Download E: Demonstrating new approaches to the financing of cleaner energy

UNITED REPUBLIC OF TANZANIA
ENERGY AND ENVIRONMENT IN TANZANIA
INTRODUCTION
Tanzania is in East Africa and has an area of about 883,749 km 2 and a population of
about 36 million with average annual growth rate of 2.9%. About 70% of the population
resides in rural areas being engaged mostly in agricultural and livestock production
activities. Main sectors of economy in Tanzania include agriculture which account for 45
percent of the Gross National Products (GDP) and about 60% of export earnings; natural
resources including forestry and fishing (5.7 % of GDP); and Tourism (12 % of GDP).
Other key sectors encompass industry, mining and infrastructure that include roads, water,
energy, and telecommunications. Since 1996 the country’s GDP growth rate has been
consistently rising and reached 6.2 percent in 2002. However, the average per capita
income is still very low (US$270 per annum).
Recognising the poverty situation in Tanzania, the Government developed the National
Strategy for Growth and Reduction of Poverty (NSGRP) in 2005, which is a second
national organizing framework for putting the focus on poverty reduction high on the
country’s development agenda. The NSGRP keeps in focus the aspirations of Tanzania
Development Vision 2025 for high and shared growth, high quality livelihood, peace,
stability and unity, good governance, good education and international competitiveness.
The NSGRP recognises the constructive roles of all sector and other major policy
processes and counts on inter-sector collaboration. It maintains commitment to the
regional and international initiatives for social and economic development. The targets of
NSGRP are in line with those of the Millennium Development Goals (MDGs).
Among other sectors that have a crucial role in stimulating economic and social
development, energy and tourism are given a high profile in the NSGRP. Therefore,
NSGRP highlights intervention areas in various sectors including energy and tourism.
Though very important in the development process, energy’s procurement has a number
of impacts, some of which are negative. Of the many environmental, economic and social
impacts of energy procurement and end-use, deforestation and emission of greenhouse
gases have been identified to be of concern. About 90% of energy consumed in Tanzania
is in form of woody biomass with annual l consumption is to the tune of 36 million m3, this
is reported to be contributing to deforestation which is currently estimated to be over
91,000 hectares per annum. The identified major sources of energy sector related
greenhouse gases emissions in Tanzania include; combustion of fossil fuels, woodfuel
and other combustible biomass. Fossil fuels encompass; petroleum products, coal and
natural gas.
A: Improving policies and management in the energy sector
The national Energy, Forest, Environment and Science and Technology policies recognise
the essential links between sustainable development and sound environmental
management. They provide statements on climate change mitigation and a measures on
what should be done in order to meet the minimum technological and behavioural
requirements of sustainable development
Recognizing the importance of energy in the development process, Tanzania’s Energy
Policy of 1992 has been reviewed and culminated into the National Energy Policy of 2003.
The policy among others, calls for ensuring availability of reliable and affordable energy
supplies and their use in a rational and sustainable manner in order to support national
development goals. It further calls for establishment of an efficient energy production,
procurement, transportation, distribution and end-use systems in an environmentally
sound and sustainable manner, this includes the need to put in place an appropriate
institutional arrangement.
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In order to operationalise the Policy, a Rural Energy Agency (REA) and Rural Energy
Fund (REF) are being established. To this end, a Rural Energy Act of 2005 was passed;
arrangement to physically establish the REA and REF are at advanced stage.
Environmentally sound energy technologies are key candidates for promotion under REA
and REF.
B: Improving access to Energy for the underserved
Follow up to launching the National Energy Policy in 2003, efforts are underway to
formulate a comprehensive energy strategy. In addition to the REA & REF, other elements
of the strategy that are being executed include the finalization and effectualisation of the
New power Legislation, reviewing and updating the National Power Systems Master Plan,
Developing a Rural Electrification Master Plan, implementation of pilot projects on removal
of barriers to renewable energy development and preparations of a World Bank and
Swedish International Development Cooperation Agency (Sida) supported Programme on
Energizing Rural Transformation.
In addressing issues of energy access to the underserved and in line with other national
policies, Tanzania:
a) Is establishing the REF to provide capital subsidy to buy down investment cost so
as to enhance affordability for modern energy services including rural
electrification;
b) Has liberalized the petroleum industry to encourage fair competition,
c) Petroleum law is currently being reviewed to take care of experiences, new
developments and challenges of the sector;
d) Electricity sub-sector has been undergoing reforms to allow more private sector
participation in delivering modern energy services to customers. The power
generation side allows the participation of Independent Power Producers (IPPs)
and so far about 290MW capacity is being generated by IPPs. Currently the
vertically integrated state owned Power utility is being ring-fenced into three
operational entities namely; generation, transmission and distribution;
e) Is committed to promoting renewable energy technologies so as to reduce
reliance on fossil fuels. In July 2005, all taxes on solar energy appliances and
small scale wind turbines were removed;
f) Recently commissioned consultants to conduct energy audits in selected
government buildings with a purpose to identify energy saving and conservation
opportunities;
g) Tested a number of renewable energy technologies, experiences show potential
for scaling up of such technologies. The technologies include: Biogas; Solar
electricity (photovoltaic); Biomass briquetting; Efficient cookstoves; Efficient
charcoal production kilns; Liquid biofuel production; Wind mill for water pumping;
Small scale hydropower; Biomass Co-generation using wood or bagasse; and
Solar thermal (cookers, water heaters and crop dryers). Other technologies are to
be ascertained based on results of resource assessments that are underway.
h) Converted 112MW jet fuelled power plant to run on natural gas and installed
78MW additional natural gas fired capacity. Plans are underway to convert
100MW diesel fuelled power plant to run on natural gas;
i) Replaced heavy fuel oil with natural gas at one of the three cement processing
factories. Natural gas is also being used in some dare s salaam based brewery,
textile, glass and steel processing factories; and
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j) Is in the process of establishing an Energy and Water Utilities Regulatory
Authority (EWURA).
