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Why the power grid must be truly pan-territorial
2005-07-20 08:55:55
By Editor
The discovery of natural gas off the shores of Songo Songo island in southern Tanzania, and the resolve by the government to attract private capital to develop the gas field has won the heart of many stakeholders.
For one thing, the prime strategy for developing the off-shore gas field was to generate power from this cheaper type of fuel and reduce over-dependence on unreliable hydro-power.
Up to 2004, occasional power rationing in Tanzania used to cause losses amounting to USD 500 (Tshs.500bn) a year owing to prolonged drought. Worse, 70 per cent of the country’s electricity supply is provided by hydro-power stations. The remaining 30 per cent comes from thermal power.
It is encouraging to see that a number of Dar - based companies are increasingly opting for the use of the natural gas for their power needs. Twiga Cement, in particular, has seen its production costs declining from USD 8 million to USD 3 million in just ten months since its management switched from hydro-electric power to natural energy. Obviously, this amounts to massive efficiency and leverage to competitive advantage.
The Pan African Energy Company, the firm behind the project, estimates that 30 companies in Dar es Salaam are planning to use natural gas from the Songas Company. Five are already using it.
It is also on record that the overall cost of power generation at Songas Ubungo Power Plant has slipped down from USD 133 million to USD 4 million in ten months, an incredible 3,225 per cent cost reduction in just ten months!
While everybody feels like cheering at these recent developments where energy is increasingly becoming less expensive, overall, things may not be so rosy in the near future unless the whole country, measuring 915,884 square kilometres, is linked to the national grid.
Four regions, (Kigoma, Ruvuma, Mtwara and Lindi) are yet to be connected to the grid, and Tanzania Electric Power Company (TANESCO) supplies them with electricity from expensively-run thermal power stations.
Last year alone, TANESCO incurred Tshs.10.17bn in losses from its four thermal power stations. It seems TANESCO is unable to factor out increased running costs into hiked tariffs exclusively for these four regions owing to unwanted social or political implications for in not having a uniform national tariff structure.
Hence, all power consumers have to share this extra burden in the form of relatively higher tariffs within the Southern African Development Community (SADC).
Which means we must have a short-medium term strategic plan for establishing a truly national grid system that would do away with the thermal power generating plants.
It is not very difficult to imagine this grand project happening. Funds for changing Independent Power Tanzania Limited (IPTL) turbines from oil-to-gas power have been budgeted. Again, additional good news comes from the successful experiment at Mnazi Bay in Mtwara, whose developer is ready to lay a pipeline to Mtwara town and its outlying districts.
This will amount to additional cheaper and environmentally friendlier energy, in turn making rational any scale of investment meant to link the four regions to the national grid.
A strategic public-private partnership has to be sought and effectively engaged to ensure that the four regions are connected to the grid.
Much better, long-term concessional loans can implement the vision that has all the hallmarks of boosting national economic growth and reducing poverty.
One of the factors making Tanzania less attractive to investors is its higher cost of power that makes final products and services less competitive on the marketplace.
Four years down the road, it is apparent that some of the domestic products will compete on the enlarged East African common market, in the SADC, under AGOA terms and even in the recently expanded EU market.
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