Rural Energy Agency (REA)

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1 Rural Energy Agency (REA) Africa Electrification Initiative (AEI) REF/REA (Public-private Sector Partnership) The role of the REA/REF in increasing access to modern energy in Rural Tanzania. Radisson Blu Hotel, Dakar Senegal, 14 th November, 2011 Eng. Bengiel. H. Msofe Rural Energy Agency (REA) Director of Technical Services P.O. Box 7990 Dar-Es-Salaam Tel:+255 (0) Mobile:+255 (0) Fax: +255 (0)

Radisson Blu Hotel, Dakar Senegal, 14 th November, 2011 Eng. Bengiel. H. Msofe Rural Energy Agency (REA) Director of Technical Services P.

2 Outline 1. County profile and the energy challenges 2. Latest energy sector reforms to meet the challenges 3. REA /REF s role and operational experiences 4. The successes of REA examples, and 5. How can REA improve in the future 6. End 2

REA /REF s role and operational experiences 4.

3 1.0: Country Profile and Energy Challenges Tanzania is one of the five countries of East Africa. Others are Kenya, Uganda, Rwanda and Burundi Tanzania 3

4 Country Profile and Energy Challenges cont. Key figures Item Description Unit Tanzania Country Size Sq.km 942,500 Population (2011 approx) Mil. 42 Percent access of electricity country/rural (HH Budget Survey 2007) % 15/2,5 Installed /Available Capacity/Maximum Demand (Sept 2011) (MW) 1220/560/900 Energy consumption per capital (2008 year, World Bank Report) kwh/y 85 4

5 Country Profile and Energy Challenges cont. The Energy situation of the country is as follows:- The use of biomass accounts for an average 90% of the energy consumption in Tanzania and meets about 40% of cooking needs (in peri-urban) and 96% in rural areas. The use also has a long-term implication on environmental degradation and gender dimensions as women and children spend more time on collecting fuel wood. The poor spends about 35% of their income on energy expenditure. The current policy and legal framework attempt to complement and add value to current initiatives in order to up-scale, strengthen and provide support. Hydropower potential is estimated at 4.7 Gigawatts (only 12% has been developed so far); Proven coal reserves amount to 1.2 billion tones; Proven natural gas reserves exceed 45 billion cubic meters; Potential geothermal above 150MW Potential wind energy approximately 300MW, Solar isolation about 200Wp/sq.m 5

in rural areas. The use also has a long-term implication on environmental degradation and gender dimensions as women and children spend more time on collecting fuel wood.

7 2.0: Latest energy sector reforms to meet the challenges The following are Institutional and regulatory framework established the latest energy sector reforms to meet the challenges: National Energy Policy 2003 Petroleum Exploration and Production Act 1980 Energy and Water Utilities Regulatory Authority Act 2001 Rural Energy Act 2005 Electricity Act 2008 Petroleum Act 2008 (downstream) Public Private Partnership Act

Petroleum Exploration and Production Act 1980 Energy and Water Utilities Regulatory Authority Act 2001

8 3.0: REA /REF s role and operational experiences From the Energy Policy 2003; a Policy statement states that :- Rural energy is diverse and characterized by various actors and interests. A sustainable institutional framework that can cope with the diversity, manage and co-ordinate various efforts, is a key factor for successful development of rural energy. So far, appropriate focus for handling rural energy services is lacking. There is a need to establish an institutional framework that can mobilize, coordinate and facilitate private and public initiatives in rural and renewable energy. The Rural Energy Agency (REA) was established as an institutional framework to mobilize, coordinate and facilitate private and public initiatives for provision of modern energy services in rural Mainland Tanzania. REA/REF started operations in October, REA s mission is to promote and facilitate improved access to sustainable modern energy services in the rural areas for social and economic development. 8

So far, appropriate focus for handling rural energy services is lacking.

9 REA/REF Governance Minister of MoF REB governs REF Board reports to both Ministers Rural Energy Fund REB apponts Trust Agent to manage REF payments Trust Agent Rural Energy Board Minister of MEM Staff of Rural Energy Agency Works with project developers Project Developers & Partners Minister appoints Board from stakeholder reps Stakeholders REA is secretariat to REB Main sources of funding: Government budgetary allocations; Contribution from International partners: multilateral and bilateral; Levy on electricity (up to 5%, currently charged is 3% of consumed electricity/month); 0.4% of FoB price for imported petroleum products. 9

stakeholder reps Stakeholders REA is secretariat to REB Main sources of funding: Government budgetary allocations; Contribution from International partners:

11 The successes of REA examples cont. An off-grid 2x150kW Mini hydro plant saving a mini-grid in five villages with 400 customers, Mawengi Ward, Ludewa District 11

