Energy cooperation

  • green_embassy

    Green embassy. Photo: Erik Johansson

The Swedish cooperation in the energy sector in Tanzania spans from generation to transmission and distribution of electricity, strengthening capacity to ministries, agencies, utilities, improving policies, laws and regulations, and private sector collaboration.

Background

Increasing the access to modern and environmentally sustainable energy, not least for the rural population, is a prerequisite for growth and a major challenge.

About 90% of Tanzania´s total energy consumption is met by traditional biomass leading to accelerated forest degradation. While the electricity sub-sector contributes to less than 2% of the total energy use in Tanzania, it has a very large impact on the economy.

The effects of climate change are visible also affecting electricity generation from hydropower resources. The main response to power shortages has been to increase dependency on fossil fuel sources, and the bulk of investments are still focussed on power production from non-renewable sources.

There is however a great potential for increased utilisation of renewable energy sources such as geo-thermal, hydro, solar, wind etc. The involvement of the commercial and financial institutions in energy related projects is still limited.  

Tanzania need further to strategically prepare for possible revenues from natural gas.

Swedish support

Energy is one of eight priority areas with the ambition of “Increased access to sustainable energy, including the ambition that at least 300,000 people gain access to electricity”.

Sweden has supported the energy sector in Tanzania for many years. The support has moved from having main focus on investments in energy infrastructure to supporting strategic sector institutions and rural electrification. Sweden also continues to supports investments in the sector through its Loans and Guarantees instrument, and works with both the Government and with the private sector.

The support focuses on:

  • Increased electricity access in rural areas through the support to grid extension to rural areas and off-grid solutions. The support is shifting from project-support to programme-support by providing financial support to the Rural Energy Fund.
  • Institutional support and sector reform by supporting capacity development of the Ministry of Energy and Minerals, the power utility TANESCO and the Rural Energy  Agency in mainland Tanzania. Ministry of Lands, Housing, Water and Energy and Zanzibar Electricity Company (ZECO) on Zanzibar.
  • Investment projects where Sweden supports both generation and transmission line expansion through the Sida’s Loan and Guarantee financing instrument, eg Makambako-Songea transmission line, and rehabilitation of Hale Hydropower      station.
  • Renewable Energy: Sweden facilitated the growth of the market for Solar home systems, supporting the government in Institutional, Policy and Regulatory Framework for sustainable production of liquid bio-fuels and support independent power producers through the support to the Rural energy Fund and renewable energy challenge funds.

Sweden in collaboration with other development partners also pursues an active dialogue (including through the budget support instrument) with the Tanzanian government in the following areas to encourage reforms in areas such as:

  • Cost recovery and financial sustainability in the sector.
  • Improved conditions and regulatory framework for private sector participation in leveraging finances in the energy sector.
  • Increased transparency in the energy sector, particularly in procurement.
  • Increased share of renewable energy sources in the Tanzania energy mix.

The Government of Sweden in July 2014 announced a commitment to catalyze investments of $1 billion to the Power Africa initiative. “Our participation is a clear sign of the solid partnership between Sweden and the U.S. in the field of development cooperation,” said the former Swedish Minister for Finance Anders Borg. “Power Africa marks a new age in the use of innovative financing solutions in development cooperation. By focusing on the energy sector more people and areas will gain access to electricity, which will be a strong force to economic and social development to the benefit of poor people.”

The Embassy, in coordination with Power Africa and the Loan and Guarantees department, is working with USAID Tanzania and the US DCA on a regional joint portfolio guarantees in addition to Tanzania specific joint portfolio guarantees in support of increased private
sector investments in renewable energy generation, and build capacity for project delivery.

Recent results

Important results that Sweden contributed to include:

  • The portfolio of projects financed by Sweden has led to more people in rural areas had access to electricity, directly contributing to to almost 20% of all rural electrification in the country. 
  • The Swedish support has also contributed to increased investment from the private sector in electricity production from renewable energy sources through improved regulatory framework and capacity-building initiatives for both private sector and government. Investments in renewable energy from the private sector has also been promoted through support for a "Challenge Fund", REACT, directed particularly to small and medium-sized energy companies in Tanzania. 

Contact:

Jörgen Eriksson (jorgen.eriksson@gov.se)
Stephen Mwakifwamba (stephen.mwakifwamba@gov.se)