Policy, PPA Framework and Need for Reliable Off-Takers in Tanzania Presentation at the 17 th East Africa Power Industry Convention FELIX NGAMLAGOSI DIRECTOR GENERAL - EWURA 25 th 28 th August 2015 KICC, Nairobi, Kenya
OUTLINE Background - EWURA Tanzania ESI Structure Policy & Regulatory Framework Reform of the ESI in Tanzania Concluding Remarks 2
BACKGROUND - EWURA EWURA is an Independent regulator, established in 2001 by EWURA Act (Cap. 414); It became Operational in June 2006; EWURA undertakes both Economic and Technical regulation of the Regulated Sectors: Electricity Natural Gas Petroleum Water. 3
EWURA FUNCTIONS EWURA s functions include: Licensing- issue, renew and cancell licenses; Regulate Tariffs and Charges for service provision; Promote availability of Regulated Services to all consumers; Monitor Performance of regulated Services; Resolve Complaints & Disputes between Consumers and Suppliers; Makes rules 4
TANZANIA - ESI STRUCTURE 5
TANZANIA - ESI STRUCTURE 6
ESI - BASIC INFORMATION The power sector of Tanzania is characterized by:- Low Installed capacity 1,733MW including 150MW under construction. Ownership structure is 58% (1005MW) and 42% (748MW) public and private sectors respectively Low per capita electricity consumption - 97kWh (2012) while target is 236kWh (2015 Low access Only 36% of population. 7
TANZANIA ENERGY POTENTIAL S/ RESOURCE PROVEN TOTAL POTENTIAL DEVELOPED 1 Hydro Power 4,700MW, (firm Capacity (3,200) 12% (562 MW) 2 Natural gas More than 53 TCF. Songosongo- 30mill.m3, Mnazi Bay-15mill.m3 361 MW 3 Coal 13200 Million Tons (300 Million Tons at Kiwira Field). 0.04% /annum 4 Biomass wood 1.8 Billion, m3 2.2% /annum 5 Biomass residues -Crop residues= 15Million Tons/annum - About 1,000 biogas digester units of 50m3. -Animal droppings=25million Tons/annum -22.75 MW electricity from steam and sisal plants. -Volatile solids of sisal waste= 0.2Million Tons/annum. -3.5MW from forest residues. - Forest residues=1.1 Million Tons/annum 6 Wind Speed 0.9 9.9 m/s 129 windmills (8.5kWp) (studies for electricity generation are being undertaken) 7 Solar Approximately 215 W/m2/day More than 2MWelect. 8 Geothermal There are indications of potential Studies are being undertaken. 9 Nuclear Uranium potential exists but not yet assessed Not exploited (No studies) 10 Tidal wave There are indications of potential Studies are being undertaken 8
THE ELECTRICITY SUPPLY INDUSTRY REFORM IN TANZANIA 9
POLICY FRAMEWORK The Tanzania Development Vision 2025 stresses the need for effective power physical infrastructure to enable the country to meet its development goals; Investment in infrastructure must be accorded the highest priority and be spearheaded by the government; Financial resources supported by effective institutional frameworks necessary to harnest such resources; hence the need for private sector to participate. 10
POLICY/REGULATORY FRAMEWORK Tanzania has taken important steps to create conducive environment to attract private sector participation in the development of power projects. The government has instituted a number of energysector reforms, including policies, legislation, and Institutional Framework aimed at attracting the private-sector investment to boost electricity supply. Key policies and legislation include the EWURA Act, 2001; National Energy Policy, 2003; revised 2015. Rural Energy Act, 2005; Electricity Act, 2008; and Public Private Partnership Act. No. 18, 2010. 11
ESI REFORM The Government of Tanzania has embarked on the restructuring of the Electricity Supply Industry (ESI) - 2014 to 2025; The Reform Strategy and Roadmap highlights the need for reform and provides a roadmap for the reform of the Tanzania's ESI; It proposes the desired market structure and the roadmap for implementation. The outcome is unbundled sector: G, T, D; Established Independent System Operator & Independent Market Operator. The reforms are not only meant to attract private sector participation but also encourage FDIs. 12
ESI REFORM OBJECTIVES The main objectives of the reform include, but not limited to: establishing a financially sound ESI in Tanzania through increased investment from both private and public sector; increased electricity connection and access levels; use of various energy resources for electricity generation; and enhanced affordability and reliability of electricity supply. 13
ESI REFORM ROADMAP Immediate Term (July 2014 June 2015) Ring fenced TANESCO s business units, ISO and EIPC embedded within transmission; Short Term (July 2015 June 2018) Unbundling of generation segment from transmission and distribution segments by December, 2017; Medium Term (July 2018 June 2021) Unbundle distribution from transmission by May, 2021; Long Term (July 2021 June 2025) Commercially viable zonal offices established as independent distribution companies based on market needs.
