Getting Gas & Hydro Power Flowing in Tanzania

A worker checks equipment at Tanzania’s Kinyerezi I gas power plant, which was commissioned in October 2015
A worker checks equipment at Tanzania’s Kinyerezi I gas power plant, which was commissioned in October 2015 with Power Africa support.
Merrica Dominick, U.S. Embassy Tanzania.

Behind every power project, whether it’s a giant wind farm or an off-grid solar installation, is a business deal. Before switches are flipped at power plants or on kitchen walls, developers, governments and investors must dot i’s and cross t’s on complex legal agreements. In sub-Saharan Africa, this challenge has often prevented power projects from being built. But Power Africa is helping our partner countries remove roadblocks and get deals done, including two recent and important transactions in Tanzania.

Since its launch in 2013, Power Africa has supported the Government of Tanzania’s Big Results Now (BRN) initiative, which seeks to phase out high-cost emergency power plants, increase generation capacity from 1,300 MW to 2,780 MW, reform operations at the public utility (TANESCO), and meet new demand through low-cost solutions.

The Kinyerezi I gas power plant, with 70 MW already online and 80 additional MW expected by the end of 2015, is a major step toward these goals.

Recent natural gas discoveries have quadrupled Tanzania’s known resources, and made gas-fired power generation facilities a cheaper and cleaner option than current reliance on diesel. Still, to make a project like Kinyerezi I possible, a host of details needed to be ironed out, including Kinyerezi’s need for a 542 kilometer pipeline to pump gas from wells in southern Tanzania to the power plant near Dar es Salaam.

Upon completion of the new pipeline from Mtwara to Dar es Salaam, Power Africa provided critical technical support through USAID and the National Association of Regulatory Utility Commissioners (NARUC) to help get the gas flowing. USAID and NARUC helped  the Energy and Water Utilities Regulatory Authority (EWURA) with establish an interim gas tariff, setting the rates that the Tanzania Petroleum Development Company (TPDC) can charge for processing and transporting natural gas through the pipeline. USAID also conducted technical workshops on business practices in the natural gas industry, targeting key personnel at EWURA, TPDC, the Ministry of Energy and Minerals, the utility TANESCO, and the Mineral Resource Institute.

Consequently, natural gas is now being pumped to Dar es Salaam, powering Kinyerizi’s four gas turbines manufactured by Power Africa partner General Electric. At the same time, two additional power plants, Symbion and Ubungo II, which previously ran on expensive A1 jet fuel, were able to switch to cheaper, clean natural gas. The 180 MW of electricity generated by these plants is cleaner and more sustainable as a result.

“Power Africa and USAID are proud to support our Tanzanian partners through transaction assistance for priority power generation projects like Kinyerezi,” said Sharon Pauling, Power Africa Country Team Leader in Tanzania. “Fueling power plants like Kinyerezi with cleaner, domestic natural gas will help Tanzania achieve a reliable electricity supply, which will enable increased industrial production, create jobs, and contribute to a cleaner environment.”

Natural gas isn’t the only thing flowing in Tanzania. Several strong rivers cut across the country, making hydro power an important part of the government’s plan.

On the Ruvuma River in southern Tanzania, the Tulila Hydroelectric Plant will deliver 5 MW of clean electricity (with a provision for expansion to 7.5 MW) to a TANESCO-operated mini-grid currently supplying power to over 27,000 households in Mbinga and Songea districts. The Tulila project, developed by the African Benedictine Sisters of St. Agnes Chipole Convent, reached financial close in July 2014, with help from Power Africa’s team on the ground in Tanzania.

During the development stage, the Power Africa team produced the critical documents needed for the project to acquire comprehensive insurance, helping to clear one of the final hurdles to reaching financial close.

Power Africa teams also helped amend the Power Purchase Agreement (PPA), extending the standardized PPA agreement from 15 years up to 25 years, allowing for sufficient time to fully amortize the term of the project debt. The project also received technical and financial assistance from Power Africa for select tasks required by the Rural Energy Agency under the Tanzania Energy Development Access Program (TEDAP).

The Tulila Hydroelectric Plant is slated to be fully operational in late 2015 or early 2016, and will produce a cleaner and more efficient supply of electricity to an isolated mini-grid displacing the existing TANESCO diesel generators.

These two examples from Tanzania show that opportunities for growth in Africa’s energy sector are tremendous and real, and that the benefits of new power projects flow to real people. Power Africa and our more than 100 partners are making it possible to get deals done between the private sector and African governments. With Power Africa support, transactions expected to generate over 4,100 MW have financially closed (approximately 41% of the initial 10,000 MW goal and 13% of the new 30,000 MW goal). This new generation capacity has the potential to enable approximately 4 million new connections through increased availability of power.

 

Last updated: June 07, 2016

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