1. 1 Power Sector in Tanzania Recent Developments, Current Crisis, Issues, Challenges and Solutions

2. 2 AGENDA Recent Developments Current Crisis Issues Challenges Solutions

3. 3 Recent Developments 1)Power System Characteristics Installed generation capacity of 947 MW (Hydro 562 MW, Diesel 85 MW, IPPs 295 MW, Imports 5 MW), 550,000 consumers 4 IPPs – IPTL, Songas, Kiwira Coal Mine, TANWAT selling power to TANESCO Electricity imports from Uganda and Zambia, and exports power to Kenya EWURA established – not yet fully operational Several privately owned generation facilities mostly for standby

4. 4 Hydropower Resources

5. 5 Mtera Dam Water Levels

6. 6 Nyumba ya Mungu Dam Levels

7. 7 Annual Generation - GWh

8. 8 Current Crisis Generation shortage  load shedding (power rationing) in February and March, June to October/November Severe cash shortage  O&M costs financed through overdraft (now TShs 70 billion, expected to increase) Under recovering about TSh 8.3 billion per month due to low electricity tariffs

9. 9 Issues Shortage of generation High liquid fuel prices form about US$40/barrell in 2003 to over US$70/barrell now High technical and commercial losses Lack of investments since 1997 when TANESCO was specified Low tariffs that under recover O&M costs Poor quality of supply and service Conflicting uses for the water and poor catchment management Load shedding 1994, 1997, 2000, 2006

10. 10 Issues Delays in commissioning of Ubungo units 5 & 6 in 2005 Outages of Songas’ generating sets and transformer in 2005 and 2006 Sub-optimal operation of the hydro/thermal system (overuse of hydro system) Unsuccessful procurement of emergency power plant in 2004 (IDA funding),

11. 11 Challenges Lower than average hydrology (drought) High cost of thermal generation Financing of future investments Overloaded transmission and distribution  Unbalanced electricity tariffs – Zanzibar at TShs 26/kWh (US$0.0211/kWh)  much lower than LRMC of US$0.04/kWh

12. 12 Challenges Costs about US$1.1 per kWh not served TANESCO estimate load shedding to year end to be about 199 GWh Cost to the economy estimated to be US$219 million In addition, the government will loose VAT on electricity consumption amounting to about US$3 million

13. 13 Solutions 1)Short Term Procurement of leased gas based generation Increase electricity tariffs by 25% Convert IPTL to natural gas firing Purchase of the IPTL power plant Demand side management Hydro/thermal generation optimization Negotiate long term gas prices for new plant Procurement of 100 MW gas based generation

14. 14 Solutions 2) Short Term Enforcement of water rights, catchment's management and protection, prohibit agro activities close to rivers, proper environmental management of river basins Rehabilitation, reinforcement and expansion of the T&D systems, replace billing system and faulty meters

15. 15 Actions with High Impact on TANESCO’s Financial Performance ActionMonthly Impact TShs billion Target Date 5% tariff increase 1.2Done 20% fuel levy5July 2006, annually if needed IPTL conversion 5.3March – Dec 2007 100 MW leased generation 6Oct/Nov 2006

16. 16 Actions with High Impact on TANESCO’s Financial Performance ActionMonthly Impact TShs billion Target Date Acquire IPTL3.2December 2006 Hydro resource management 2.8June 2006 Refinance Unit 5&6 debt 0.4July 2006

17. 17 Solutions 3) Short Term – Studies and TA Long Term Power Master Plan (2007-2032) Demand Side Management Capacity building IPP Strategy and standardized bidding documents Hydro/thermal generation optimization Grid extension to Kigoma, and mines Preparation of a new Sector Reform Strategy

18. 18 Solutions 4) Short to Medium Terms Demand side management: Replace incandescent lamps (ILs) with compact fluorescent lamps (CFLs) – less wattage on equivalent light output Benefits to both the consumers (reduced energy consumption) and the utility (reduction of demand)

19. 19 Comparisons CFLs and ILs on Equivalent Light Output ILsCFLsSavings 40 W9W31 W 60 W15 W45 W 100 W25 W75 W

20. 20 Comparisons CFLs and ILs on Equivalent Light Output On equivalent light output, replacement of 23 @ 60 W ILs with 15 W CFLs would reduce the peak demand by about 1 kW Consumers would save TShs 23 per day in electricity charges for every 60 W IL replaced (assuming usage of 5 hours/day) Replacing just 2 ILs per consumer for the 550,000 consumers, would reduce the peak demand by 50 MW and the energy demand by 90 GWh annually (assuming usage of 5 hours/day)

21. 21 Solutions 1)Medium to Long Term TANESCO;s capital investments needs 2006 to 2010 TShs 1.3 trillion for: a)New generation additions 345 MW b)Transmission and distribution system rehabilitation and expansion c)Increasing access to electricity in rural areas d)Interconnections – EAC and SADC

22. 22 Comparison of Tanzania’s Electricity Tariffs with selected African and OECD Countries US$ cents per kWh