Challenges in Small Hydropower Development in Tanzania: Rural Electrification Perspective

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1 Challenges in Small Hydropower Development in Tanzania: Rural Electrification Perspective Kato T. Kabaka 1) and Florence Gwang ombe 2) 1) Department of Research and Development, TANESCO, Box 9024, Dar es Salaam, Tanzania 2) Department of Research and Development, TANESCO, Box 9024, Dar es Salaam, Tanzania ABSTRACT The natural topographic features of Tanzania provide the country with ample opportunity for hydropower resources in the magnitude of 4.7 GW in total, with only 10% tapped. Albeit abundance of small hydro resources in most parts of the remote areas of Tanzania, the rural areas of the country remain virtually unelectrified. Earlier approach to rural electricity supply was to extend the national grid network and implementation of isolated diesel-based electric networks. The extant rural electrification approach is based on drawing energy from diverse sources, of which small hydro is the major potential source. In the midst of the rising importance of harnessing small hydropower (SHP), the government has funded countrywide inventory of small hydro potentials for the purpose of updating the SHP directory of resources of the country. The central government, local government, private investors, and Non Governmental Organizations (NGOs) have keen interest in the information, specifically the sizes and geographical distribution of SHP in the country, which the catalogue provides. The just concluded national Rural Electrification Master Plan (2005) was largely extent enriched by the existing SHP directory. This paper aims at presenting the existing information on SHP resources in Tanzania and highlighting challenges associated with SHP development, in the context of rural electrification. 1 BACKGROUND 1.1 Description of the United Republic of Tanzania The United Republic of Tanzania is located in East Africa between latitude 1 S and 11 45' S and longitude E and 40 38'E. It is made up of two countries; Tanganyika and Islands of Zanzibar, which united in 1964 to form the United Republic of Tanzania. It borders Kenya and Uganda in the North; the Democratic Republic of Congo, Rwanda and Burundi in the west; and Zambia Malawi and Mozambique in the South (Figure 1). It has land area coverage of 945,749 km 2 and per capita GDP of Tanzania is about US $ 280. The population of Tanzania, according to 2002 census, is 34.9 million people with an average household size of 5 people. About 80 % of the Tanzanians still live in 8,600 villages. 1.2 Status of Energy Sector Tanzania s energy sector is characterized by a low per capita consumption of commercial energy (petroleum and electricity), and a large dependence on biomass energy in form of firewood, charcoal and agricultural waste as well as human and animal waste (URT, 2003). The energy balance of Tanzania shows that biomass use accounts for over 90% of energy consumption. Petroleum and electricity accounts for about 8% and 1.2% respectively, the remaining 0.8% from coal and other renewable energies (URT, 2003). Ministry of Energy and Minerals (MEM) is responsible for the whole energy sector including development of renewable energy sources, in which small hydro belong. 1

2 Renewable energy technologies currently in use in the country include hydroelectric, biomass, solar thermal, photovoltaic (PV) as well as windmills for water pumping. These applications are at various stages of development between demonstration and commercialization. Figure 1: The location of Tanzania 1.3 Overview of Electrification Situation in Tanzania The level of electrification in Tanzania is comparatively small by both the African and World Standards (World Bank 2003). Electricity consumption per capita in Tanzania is estimated at 85 kwh in comparison to 432kWh and 2,176 kwh for Sub-Africa and the world average respectively for year 2000 (World Bank, 2003) and is rising at a rate 10%; which is higher than the birth rate estimated at 2.1 %. The access to electricity is not equitable between the urban and the rural areas as only 2% of the rural population have electricity in contrast to 37% in urban areas. On average only 10% of the country s population have access to electricity. Extending the grid to many parts of Tanzania is not economically viable and, in some cases, not practically possible. Thus means 90% of the population has inadequate energy for cooking, lighting, conditioning their homes, and supplying clinics, schools, and community centers; a situation that hinders social end economic development of the rural population. Up to 1992 the state owned utility, Tanzania Electric Supply Company Limited (TANESCO) was the sole company responsible for generation, transmission and distribution of electricity in Mainland Tanzania and selling bulk power to Zanzibar. At present, TANESCO is the major company supplying electricity in the country including the rural areas and private sector participation is on increase in the generation but not in the transmission and distribution of electricity. Electricity supply is primarily from hydroelectric power (60%), with thermal (gas and diesel) and imports from neighboring countries (Uganda and Zambia) making up the remaining supply (40%). The electricity supply consists of both interconnected and isolated grid systems. The installed capacity is 959 MW out of which 561 MW is from hydro and 398 MW is thermal. The suppressed demand is about 620 MW. The annual growth in demand is assumed to be roughly 8% up to year 2015 (according to power demand forecast in the power system master plan). The annual electricity generation of TANESCO for year 2006 was 2,662,027,682 kwh, an annual consumption of 76kWh per person. With the exception of the capital city, Dar es Salaam, and North East Tanzania, where levels of household access to electricity exceed 10%, the rest of the country is between 2% and 10% (Figure 2). Almost all regions where level of electrification exceeds 5% are connected to the national electric grid or the 2

