ElectricitySectorMatrix

Country:Tanzania

Topic

Explanation

ReferencesandRemarks

ElectricitySectorPolicy

EnergyandWaterUtilitiesAuthorityAct2001and2006
NationalEnergyPolicy,2003
RuralEnergyAct2005establishedtheRuralEnergyBoard,
FundandAgency
ElectricityAct2008:establishedageneralframeworkforthe
powersoftheMinistryofEnergyandMineralsandEWURA.

The Act opened the electricity sector to private companies, to

compete with the state-run Tanzania Electric Supply Company The2008ElectricityActfocuseson
(TANESCO), in providing electricity and generating power in
restructuringtheelectricitysupply
the country

ElectricityAct(name,year)

PublicPrivatePartnershipActNo.18of2010:
MediumTermStrategicPlan(20122016)

PowerSectorMasterPlan2012Updatereinforcesthe
commitmenttowardscollaborationwithandencouragingthe
privatesector

industryattractingprivatesector
andotherparticipationthus
bringingtheendofTANESCO
monopoly.
Thesectorhasbeenundergoing
reformstoallowhigher
participationbytheprivatesector

ElectricitySectorMatrix

ElectricitySectorunbundled(yes/no),since
when?

Regulationoftheelectricitysector;mandate;
organization,autonomystatus

Masterplans/LeastCostPowerDevelopment
Plans/capacityexpansionplan

TheTanzaniaElectricSupplyCompany(TANESCO)isthe
principalelectricitygeneratorandasingleverticallyintegrated
nationalutility.TANESCOfullyownstransmissionand
distribution.Unbundlingintoseparateentitieshasnothappened
yetbutistheintentionofthe2008Act

ZanzibarElectricityCorporation(ZECO)suppliespowertothe
twoislandsofUngulaandPemba.

TheenergysectorinTanzaniaisfacingdifficulties.TANESCO
hasbeenpoorlymanagedandhasbeeninabadfinancial
situation(highdemand,toolowtariffs).(SREPIP,2013+IED,
2013)

EnergyandWaterUtilitiesRegulatoryAuthority(EWURA)
REA,EWURAandTANESCOarethe3keyactorsunderMEM
(MinistryofEnergy&MineralResources)

EnergyandWaterUtilitiesRegulatoryAuthority(EWURA)
cameintobeingin2006.
REAisanautonomousbodyestablishedundertheRural
EnergyActof2005

ThePowerSystemMasterPlan(20102035)anticipatesthat
Tanzaniawillincreaseelectrificationstatusfrom18.4percent
toatleast75percentby2035

Theunbundlingprocessis
expectedtocost$500million.
Witha$300millionloanfromthe
WorldBankanda$200million
loanfromAfDB.

TheEnergyandWaterUtilities
RegulatoryAuthority(EWURA)is
anindependentbody.

TheMinistryofEnergyand
Minerals(MEM)overseesthe
activitiesofREA
11thEDFNationalIndicative
ProgrammeforTanzaniawill
provideEUsupporttocore
reformsintheelectricitysectorto

ElectricitySectorMatrix

Gridexpansionplans

IPPsallowed/operating?

TheGovernmentwillintroducearoadmapforthereformof
theenergysectorbymid2014.
ThePowerSystemMasterPlansetsoutobjectivestobring
electricitygenerationcapacityfromthecurrent1501MWto
2780MWby2015
Thereareplansforupgradingoftransmissionanddistribution
linesandtheconstructionofsome3000kmofnewHVlines
whichwillfacilitateincreaseofpowersupplytoruralareas.
IndependentPowerProducersandEmergencyPower
Producers:
TheelectricitysectorisopentoIPPs.Therearecurrentlysix
IPPs/EPPs(SymbionUbungo,IPTL,SymbionArusha,Songas,
AggrekoandSymbionDodoma)contributing40percentof
generatingcapacitytothenationalgrid.
SmallPowerProducers(SPPs):Currently3SPPsareselling
powertothegridandanadditional8SPPAsigned
withTANESCO.
TheGoThasatargettoincreasetheshareofrenewable
energy(excludinglargehydro),intheelectricitymixto14
percentby2015.Achievingthetargetwillrequireadding
about300MWofnewrenewableenergycapacitybefore2016
(Source:MEM,MediumTermStrategicPlan(20122016),December2011).

