, improving sector viability.

Power Africa Contact for Tanzania

Sharon Pauling, Power Africa Country Team Leader
Email: spauling@usaid.gov

Power Africa Coordinator

Andrew Herscowitz
Email: powerafrica@usaid.gov
Follow on Twitter: @aherscowitz

Related Links

• Country Memorandum of Understanding (MOU)
• Investment Guide
• Fact Sheet