3 population living in urban area is substantially large. The level of electrification is lower than 5% for Kagera, Shinyanga, Tabora and Rukwa because the population in these regions is more sparsely distributed. Figure 2: Percentage of households with access to electricity in Tanzania (Source: TNBS, 2000/2001) The impact of the various technologies on the access to affordable electricity can be evaluated using factors such as occurrence of the resource, capital costs, operations cost, efficiency, environmental impact, and reliability. It can seen from Table 1 that, despite the high capital costs and moderate environmental impacts, small hydropower schemes have almost negligible operating costs and are very efficient. Though the inventory of small hydro has not been completed, small and mini-hydro potentials are common in most of the rural Tanzania (Figure 3). Thus, small hydro seems to be promising sources of electricity in supplying rural areas with reliable and efficient energy. Off grid small and mini-hydro plants could meet a major portion of the efficient energy required for both social services and economic activities; such lighting of households, health centres, dispensaries and running grain milling machines and water pumps, shops, bars and team rooms and guest houses. 1.4 Rural Electrification Objectives and Strategies In Tanzanian context, rural electrification encompasses electrification of the district headquarters, townships, villages, and commercial centers.the government view rural electrification as a key input in enhancement of growth and economic development of the country and thus address it in the framework of poverty reduction (URT, 2003; ESRF, 2006). Unfortunately the impact of the policy has not reached the grass root level. To a large extent, the present level of rural electrification in Tanzania is an outcome of the policies adopted by colonial and early post independence governments rather than the present day policy which encompass public private partnership. According to current National Energy Policy of the United Republic of Tanzania, the goal of the rural electrification is widespread improvement of standard of living of the rural population thus attaining balanced socio-economic growth for all Tanzanians. Underpinning the policy objective is the issue of poverty alleviation, social development and environmental conservation objectives. Small scale Industries, agricultural-processing industries and other income generating activities are given primary importance in planning rural programs. In order to accelerate social development in rural areas, schools, education institutions, heath facilities water supply, communication and community centers are targets of rural electrification projects. In addition, rural electrification has an objective of conservation of environment to avoid deforestation, climate change, air pollution (indoor & out door) and land degradation. 3

4 Table 1: evaluation of suitability of various energy sources for rural electrification Evaluation Grid extension and imports Isolated thermal generation Solar Thermal Photo Voltaic Small hydro Wind Spatial Distribution Limited Limited Large Large Moderate Erratic Capital Costs Transmiss ion line expensive Large Large Large Enormous Moderate Operating Costs Moderate High Moderate Moderate Negligible Small Efficiency Energy losses Efficient 15% 5--10% 80% 42% Environmental Impact Moderate High Moderate Large Moderate to enormous Small Reliability Yes Moderate (spares/fuel) No No Yes Moderate 2 OCCURANCES OF SMALL HYDRO POTENTIALS IN TANZANIA The best geographical areas for exploiting small-scale hydro power are those where there are steep rivers flowing all year round. Geographically, the hydropower potentials of Tanzania are located in the rift valley escarpments which occur in the west, south west and north east Tanzania. The central Tanzania is relatively flat and dry and has no hydropower potentials. Studies show that twelve out twenty one administrative regions of main land Tanzania are blessed with min-hydropower resources but only three regions (Mbeya, Iringa, and Kilimanjaro) have at least managed to develop them. The total small hydro potential in the country is not well known (Kjellostrom, et, al 1992) but the best estimate puts it at 250 MW, which is about 50% of all developed hydro capacity. 2.1 Small Hydro Potential Studies and Assessment In the on going small -hydro inventory studies which are being carried out by TANESCO, and financed by MEM, a total of 85 small hydro sites countrywide with a total of 187 MW have been identified. The study comprised both desk studies and fieldwork. During the desk studies existing information on small hydro resources was reviewed and a list was made. New sites were identified by carrying out topographical map reading of the standard 1:50,000 sheets. Reconnaissance studies of the new potentials and confirmation of existing information are completed for Rukwa, Kagera and Ruvuma regions. Field studies are planned in this year for Iringa, Mbeya, Morogoro and Kigoma regions. Figure 3 shows the location small hydropower sites which have been identified and confirmed on the ground during the study. 4