REelectricitysharetargets

ThereisaScalingupRenewableEnergyProgramme
(SREP).Currentlyexcludinglargehydro4.9percentoftotal
generationcapacityin
Tanzaniaisfromrenewableenergy,includingcaptive
generationinsugar,tanninandsisalfactories,solar,andsmall
hydroplants.

restorethelongtermfinancial
viabilityofthenationalutility

Anadditionaltenprojectswitha
capacityofover60MWareinthe
pipeline.
(Source:GlobalStatusReport
(GSR)2013."Country
ProfileTanzania")

ElectricitySectorMatrix

PowerPurchaseAgreements;Feedintariffs

Thereisafeedintariff(FIT).Thefeedintariffiscalculatedby
EWURAastheaverageoftheavoidedcostsofsupplyandthe
incrementalcostofminigrids.

For2012,thefeedintariffforminigridswassetat
TZS480.50/kWh($0.30/kWh).
ThereareStandardizedsmallPowerPurchaseagreementsin
place

Wheelingpolicy

NoInformationavailable

Futuresectorreform

AGovernmentroadmapfortheelectricitysectorreformwill
belaunchedinmid2014,whoseimplementationcouldbe
supportedfrom2015/16throughaSectorReformContractby
theEU.Thiswillrequireacrediblyimprovedfinancialsituation
EUhasidentifiedSectorBudget
anddecisiveinitiativestakentodeliverontheroadmap.
ReformsmayincludetherestructuringofTANESCO,measures Supportasapossibleintervention
modality.
toimproveplanningandattractinvestment,measuresto
strengthentransparencyforpublicprocurements,and
measurestopromoteenergyefficiencyandrenewable
energies

Utilities
GENERATION

Mainutilities(s=stateowned;p=private;
m=mixed),shareholders

TANESCO TanzaniaElectricSupplyCompanyLtd(s)
ZanzibarElectricityCorporation(ZECO)(s)

Tanzaniahasanelectricitydeficit.
Despitelargehydropower
potentialandotherrenewable
resources,thedevelopmentof
newsitesiscurrentlynotkeeping
trackwiththeincreasinglocal
demand.

ElectricitySectorMatrix
(Source:TANESCO,March7,2013)

(TANESCO)plantoutput3,034GWh.

Generation(GWhproducedinyear.)

ThecountrysavailableelectricitygenerationcapacityinMarch
2013was1,564MWofwhich1,438.24MWisavailableinthe
maingridandthebalanceof125.9MWisaccountedbymini
gridsandimports.

Itisbasedprincipallyonthermal(62percent32percent
fromnaturalgasand29percentfromoil),largehydropower
(35percent)andwiththebalancefromsmallrenewable
energypowerandimports

Frequentdroughtsinthe
catchmentsofthehydro
generatingdamshaveledto
duallyconstrainedsystemslack
ofMWhandpeakingMWEnergy
constrainedsystemswithover
depletedreservoirs

Generationtype(coal,hydro,wind)and
capacitiesofmainutilities(MW)

Generationbyfuelsource(GWh)inyear

GenerationCapacities(MW)inMarch2013

Hydropower553MW35%
Oil(JetA1anddiesel)456MW29%
Gas501MW32%
Imports14MW0.9%

Total1,564MW100%

Hydrocontributed57%oftotalpowergenerationfrom
january2012uptodecember2012.GasandThermal
contributedtheremainingamount
Largehydrocapacityinstalled(561MW)butitspartofthe
consumptionhasactuallybeenreduced(35%)infavourofgas
generation(32%).

Hydrowhichaccountedfor79%
capacityin2003,accountedfor
lessthan40%oftotalgeneration
capacityin2012,whilenaturalgas
andoilaccountedformostofthe
balance.

Futuregenerationplanwilllargely
bedominatedbyCoalandGas
powerplants.

ElectricitySectorMatrix
9501,000MW UnconstrainedPeakDemand
851.35MW(October2012) SuppressedPeakDemand

Peakload(MW)inyear

TRANSMISSION

TANESCOanticipatesmajor
demandincreasesfromseveral
miningoperations,LNGplant,

factoriesandwatersupply

schemes.Peakdemandis
Generation2013Peakdemand1,444MWAvailableCapacity
projectedtoincreaserapidlyfrom
1,143MW(79%ofPeakDemand)
about1,000MWtoday

toabout4,700MWby2025and
(Source:AnalysisbasedonSAPP(2013a)*Figuresincludeestimatesof
7,400MWby2035
suppresseddemand).

