RENEWABLE ENERGY FINANCING OPPORTUNITIES FROM THE GOVERNMENT

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National Museum, Shaaban Robert Street, Dar es Salaam,

JUNE, 6TH – 7TH 2012

NATIONAL RENEWABLE ENERGY DAY

Rural Energy Agency (REA)P.O. Box 7990Dar-Es-SalaamTel:+255 (0) 22 241 2001-3 Fax: +255 (0) 22 241 2007Email: info@rea.go.tzWebsite:www.rea.go.tz

PRESENTATION OUTLINE Background Projects Financed through REF since 2007 Project implementation Status Budget Allocation 2007/08 – 2011/12 Project Eligibility Criteria Exploiting Opportunities Required funds to Finance ongoing/New Projects Challenges Way forward END

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0BACKGROUND

ENERGY SECTOR REFORMS

The following are some of Institutional and regulatory frameworks in the sector:-

National Energy Policy 2003 Rural Energy Act 2005 Electricity Act 2008 Energy and Water Utilities Regulatory Authority Act 2001 Petroleum Exploration and Production Act 1980 Petroleum Act 2008 (downstream) Public Private Partnership Act 2010

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REA/REF OPERATIONAL EXPERIENCES

From the Energy Policy 2003; a Policy statement states that :-

“ Rural energy is diverse and characterized by various actors and interests. A sustainable institutional framework that can cope with the diversity, manage and co-ordinate various efforts, is a key factor for successful development of rural energy. So far, appropriate focus for handling rural energy services is lacking. There is a need to establish an institutional framework that can mobilise, co-ordinate and facilitate private and public initiatives in rural and renewable energy”.

The Rural Energy Agency (REA) was established as an institutional framework to mobilize, coordinate and facilitate private and public initiatives for provision of modern energy services in rural Mainland Tanzania .

REA/REF started operations in October, 2007.

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VISION AND MISSION OF REA

VisionVisionTransformation of rural livelihood through provision of modern energy services.

MissionMissionTo promote and facilitate availability and access to modern energy services in rural Tanzania

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REA/REF GOVERNANCE

Rural Energy Board

Rural Energy Fund

Staff of Rural Energy Agency

Trust Agent

REB governs REF

REA is secretariat to REB

REB apponts Trust Agent to manage REF payments

Project Developers & Partners

Works with project developers

Minister of MEM

Stakeholders

Minister appointsBoard from stakeholder reps

Minister of MoF

Board reports to both Ministers Susta

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SOURCES OF FINANCE FOR THE REF FOR FINANCIAL YEAR 2011/12.

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PROJECTS FINANCED THROUGH SINCE 2007

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BUDGET ALLOCATION 2007/08 – 2011/12

YEARS

TZS

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PERCENTAGE DISTRIBUTION OF PROJECTS FINANCED FROM REF AS OF

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EXPECTED NUMBER OF CONNECTIONS FROM TURNKEY RE THROUGH

TANESCO Susta

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DISTRIBUTION OF SOLAR PV SYSTEMS

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PERCENTAGE DISTRIBUTION OF PROJECTS ISSUED WITH COMPLETION

CERTIFICATE

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PROJECT ELIGIBILITY CRITERIAEligible projects supported by the REF include:

Grid Extension; Off-grid;

Small hydropower Supply into Main Grid & Distr. Net. Supply to Mini grid & Distr. Net; Supply into Main Grid Supply into Mini grid Green field

Solar Packages/Solar lanterns; Wind; Biomass; and Energy efficiency.

Technical Assistance to project developers According to Section 22(3) of the Act, the Fund is used mainly to

co-finance projects from project champions and cannot be used for financing operation costs or debts services costs of any project or developer.

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SMALL POWER GENERATION AND DISTRIBUTION PROJECTS (SPGD)

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REA in collaboration with public and private sector is carrying out the following:-

a) Promoting development of small power projects which can sell power to grid and mini-grid networks by putting in place;

Standardized Power Purchase Agreement (SPPA) and Standardized tariffs (SPPT) calculation methodologies based on the avoided cost to the power utility;

Guidelines and Rules, specifications, standard and norms for connection of small power project to the grid/minigrid;

Credit line to enable small power developers to access long term loans from commercial banks

SMALL POWER GENERATION AND DISTRIBUTION PROJECTS (SPGD

CONT.

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EXPLOITING OPPORTUNITIES1. REA supports development of rural electrification projects by

providing the following:- Matching grants for:-

- Market development (e.g. market studies, promotion, education, etc)- Business improvement (e.g. business plan preparation, staff training, etc)- Pre-investment and preparation activities (e.g. preparation studies for licenses)

- Market entry (e.g. establishing new outlets and networks, demonstrations)- New initiatives (e.g. new alliances and partnerships, new territories, etc)

Performance grants; (during development phase) Technical assistance; (Engagement of consultants) Capacity building (training, ); Facilitation of carbon finance; Support to participate in local and national exhibitions;

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EXPLOITING OPPORTUNITIES CONT.2. Scaling Up Renewable Energy Program in Low

Income Countries (SREP) In 2011 Tanzania through REA expressed interest to be among the

pilot countries; Tanzania was in the reserve list only six countries were selected; In 2012SREP sub – committee meeting held in Nairobi March 2012

select Tanzania to be the 7th country in the pilot list; A total of USD 50 Mln has been allocated to Tanzania though REA; To prepare list of renewable energy projects to be implemented

under SREP financing.

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Measuring Success• Remove barriers to renewable

energy • Lead to replication of

renewable energy investments• Increase installed renewable

energy capacity in a country’s energy supply

REQUIRED FUNDS TO FINANCE ONGOING PROJECTS FY 2012/13 (BILLION TZS)

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REQUIRED FUNDS TO FINANCE NEW PROJECTS FY 2012/13 (BILLION TZS)

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PROJECTS BEING FINANCED BY OTHER DPS

Pilot Regions

for IREP

Solar PV

SHP

Biogas

SSMP 1

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CHALLENGESo Increased electricity demand which require

massive investments in generation, transmission and distribution;

o Inadequate funds allocation and availability while the grants requests are ever increasing

o Inadequate private sector participation in investment;

o Limited long-term financing especially for small / isolated rural energy projects;

o High interest rates loans from commercial banks;

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WAY FORWARD REA intends to:- Use Low Cost Design Standards for affordability

strategy and scale up rural electrification; Increase sources of funds for Rural Energy Fund; Coordinate with Local Government Authorities on

energy issues; Continue to build capacity of the private sector to

participate in scaling up access to modern services to rural communities;

Continue with international networking and linkages eg South-South cooperation;

Disseminate Baseline Energy Survey results; and Carry out Rural Energy Master Plan.

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SPP DEVELOPMENTRENEWABLE ENERGY PROJECTS

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ASANTENI KWA KUNISIKILIZA! Susta

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THANK YOU FOR YOUR ATTENTION