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Power Sector in Tanzania

Recent Developments, Current Crisis, Issues, Challenges and

Solutions

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AGENDA

• Recent Developments

• Current Crisis

• Issues

• Challenges

• Solutions

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Recent Developments

1) Power System Characteristics• Installed generation capacity of 947 MW (Hydro

562 MW, Diesel 85 MW, IPPs 295 MW, Imports 5 MW), 550,000 consumers

• 4 IPPs – IPTL, Songas, Kiwira Coal Mine, TANWAT selling power to TANESCO

• Electricity imports from Uganda and Zambia, and exports power to Kenya

• EWURA established – not yet fully operational• Several privately owned generation facilities

mostly for standby

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Hydropower Resources

5

Mtera Dam Water Levels

686

688

690

692

694

696

698

700

J F M A M J J A S O N D

Month

Lev

el m

.a.s

.l. 2003

2004

2005

2006

MSL

FSL

6

Nyumba ya Mungu Dam Levels

678

680

682

684

686

688

690

J F M A M J J A S O N D

Month

Lev

el m

.a.s

.l. 2003

2004

2005

2006

MSL

FSL

7

Annual Generation - GWh

0

500

1000

1500

2000

2500

3000

3500

4000

2002 2003 2004 2005 To Ap06

Gen

erat

ion

- G

Wh

IPPs

Thermal

NYM

Pangani

Hale

Mtera

Kihansi

Kidatu

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Current Crisis

• Generation shortage load shedding (power rationing) in February and March, June to October/November

• Severe cash shortage O&M costs financed through overdraft (now TShs 70 billion, expected to increase)

• Under recovering about TSh 8.3 billion per month due to low electricity tariffs

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Issues

• Shortage of generation• High liquid fuel prices form about US$40/barrell

in 2003 to over US$70/barrell now• High technical and commercial losses• Lack of investments since 1997 when

TANESCO was specified• Low tariffs that under recover O&M costs• Poor quality of supply and service• Conflicting uses for the water and poor

catchment management• Load shedding 1994, 1997, 2000, 2006

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Issues

• Delays in commissioning of Ubungo units 5 & 6 in 2005

• Outages of Songas’ generating sets and transformer in 2005 and 2006

• Sub-optimal operation of the hydro/thermal system (overuse of hydro system)

• Unsuccessful procurement of emergency power plant in 2004 (IDA funding),

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Challenges

• Lower than average hydrology (drought)

• High cost of thermal generation

• Financing of future investments

• Overloaded transmission and distribution Unbalanced electricity tariffs – Zanzibar

at TShs 26/kWh (US$0.0211/kWh) much lower than LRMC of US$0.04/kWh

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Challenges

• Costs about US$1.1 per kWh not served

• TANESCO estimate load shedding to year end to be about 199 GWh

• Cost to the economy estimated to be US$219 million

• In addition, the government will loose VAT on electricity consumption amounting to about US$3 million

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Solutions

1) Short Term• Procurement of leased gas based generation• Increase electricity tariffs by 25%• Convert IPTL to natural gas firing• Purchase of the IPTL power plant• Demand side management• Hydro/thermal generation optimization• Negotiate long term gas prices for new plant• Procurement of 100 MW gas based generation

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Solutions

2) Short Term• Enforcement of water rights, catchment's

management and protection, prohibit agro activities close to rivers, proper environmental management of river basins

• Rehabilitation, reinforcement and expansion of the T&D systems, replace billing system and faulty meters

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Actions with High Impact on TANESCO’s Financial PerformanceAction Monthly

Impact TShs billion

Target Date

5% tariff increase

1.2 Done

20% fuel levy 5 July 2006, annually if needed

IPTL conversion

5.3 March – Dec 2007

100 MW leased generation

6 Oct/Nov 2006

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Actions with High Impact on TANESCO’s Financial PerformanceAction Monthly Impact

TShs billionTarget Date

Acquire IPTL 3.2 December 2006

Hydro resource management

2.8 June 2006

Refinance Unit 5&6 debt

0.4 July 2006

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Solutions

3) Short Term – Studies and TA• Long Term Power Master Plan (2007-2032)• Demand Side Management• Capacity building• IPP Strategy and standardized bidding

documents• Hydro/thermal generation optimization• Grid extension to Kigoma, and mines• Preparation of a new Sector Reform Strategy

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Solutions

4) Short to Medium Terms

• Demand side management: Replace incandescent lamps (ILs) with compact fluorescent lamps (CFLs) – less wattage on equivalent light output

• Benefits to both the consumers (reduced energy consumption) and the utility (reduction of demand)

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Comparisons CFLs and ILs on Equivalent Light Output

ILs CFLs Savings

40 W 9W 31 W

60 W 15 W 45 W

100 W 25 W 75 W

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Comparisons CFLs and ILs on Equivalent Light Output

• On equivalent light output, replacement of 23 @ 60 W ILs with 15 W CFLs would reduce the peak demand by about 1 kW

• Consumers would save TShs 23 per day in electricity charges for every 60 W IL replaced (assuming usage of 5 hours/day)

• Replacing just 2 ILs per consumer for the 550,000 consumers, would reduce the peak demand by 50 MW and the energy demand by 90 GWh annually (assuming usage of 5 hours/day)

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Solutions

1) Medium to Long Term• TANESCO;s capital investments needs

2006 to 2010 TShs 1.3 trillion for:a) New generation additions 345 MW b) Transmission and distribution system

rehabilitation and expansionc) Increasing access to electricity in rural

areasd) Interconnections – EAC and SADC

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Comparison of Tanzania’s Electricity Tariffs with selected African and OECD

Countries US$ cents per kWh