Utility(ies)

TANESCO TanzaniaElectricSupplyCompanyLtd(s)
ZanzibarElectricityCorporation(ZECO)(s)

LengthandcapacityofHVlines

Thetransmissionlinescompriseof4816.86kmofsystem
voltagestotalingbytheendofNovember,2012

TransmissionExpansionprojectsHVLines:
400kVIringaShinyanga(648km)2015
400kVSingidaArushaNairobi(577km)2016
400kVKasamaMbeya(220km)2016
400kVMbeyaIringa(280km)2016

OldandoverloadedTransmission
andDistributionSystemscause
hightechnicallosses.

Electricitytrade(export/import)

Ugandavia132kV,(8MW)
Zambiathrough66kV,(5MW)

Utilities

TANESCO TanzaniaElectricSupplyCompanyLtd(s)
ZanzibarElectricityCorporation(ZECO)(s)

LengthofMVandLVlines

220kV18lines(2,732km)
132kV16lines(1,543km)
66kV5lines(544km).

DISTRIBUTION

ElectricitySectorMatrix

Developmentofongridcustomerbase

Thenumberofcustomersservedbythepowerutility
TANESCOis1,032,000

TANESCOFinancialPerformancefor2012/13(SourceSAPPUtility
FinancialPerformance2013)
Debtors
Rate
Revenue Net
SalesinGWhandlocalcurrencyinyear(per Energy $
Days
of
Income
Reported
Million
Sales
consumeroftariffsector)
Return 240
7.4USc/ 19.1

3770
$Million 4.86%
GWh 277.3 kWh

Demandforecastnationalgrid(MW)

TANESCOplanstoincreaseits
customerbaseto1,500,000by
2015.
TANESCOnotbeingabletomeet
itssalestargetisnotduetothe
lossofmajorcustomerslikethe
mines,butratherduetohigh
electricitytariffsandpooror
unreliablepowersupply.

1380MW(TANESCO2013)(Source SAPP2013Energy
Statistics)

TANESCOsubmittedtoEWURAasystemwidetariff
adjustmentsoverthreeyearsfrom1stOctober,2013.The
proposedtariffincreaseswere
67.87%effectivefrom1stOctober2013,12.74%effective
from1stJanuary2014and9.17%effectivefrom1stJanuary
2015

AccordingtoTANESCO,theproposedtariffadjustmentswill
enableittofinanceitsoperationalcostsandcapital
investmentprogram(CIP);demonstrateitsbankabilityto
donorsofferingconcessionaryloansandgrants;increase
capacityneededtomeetsystempeakdemand;and
adequatelyfundrepairsandmaintenanceofitsinfrastructure
inordertoensureconsistentandstablesupplyofelectricity.
(SourceEWURADecember2013)

TANESCOshugeproposed
increaseoftariff
whichisfarabovethat
recommendedbythe
IndependentConsultant

(Source:CostofServiceStudy
AFMERCADOSEMIOct2012)

AstudybyAFMERCADOSEMI
recommendedcostreflective
tariffswithincreasesof33.8per
centfor2013,followedbysmall
increaseof0.85percentin2014
and15.14percentin2015.
Currenttariffregimeyieldsan
averagerevenueof197.81

Tariffs/costcoverage/subsidies

Electricitytariffs

ElectricitySectorMatrix

Lifelinetariffsinplace

Tariffscostcovering?Tariffincreasesplanned?

Levelandsourceofsubsidies

TANESCOtariffseffectivefrom1stJanuary2014will increase
by39.19%comparedtothecurrenttariffs

In2012,theratesweresetatTZS152.54/kWh(around$0.09)
forongridprojectsandTZS480.50/kWh(around
$0.28)formicrogridprojects.