12 S/N The successes of REA - Signed SPPAs between DNO (TANESCO) and SPP developers ( as of Sept. 2011) SPP DEVELOPER 1 Tanganyika Planting Company (TPC) Co-generation 2 TANWAT - Biomass 3 Mwenga Hydro Ltd in Mufindi 4 Ngombeni Power Ltd - Biomass 5 SAO Hill Energy - Biomass INSTALLED CAPACITY (MW) MAXIMUM CAPACITY TO SELL TO DNO (MW) DATE SPPA SIGNED /10/ /09/ /01/ /01/ /02/2010 TOTAL

Mufindi 4 Ngombeni Power Ltd - Biomass 5 SAO Hill Energy - Biomass INSTALLED CAPACITY (MW) MAXIMUM CAPACITY TO SELL

13 The successes of REA examples cont. b) Implementing a Sustainable Solar Market Packages (SSMP) in places far from the grid The aim of this important programme is to supply and install solar PV systems to public facilities (heath centers, dispensaries, public schools, police posts and street light) with a maintenance period of five years, To sell solar PV systems to private owned facilities where subsidy is provided up to 450 US$ at 1.5 US$/Wp, To sell SHS to individual household with subsidy provided as follows; 2.5US$/Wp up to 30 Wp and 1.5US$ up to 100 Wp. The first SSMP programme is expected to cover 8,000 household and 382 public systems with a total cost of USD 2.84 million in one district, The preparation for the second phase of SSMP is under way and it is expected to cover eight district in five regions A contractor, CA of Germany is at site and will carry out R&M for 5 years Build capacity of local artisans to maintain the systems in the future Developing a business model to entrepreneurs 13

centers, dispensaries, public schools, police posts and street light) with a maintenance period of five years, To sell solar PV systems to private owned facilities where subsidy is provided up to 450

14 The successes of REA examples cont. A Sustainable Solar Market Package (SSMP), Rukwa region A scale up project, SSMPII is under preparation where it will involve 8 districts 14

15 The successes of REA examples cont. c) REA is co-financing grid extension projects Extension being carried out by TANESCO gangs Turnkey projects being carried out by private contractors projects (a project worth TZS Billion is ongoing) Is currently carrying out a Low Cost Design Study and pilot project where, NRECA Consultants has been engaged to assist the project Implementation (PIU) that comprise experts from REA. TANESCO, EWURA and MEM to investigate the high costs of connection, financing and procurement schemes models that will scale up access to rural areas 15

contractors projects (a project worth TZS 100.

16 The successes of REA examples cont. REF is currently supporting projects worth US$ 75 Million on grid extension in 16 regions\of Mainland Tanzania 16

$extension in 16 regions\of Mainland$

17 The successes of REA - Low Cost Design Initiative with New Technical Standards and Designs Low cost Designs approach for RE (NRECA, Consultant) Objective is to prepare new standards for RE Establish why current costs are high Prepare a model procurement for RE line materials Establish Financing schemes for scaling up RE Learn from others through the South-South Cooperation Assist REA to carry our area planning for RE projects

costs are high Prepare a model procurement for RE line materials Establish Financing schemes for scaling up

18 Others successes REA has other successes including: Capacity building of private sector so that it can participate in developing energy projects to supplement Governments efforts and as per the Electricity Act 2008 Has formed a Rural Energy Working Group comprising representatives from ministries which are key stakeholders Is networking with various local and international e.g. Joint Energy Sector Review Group, South-South Cooperation Initiative, Club ER etc Is working with Developing Partners (World Bank, Sida, NORAD, JICA, EU, BADEA, OFID) Due to the confidence of DPs to Government, Sida has started contributing towards Rural Energy Fund (REF) 18

19 5.0: How REA can improve the future Speed up the trend to reaching the overall national objective in increasing electricity access to 30% all Tanzania by 2015 Use of Low Cost Design Standards for affordability strategy and scale up rural electrification Increase sources of funds for Rural Energy Fund Coordination with Local Government authorities on energy issues Continue capacity building of the private sector to participate in scaling provision of modern services to rural communities Continue with international networking and linkages e.g. South-South cooperation Complete the ongoing Baseline Energy Survey and disseminate the results Carry out a Rural Energy Master Plan (negotiation are being finalized with World Bank) 19

20 END THANK YOU ASANTE sana 20

Establishment of REA/REF and Available Financing Opportunities for Rural Energy Projects Paper Presented on:

RURAL ENERGY AGENCY (REA) Establishment of REA/REF and Available Financing Opportunities for Rural Energy Projects Paper Presented on: Workshop on Sustainable Access to Sustainable Energy Uhuru Hostel,