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Achieving development goals with renewable energy: the case of Tanzania

Case Summary: 

Tanzania is a developing country that is turning to more renewable energy sources to address some of its biggest energy concerns. Currently only 14% of the country is electrified and this drops to 2% in rural areas. About 40% of the electricity is generated through hydroelectricity which becomes unreliable during droughts, which are expected to increase in frequency and severity with climate change. The Tanzanian economy has experienced some deflation making imported fuels such as diesel more expensive. Several microgrids are powered entirely by diesel and the electricity production costs in these systems can be nearly four-times as high as in the central power grid.

Distributed generation projects present a major opportunity for Tanzania. They can cost-effectively bring electricity to rural areas, do not rely on imported fuels, and can provide local income to grow the economy. But renewable projects traditionally faced several barriers: a lack of local experience implementing projects, skepticism among private sector participants on the profitability of a project, complicated regulations, and lack of financing institutions.

To address these issues Tanzania launched the Small Power Projects (SPP) program. This program established a single body, the SPP cell, to streamline the regulatory project, host international knowledge exchanges, and establish a feed-in-tariff. These services were provided to distributed generators with a plant capacity less than 10 MW. The program has successfully assisted five biomass renewable power plants with a combined capacity of 28.3 MW and has received application for an additional 10 plants with a combined output of 60 MW. The program has also been responsive to feedback and criticism. It has implemented changes to its rules since 2009 to continue growing the adoption of renewable energy. Several lessons have been learned by the program operators which include:

  • Feed-in tariffs (FITs) can spur renewable development but have to be properly priced. Original tariffs were adequate to encourage private investment in biomass electricity generation by large companies with stable finances and free biomass waste streams available. Previous FITs did not encourage private ownership of other technologies like solar photovoltaics and wind turbines.
  • Addressing more issues than financial profits is important. In Tanzania addressing skepticism, lack of experience, land and water rights use, and financing conditions was also necessary. The SPP cell helped to streamline these issues so that one organization could be consulted by interested investors.
  • Government sponsored technology and expertise exchanges proved effective at building capacity. Tanzania sponsored the “South-South exchange” which brought energy experts from Thailand and Sri Lanka to advise the government, banks, companies, and private plant owners.
  • Planning early greatly helps a country’s energy portfolio. In 2009-2011 droughts caused energy shortages that made it difficult to advance new energy projects that made financial sense but were not proven in the country.
Action Area 
Planning and Implementation Activity 
Developing Strategies and Plans, Governance and Stakeholder Engagement, Financing Implementation, Long-Term Strategies
Sectors and Themes 
Renewable Energy, Rural, Urban
Climate and Development Knowledge Network (CDKN)