TheenduserretailtariffisuniformonTANESCOnetwork(60
to273TZS/kWhfordomesticcategories,$0.04and$0.17
respectively).Theaverageretailtariffisestimatedat
$0.12/kWh18.A3%taxisleviedonthetariffforREAand
EWURA

Alowsocialtariffisavailableforcustomersusingupto50kWh
amonth.However,veryfewofthatbeneficiarygroupwere
abletobenefitfromthelowertariffasthehighconnection
costwasabarriertogainingelectricityaccess.Itwas
drasticallyreducedinDecember2012.
Since2005therehasbeenascalingbackoflifelinetariffsand
crosssubsidybetweenindustrialandresidentialcustomers
TheproposedaverageadjustmentsrequestedbyTANESCOare
67.87%effectivefromOctober1,2013,12.74%effectivefrom
January1,2014,and9.17%effectivefromJanuary1,2015.

TShs/kWh,yettherevenue
requirementtargetforTANESCO
in2013is332.06TShs/kWh.

TANESCOsaystheshortfallof
134.25TShs/kWh(67.87%)
severelyrestrictstheabilityofthe
companytoprovidetheservices
requiredtomeetitsobligationsto
bothitslendersanditscustomers.

EWURAapprovedatariffs
increaseof39.19%comparedto
thecurrenttariffs,effective1Jan
2014to remaininforceuntil31st
December2016

TANESCOretailtariffsareregulatedbyEWURA.Tanzania
raisedelectricitytariffsby40.29percentinJanuary2012.
DespitethisincreaseTANESCOlossescontinued.
40%increaseoftariffsinJanuary2014,alevelofGovernment
subsidiestothenationalutilitywillbeneededoverthenext

years

ElectricitySectorMatrix

Financialsituationofmainutilities

ThegovernmentsaiditwouldlimitsubsidiestoTANESCOto
US$105millioninthe2013/14financialyearagainstthe
company'sprojectedfinancingneedsofUS$352million
includingUS$19millionfrom2012/13

Thegovernmentcoversthequasifiscaldeficitthedifference
betweentheactualrevenuechargedandcollectedat
regulatedelectricitypricesandtherevenuerequiredtofully
covertheoperatingcostsofproductionandcapital
depreciation.
TANESCOlossesamountedtomorethanUSD300millionin
2012(221million),comparedtorevenuesofonlyUSD536
million(395million)

WBisproviding$113.7millionforTANESCOforurgent
investmentsinitstransmissionanddistributionnetwork.

Performance:Losses/efficiencies/servicereliability

Generationefficiency

TANESCOsactualexpenditurein2011wasonlyabout4
percentofrevenues

TANESCOhasspentonlyafractionofthefundsforrepairsand
maintenance(R&M)dictatedbyinternationalbestpractice
since2002,thecostofelectricitygenerationhascontinuously
increased,primarilyastherelianceonthermalenergyhas
increased.
Largehydrohasbeencontinuouslydecreasingfrom98percent
oftotalcapacityin2002to40percentin2006,In201335
percentoftheavailablecapacity,withhydroelectricityoutput
decliningduetoextendeddroughts.

HighdependencyonEmergency
PowerPlants.
TANESCOsaysuseofEPPswillbe
substitutedbygasplantsfrom
theyear2015.

ElectricitySectorMatrix
Transmissionlosses,trendsandtargets

Distributionlosses(technical/nontechnical

Thetransmissionsystemlossesrecordedin2011were6.3%,in

20126.12%,in2013,6.17%
Distributionlosses18.8%(2013)

TANESCOhascommittedtoreducetechnicalandnon
technicallossesinthedistributionnetworkfromthelevelof
19percentin2012toalevelof15.1percentin2015.

Noncharged/paidrevenues

NoInformationfound

Between2008and2010powerinterruptionstoTanzanian
industriesincreasedbyalmost20%toatotalof26
Averagehoursofblackouts,targetsforimproved hours/month.
TANESCOhadtoprocurein2011morethan300MWof
performance
expensiveemergencypowergenerationcapacity,basedon
fossilfuels.

Transmission&distribution
lossesof24.97%fortheyear
2013arehighcomparedtothe
currentindustrialstandardof
15%

Energyaccessandoffgridelectrification

Electrificationrate(urban/rural)

10

Electrificationrate14%(Overall)
Electrificationrate3%(Rural)

Thereislessthan3%electricityaccessinruralareas.Thefirst
objectiveistoelectrifyalldistrictcentresandtoreach16%by
2015inruralareas(SourceREA,ClubER,2013).