MODEL PPA To smoothen the participation of private sector, EWURA has established and approved Model Power Purchase Agreements (Model PPAs) for Large Power Projects (above 10MW) for different resources including: Hydro power; Natural gas; Coal; Geothermal; Solar; Wind; and Liquid fuel. 15
MODEL PPA. To complement the use of Model PPAs EWURA has developed the following tools: Electricity Rules for Initiation of Power Projects pursuant to Section 5 of the Electricity Act, Cap. 131, and published in the Government Gazette (GNN 110 of May 2014). EWURA is finalising the Electricity Rules for Approval of Power Purchase Agreements pursuant to Section 25 of the Act. 16
INDICATIVE TARIFFS EWURA has also determined Indicative tariffs for the following technologies: Open/Simple Cycle Gas Turbine (OCGT); Combined Cycle Gas Turbine (CCGT); Combined Cycle Gas Turbine with Carbon Capture and Storage (CCGT - CCS); Pulverised Coal; Pulverised Coal with Carbon Capture and Storage (Pulverised - CCS); Integrated Gasification Combined Cycle (IGCC); 17
INDICATIVE TARIFFS... Hydro Power Plants; Flash Geothermal; Binary Geothermal; Onshore wind; Offshore wind; Solar Photovoltaic (solar PV) and Solar Thermal. 18
STANDARDISED PPAs To promote private sector investment in renewable power development, EWURA developed Standardised Power Purchase Agreements (Main grid and Isolated Mini-grid) for Small Power Projects (100kW to 10MW) and respective Standardised Tariff Methodologies; Two mechanisms are in place:- First Generation SPPs - tariffs are based on Avoided Cost principles; Second Generation Tariffs are Technology Specific (REFIT) for Hydro and Biomass, and Competitive Bidding for solar and wind. 19
SPP FRAMEWORK OBJECTIVES Why SPP Framework - Light-Handed Regulation: Minimizing amount of information that is required; Minimizing the number of separate regulatory requirements and decisions; Use of standardized documents to reduce need for case-by-case analysis and negotiation.
ENHANCE ESI CREDITWORTHNES EWURA approved a Cost Reflective Tariff (Multi- Year Tariff), January 2014: based on COSS. Increase players in the market (IPPs, PPPs and SPPs). Developed Tariff Methodologies in the power supply Value Chain (Generation, Transmission and Distribution). RR =O&M + D + T+ RoI With Adjustment: Fuel + Forex + Inflation Developed Grid Code governing entry into the power system. 21
CONCLUDING REMARKS 22
CONCLUDING REMARKS The ESI Reforms in Tanzania will establish a financially sound ESI: with a reliable Off-Taker; increased investment from both private sector; increased electricity connection and access levels; and use of various energy resources for electricity generation; and In consultation with industry stakeholders, EWURA will continue to prepare regulatory tools: rules, guidelines, templates, models, to facilitate the ESI and enhancing creditworthiness of all players. 23
Thank You Website: www.ewura.go.tz 47