ESMAP’s work on energy access, including activities implemented by the World Bank regional energy units and those funded by AFREA, have influenced financing; informed countries policies and strategies; increased client capacities; and generated innovative approaches in the developing world.
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Tanzania: Light-Handed Power Purchase Agreements
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On average, nearly eight out of ten Tanzanians lack access to electricity. Rural Tanzanians are more deprived with less than 2% having electricity. Such a low electricity access rate contrasts with abundant renewable energy resources including small hydro, wind, solar and various forms of biomass. These renewable resources can be tapped to produce electricity with a suitable regulatory framework that promotes the involvement of local and private investors in electricity generation and supply.
Scope and Recommendations
ESMAP assisted the Tanzanian Energy and Water Utilities Regulatory Authority (EWURA), to develop light-handed power purchase agreements for projects under 10MW and simplified regulatory procedures for projects under 1 MW. The agreements and procedures paved the way for involving local and foreign operators in electricity generation and supply in rural areas.
This pioneering work done in Tanzania with ESMAP’s assistance has been disseminated for possible adoption in other African countries. It was presented at the African Electrification Initiative launch workshop, in Maputo, attended by 130 representatives from African ministries of energy, electricity utilities, regulatory entities, and rural electrification agencies. The Tanzanian SPP regulatory system was also presented to electricity regulators from 10 Southern African countries at the 2009 annual meeting of the Regional Electricity Regulatory Association of Southern Africa.
Results and Outcomes
Enhanced regulatory framework: In 2009, EWURA formally adopted the power purchase agreements (PPAs) and simplified tariff setting mechanisms. It further expanded on this initial work by developing guidelines for Small Power Producers (SPPs). The regulatory framework for SPPs has been enhanced through the World Bank-financed Energy Development and Access project.
Increased power generation by private operators: Under the enhanced framework, five standardized power purchase agreements have been signed with the national utility, TANESCO for 24 MW, and four letters of intent have been concluded for estimated sales of 17.8 MW. In addition, two projects with commitment to supply 10.4 MW are selling power to TANESCO. Among the small power projects being developed are: 1) the Kilocha project, which will produce and supply 12 MW of electricity to 1,500 rural households and supply 9MW to the national grid; and 2) the Mbinga Mtambazi hydro project, which will supply about 500 KW of electricity to 900 households in three off-grid villages.
Related Links
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Tanzania Energy Development and Access Project (TEDAP) and SPPs
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Lighting Africa Spreads to Ethiopia, Mali, Senegal, and Tanzania