Tanzania demonstrates Africa’s mini-grid opportunity

30Nov 2017
The Guardian
Tanzania demonstrates Africa’s mini-grid opportunity
  • • Tanzania already has at least 109 operational mini-grids, with installed capacity of 157.7MW most of which are not yet green; around 46 per cent are running on fossil fuels
  • 33 per cent are biomass, 21 per cent are hydro, one per cent are solar and less than one per cent are hybrid

Solar Media, the publisher of PV Tech, has identified more than 50 potential mini-grid projects in Tanzania ahead of its solar and off-grid renewables summit to be held in Dar es Salaam next week.

The German Development Bank (KfW) and the African Trade Insurance Agency (ATI) have set up a new credit facility instrument worth US$38.8 million to support renewable energy projects in sub-Saharan Africa that targets small and mid-scale renewable energy projects (up to 50MW). File photo

According to a statement on the event set to kick off on December 5, Tanzania has shown itself to be a leader in this particular market segment with global heavyweights such as Engie and E.On already very active via PowerCorner, Engie’s Ketumbeine project and Rafiki Power, a start-up sitting in the E.On incubator.

Solar & Off-Grid Renewables Africa is a 2-day high-level conference that aims to support and accelerate the deployment of solar and off-grid renewable energy in Africa, and break down the barriers to development - financial, political, technological - by bringing together key stakeholders, including investors, policy makers, developers, energy companies, financiers, NGOs, manufacturers and suppliers.

Next week’s event will bring developers, tech firms, financiers and regulators together to discuss the opportunity available in Africa now for solar and off-grid renewables in general.

“We are delighted to be able to host Tanzania’s regulator, EWURA and TaTEDO which has been developing alternative energy in Tanzania since 1990. Both will outline their role in stimulating the market,” said Jo Wilkinson, the event’s director.

“The summit provides an essential meeting place for the industry to see where we are up to now. It will allow developers to meet with their funders, equipment providers to meet with buyers and the whole industry to chart a path towards identifying opportunities to improve access to clean energy,” she added.

Local developers such as home-grown company Ensol Tanzania Ltd. are also driving the market forward with the recent completion of a project in Mpale Village which connected 50 households in September and who are planning a further 250 households by June 2018.

Tanzania already has at least 109 operational mini-grids, with installed capacity of 157.7MW most of which are not yet green; around 46 per cent are running on fossil fuels; 33 per cent are biomass, 21 per cent are hydro, one per cent are solar and less than  one per cent are hybrid. The market is set to grow considerably in 2018 and beyond and will be attributable to government policy which is set up to encourage small power producers to do business in Tanzania.

“With standardised protocols in place, the government’s framework for small power producers (SPPs) has outlined the role of an SPP, the PPA and the support mechanism available, which is tied to the US dollar,” reads the statement.

“Finance is one of the missing pieces of the puzzle but funds are in place to stimulate market growth and the major organisations involved in the early stages of the market have confirmed to attend the summit in December: DFID, TIB Development Bank, Investec, Camco, Africa Enterprise Challenge Fund, OPIC, CrossBoundary, Swedfund, Finnfund, SunFunder and many more,” it adds.

Meanwhile, the German Development Bank (KfW) and the African Trade Insurance Agency (ATI) have set up a new credit facility instrument built to support renewable energy projects in sub-Saharan Africa that targets small and mid-scale renewable energy projects (up to 50MW).

The German Federal Ministry of Economic Cooperation and Development (BMZ), through the KfW, will provide funding up to US$38.8 million for the facility – which looks to allow small-and mid-scale renewable energy projects in Africa to reach financial close by meeting liquidity requirements that lenders frequently ask for in order to fund these projects.

Günther Nooke, personal representative of the German Chancellor for Africa, BMZ, said: “The Regional Liquidity Support Facility will address a key challenge in renewable energy project finance and de-risk private sector investments. We are pleased to provide the funding to this innovative instrument underlining Germany’s commitment to the objectives of the African Renewable Energy Initiative (AREI).”

The facility is designed to assist independent power producers (IPP) developing renewable-energy projects in Africa to reach the liquidity they need in case their off-taker delays payment.

The facility will provide immediate cash collateral supported by guarantees to a commercial bank that will in turn open a standby letter of credit to the benefit of the IPP. The amount provided will enable the IPP to operate and service the debt for up to six months.