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Tanzania’s Small Power Producer (SPP) Program
IFC Investment Climate Infrastructure Workshop on
Small Power Producers
Chris GreacenConsultant, World Bank Africa Energy Unit (AFTEG)
April 30 2013
The views expressed in this presentation are solely of the author
Good News Bad NewsSPP program
works…TANESCO is
insolvent
2
Outline
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Definition of SPPs in TanzaniaFour Key Elements of Tanzania’s SPP
ProgramExamples of projects onlineOverview of Tanzania SPP regulations
Standardized Framework / Table of SPP documents
Standardized TariffsMain grid, mini grid, wholesale and retail salesCalculation process and Levels
Required permissions and approvals, procedures for application and process rules
“2nd Generation” SPP rules
Current situation: successes and challengesPPAs, generators in the pipelineChallenges and possible solutions
SPPs– What are they?
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Restricted to export of 10 MWInterconnected to main grid or to an
existing or new isolated mini-grid 16 existing diesel-fired isolated mini-
grids owned and operated by TANESCOIf main grid-connected then must be
renewable energy or cogeneration“renewable” means < 25% fossil fuel
(hybrid generator)
Four Key Elements of Tanzania’s SPP ProgramSPP Regulatory framework developed by
EWURAMore complete than anywhere else in Africa. Goal:
Light-handed regulationProcess as well as prices. (Kenya versus Tanzania)
Grants through the REAConnection grants (US $500 per new
connection)Grants for studies (business plans and
environmental assessments)Availability of financing (loans from local
commercial banks supported by a US $25 million WB line of credit)
Technical assistance for developers, the REA and the electricity regulator (side-by-side assistance not reports)
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Location of Generation
Connected to
Isolated Mini-grid
Connected to Main
Grid
Nature of
Customers
Selling Retail to
End Customer
Case 1 Case 3
Selling Wholesale to Utility
Case 2 Case 4
Types of SPPs
6 SPPs can be combinations of these cases (e.g., Cases 3 & 4)
• 300 kW – remote mini-grid• Target 1400 customers• Mawengi village, Njombe, Tanzania
LUMAMA hydropower project
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• 300 kW – remote mini-grid• Target 1400 customers• Mawengi village, Njombe, Tanzania
LUMAMA hydropower project
Mini-grid Main grid
Retail Case 1 Case 3
Wholesale to utility
Case 2 Case 4
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Mwenga 4 MW hydroelectricity to 4000 households in 15 villages & sells to the grid
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Mwenga 4 MW hydroelectricity to 4000 households in 15 villages & sells to the grid
Isolated mini-grid Main grid
wholesale to utility
Case 1 Case 3
retail Case 2 Case 4
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TPC, Moshi 17.5 MW – selling 3-4 MW to main grid
CogenerationSugarcane bagasse
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TPC, Moshi 17.5 MW – selling 4 MW to main grid
CogenerationSugarcane bagasse
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Mini-grid Main grid
Retail Case 1 Case 3
Wholesale to utility
Case 2 Case 4
Regulatory and Commercial Framework Documents
http://www.ewura.go.tz/sppselectricity.html
Main grid Isolated Mini-grid (off-grid)
Standardized PPA*
Standardized Power Purchase Agreement for Purchase of Grid-Connected Capacity and Associated Electric Energy Between Buyer and a Small Power Project
Standardized Power Purchase Agreement for Purchase of Off-Grid Capacity and Associated Electric Energy Between Buyer and a Small Power Project
Tariff methodology*(Feed-in Tariffs)
Standardized Tariff Methodology for the sale of Electricity to the Main Grid Under the Standardized Small Power Purchase Agreements.
Standardized Tariff Methodology for the Sale of Electricity to the Mini-grids Under the Standardized Small Power Purchase Agreements
Process Guidelines(roadmap)
Guidelines for Developers of Small Power Projects (SPP) ; • Includes standardized forms
Process rules Rules for Developers of Small Power Projects (SPP)
Interconnection Guidelines*
Guidelines for Grid Interconnection of Small Power Projects (Parts A, B, C)
Interconnection Rules* Rules for Grid Interconnection of Small Power Projects (Not yet provided)
Annual Tariff Calculations *(Feed-in-Tariffs)
Detailed Tariff Calculations under the SPPA for the Main Grid for each year
Detailed Tariff Calculations under the SPPA for the Mini-grids for each year
13* Applies to cases 2 and 4 only.
