Tanzania - Country Commercial Guide
Energy

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2021-12-02

Overview

Tanzania relies on several energy resources for its power generation. About 45% of the country’s electricity comes from hydro. However, poor rains in the past few years led to water shortages that affected the turbines generating electricity. As such, Tanzania embarked on a deliberated measure to forge an energy mix which will ensure reliable availability of power for the economy. This deliberate measure involves promotion of increased use of renewable energy technologies (solar, wind, biomass, wastes, micro hydro), natural gas and other locally available energy sources including coal and geothermal. As of the year 2021 Tanzania’s total electricity supply was 1605.86 MW.

Peak electricity demand in the country is expected to roughly quadruple by 2025 to 4,000 MW. To help meet this demand, Tanzania is targeting installed capacity of 10 GW by 2025. Meanwhile, the country is aiming to nearly double electrification rates to 75% by 2033.

Since the 1990’s Tanzania has endeavored to reform its electricity sector to attract greater levels of private participation. Despite policy, regulatory and legal reforms, public-private partnership (PPP) project structures are generally still preferred over structures where IPPs have full ownership. The country does allow private participation in generation and distribution of electricity. Several IPPs and smaller projects are providing critical capacity, however suboptimal competitive conditions persist.

The industry continues to develop with several projects and companies reaching milestones. A local solar kit supplier in March 2020 passed the 1.5 million mark of people electrified. Construction of 11 solar minigrids are underway on a cluster of islands in Lake Victoria as part of the first phase of an ambitious 200 MW rural electrification project.

Leading Sub-Sectors

Natural Gas

Tanzania is estimated to have 45 billion m3 of natural gas reserves, enough to cover the country’s domestic use and make Tanzania the next natural gas hub in Africa. Natural gas deposits in Tanzania are found at Songo Songo in Lindi region, Mnazi bay in Mtwara Region and Mkuranga in Coast Region. The reserves at Songo Songo and Mnazi bay are estimated at 30 and 15 billion m³ respectively. A 232 km gas pipeline from Songo Songo Island to Dar es salaam has been constructed and is supplying natural gas for power generation and other industrial thermal processes.

There are nine thermal power plants in Tanzania converting natural gas to electricity: Ubungo I and II, Tegeta, Songas, Mtwara, Somanga, Kinyerezi I and II, and Dangote. Total production per year stands at approximately 650 MW. The Songas Project is currently producing around 200 MW of electricity using natural gas.

Some of the Dar es Salaam based industries using Natural Gas for thermal applications include Cement factories, Textiles, Breweries, Glass and Aluminum industry among others.

Hydropower

Tanzania hydropower capacity stands at 562 MW and estimates of potential capacity are as high as 4.7 GW. Most of the hydro power water source in Tanzania are rivers.

There are planned large hydro projects at Ruhudji (360 MW), Rumakali (22 MW), and Stieglers Gorge (2,100 MW). Small Hydro Power (smaller than 10 MW) so far has been only exploited up to 8 MW by Tanzania Electric Supply Company Limited (TANESCO) and private developers, whereas potential is estimated at 315 MW, and interest seems to be increasing. Studies also taking into account economic aspects highlight a variety of sites that could produce electricity at competitive cost to supply power to the national grid and through mini-grids to villages in the community.

The 222 MW Rumakali and 358 MW Rhuhudji projects are both located in the Njombe region in the southern highlands of Tanzania and could double the country’s total installed hydropower capacity from 562 MW to 1,142 MW.

In May 2021, the African Development Bank (AfDB) and the Government of Tanzania signed loan agreements totaling USD 140 million to finance the construction of the 50 MW Malagarasi hydropower plant in Western Tanzania. The funds will be used to construct the plant and an evacuation transmission line, as well as to add 4,250 rural electrification connections, providing reliable renewable energy to households, schools, clinics and small and medium-sized enterprises in the Kigoma Region.

Solar

Solar energy investments in Tanzania are still at a small scale. To date, about 6 MW of Photovoltaic (PV) solar energy have been installed in Tanzania.

The Government supports solar development within the country by removing VAT and import taxes on the main solar components such as panels, batteries, inverters and regulators.

In 2019, the World Bank (WB) signed a grant agreement with the Government of Tanzania amounting to USD 4.5 million to finance the access to a sustainable water supply through improved solar pumping systems in 165 rural Tanzanian villages.

Liquified Petroleum Gas (LPG)

Currently, five major suppliers of gas share the market namely BP Gas, Oryx Gas, Alpha, Mohan Gas and Pan African/TPDC which is piloting bottling and distribution of natural gas. In cities the LPG sector is growing; for instance, in Dar es Salaam City, where mostly middle-class families live, kiosks using LPG can be found less than a kilometer from each other. About 90 percent of all households in Tanzania also use LPG for their cooking. LPG has replaced the traditional use of charcoal and firewood.

Power Africa Initiative

Through the Power Africa Initiative, the Government of Tanzania (GOT) has committed to reform the operations of TANESCO (the national utility), and meet new demand through low-cost solutions. High reliance on expensive thermal and emergency generation sources have helped make the sector financially unviable. Tanzania has made progress in grid expansion, increasing generation capacity with natural gas, facilitating an enabling environment for solar home systems, and publishing of new standard Power Purchase Agreement for small producers in 2017; but more progress is needed to provide adequate and reliable electricity.

Power Africa is a market-driven, U.S. Government-led public-private partnership aiming to double access to electricity in sub-Saharan Africa. It offers tools and resources to private sector entities to facilitate doing business in sub-Saharan Africa’s power sector.  The Electrify Africa Act of 2015 institutionalized Power Africa. Learn more about the full Power Africa toolbox or other opportunities offered by Power Africa.

Key players in the Tanzanian Energy Sector

  • Ministry of Energy (ME) - ME is mandated to develop energy and manage the energy sector. It is responsible for the formulation and articulation of policies to create an enabling environment for stakeholders in the sector. The ME plays an essential policy guidance role, complementing the other major players (i.e., the REA, TANESCO, EWURA, TPDC, private companies, and financiers). See www.nishati.go.tz.
  • Energy and Water Utilities Regulatory Authority (EWURA) - EWURA is an autonomous, independent regulatory authority established by the Energy and Water Utilities Regulatory Authority Act. It is responsible for the technical and economic regulation of Tanzania’s electricity, petroleum, natural gas, and water sectors. See www.ewura.go.tz.
  • Tanzania Electric Supply Company (TANESCO) - TANESCO is a vertically integrated utility owned by the Government of Tanzania and is the country’s principal electricity generator, transmitter, and distributor. Currently, it provides the vast majority of the effective generating capacity to the national grid, and is responsible for transmission and distribution, serving customers on the main grid and in 18 isolated grids. See www.tanesco.co.tz.
  • Tanzania Petroleum Development Corporation (TPDC) - TPDC is the state-owned corporation through which ME implements its petroleum exploration and development policies.  See www.tpdc.co.tz.
  • Rural Energy Agency (REA) - REA is an autonomous body under ME that became operational in October 2007. Its principal responsibilities are to (i) promote, stimulate, facilitate, and improve modern energy access in rural areas to support economic and social development; (ii) promote rational and efficient production and use of energy and facilitate the identification and development of improved energy projects and activities in rural areas; (iii) finance eligible rural energy projects through the Renewable Energy Fund (REF); (iv) prepare and review application procedures, guidelines, selection criteria, standards, and terms and conditions for the allocation of grants; (v) build capacity and provide technical assistance to project developers and rural communities; and (vi) facilitate the preparation of bid documents for rural energy projects. See https://rea.go.tz/.