5 Figure 3: Location of identified mini hydropower Potentials in Tanzania Another study that focused on the mini hydro potentials was the Rural Electrification Master Plan study that was commissioned by MEM and implemented by TANESCO. The Objectives of Rural Electrification Master Plan study was to examine the technical, economical, social, and environmental aspects of least cost solution of supplying electricity to un-electrified rural areas, defining programs; and priority projects for expansion of electric networks as well as development of renewable energy supply systems for the country for years. In addition to other sources of electricity, five small hydropower potentials (Table 2) from the small hydro database were appraised during this study. Table 2: Small Scale Hydro potentials appraised for Development in Rural Master Plan Study (2005) Potential Location Cost( USD/kW) Pinyinyi Hydropower potential Ngorongoro District, Arusha 5500 Nzovwe Hydropower potential Sumbawanga Rural District, 2700 Rukwa Malagarasi (Igamba Falls Stage II) potential Kigoma Rural District); 2900 Sunda Falls Hydropower potential Tunduru District, Ruvuma 2800 Nakatuta Hydropower potential Lower Nakatuta, Songea Rural 3500 District 3 SMALL AND MINI HYDROPOWER DEVELOPMENT CHALLENGES The topography and rainfall in Tanzania are ideal for the small and mini-hydro technology development. With steep hillsides that are abundant in much of the west, north, northeast, and south west; rainfall is generous, and where the environment is not disturbed by agriculture, streams are perennial. The small and mini-hydro technology is appropriate for the demographics and environment of these areas as settlements in 5

6 these areas are generally remote and sparse. The central, coastal and southern Tanzania is deficient in small and mini hydro potentials. Notwithstanding the geographical and climatic conditions and technological suitability for small hydropower potential development, Tanzania, like most of most African countries lags behind in utilizing small scale hydropower for rural electrification. Various reasons have been posited by experts in rural electrification in Tanzania such as Sawe (2005), Mwakasonda ( 07 June 2007)). The list is long but can thematically be aggregated into five major categories (1) rural electrification policy, (2) financing of small hydropower, (3) characteristics of rural electricity load market, (4) institutional set up, and (5) human resources development for small hydropower development. Figure 4 below summarizes the relationship among the factors. These factors are intertwined but authors think that if they can be carefully harmonized, the development of sustainable small hydro projects for rural electrification can significantly be improved. This conclusion is based on the findings of the Rural Master Plan (2005), on going mini-hydro inventory studies, and experience from operation of small hydropower schemes in Tanzania. Figure 4: Challenges inherent in small hydro development for rural electrification in Tanzania 3.1 Rural Electrification Policy and Guiding Principles The government of the Tanzania has adopted a number of broad policy objectives relating to the development and governance of the energy sector. The government bears the responsibility of rural electrification in terms of creating enabling environment for all stakeholders (i.e., the power utility, Independent Power Producers (IPPs) and Non Profit Organizations (NGOs), municipals etc., to participate in the successful implementation of rural energy projects. The challenge to the Tanzanian policy makers is to forge a common understanding of public and private sector actors to fit together skillfully to form an intact mechanism for enabling rural electrification that will: 6

