Download STATEMENT ON BEHALF OF THE ENERGY DEVELOPMENT

STATEMENT ON BEHALF OF THE ENERGY DEVELOPMENT PARTNER GROUP
PRESENTED AT THE SIXTH JOINT ENERGY SECTOR REVIEW
STAKEHOLDER WORKSHOP
DAR ES SALAAM
31st OCTOBER 2013
Mr./Madame Chair,
Excellencies,
Distinguished participants,
Ladies and Gentlemen
Introduction
It's a pleasure to address you at this important meeting. On behalf of the Energy
Development Partner Group (EDPG), I would like to applaud the Ministry of Energy and
Minerals for hosting this event and for the opportunity to participate in this workshop.
EDPG would also like to thank the Ministry, its agencies, energy stakeholders, and the
consulting team for producing this year’s joint energy sector review report. The draft
report contains informing inputs; it identifies areas of progress, and presents areas of
opportunities to improve existing constraints within the sector.
Overview of the Power Sector
Energy is central in Tanzania’s socioeconomic growth and environmental sustainability.
Given that energy is crosscutting and currently an expanding sector, it has a bigger role to
play in enabling other sectors to flourish.
Since last year’s forum, the Ministry has made several strides that have had a positive
impact on the sector. For example, they have been promoting rural grid expansion through
the Rural Energy Agency (REA). REA has initiatives in various regions of Tanzania with
several small-scale renewable energy projects underway promoted through Public Private
Partnership format and finance with Rural Energy Fund, like in the case TEDAP – the
Tanzania Energy Development and Access Project, which has enable rural institutions to
gain access to power.
These efforts have not gone far enough to ensure reliable power services to 44.6 million
people in the country. The Ministry faces a number of hurdles, and EDPG has partnered with
the Ministry and other energy stakeholders to discuss strategies on improving the availability
of adequate and reliable power.
Energy provision in Tanzania remains a challenge that is preventing the country’s ability to
reach her goals for poverty reduction by 2025. Currently only 21% of the population has
access to the electricity grid, mostly those who reside in urban areas. The electrification gap
between rural and urban areas is significant, since more than 80% of the overall energy
consumption takes place in rural areas, majority of which is biomass energy. In past decade
the national electrification status has slowly increased, from 10% in 2002 to the current 21%
of the population.
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Energy Sources
Biomass continues to dominate the total energy consumption Tanzania, at 90%, which is leading
to accelerate environmental degradation. This reliance on biomass as the main source of energy
is not sustainable. The historical dependency on hydropower has been affected by the nature of
climatic variation and seasonal change, reducing the availability of water resources for power
production, which has now focused on thermal. Over the years, the bigger portion of electricity
has gradually been derived from thermal generation.
The current reliance has also been problematic, since thermal generation under Emergency
Power Production has not been able to cover the deficit caused by the lack of hydropower. It has
also proven to be less efficient and costly, as thermal production requires enormous government
subsidies, while utilizing other natural resources.
While efforts have been made in using renewable energy sources such as Solar, and adapting
energy efficiency strategies in cook stoves, moving towards more efficient and cost effective fuel
production systems, and investing in renewable energy production would create a mix of energy
sources for reliable power supply.
Electricity Availability
Electricity contributes less than 2% of the total energy use in Tanzania, but it’s impact on the
economy is significant. In the past Tanzania has experienced many problems related to the
lack of reliable access to electricity, including industrial underproduction and a reduction in
social welfare, which have all lead to major economic losses.
For the majority of Tanzanians living in rural and peri-urban areas, access to grid power has been
slow, and in most cases unaffordable. Off-grid alternatives for energy such as kerosene and
wood charcoal produce polluting fossil fuels, and come with long-term health and environmental
repercussions, besides being very expensive. For those with access to electricity, even in urban
areas, the majority are underserved, and they as well turn to similar unsustainable energy
sources. There are also immediate tradeoffs in terms of production given that Tanzania depends
on the agriculture industry to generate economic output.
In the short-term perspective, the financial viability of TANESCO is far from credible.
TANESCO is operating with a deficit, and they have not been able to recover operational
cost due to historical low tariffs and exorbitant power purchase agreements with
Independent Power Producers. Additionally the subsidies that were put in place for thermal
generation as backup for hydropower have created more debt for the company, which
leaves little incentive for private sector partnerships. In the long term this will prevent much
needed private sector investment in the sector, especially in electricity generation capacity.
