Untapped potential Who pays the transition ?

Tanzania continues to be among countries whose popula- tion largely relies on the use of traditional biomass (firewood and charcoal) and fossil fuels as a main source of energy. From the power generation side, nearly 60% of the total installed capacity of electricity production in the country originates from natural gas (a non-renewable fossil fuel), with only 37% originating from the renewable hydro sources. When it comes to the consumption side, mostly at household level, more than 85 percent of Tanzanian house- holds rely on biomass fuels for cooking, associated with indoor air pollution and related health issues as well as significant amounts of deforestation.

Yet, the country is endowed with huge potential of producing and consuming energy from a wide range of clean renewable energy sources such as solar, wind, geothermal and clean biomass. Despite the endowed renewable energy potential but there is a little realization of the energy projects due to the limitation of financial aspects. These aspects arise from limited investment from both private and public sectors as well as the public adoption and utilization of renewable energy products.

Currently the many renewable energy products are donor financed with limited private invest- ment and institutional involvement from Tanzania. The current commercial bank portfolio on financing renewable energy projects is under than 1% of the total loan advance in various sectors. It is against this background; a desk review study was com- missioned so as to establish the key policy constraints and key recommendations to enhancing renewable energy fi- nancing in Tanzania.

Energy Transformation:

Transformation of the global energy system is working to- wards meeting the objective of the Paris Agreement to limit the rise in average global temperatures to well below 2°C, and ideally to 1.5 °C, by the end of the century. Re- newable energy investment increased clean electrification of energy services, and energy efficiency at production, storage, transportation, and use can deliver more than 90% of global emission reductions needed for industrial, trans- portation and household energy needs (WWF Technical Report 2021).

Why a Renewable Energy Policy Is important ?

The need for formulating the renewable energy policy is based on the current context in Tanzania. These points relate to the current existing policy and regulatory frame- work in Tanzania

1. The government has committed itself to develop a Renewable Energy policy as shown in the SE4ALL Action Agenda 2015 – to help the government reach its target of 50% of renewable energy contribution to the national energy mix by 2030.

2. Renewable energy product prices (and operational costs such as connection cost per customer) are lower/cheap compared to non-renewable (fossil fuels).

3. The current National Energy Policy 2015 is due for update to take on board new challenges about re- newable energy issues. It lacks implementation instruments which gives room for contradicting guidance and tools as shown in the figure 3 below:

4. A policy instrument to enforce government’s com- mitments to the Nationally Determined Contribu- tions to the Paris Agreement and its commitment as stipulated clearly in the sustainable energy for all action agenda.

5. Existence of strategies which are not implemented as they lack policy back-up– For example, Biomass Energy Strategy (BEST), Scaling up Renewable Ener- gy Program (SREP) ,Tanzania SE4ALL Regionalization and Implementation Plan 2017 to 2025

Out-dated fossil-based energy sys- tem: slowing down development

From the power generation side, nearly 60% of the total installed capacity of electricity production in the country is from fossil fuels ( mainly natural gas : 57 % )natural gas (a non-renewable energy), with only 37% originating from the hydro sources. The electrical supply varies in times of drought leading to rolling blackouts. Furthermore, a quar- ter of the produced power is lost due to the poor state of the grid infrastructure.

The unreliability of power supply has had a negative impact on the development of Tanzani- an industry sector. When it comes to the consumption side, mostly at household level, more than 85 percent of the Tanzanian households rely on biomass fuels for cook- ing, associated with indoor air pollution and related health issues as well as significant amounts of deforestation.

Untapped potential: RE to leverage development

Although Tanzania has excellent wind, solar, geothermal and biomass resources for power production, only 4.85% of non-hydropower renewables potentials are being con- sidered in the Electricity Industry Reform Roadmap to 2025. The country’s abundant renewable energy potential offers the possibility to overcome some of the challenges faced by the energy and power sectors.

This would lead Tanzania towards economic growth that is sustainable and cost effective. Tapping more of these sustainable resources would facilitate Tanzania’s economic transformation, and hence put her in the right direction towards attaining a middle-income status in the next decade

Open doors for the Private Sector ?

Electricity act of Tanzania of 2008 has opened doors to private sectors to invest on production and distribution of electricity in rual and urban areas under the provision of investment regulations. Linked to the Tanzanian National Energy Policy (NEP 2015) embrace wider and increased private sector involvement in electricity production and distribution. Tanzania National Electricity Supply Company Limited (TANESCO), which is a government owned compa- ny remain to be a dominate electricity producer and suppli- er in Tanzania.

Despite the government and other related stakeholders initiative to promote private sectors involve- ment in electricity production and distribution its realiza- tion has remain low. Private sector involvement in the power production is critical and studies indicate its great contribution towards successful power production and distribution thus accelerating ecological and socio- economic transformation in Tanzania. It is therefore a paramount importance for the government in Tanzania together with other key stakeholders in the energy sector to accelerate enabling environment that fa- vour private sector in power generation and distribution in Tanzania

Acknowledgements

The project consultant would like to sincerely thank Sida for providing the financial support which enabled this study to be conducted. The cooperation and logistical support from the Swedish Embassy in Dar es Salaam, particularly by Dr. C. McNabb, and from Sida/INEC in Stockholm, particularly Ms. A.-C. Malm, is deeply appreciated. We are especially grateful to the staff of the Energy Department in the Ministry of Energy and Minerals (MEM), particularly Mr. B. Mrindoko, the Acting Commissioner for Energy and Petro- leum Affairs, for his willingness to assist and provide advice whenever he was contacted. Con- tributions of Mr. H. Mbise and Mr. N. Mwihava both in the field and from the MEM office are honestly appreciated. The success of this study is greatly attributed to the many institutions, companies, individuals and above all villagers who patiently rendered their invaluable support and time to the study team. We are greatly indebted to all.