C: Promoting renewable sources of energy
Renewable energy resources are inexhaustible and offer many environmental benefits
over conventional energy sources. However, as indicated earlier, most of them have
relatively high upfront costs.
The National energy Policy (2003) emphasizes on development of renewable Energy
resources and technologies.
At present the following renewable sources of energy are being promoted or assessed:
 Hydropower (both small and large-scale), modern biomass (co-generation,
improved stoves, improved charcoal production, thermal-gasification, briquetting,
small scale liquid and gaseous biofuel production, etc.), solar (thermal and
electricity), wind for mechanical and electrical power;
 Enhancement of tree planting campaigns (e.g. Through the National Tree planting
day) as a way to sensitize people to plant trees;
 Application of improved forest management practices, including community forest
management; and
 Wind, small hydro and geothermal resource assessment
D: Promoting energy efficiency
Energy efficiency and conservation are important in ensuring sustainable supply of
affordable energy and contributes to conserving the environment and resources. In this
area, Tanzania has implemented a number of projects including:
o Over 150 industries have been audited. Audit findings indicate potential savings
ranging from 15-40%. Energy savings in most industries can be achieved through
improved combustion efficiency in boilers and furnaces; steam and condensate
management and efficient utilization of electricity,
o SADC Industrial management Project (1994-2002) in which selected industries
engineers and technicians were trained/exposed to energy management;
o Dar es Salaam Water supply system energy audit which indicated a potential
saving of up to 40% of the total annual bill on adoption of energy efficiency
recommendation measures.
o Selected government buildings energy audit for creating awareness amongst
planners and decision makers; this project is ongoing.
o Advanced cleaner fossil fuel use including natural gas (e.g. using combined cycle);
Mitigation of green house gases
The identified energy sector related greenhouse gases’ mitigation options in Tanzania
encompass:
 Efficiency improvement of existing energy systems including retrofitting thermal
power plants;
 Enhanced deployment of renewable energy technologies;
 Energy efficiency and conservation by applying cleaner energy technologies and
techniques in all sectors of economy;
 Power trading with neighbouring countries to allow for optimised use of electricity
generated from cleaner sources of energy and cleaner technologies;
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Fuel switching to alternative environment benign energy resources; and
Energy pricing with due regard to social and environmental costs including the
application of economic instruments including polluter pays’ principle so as to
discourage wasteful behaviours in energy use.
A need to strengthen the functions of the legislative in health, safety and
environmental protection.
E: Demonstrating new approaches to the financing of cleaner energy
To address some of the identified constraints to environmentally and socially sound
energy Technologies (ESETs)., Tanzania:
 In 2000, liberalised petroleum trade so as to allow competition and efficiency in
delivery of services;
 Deregulated the power generation segment to allow independent power producers
(IPPs) and of todate about 290MW are generated by IPPs
 Is implementing a project on removal of barriers to renewable energy technologies
in which aspects of energy pricing and financing renewable energy are being
addressed;
 Is in the process of establishing a rural energy fund that is envisaged to support
ESETs in ensuring reliable and affordable modern energy services to rural areas.
 Is process of building capacity in environmental impact assessment, ESET design,
installation and maintenance, energy resource assessment, etc.
Responsible department and partners involved
The indicated efforts are achieved through the Ministry responsible for energy
collaborating with various stakeholders. The stakeholders include, the power industry,
petroleum industry, ministries of finance, industries & trade, health, natural resources,
environment, education, science & technology, R&D institutions, consulting firms, NGOs,
CBOs, etc. This collaboration is pivotal in ensuring replication to countries of similar
economies and environments, which are yet to embark into such interventions.
Financial viability
The power systems master plan of Tanzania is prepared on least cost approach. So the
timing of next generation is usually based on which option has least cost among many
options. Unfortunately renewable energy resources like solar photovoltaics, biomass cogeneration are yet to qualify. However, a draft rural energy master plan has been
prepared recently. The rural energy master plan is being developed based on studies
made on various indigenous energy resources including biomass, wind, geothermal, small
hydropower, natural gas and solar. Since most of the ESETs have high upfront costs, it is
envisaged that the Rural Energy Fund would buy down such costs so as to ensure viability
of ESETs especially those of renewable energy category. Nevertheless, other resources
like wind, geothermal and small hydro need to be thoroughly assessed so as to facilitate
their future contribution in the country’s energy mix. On top of Tanzania government’s
efforts, support from developed country parties would be crucial to significantly increasing
contribution of ESETs in the national energy supply.
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