Generating power and controversy: Understanding Tanzania’s independent power projects

Initially conceived of within the broader context of power sector reform in the late 1980s and early 1990s, Independent Power Projects (IPPs) were intended to relieve state utilities of the burden of financing new plants, bring quick, quality power and reduce costs for end-users. Although IPPs have indeed contributed to generation capacity in Tanzania, much of the power that resulted from investments has been supplied neither quickly nor cheaply. Embarking on power sector reform in the early 1990s, Tanzania made IPPs a pillar of its reform strategy. Presently, Songas and IPTL, the country’s two IPPs are helping to reduce load shedding. However, these projects have not been without controversy. One of Tanzania’s IPPs was taken to international arbitration over a dispute related to construction costs. The state electric utility, Tanzania Electric Supply Company Limited (TANESCO), currently pays more than 50% of its current revenue towards combined fuel and capacity charges for the IPPs. Capacity charges for the country’s two IPPs are equivalent to approximately one percent of GDP. The Government of Tanzania (GoT) is intervening to assist TANESCO with its monthly IPP payments at present. With twenty-year Power Purchase Agreements (PPAs) between IPPs and TANESCO, these costs are expected to continue, albeit with some modifications due to refinancing, fuel conversion and further development of the natural gas market. This paper provides a detailed summary of how and why IPPs developed in Tanzania as well as their impact to date. Development outcomes, namely the extent to which the host country is benefiting from reliable, affordable power and investment outcomes, the degree to which investors have made favourable returns and been able to expand market share, are analysed in turn. IPPs offer more than a decade of experiences in private sector investment in developing countries and a detailed understanding of them may be the key to unlocking and sustaining future power investment

Generating power and controversy: Understanding Tanzania’s independent power projects

Initially conceived of within the broader context of power sector reform in the late 1980s and early 1990s, Independent Power Projects (IPPs) were intended to relieve state utilities of the burden of financing new plants, bring quick, quality power and reduce costs for end-users. Although IPPs have indeed contributed to generation capacity in Tanzania, much of the power that resulted from investments has been supplied neither quickly nor cheaply. Embarking on power sector reform in the early 1990s, Tanzania made IPPs a pillar of its reform strategy. Presently, Songas and IPTL, the country’s two IPPs are helping to reduce load shedding. However, these projects have not been without controversy. One of Tanzania’s IPPs was taken to international arbitration over a dispute related to construction costs. The state electric utility, Tanzania Electric Supply Company Limited (TANESCO), currently pays more than 50% of its current revenue towards combined fuel and capacity charges for the IPPs. Capacity charges for the country’s two IPPs are equivalent to approximately one percent of GDP. The Government of Tanzania (GoT) is intervening to assist TANESCO with its monthly IPP payments at present. With twenty-year Power Purchase Agreements (PPAs) between IPPs and TANESCO, these costs are expected to continue, albeit with some modifications due to refinancing, fuel conversion and further development of the natural gas market. This paper provides a detailed summary of how and why IPPs developed in Tanzania as well as their impact to date. Development outcomes, namely the extent to which the host country is benefiting from reliable, affordable power and investment outcomes, the degree to which investors have made favourable returns and been able to expand market share, are analysed in turn. IPPs offer more than a decade of experiences in private sector investment in developing countries and a detailed understanding of them may be the key to unlocking and sustaining future power investment

Adaptation of Feed-in Tariff for remote mini-grids: Tanzania as an illustrative case

Following the successful Feed-in Tariffs (FiTs) system worldwide, few countries have implemented FiTs explicitly tailored for off-grid or mini-grid systems. This study takes an integrated approach to examine the feasibility of an off-grid Feed-in Tariff (off-FiT) for existing and new remote mini-grids in Tanzania, using a combination of geographical analysis, technical, economic and institutional assessments. Based on detailed modelling of two community off-grid cases, (i) PV-diesel and (ii) mini-hydro, we identify least-cost rural electrification options that make solar and mini-hydro energy competitive with diesel generators and potential effect of the support scheme on rural electrification plans. In the first case, we illustrate where the off-FiT complements diesel generation of an existing mini-grid (PV-diesel). In the second case (mini-hydro), we illustrate conditions where the off-FiT policy brings mini-hydro generation to non-electrified communities and sells renewable electricity directly to new customers. Currently, Tanzania has Standardized Power Purchase (SPP) rates, which target generators connected to the national grid and distribution systems of mini-grids or isolated grids. We found for the off-FiT tariff the total amount needed to support the same number of customers by solar and hydro-mini grids versus diesel would be of 31.5 million US$, or a premium of 0.11 US$/kWh to the present current SPPs tariff of 0.24 US$/kWh for PV. We also found that a technology specific FiT tariff would be most suitable to attract national and international investors by providing a rate of return that compensates the risk of the investment. The overall support is comparable to the 36 million US$ that the government currently subsidizes and allocates to diesel mini-grids in country, and this shows the potential for a long-term renewable energy strategy for mini-grid areas.JRC.F.7-Renewables and Energy Efficienc

The Technology Path to Deep Greenhouse Gas Emissions Cuts by 2050: The Pivotal Role of Electricity." Science

there has been little physically realistic modeling of the energy and economic transformations required. We analyzed the infrastructure and technology path required to meet this goal in a specific economy (California), using detailed modeling of infrastructure stocks, resource constraints, and electricity system operability. We find that technically feasible levels of energy efficiency and decarbonized energy supply alone are not sufficient. Rather, widespread electrification of transportation and other sectors is required. Decarbonized electricity becomes the dominant form of energy supply, posing challenges and opportunities for economic growth and climate policy. The transformation demands technologies that are not yet commercialized and coordination of investment, technology development, and infrastructur