The African Development Bank-hosted Sustainable Energy Fund for Africa (SEFA) approved on November 29, 2016 a US $870,000 preparation grant for Tanzania’s the Rural Energy Agency (REA) to structure the Renewable Energy Investment Facility (REIF), which will provide affordable finance to private sector clean energy projects providing energy access to rural communities in Tanzania. Specifically, the SEFA grant will include advisory support, development of operational guidelines, risk mitigation framework, fund manager identification, technical and institutional support for the REA towards the establishment of REIF and capacity building for relevant public sector institutions/agencies and private sector project developers.
Tanzania’s national electricity coverage is estimated at just over 20% with transmission grid covering a minor part of the country and leaving out most of the territory. Access is even lower for the rural population at 7% thus nearly 30 million people lack a connection to the electricity grid. The vastness of the country, coupled with low population densities, makes grid extension too expensive, creating a significant market potential for off-grid electrification schemes.
Within this context and the country’s considerable and untapped renewable energy potential, the Government of Tanzania (GoT) has set an objective of increasing access to electricity by promoting renewable energy powered off-grid/mini-grid electrification schemes. GoT estimates that about half of the country’s rural population could be served by off-grid options in a cost-effective manner, and that mini-grids could benefit 9.1 million people in the country. GoT plans to achieve about 1.3 million connections in rural areas (including public facilities) and increase the average access rate to electricity (both urban and rural) to 35% by 2022. The REIF will thus contribute to expanding rural electrification and increase access to energy services by channelling appropriately tenured and priced finance to private sector companies developing and operating energy access projects in rural areas based on renewable energy technologies.
After the approval, Tonia Kandiero, AfDB Resident Representative in Tanzania, stated that “the SEFA support to will help address existing financing gap in the market and accelerate private sector participation in off-grid electrification in Tanzania. We expect this initiative to make a real contribution to Tanzania’s ambitious energy access targets, ultimately improving livelihoods for all rural communities in the country. We are also pleased to provide this support in the context of African Development Bank’s New Deal on Energy for Africa Strategy, which stresses universal energy access through increased adoption of clean energy technologies and partnership with the private sector.”