Ruralelectrificationchallengeremainsdaunting.

About75percentofTanzaniansliveintheruralareas,and
almost95percentofthemareoffgrid.
80percentofthepopulationliveinareaswherepopulation
densitieswerelessthan70persons/km2.

Abaselinesurveyin
2011showedruralaccesslevelsat
6.6%,largelyduetotheeffortsof
REA.

ElectricitySectorMatrix
Halfthepopulationlivedinregionswherethepopulation
densitieswerelessthan40persons/km2.

Electrificationtargets

RuralElectrificationAgencyinplace?

Statusandplansforoffgridruralelectrification

11

TheGovernmentofTanzaniahassetambitioustargetsfor
extendingelectricityaccesswhichincludesreachingan
electrificationratioof30percentby2015and50%ofthe
populationhavingaccesstomodernenergyservicesby2020.
RuralEnergyAgency(REA)establishedin2005
REAisinchargeofperiurbanandruralelectrification.REAhas
implementedmorethan140gridextensions
TanzaniaEnergyDevelopmentandAccessProject(TEDAP)is
financedbytheWorldBankthroughaUS$157.9millionIDA
creditandaUS$6.5milliongrantfromtheGEF

In 2008 a GEF/World Bank US$100 million for grid extension

projectsdeveloped byTANESCOandsmalloffgrid renewable
energyprojectsbyprivatedevelopers.

To underline plans for rural electrification, REA has prepared

with the support of Norad, a document for a coordinated
electricity sectorwide framework for Tanzanias national
coverage (rural, perurban, rural, and deep rural) scale up
program,aSectorInvestmentandPolicyProspectus

Investmentplanoverthenext10+years.Electrificationof
almost1,500settlementsintheperiod20132015

11thEDFNationalIndicativeProgrammeforTanzaniathe
EuropeanUnionhasidentifiedtheenergysectorasafocus
area,withanindicativebudgetallocationofupto180million
Euro.Ofthese,upto85millionEuroareavailableforSector

Regulatorsaystheproposednew
connectionsof250,000annually
from2014appeartobeover
ambitiousconsideringtheactual
connectionsachieved.

(Souce:REAClubER,2013).

REAissupportingrenewable
energybasedminigridsand
standalonesolarsolutionsthat
areoperatedbytheprivatesector
andNGO

REAandTANESCOare
implementingtheWorldBank
andGEFassistedTanzania
EnergyDevelopmentandAccess
Project(TEDAP)tosupportrural
electricityaccess

ElectricitySectorMatrix
BudgetSupportandupto80millionEuroareavailablefor
RuralElectrification

AssistancefromNORADispreparingaRuralElectrification
InvestmentProspectusthat,forthefirsttime,willfully
integrategridbasedelectrificationwithuseofminigridsand
standaloneoptions.NORADandSIDAareexpectedtoprovide
significantfundingtotheRuralEnergyFund

TheEuropeanUnionhassupported5minigridsinTanzania

USAIDisestablishingafundforfinancingruralandrenewable
energy.AFDisestablishinga20millioncreditlinethatcanbe
accessedthroughdomesticcommercialbanksforrenewable
andruralenergy.

DFIDhasa30millionregionalsoftloanfacilitythatcould
financerenewableenergyinvestments,andispreparinga
minigridprogramforTanzania.

TEDAPhassupportedthecreationofanenablingenvironment,
includingregulatoryandtariffframeworkforpowerplants
committingtosupplyupto10MWtoTANESCO,andcapacity
building.Ithasalsofacilitatedthedevelopmentofapipelineof
renewableenergyelectrificationprojectswiththepotential
foraround135MW.

ATEDAPcreditlineavailablethroughcommercialbanksoffers
financing.Severalotherdonorsarealsosupportingrenewable
energybasedminigrids.

12

ElectricitySectorMatrix

Operatorsofisolatedgridsetc.

