As of 2016, its operations in the sector involving power generation, transmission and distribution in the public and private sectors, regional interconnection projects and several sector wide studies represented US$247 million, about 12 per cent of the lender’s active portfolio of US$1.8 billion.
According to it, the growing demand for electricity connections largely emanates from accelerating investments in mining and industry, and an increase in consumption by connected users and newly connected households.
AfDB has it that despite the country’s abundant energy resources, meeting the growing demand is currently difficult due to structural and operational shortcomings. In the recently published Country Results Brief 2017, the lender says the local energy sector faces considerable challenges, including mobilising funds, expanding power generation capacity and diversifying energy resources for increased access.
“Tanzania has abundant energy resources: natural gas, coal, uranium, and renewables.
However, reflecting the country’s high economic growth, Tanzania’s demand for energy is growing by 10 per cent every year because of accelerating investments in mining and industry, and an increase in consumption by connected users and newly connected households. It is hard to meet this demand,” reads the report.
“Power generation is not the only challenge; Tanzania’s transmission and distribution network suffers from inefficiencies and underinvestment,” it adds.
The report reviews Tanzania’s progress on the bank’s five key development priorities, the High 5s: Light up and Power Africa, Feed Africa, Industrialise Africa, Integrate Africa, and Improve the quality of life of the people of Africa.
According to it, national access to electricity increased by 21 per cent between 2006 and 2016, but remains low at 30 per cent. For rural populations, AfDB put access to electricity at just 11 per cent — a level it says potentially prevents rural households from engaging in gainful economic activities and benefiting from education and health services.
To help meet the increased pressure on power capacity, the country is extending and upgrading its transmission and distribution lines, increasing electricity trade with neighbouring countries and undertaking electricity supply industry reform.
Opportunities for new power generation are abundant: generation potential from hydro (4.7 GW), coal (1.9 billion tons), geothermal (650 MW), gas (55 trillion cubic feet) and renewables (wind and solar) is expected to increase the supply of electricity from the current level of 1585 MW.
“Recent droughts in 2012 and 2016 caused power shortages and demonstrated that the right energy mix needs to be identified to strengthen Tanzania’s national energy security,” AfDB notes in the report.
Contribution to Enhancing Access to Energy
A key area of the bank’s support to energy in Tanzania is in the governance sector, where it supports the Energy Sector Reform Strategy and Roadmap covering 2014–2025.
The roadmap aims to increase the country’s installed power capacity from current levels to at least 10,000 MW by 2025 while also expanding the transmission and distribution systems. It also focuses on such key drivers as the unbundling of the Tanzania Electricity Supply Company (Tanesco) and strengthening of the institutional framework in light of anticipated revenues from natural gas.
Over 2500 MW are expected to be generated from natural gas and renewable energy sources, and the bank will contribute to this target through various energy sector operations, including by supporting the implementation of Tanzania’s objectives under the Sustainable Energy for All Action Agenda as well as the Scaling Up Renewable Energy Programme (SREP).
All of these operations are taking place under the New Deal for Energy in Africa, which seeks to foster a major transformation in the continent that will bring universal access to electricity. AfDB says the energy sector is a key focus area for its operations in the country, and its interventions are aimed at improving regional connectivity and access to electricity in urban and rural areas.
“Between 2006 and 2017, our interventions in the energy sector provided over 156,000 people (half of them women) with improved access to electricity. Between 2006 and 2016, AfDB has also constructed or rehabilitated over 630 km of transmission lines, contributing to allowing businesses to stay open longer in the evenings and students to spend more hours studying,” the multilateral financial institution emphasizes in the report.
One of the bank’s flagship projects is focusing on constructing transmission lines between Inriga and Shinyanga regions to reinforce the entire backbone transmission grid system in the country. Approved in 2010, this project was designed when only 10 per cent of the population was connected to the national grid, a third of today’s access rate.
AfDB is also building lines to interconnect four substations in Iringa, Dodoma, Singida and Shinyanga cities, and is designed to cover a length of 670 km. This transmission line received US$68 million in support from the bank as part of a US$479 million multi-donor project, with a goal of benefiting half a million Tanzanians.
In support of Tanzania’s rapid growth in urbanisation and related demand for energy services, the bank improved the supply of electricity in districts of Dar es Salaam, the country’s largest city and leading commercial centre. It doubled the power capacity of the Sokoine station to 30 MVA, and the station is now providing reliable energy to residents and businesses, reducing power outages in the city centre.
This achievement is part of the US$50 million Electricity V project financed mostly by the African Development Fund (ADF), the concessional window of the African Development Bank, in support of the Tanesco.
“Going forward, the bank’s investments in the energy sector will aim to contribute to the government’s objective of increasing national electricity access from 24 per cent in 2013 to 32 per cent by 2020,” reads the report.
As a SREP pilot country, Tanzania will implement bank-supported operations focusing on renewable energy—notably geothermal and hydropower — and on rural, national, and regional transmission lines.
SREP is funded by the Strategic Climate Fund (SCF), one of the two Climate Investment Funds (CIF) and aims to scale up the deployment of renewable energy solutions and expand renewable markets in the world’s poorest countries. It pilots and demonstrates the economic, social, and environmental viability of development pathways that do not exacerbate global warming.
Already, the AfDB has provided US$21.7 million to conduct exploratory drilling and install steam-gathering infrastructure to generate 100 MW in Ngozi, adding 823 GWh per year to the grid. Lake Ngozi is the second largest crater lake in Africa located near Tukuyu in the highland Rungwe District in Mbeya Region.
“This will diversify the energy mix, reducing dependence on fossil fuels and thus decreasing carbon emissions,” AfDB notes.
The bank says that it will also support cross-border power interconnection projects to harness affordable power sources through the Eastern Africa and Southern Africa Power Pools, increasing electricity access through regional power trade and generating “wheeling” revenues for power being transmitted through Tanzania.