WASHINGTON D.C. June 21, 2016 – A newly approved loan for a Program for Results for Tanzania will connect 2.5 million poor households in rural areas to the national electricity grid over the next five years.
The Tanzania Rural Electrification Expansion Program was approved yesterday by the World Bank Board of Executive Directors with $200 million from the International Development Association.* The Program aims to build on the recent achievements of expanding nationwide access to 36 percent in 2014. In addition, the Program will scale up the supply of renewable energy in rural areas while strengthening sector institutional capacity.
“Access to electricity is critical to extend economic opportunities and reduce poverty,” says Bella Bird, World Bank Country Director for Tanzania, who also covers Malawi, Burundi and Somali. “This program not only offers the opportunity for many more Tanzanians to have access to power in their homes and businesses, but also enables small power producers to access finance to invest in production, including with renewable energy sources.”
The Government of Tanzania is currently implementing a national energy policy whose goal is to increase the country’s overall electricity connectivity to 50 percent by 2025 and to at least 75 percent by 2033.
The National Rural Electrification Program (2013–2022) under which the new Program is to be implemented, includes both on-grid and off-grid solutions and has four priorities; (i) the connection of new customers to the grid in already electrified settlements; (ii) new connections to the grid; (iii) electrification through off-grid investments; and (iv) the development of distributed technologies, in particular off-grid solar and other renewable technologies.
In addition to household beneficiaries, Bank financing will also benefit 25,000 education facilities, 25,000 health facilities, 150,000 businesses. Small Power Projects will also benefit from access to capital to enable them to contribute 33MW in renewable energy under the Program. The respective implementing institutions, including the Ministry of Energy and Minerals, as well as the Rural Electrification Agency will benefit from capacity strengthening to improve efficiency, transparency, and accountability.
“The Program comes at a time when the Government has embarked upon an important long-term power sector restructuring plan which will greatly improve transparence, performance and efficiency that are vital for future expansion achievements,” says Nataliya Kulichenko, the World Bank’s Senior Energy Specialist and Task Team Leader.
Recent increases in access have been attributed to key Government actions including a 2013 Parliamentary resolution that resulted in more financing to the Rural Energy Fund using a petroleum levy; and the reduction in connection fees for the final consumer owing to improved technologies as well as an increase in Government subsidies, effective since January 2013.
The Bank is supporting ongoing projects in Tanzania’s energy sector including in power generation and capacity strengthening in addition to two recent development policy operations in 2013 and 2014. Among the recent significant achievements registered in the Sector are the progress of the gas-to-power program - a key medium to long-term cost reduction measure, enabled by the completion of a large gas transmission pipeline, connecting producing fields in Mtwara and Songo-Songo to Dar es Salaam.
A new 150MW gas power plant (Kinyerezi I) has been completed while the construction of another 240MW gas power plant (Kinyerezi II) has also begun. With the increased gas production and gas becoming available to all existing and newly commissioned power plants in the Dar es Salaam area, this has eliminated the need for using more costly liquid fuels in those plants and significantly reduced the cost of generation.