Thefirstfewprivatelyrunminiandmicrogridshave
emergedrecentlyinresponsetotheenablingfinancingand
regulatoryframeworkthattheGovernmenthasputinplace
StaterunMG:
oExisting:21dieselbasedMG(TANESCO)
oExisting:13hydro,2biomass,2gasifierMGs
oPlanned:hybridationofexistingdieselbasedMG
oPlanned:>13newmicroorminihydro
oPlanned:hybridsolar/wind/dieselfortelecombase
stations
oMajorprogrammes:TEDAP,SREP
PrivateorcommunityrunMG:manymicroandmini
hydroprojects
Tariff:uniformforgridandoffgrid=~0.12$/kWh(2013)
SPPs:11gridconnectedSPPsmainlyhydro&biomassand
oneSPPforisolatedMGFITinplaceforGridinjectionandfor
minigrids

(Source:MinistryofEnergyand
Minerals,FinalReportonJoint
EnergySectorReviewfor2010/11,
September2011).

Regulationforsettingupisolatedgrids,incl.
microgrids(concessionterritoriesinplace?)

13

The20townshipsinotherregionsservedbyTANESCOare
dependentonisolateddiesel(18)andnaturalgas(2)
generators,andimports.IndependentPowerProducers(IPP)
supplied26percentofthecapacity.EmergencyPower
Producers(EPP)supplied13percent.Inaddition,thereisan
estimated300MWofprivatedieselgenerationnotconnected
toTANESCOgrid,whosefuelcostaloneisexpectedtoexceed
UScents35/kWh.

ThenewinstitutionalframeworkisfavourabletoIPPandto
renewableenergieswithFITtariffsadjustedbyEWURAforon
gridandoffgridinjection.IPPregimeissetwithstandard
.
procedures,PPAandannuallicences(>1MW).

ElectricitySectorMatrix
TheMEMhasadoptedin2007theStandardizedPower
PurchaseAgreements(SPPA)andStandardizedPower
PurchaseTariffs(SPPT)forinterconnectingandsellingpower
(<10MW)tothemaingridandtominigrids

TANESCOwillpurchasepowerfromprivatelydevelopedand
operated,smallrenewablesprojectsundertheSPPA
programmeandwhererequiredwillsupplypowerundera
bulkpowersupplyarrangementstotheminigridsthatare
interconnectedwithitsnetwork,whentheminigrid
generationisindeficit.Largergeothermalprojectswillfollow
existingIPPapproaches

TheSmallPowerProjectsprogrammeallowssmallrenewable
energyandcogenerationfacilitiesofupto10MWofcapacity
tobeconnectedtothegridandtobepaidafixedpredefined
tariffforthepowertheyselltotheutility,undera
standardisedpowerpurchaseagreement.

PolicyforBoPelectricitysupply(lowlevel
electrification)

TANESCOisrunning21dieselbasedoffgridstationssupplying
isolatedminigridsforsmalltowns(installedcapacitiesranging
from400kWto12MWand8stationshavepeakloadsbelow
1MW).TANESCOspriorityistoconnectthoseisolatedgridsto
themaingrid
Agrantof$500foreachnewhouseholdthatisconnectedtoa
microgridisprovidedbyTanzaniasRuralElectrification

Agency(REA).

EnergyEfficiency
DemandsideManagementprogrammes
14

ConditionsforTANESCOoperatingundernewtariffsisaplan
forimplementationofaDemandSideManagement
Programme.

Source:USAIDWORKSHOPONDEMANDSIDE
MANAGEMENT
ANDADVANCEDMETERING,May2013

ElectricitySectorMatrix

TherehasbeenarecentintroductionofanAdvancedMetering
InfrastructuresystembyTANESCO.Thesystemwasdeveloped
tohelpimproverevenuecollectionandreducethetheftof
energy.Priortotheprogram,energylosses
forTANESCOwereestimatedtobe26%from
transmission/distributionlossesandnontechnicallosses.A
pilotprojectwasinstitutedtoconvertallofTANESCOslarge
powercustomerstoAdvancedMetering.Byinstallingsmart
metersforlargepowerusersTANESCOhasreducedpower
lossesfrom26%to21%andimprovedrevenuecollection.

EnergyEfficiencyactivities

AstudybyTANESCOtoimprove
capacityfactorsinindustrial
The residential sector contributes most to energy consumption
plantscameupwithproposalsto
in the country (72% in 2009), mainly due to the large amounts
reducepowerdemandinTanzania
of biomass consumed for heating, light and cooking.
tobeginJanuary

2012,implementation
hasnotstarted.

OtherIssues

Author:DetlefLoy
StatusasofFebruary2014

15