EDPG is aware of the continued efforts of the GoT led by MEM to find more cost effective
and environmentally sound solution to the problem.
Access to Modern Energy
Apart from the need to increase electricity generation capacity, increasing access to modern
energy needs priority. This is a main objective of the current 5 years development plan. As
mentioned before, the Ministry and it’s Rural Energy Agency is working hard to increase rural
electricity access through increased connection to the grid and decentralized renewable
energy technologies through support to both on and off-grid connection. Development
partners welcome these efforts.
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Connection Rate
There has been a steady increase in connections, and hence increased coverage of
services reaching the population, at more than 1,032,000 electricity customers. A clear
definition of electricity access is needed, with emphasis on increased productive use of
electricity to enhance economic growth. The Ministry’s on-going grid expansion efforts
through REA are commendable and encouraged.
Implementation Plans
Successful development plans are both dependent on sound policies and realistic
implementation strategies and capacity. While more than half a million new connections have
been added in recent years, this does not even come close to keeping pace with the
country’s annual population growth rate, estimated at 2.9%. TANESCO’s power system
development plan is supposed to increase supply to various regions with up to 3,262 MW
through investment in energy infrastructure, but some of the planned projects are behind
schedule, therefore the extent to which these plans will actually be realized, particularly in
rural areas is undetermined. The Ministry’s efforts to create a well functioning planning and
budgeting system will eliminate a number of implementation bottlenecks. Development
partners commend these efforts and looks forward to further improvements.
Electricity Tariff
An effective tariff restructuring is also crucial. The implementation of a multi-year tariff by
the independent regulator EWURA is commendable in this regard. A realistic cost
reflective tariff is needed to solve the financial constraint for investment in the energy
sector. Over time a tariff for supply side operation will enable TANESCO to recover from
their financial burden, and support Tanzania’s economic growth.
Energy Subsidy
In addition to effective tariffs, the energy sector requires a comprehensive subsidy policy.
The effort by the Ministry to establish a clear subsidy structure is commendable and an
important measure to allow the access expansion agenda of the government as stated in
the MKUKUTA and GoT operational plans.
Concluding remarks
Tanzania has made significant progress in achieving macroeconomic stability making it one of the
best economic performers in sub-Saharan Africa. The country’s economy is presently growing at
a yearly rate of 7% and is estimated to grow at a rate of 8% within the next one to two years, and
subsequently 10%, as declared on the national development vision 2025.
Implementing this strategy requires considerable enforcement of existing legislations, investment
in energy infrastructure and the provision of modern energy services along the grid. EDPG
strongly believes that the sustainable energy mix would enable reliable energy in urban centers
and support grid expansion efforts in rural areas. However this needs GoT commitment of
transforming energy plans into services.
EDPG believes that further progress in the energy sector is crucial. There’s a need for clarify
short term and long-term energy plans, sector strategy, coupled will proper implementation
strategies that are considerate of cross-cutting sectors. Such strategies and plans, and their
timely implementation, will enable the sector to unlock its potential and increase opportunities for
private sector investments.
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There’s also a need for financially viable solution for improving operational efficient of the
power utility TANESCO, among other needs, building capacity with district agencies and
involving private sector will allow energy infrastructure services to reach rural areas a cost
effective tariff structure and energy subsidy policy, coupled by the need for modern energy
access, and increase in electricity connection rates.
EDPG will continue to support the GoT, and we hope that the Ministry and its agencies will
play an active role in addressing energy sector challenges. Understanding the importance
of energy in achieving national goals of poverty reduction, and growth in other sectors
while sustaining Tanzania’s economic in the future.
EDPG regards the Joint Energy Sector Working Group as an important platform for
assessing develop measures to address the key challenges related to energy in Tanzania. In
this year’s review the focus will be on the coordination, monitoring and evaluation of
electricity generation, transmission and distribution, in addition to the sector’s capacity
building initiatives.
EDPG will continue to partner with the GoT to further strengthen the function of Working
Group and facilitate consultations for the advancement of this sector. In this regards, the
2013 JESR is an opportunity to reflect on the sector’s progress by various stakeholders and
make recommendations on implementing current and future energy plans and policies.
Development partners anticipate insightful discussions.
Once again and on behalf of the Energy Development Partner Group I would like to thank the
Ministry for giving us the opportunity to participate in this event, and share our views on both
the progress made and challenges to come.
Asanteni sana
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