1. UNITED REPUBLIC OF TANZANIA Ministry of Energy and Minerals RURAL ENERGY AGENCY (REA)

2. INTRODUCTION The Rural Energy Agency (REA) was established by the Act of Parliament in 2005 as an autonomous institutions to promote and facilitate access to modern energy services in rural areas. The main functions of REA is to promote development of rural energy projects by providing grants and subsidies as well as working with private sector, NGOs, CBO, Development Partners and Government institutions.

3. ENERGY SITUATION IN TANZANIA The majority of rural Tanzanians have no access to modern energy services including electricity supplies About 12 percent of households in Tanzania are connected to the electricity grid, with rural coverage of only 2.5 percent in 2007

4. RURAL ENERGY FUND (REF) The Rural Energy Fund (REF) was established by The Rural Energy Act, 2005 for the purpose of providing grants to qualified project developers;The Rural Energy Act, 2005 The REF provides capital subsidies to rural energy projects through a trust agent; The REF provides training, capacity building and technical assistance to project developers.

5. SOURCES OF FUNDS Government annual budgetary allocation; Contribution from international financial organization, multilateral and bilateral agencies and other Development Partners; Levy of up to five percent on the commercial generation of electricity; Interest or return on investment;

6. CHALLENGES Inadequate funds. For instance electricity projects which have been identified are estimated to cost about Tsh. 1.2 trillion (US$ 1bn); Private sector in Tanzania has a very limited capability to invest in rural energy project which requires substantial capital investment; Low purchasing power of rural communities.