Key Features of SPP framework (cases 2 and 4)
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Small Power Purchase Agreement (SPPA)Buyer “must take” SPP’s output if SPP is connected to the
main gridTerm – 15 yearsSPPA type depends on context: (1) selling to an existing
isolated mini-grid; (2) selling to main gridIsolated SPPA switches to Main grid SPPA upon
interconnection with main gridStandardized Tariff Methodology
Avoided Costs of the UtilityLocal Currency Denomination Reflect Seasonality (Main Grid)Floor and Cap PricesTechnology NeutralFuture (?): Technology-specific feed-in tariffs
Annual Feed-in-Tariff Levels(Calculated by EWURA for SPP wholesale sales)
2009 2010 2011 2012
MAINGRID TZS/kWh
96 110 121 152.54
Mid Yr Rate
(TZS/$) 1322 1394 1598 1587
US$/kWh $0.073 $0.079 $0.076 $0.096
ISOLATEDMINI-GRIDS
TZS/kWh334.8 369 380 480.50
US$/kWh $0.253 $0.265 $0.238 $0.303
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Necessary permits, clearances and procedures for application
16EWURA license to operate
Business license, tax registration, etc.
Power Purchase Agreement (PPA)*
Land title or lease
Resource Rights (e.g. water rights from River Basin Water Office)
Letter of Intent (LOI) (from buyer)
Environmental and Social Clearance (NEMC)
Building Permit
Sequence is important to avoid competing claims on project sites
EWURA’s rules relating to retail salesLegal right to sell electricity at higher-than-
national uniform tariffTariffs may take into account ability to pay
of customersFor example, charging small residential
customers below-market rates and higher tariffs to commercial customers
Retail tariff structure proposed by SPP is not limited to ‘standard’ kWh tariff typesFlat tariffs, power-tariffs, etc. are allowed. But
to be accepted by the Authority, any tariff must reflect prudently incurred costs and reasonable efficiency. http://tinyurl.com/rea-spp 17
Principal changes proposed in
second generation SPP rules
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•Optional•Covers preparatory activities for studies, financial arrangements, land acquisition, construction
Provisional license
•Only energy charge (no peak demand charge) if SPP’s power import load factor is < 15%
Tariffs for backup power
•Right to convert to a “Small Power Distributor” (SPD), to sell wholesale to the main grid, or both.
When big grid connects to little
grid
•Streamlined and simplified rules for projects under 100 kW•For VSPPs no prior approval of retailed tariffs required.
Very Small Power Projects (VSPPs)
SPPs In Operation
Project MW Type of Resource
Grid type Status
ACRA - LUMAMA
0.3 Hydro New Isolated (Case 4)
In Operation / Community based
TANWAT 2.34 Biomass –wood
Main (Case 1) Selling 1 MW (2010)
TPC Co-Generation
15 Bagasse Main (Case 1) In operation. Contracted to Sell up to 9 MWe to TANESCO
Katani Power Plant
0.3 Biomass – Waste
New Isolated (Case 4)
In Operation – Pilot, not connected to network
Mwenga – Mufindi Tea
4 Hydro Cases 1 & 3
In operation
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SPPs with signed PPAs
Project MW Resource Grid type Expected COD
Ngombeni Mafia 1.4 Biomass TANESCO Isolated
June 2013
Sao Hill Energy 15 Biomass –wood (CHP)
Main Delayed. COD ???
Symbion – KMRI Tunduru
0.3 Biomass TANESCO isolated
July 2014
Symbion – KMRI Tunduru
3.3 Biomass TANESCO isolated
Mar 2014
St. Agnes Chipole – Songea
7.5 Hydro TANESCO isolated
Mar 2014
NextGen Solawazi 2.0 PV TANESCO isolated
Sep 2013
Andoya Hydro Electric Co.
1.0 Hydro TANESCO Isolated
Feb 2015
EA Power – Tukuyu 10 Hydro TANESCO Isolated
Feb 2015
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Remaining challenges and possible solutions
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•Developing payment guarantee mechanism
High risk of not getting
paid
•Early discussions of new rules.
Limited to 10 MW
For more information, please contactChris Greacen: [email protected]
Bernard Tenenbaum: [email protected]
SPP regulations available at:www.ewura.go.tz/sppselectricity.html
Thank you
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