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.