Is there a support framework for mini-grid development in Tanzania?
In 2008, the Energy and Water Utilities Regulatory Authority of Tanzania (EWURA) promulgated Rules and Guidelines for the development of Small Power Projects ranging from 100kW up to 10MW (the SPP Framework) to capitalize on renewable energy opportunities. The SPP Framework was designed to promote small power project development through private investment by providing investment security and market stability, reducing transaction and administrative costs and delays, and expediting regulatory processes.
Pursuant to section 19(2) of the EWURA Act, EWURA consulted stakeholders during the review of the SPP Framework and prepared the Second Generation SPP Framework. This covers the development of small hydro, biomass, wind, and solar energy projects of capacity ranging from 100kW up to 10MW, and is based on two approaches: a Renewable Energy Feed-in Tariff (“REFIT”) approach for small hydro and biomass (not grown-biomass energy plantation) projects; and a competitive bidding approach for wind and solar projects with a capacity above 1MW up to 10MW.
The Second Generation SPP Framework is designed to respond to challenges identified during implementation of the First Generation SPP Framework and thereby further improves the conditions for small power project investments in Tanzania.
What is a SPP (Small Power Producer)?
Small Power Producer (SPP) means an entity generating electricity in the capacity between 100kW up to 10MW using renewable energy, fossil fuels, a cogeneration technology, or some hybrid system combining fuel sources mentioned above and either sells the generated power at wholesale to a Distribution Network Operators (DNO) or at retail directly to a customer or customers. An SPP may have an installed capacity greater than 10MW but shall only export power at the interconnection point not exceeding 10MW.
In the same sense, an SPP developer means a person who promotes and constructs an SPP for the purpose of selling power to a DNO pursuant to an SPPA or to any other entity subject to terms and conditions they may agree.
What is a SPPA (Standardised Power Purchase Agreement)?
Standardized Power Purchase Agreement (SPPA) means the power purchase agreement entered between a Distribution Network Operators (DNO) and the seller for the sale of electric power. For purposes of facilitating the development of mini grids, EWURA in collaboration with TANESCO and other stakeholders has standardized these agreements.
What is the Competitive Bidding procedure?
The competitive tendering procedure applies to the development of solar and wind small power projects, with a capacity between 1 and 10 MW power plants, with the purpose of connecting to the Main Grid or an Isolated Mini-Grid. It is noted that the competitive bidding does not apply in the case of small hydro or biomass projects.
In general, the competitive tendering procedure is broken down in two stages: a request of qualification (RfQ) stage, and a request for proposal (RfP) stage.
The competitive bidding is initiated from time to time by EWURA by issuing an RfQ. Small power project developers seeking to be qualified must then submit the requested documentation to the Electricity Infrastructure Procurement Committee (EIPC). Following review and appraisal, bidders which qualified should then submit a binding Project Proposal to the EIPC secretariat of the DNO together with a detailed description of the project.
I am a project developer and want to obtain necessary the licenses for my project. What should I do?
In order to have a review of all the steps required for the licensing and relevant administrative and other documentation, please visit the Licensing section of this portal
Project financing support
Is there financing support available for mini grids?
Subject to the availability of funds, financing support for mini grid development projects could be provided through the Rural Energy Fund (REF), which is managed by the Rural Electrification Agency (REA). Information on applicable procedures is available in the Financing section of this Portal.
What kind of projects are eligible for financing support by REF?
- Support provided by the Rural Energy Fund (REF) is technology neutral. Projects should comprise a least cost approach to serving new areas with electricity, i.e. a least cost solution among comparable alternatives. Categories of rural energy projects that can be supported are:
- Distribution line extension projects: This category comprises projects for the extension of existing distribution lines to cover new and/or previously unelectrified areas. These types of projects can be justified, as a least cost option, when the volume of demand over a 15 year time horizon is such that an extension of existing distribution lines to new areas implies savings in diesel operations
- Mini grids or isolated grids: This category comprises grids that are sufficiently far from the national grid to be cost effective solutions to providing certain areas with electricity. The least cost technology option could be renewable energy capacity, agro-industrial generating capacity currently used for self-generation (e.g. bagasse cogeneration), hybrid solutions, etc. depending on the specific context of the area to be served.
- Stand-alone systems: This category comprises photovoltaic (PV) systems which have limited capacity and offer less scope for income generating activities than the two aforementioned categories. Typically, they can be the only viable option for households, small commercial establishments, health centres, schools and community halls in isolated and dispersed rural areas.
- Embedded generation: This category comprises electricity generation plants connected to the distribution network (33 kV and lower). Generally, embedded generation comprises smaller generators that use a variety of generation technologies, e.g. biogas, biomass, PV, wind turbines and small hydro.
Which funding windows are available financing through REF?
The following funding windows are currently available:
- Matching grants
The matching grants are typically not investment support but rather support to preparatory work and/or support to developing new and innovative approaches on a cost-share basis (co-financing) with a Project Developer. Indicative activities eligible are:
- Market development activities (e.g. market studies, promotion, education),
- Business improvement (e.g. staff training, business plan preparation),
- Product development activities (e.g. assembly optimization study, testing),
- 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)
- Performance grants This comprises Investment support on a cost-sharing (co-financing) basis with a Project Developer. Financing or acquisition of existing assets (including land) or refinancing of existing debts or accrued interest is not eligible for performance grants.
Selling of produced electricity
Whom can I sell the produced electricity to?
A Small Power Producer can sell electricity:
- at wholesale to a DNO
- at retail to consumers, or
- to a DNO and retail consumers.
At which tariff could I sell the electricity produced by a mini grid?
Tariffs for selling electricity produced by a mini grid as well as the process for the calculation of the tariffs are determined by EWURA.
As per the second SPP framework, feed-in tariffs for selling renewable energy to a DNO is based on technology-specific costs for hydro and biomass SPP with capacity from 100kW to 10MW (Regulatory REFITs).
For Main Grid connected and Isolated Mini-Grid solar and wind small power projects with capacity above 1MW up to 10MW, tariffs will be based on bid prices obtained through a competitive process (Bid REFITs).
For solar and wind projects with capacity up to 1MW - Very Small Power Projects (VSPPs) - tariffs for Main grid connected projects will be based on the approved REFIT of a 500 kW biomass project subjected to a 5% premium and a 15% premium be used to pre-determine Isolated Mini Grid connected VSPPs' tariffs or as may be determined by EWURA.
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