7 Formulate electrification plan that allows the rational use of available energy resources, including off grid schemes such as small hydro. Facilitate the transfer of expertise and capital for the implementation of projects Promote initiatives that provide remote and rural electrification projects to be commercially viable, thus attractive to investors and banks. The policy should enable development and mobilization of knowledge, capital, motivation, know-how or access to know-how among the stakeholders so as to enable improvement of skills for implementing rural electrific ation through various technologies including small hydro. Without appropriate policy and its implementation strategies, rural energy development follows an ad hoc path, as it is today, with little recourse to national energy plans and it is for these reasons that the policy variable is located at the center in the model in Figure Financial Viability So far, the most active financiers in remote and rural areas of Tanzania are the central government, international donors and religious societies. Experience elsewhere shows that no private-sector investor will invest in a project until it appears profitable and no private-sector banker will lend money to a project which has unacceptable risks. Rural electrification projects have the reputation of being both unprofitable and of high risk. Therefore these institutions have typically perceived the risks of investment in this sector as being too high, and the rates of return as being too low. Incumbent utility company, TANESCO, also view provision of electricity service and rural electrification in general as a burden, since it is not profitable. Recently studied small hydropower potentials of Sunda Fall, Igamba Falls, Nzovwe and Pinyinyi, in the rural electrification master plan study of 2005 were found to be financially unviable even at the highest tariff scenario. This explains why so few small hydro projects have been built, as well as why the government in collaboration with donors and non profit organizations remain the main participants in rural electrif ication. The main challenge however is how to make the projects financially viable to private investors as well as reduce the perceived risks so as to attract national commercial and development banks to finance small hydro projects for rural electrification. 3.3 Rural Electricity Market Characteristics (Market Demand) As shown in the previous sections, the rural people in Tanzania are poverty prone that majority can not afford the initial connection costs and monthly bills, which are uniform throughout the country. Rural electrification projects are associated with long transmission and distribution distances because of sparse population as well low load centers. In addition a large proportion of electricity used in the rural areas is for household energy uses (lighting, heating, cooking) and social welfare services ( education, health care, water supply) and limited income generating activities mainly service oriented business such as grain milling, preserving agricultural crops, irrigation, industrial production, entertainment and rarely ICT. For example, Kjellstrom et, al, (1992) report a consumption pattern of % of the energy consumed in three districts of Babati, Same and Sumbawanga to be residential and light commercials. The small hydropower projects studied in the rural master plan study (2005) have persistently shown low economic internal rate of return (EIRR), and financial internal rate of return (FIRR). Sunda Falls for example is acceptable at a 70% subsidy and the highest tariff level scenario. Under these market conditions, the consultant for the project recommended that a need for the government, multilateral development agencies, NGOs, and the private-sector working together to design mechanisms and opportunities for providing credit that responds to the needs and abilities of the local community. This indicates that the current income and potential economic activities (i.e. electricity demand) in most rural areas in Tanzania can not justify a fully commercially oriented project without some policy interventions to adjust the project to local market forces, specifically the ability to pay for electricity. 7

8 3.4 Institutional Set Up For Rural Electrification Presence of well coordinated and comprehensive energy policy strategy with capacity for integrating stakeholder collaboration, as well as enhancing inter-linkages of arms of the government are vital for small hydropower development in rural areas (Wamkonya, 2001). This observation holds true for Tanzania because there are many potential actors in the rural electrification Tanzania such as the central government, power utility, IPPs, CBOs, NGOs, and development partners (World Bank UNIDO, SIDA, etc) but the current institutional arrangement is neither synergetic nor complementary for small hydropower development. In the current set up, the local government, i.e. the municipals, regional and districts government are left out of the mainstream of planning and development of strategies for implementation of energy projects. Because the local government and municipals are not incorporated in the SHP development process, rural electrification is not linked to the short term and long-term development programs at grass root levels. The absence of linkage between regional, district and village government levels in the rural electrification framework also hinders permeation of knowledge and skills for developing small hydropower actors in remote areas. This weakness was noted by the rural electrification study (2005) that municipals and local governments are passively waiting for the Tanesco and central government electrify townships, commercials centres and villages. 3.5 Learning and Improvements Despite the long experience the country has in implementing small and mini hydropower schemes (about one century), one might wonder why this technology is not more widespread given that many Tanzanians have received good training in small hydro development, and participated in refresher courses. Though the participation of the private sector in electricity service was formally accepted in Tanzania since 1992, its involvement is still very limited if not just beginning. One of the explanations could be that the centralised administrative framework which tends to localise the knowledge, experience, skills in the ministries and the state power utility has left lower levels starved and un-networked. This is argument is supported by the recent rural master plan study results which show that there are no qualified third party operators in rural areas to implement small hydropower projects except TANESCO which has offices in almost all districts in mainland Tanzania. 4 CONCLUSION The paper provides the decision makers and other stakeholders with information on the occurrences of small hydro potentials in Tanzania. Further, it highlights the fundamental challenges in harnessing small hydropower resources for rural electrification. Currently, the government of Tanzania is in the process of establishing Rural Energy Agency (REA) and Rural Energy Fund (REF) whose responsibilities will include facilitating increased availability of energy services in rural areas, supporting rural electrification, supporting research and development in rural areas, creating an institutional and legal framework to finance rural energy development and promoting entrepreneurship and private sector involvement in the marketing of renewable energy in the rural areas (ESRF, 2006). These facilities are just being formulated and their impacts are still awaited. However, it is the author s opinion that success in rural electrification projects largely will depend on the extent to which the policy, the institutional set up, financing mechanisms, and technology development are strategically organized to fit the rural electricity market realities. 5 REFERENCES Economic and Social Research Foundation (ESRF) (2006): Mkukuta Based MDGS Costing For the Energy Sector Final Draft Report Kjellstrom, B., Katyega, M., Kadete, H., Noppen, D., Mvungi, A. (1992): Rural electrification in Tanzania: Past experiences- New Approaches. Energy, Environment and Development Series- No. 15 8

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